1st time Big Bank CRA ?: Is there a magic # or % of asset size that should be in CRA qualified investments? ie: 1% of asset size in MBS? Please help, we are being examined 1st time as big bank in 4th quarter. Yikes!

There is no magic amount, but that doesn't mean I wouldn't look at the PEs on some of my peer banks to see what they had and how they came out.

Sometimes the innovativeness and purposes mean more than the dollars. That is, downtown revitalization and jobs may count 3 or 4 times better than a CRA mutual fund investment.

Anyone who gives you a specific figure is either nuts, or lying to impress you so, 2% is my answer or maybe 20%...

There is really no figure, and despite the fact that on occasion you'll see folks chat about one, anyone in the business should know that it's all about opportunity, uniqueness and peer groups.

Most agencies are using net tier one as their basis for determining the level of investments you have compared to your peers. I would highly suggest you pull the exams of your peers and see what their % is in relation to their net tier one. Also pull other banks across the nation that are examined by your agency and look at their % compared to net tier one, noting the final outcome of their investment test. (I personally only pull banks that received an outstanding rating for a stretch goal).

Chart these on an excel spread sheet and see how your figures stack up.

Net tier one is used because it's a more accurate reflection of your bank's opportunity to invest. You could be $200 billion in size and have only $100 million in net tier one (ok you're not in good financial shape if this is the case, but it's just an example) which would leave you with less to invest than your asset size would typically indicate. Or you could be like me, with $2 billion in assets and over $450 million net tier one (nearly three times the average for banks my size). Given my high net tier one you'd expect that I would have substantial investments, but then the opportunity issue comes up. I can't buy mortgage backed securities because they never have enough of my states concentration to get credit for them. That leaves me chasing (and I do mean CHASING) down every reasonable investment opportunity I can get my hands on. I also require that 45% of our donations are to CRA qualified entities or programs just to get additional investments. I have little opportunity, yet lots of cash so you might see me score higher on the investment test than you for a lower percent of net tier one just because of the lengths I have to go to invest.

You also then have to consider the complexity or uniqueness of your investments. As Andy mentioned, a $500M investment into a very unique loan fund could garner you far more credit on the test than a $2 million investment in mortgage back securities. Why, because it was harder to put together, and it's creative.

Start pulling exams and good luck!