Yes we are.

I didn't think you were flip, but concise.

Concise is good.

See.

It is very easy to make things more difficult than they need to be in this industry.

I have been reading all of these threads and I'm more confused. 2005 will be our 1st year at $250m. Assuming we continue then 2007 we will be required to choose LB or SIB
requirements. We collect CRA info right now but do not scrub it or report it. Last CRA exam, they were impressed that we were collecting it. What is everyone recommendation that we do?

Lu, If you are not required to make your first submission until 2007 which would be 2006 data. Then IMO I would continue on doing what you are now doing until we really know how the Community Development Test is going to effect a bank.

There are many unanswered questions about the CD test. These questions raise some real concerns, and until we actually know how examiners are going to treat this test, it makes sense in this posters mind to NOT DUMP data collection that is in place. Getting rid of it now and then finding out later that being examined as a large bank is a better choice for you, makes it very difficult to start the process up again.

In the next few months as more knowledge is gained better decisions can be made. In many ISB's there is a wait and see position being taken.

While we are all entitled to our opinions it needs to be understood that these are opinons of individuals, and do not represent any rules or guidence to follow. None of them, regardles of reported "quoate's" are representative of any regulatory agency. None of us have an inside track on whats best for all to do. That has to be a decision left to the institution.

Hopefully, LenS and I have raised enough logical concerns that are not based on personal emotions so that folks will weigh the arguments and make a choice that is best for them.

LenS has presented some compellig data that indicates taking the ISB route may not be the way to go.

Just my opinion but I think we still need some results of ISB exam procedures, and in particular how the CD part of the exam was handled by regulators, to make that intelligent decision.

There has been an on-going debate on a number of threads regarding this issue. I have taken the position that most IS banks would benefit from the Large Bank PE and not benefit from ISB status . The primary benefits of being an ISB are (1) you don't have to report your CRA data and (2) the "new flexible" CD test. The benefit of not reporting is almost worthless because you still are responsible to perform under CRA and the consequences of not performing are significant. This means you must have an on-going self-assessment process which means you must have the data to analyze. The collection and maintenance of data cost far more than merely reporting data. Ergo, the savings of not reporting are minimal at best - if you are going to be prudent and conduct an on-going self assessment process. The new flexible CD test is not really a benefit. In reality it is more of a threat because it is mandatory that you earn a satisfactory on the CD test to pass the entire PE as an ISB whereas you don't have to as a Large Bank. The public data in the form of the CRA disclosure statements and the PE's posted by regulators show that a very large number of IS-size banks would have difficulty earning a satisfactory rating on CD activity. About 40% of ISB-size lenders in 2004 didn't originate even 1 CD loan and nearly 20% of 500 FDIC PE's on ISB-size lenders showed a needs to improve or substantial non-compliance rating on the investment test. So our belief is many ISB lenders would be better off electing to be evaluated as Large Banks. You can maintain that elective if you continue to report your CRA data annually.
I suggest you go back to some previous threads in which this issue has been vigorously debated.

The "wait and see what the ISB exam results look like" is a valid perspective. But what banker that is facing an exam right now would really want to go there?

Posters pointing to the risks that bankers are facing if they choose the ISB route are important to banks with CRA evaluations coming up. Some are facing significant challenges in meeting the ISB community development criteria. These bankers need to understand the risks of going the ISB route.

One of the rules in the Art of War is to know the terrain where the battle will be fought.

Gotta go.

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While we are all entitled to our opinions it needs to be understood that these are opinons of individuals, and do not represent any rules or guidence to follow. None of them, regardles of reported "quoate's" are representative of any regulatory agency. None of us have an inside track on whats best for all to do. That has to be a decision left to the institution.

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So true. My suggestion would be to do what I do...Talk to examiners, particularly your examiner! See what they think. They know your bank most likely and they know what is coming down the pike before we do. I know several great examiners and enjoy having conversations with them about the challenges of CRA but the most important relationship I have is with my primary CRA examiner, who is always happy to take a call with questions about our upcoming exams. Most of the examiners are similar to mine. They are willing to work through this stuff with you, verses against you, despite what you might think otherwise.

I've shared conversations I've had with examiners at seminars and through personal acquintence in the past. Obviously those "reported quotes" are unwelcome. I'll be sure to quit sharing if that's the case. Hopefully most readers of the forum know that one examiners opinion can be different than anothers, but perhaps that isn't the case given Don's remarks.

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Hopefully, LenS and I have raised enough logical concerns that are not based on personal emotions so that folks will weigh the arguments and make a choice that is best for them.

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Hopefully other posters who have shared their views are doing so with the same bend Regulatory compliance is not about emotions, but about interpretations of the regulation. Those can differ, even if it ticks those on the opposite of the opinion off. CRA is a silly subject to get emotional about. It's a great regulation to have passion to succeed in because of the value it brings to our communities, but letting it turn you into a big grump when someone differs with you is beyond goofy.

Maybe if we're all lucky we'll agree on things 100% of the time like little drones won't that be nifty!

Dawnie - you also need to remember that other agenices are not set up the same as the OCC, and if you are with one of the other agencies, you will probably get a CRA examiner that you have never seen nor spoken to before.

I had a very good relationship with the Community Outreach Officer for the Federal Reserve a few years back. It did me no good whatsoever in the CRA exam as we got a CRA examiner that didn't understand the "new" concept of the Assesment Area, was too fixated on a concentration in our HMDA data (we reported 50 applications/loans and 6 of them were from the same Census Tract.....our bank financed the manager's residence for a company that owned Mobile Home parks all in the same Census Tract and it took me way too long to explain why this was NOT discrimination....), and was dismissive of our efforts at new and innovated Community Development Lending, Services and Investments.

In the end we wound up with a Satisfactory, and that is all that bank management wanted. They felt getting an Outstanding would make us a target for community groups.

And the CRA examiners misunderstanding of what the "new" Assessment Area definitions really meant caused management to come down on me for making the area "too large." I had a nice long discussion with the EIC who agreed with me, but the damage was already done with respect to management's impression that we needed to "shrink" our area even after I demonstrated to them that it would actually hurt our performance.

(Shakes head and just walks away......)

I've been reading this forum and the Pros and Cons forum. This CRA stuff is just too subjective. I know that the agencies' re-write of the CRA regs a few years ago had some hard numbers in there (60% loan-to-deposit ratio was one, I think). If I recall, the CRA re-write came about in part because the original CRA was deemed too subjective. Still, it seems that two banks with the exact same hard numbers could be judged differently based on how well they document them or how good they are at persuading the examiners.

Bonnie because I teach CRA 101ish classes, I make sure to talk to representatives in all of the agencies. One thing I advise all banks to do is to compare themselves against other banks examined by their respective agencies no matter the location, as well as their peer banks in market. It's much easier to get a clear picture of how your bank might do in an exam if you judge yourself against other OCC/FED, etc. I will say however that the OCC is the toughest agency out there, so meeting that standard is normally enough for any bank. Fortunately they're also the fairest in my experience, so I do place a high view on their publications and advice.

Anon....AMEN! The reg is very subjective, but the alternative (hard numbers to shoot for) would be unfair given that we all serve different markets. While many of us would love to have a hard number to shoot for, it would prove unfair to force bank A, with little capacity or opportunity to try to hit the same goals as bank B with significant capacity and opportunity. Even the LTD ratio is subjective. I think the most defined numbers we have in CRA are "the majority" which can of course mean "over 50%" or..."over 90%" depending on the examiner, agency, and market. It makes the reg special to say the least

There is certainly a lot of room for interpretation in the application of standards under the CRA tests, but as Dawnie points out, the reference to "performance context" data allows for a more fair interpretation of performance. Every bank should have an internal CRA self-assessment process that references the "standards" the bank thinks are representative of its performance "meeting the need for credit services in its community".
For example, with respect to lending in LMI geographies, the bank should know the market "penetration rate" in LMI geographies within the Assessment Area and what any competing lenders penetration rates are (this data is readily available). If the market shows that 20% of the reported HMDA mortgages are in LMI tracts but only 5% of your mortgages are in those areas, you have to be prepared to explain why you performance is so much below the market experience. This can be done by examining the penetration rates of other lenders and comparing your resources and history to theirs. The truth is too many banks wait for the examiners to rate their CRA performance rather than developing their own rating. A well run CRA program will have determined its performance rating with plenty of analysis and documentation so that you know what your rating is before the examiners even show up. Moreover, examiners will respect a well thought-out and documented self-assessment program that develops the local factors that affect performance.
In my discussions with examiners, I've been told they would rather see a bank with a well-documented "process" that assures data integrity and gives confidence in the conclusions of management about performance. There are no surprises in properly administered CRA programs. Examiners and bankers usually are much happier with such programs.

We were just notified by the OCC that we will be receiving a letter soon stating our CRA Exam date. Initially we had communicated that we wished to change to the new ISB guidelines. That was before September 1st. Then all the information came out about the new guidelines and we told the OCC that we were still reviewing the situation and had not decided on which guidelines to be examined under. At this date can we chose the exam or are we set.

Most of my clients have been contacted by the EIC who has asked them which standards they want to be evaluated under. Normally, they don't give you much time to decide (my client undergoing a current Fed Exam was given 24 hours to decide after being told by EIC she could choose). So I don't think you are stuck with a choice yet. But you will get pressured to make a decision pretty quickly. If you are considering ISB make certain you have a comfortable level of CD activity (allow for some disqualifications of loans/investments as a margin of error) because you can't fail the CD test without drastic implications.

In order to have a choice you must continue to report the data. If you continue to report you can elect either ISB or Large Bank standards for your PE. But if you stop reporting, you will be examined as an ISB

Thanks, Len - In the revised reg, ISBs are a "Small Bank". So, those ISBs which used to be Large still need to decide which way they will go within a short period of time, because they will be again required to report by March 1st.

Chris, supposedly all the ISB's were collecting data until September. Why not continue collecting the data for the remainng one third of the year and report it next year so you can observe what happens with the ISB's after enough have undergone their PE examination and had it publicly posted? That seems to me to be the most prudent way to go.

Let me be sure that I have this. We have gone from Large to ISB and if I understand this correctly, we MUST file our CRA data in order to have a choice of exams. Are you saying that it is not acceptable to simply collect the data and give it to the EIC in a form that can be analyzed?

We are still a HMDA reporter and we still have the software to collect and manage the CRA data; but I am thinking that I would rather not report if I am not required to do so.

As a large bank you have to report. Just as large banks have always done. If you have already collected the data the process of reporting should not be difficult.

The revised regulation as published in the Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations explicitly states, "Any small bank that opts to be evaluated under the lending,investment, and service tests will be required to collect and report small business, small farm, and community development loan data." The related FIL, FIL-79-2005 published on August 9, 2005 states, "the regulations continue to allow small banks, including intermediate small banks, to opt for an evaluation under the lending, investment and service tests, provided that the data are collected."

As can be seen the regulation published in the Federal Register explicitly requires the data be reported as well as collected whereas the FIL does not mention the requirement to report. It is my understanding that the Federal Register version trumps the FIL, but I am not certain. Also, there may have been a clarification issued of which I am not aware. I will contact the regulators on Monday to clarify, but for now I believe you must report as well as collect the data to preserve your choice to be evaluated under the Large Bank standards (which don't require a satisfactory on the CD elements of the tests).

FYI - I left a message in the voice mailbox for Robert Mooney of the FDIC regarding this issue and will post his response as soon as I receive it.

I just asked this question on the FDIC's NY Region CRA teleconference. They said:

1) They have discussed this among themselves, and yes, it is true that it could be more beneficial to be evaluated as a large bank because it is not necessary to get a Satisfactory rating on all three tests.
2) An intermediate small bank that wants to have this option open needs to continue collecting and filing CRA small business data.

I spoke to the Chairperson of the FFIEC CRA Subcommitte earlier this week. She confirmed that the FDIC FIL issued with respect to the revised CRA regulations inadvertantly omitted the requirement to report the data as well as collect it. A new FIL or a revised FIL will be issued regarding this matter. So it is clear that if you want to preserve your option to be examined under the standards in effect since 1995 you must collect and report the data. Merely collecting it will be inadequate to perserve your option. Since you should have been collecting the data until September, and you need to collect the data only for the final third of the year I would encourage most banks to continue their data collection and maintenance and see how stringently the mandatory community development test is administered.