I have been assigned the task of quantifying what the Bank needs to do in the lending test and community development test (we are an ISB) to ensure a satisfactory rating. Are there any hard and fast rules as to what amount of the bank's lending should be done in low and moderate income geographies, number and dollar amount of community development loans, number and dollar amount of qualified investments, etc. It has been my experience that CRA exams are subjective, but management wants numbers nailed down. Any guidance is appreciated.

The best thing to do is to:

determine the needs in your community as part of your performance context
review exam reports of peer ISB banks in your region to see what they did and the ratings received.

I like to make a chart of each bank and break out CD loans, services, investments. That will give you a good idea of how the exainers in your area view things and allow you to set goals and a method to achieve those goals.

Consider asset size, product set, etc. when making your comparisons.

As far as lending to LMI people and in LMI areas, it's good to look at the demographics in your area. If 10% of the households in your assessment area are considered LMI, you would strive to have at least 10% of your household loans to LMI people. Similarly, if 10% of the households in your assessment area are located in LMI census tracts, hopefully 10% of your loans are in those census tracts.

I use demographic data regarding the geographic distribution of small businesses, small farms, owner-occupied units, and households, to analyze the geographic distribution of our small business loans, small farm loans, mortgage loans, and consumer loans, respectively. Here I'm analyzing the location of our customers, regardless of their borrower characteristics.

Similarly, I compare the demographic data of our customers to that of the entire assessment area to analyze who we are lending to, regardless of where they are located.

As Kelsey has stated examiners use demographic data to compute your performance standards. They also use the reported lending experience of lenders reporting under HMDA and CRA to compute "penetration rates" in the LMI tracts and to LMI borrowers and very small businesses. It is relatively easy to compute quantitative performance standards. You can get the information for free from the FFIEC (although the formatting is not the best) or from commercial sources such as GeoDataVision.

Len S,

Where on the FFIEC website would I look for this information?

CRA data products
HMDA data products
Census data

Does one review other institutions through their performance evaluation?

Yes, you can review other banks' performance evaluations and see how they were rated, and how they performed in each category with actual #s (loans, investments, services).

Yes, but I ususally just end up frustrated when I see that the competition down the street receives better ratings with a fraction of the effort we put forth. We'd be outstanding if we were examined like them.

I always also include in my chart who the regulator is, when the exam occurred, etc. Showing the ratings (by the same regulator particularly) can help with your own rating. The chart is part of your package for the regulators.

I would want to know why the difference in ratings for a similar size bank, similar product set, same region, same or better effort, etc.

I will have to do that next time. Here's my case in point...

Them:
$2 billion in assets
lending data comparable
no CD loans
$250 thousand CD investments
reasonable CD services

Us:
$750 million in assets
lending data comparable
$7.9 million CD loans
$2.4 million CD investments
reasonable CD services

We both received a high satisfactory in lending, low in investments, and they received a high in services while we had a low. Unacceptable, given the fact that they are more than twice our size and in the same markets.

By showing a comparison and documenting everything elaborately, a bank I worked with went from Needs Improvement (and a threat to continue that rating) to overall high satisfactory and outstanding in investments.

Unfortunately, both of our PEs were published at the same time, so it wasn't until after the fact that I realized how differently we were examined. I will definitely be more prepared next time with peer data.

That is a shame and very annoying!