We will probably become an intermediate small bank within the next three years. I am currently the CRA Officer (in addition to some other titles). All I've ever really done in this role is make sure our public file is updated by 4/1 every year, and perform an annual analysis report on lending volumes in our AA's (we geocode everything). Obtaining a satisfactory rating isn't really hard to accomplish when you're a "small" bank.

As I understand it, when you become an ISB, obtaining a satisfactory rating is much more difficult. What are some best practices or activities we could start doing to get prepared for being examined under ISB status? We won't have our next CRA exam until sometime in 2015.

As someone who just went through a horrid CRA Exam for just this very thing, I would advise you to make sure your bank participates in and documents any activities which would count for community development credit. You're ahead of the game, as at least you can prepare for the pending change.

I would also make sure you have an excellent understand of the Guidance published in March of last year, as that information is critical.

Develop and initiate a community development program at least one year before you attain ISB status because you immediately will be subject to ISB performance standards and you must pass the community development part of the exam. Failure to get at least satisfactory on your CD activity will result in needs to improve or substantial non-compliance on your composite performance evaluation. It takes at least a year to get an effective community development program that produces results. So don't wait until you attain ISB status. It would be a big mistake.

I agree. It is best to calculate when you will most likely reach ISB status and begin to develop and implement a plan for CRA: services, lending, investments - whichever mix your performance context shows will best fit your AA and your bank.

This is all very good information. Thanks all!

It's good that you recognized the change in your CRA status this early. I'd like to leverage off of Len S's comments and add a piece of advice.

First the advice: contact your examiner and invite them to a meeting at your bank to discuss with you how life under CRA will change as an ISB. Chances are they, or someone in that regulatory agency, already have a presentation that covers this. I suggest that major bank decision makers, not just compliance staff, attend this meeting. That means the CEO and the chief investment officer, at the least, as the bank will have to be cognizant of community development lending, investments and services under the ISB test. When you cross over to large bank status, I suggest adding the chief IT officer to the mix, too, as they'll have to devise the method of collecting lending data.

And now to leverage off of Len's comments: Your lending performance will still be judged via the small bank CRA test, i.e., loan to deposit ratio, lending in the AA, geo and borrower distribution, and response to complaints. What the ISB test adds is the community develop test. Get intimately familiar with the regulation's community development definition.

From that you'll see that your garden-variety investments won't garner you any CRA credit. This lead time you've given yourself, and the chief investment officer, is plenty in which to revise the bank's investment strategy, and identify and acquire qualified investments. Same thing with CD lending and services, which is where the CEO and chief lender may come in.

Your anticipation on tnis should bode well for you, avoiding the pitfalls that unprepared banks have experienced when their examiners show up for their first ISB exam and find little or no CD investments or services. Good luck. AR.