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Question & Answer
Question: We are a small bank that is fast approaching the big bank size of $250 million. I realize that we will be facing a very different kind of CRA examination even though we will still be a small player in our market. What steps should we be taking to prepare for our first big bank CRA examination?
Answer: You are smart to be preparing now. As a small bank that has been evaluated based on your lending performance, you should probably do quite well on most of the lending tests. However, don't sit back and ignore this one. Make sure that you are lending to low- and moderate- income areas or individuals in proportion to their presence in your assessment area. You should take a new and tougher look at your lending to make sure you will do well on the lending test.
Also, identify which types of loans are your strongest performers for low- and moderate-income customers. In small banks, mortgage lending is often not the strongest low- and moderate-income portfolio. Review your different categories of loans now to identify which types of loans you want the examiner to consider. Then begin gathering the required data on them and prepare to report it.
Small banks usually perform well on the service test, but you should be sure that your services are at least up to the community standard.
Finally, there is the investment test. This is the killer for the small "large banks." With your modest size, you probably can't count on appropriate investments coming along each year. There are now a variety of products that will help you meet the investment test. The most recent entrant into the CRA fund circle is FNMA. FNMA now offers special CRA-targeted Mortgage-backed Securities, Multi-family Mortgage-backed Securities, and Access Capital Strategies.. It is well worth your time to contact FNMA for information.
Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 7, 7/00
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