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#367756 - 06/03/05 03:22 PM Inside/Outside Ratio
Anonymous
Unregistered

I'm a seasoned CRA Officer and posting anonymously because I think I should know this answer but I can't figure it out.

I have many many many assessment areas, from huge Multi-State MSAs to small rural non-MSA areas. In previous exams, one Inside/Outside calculation was performed for the bank as a whole. In a more recent exam, the FRB performed an inside/outside calculation for each assessment area.

My question: How did they do that? I can calculate the number of loans made in a particular assessment area ("AA"), but what is the outside ratio? All other loans? That wouldn't make sense because some of them would be in another assessment area. Or, would the outside ratio be the same for each AA calculation, that being just all loans outside any of the assessment areas? Example: 25 loans inside AA#1. 30 loans inside AA#2. 10 loans outside any assessment area. Would the I/O calculation for AA#1 be 25/40? Or would it be 25/10? If the latter, then the I/O calculation for AA#2 be 30/10?

Aaarugh!! I know I could ask the regulator, but I don't want to. I'm losing sleep over this because I should be able to figure this out. Please help. I've ran out of under-eye cover.

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#367757 - 06/03/05 03:52 PM Re: Inside/Outside Ratio
Luper Offline
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Joined: Mar 2003
Posts: 105
They may have set up separate assessment areas for each primary market. I used to do that when I worked for a large national bank.
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#367758 - 06/03/05 06:48 PM Re: Inside/Outside Ratio
CRAatBOK Offline

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Further South than I wanna be.
Luper, please share with us how you did this. I am with Anon, I have tried to figure a way to do it and has not done so yet.
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#367759 - 06/03/05 08:03 PM Re: Inside/Outside Ratio
Luper Offline
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Joined: Mar 2003
Posts: 105
We use a software that allows us to create a number of "assessment areas" and created such an area for each major market. The software also allows us to select which assessment area to run the various reports against. If you do not have similar software, I am not certain how you would accomplish this.
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#367760 - 06/03/05 08:20 PM Re: Inside/Outside Ratio
Lestie G Offline

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Posts: 3,605
Near the Land of Enchantment
We have software that does that as well. But how would you compute an inside/outside ratio for an individual assessment area? You can get information on the number and dollar amount of loans inside the AA, but what do you use for the loans outside the AA? Some/many/most of those outside loans are going to be in your other assessment areas, right? So what would the ratio tell you?

I think that's what the anon poster and KCGeoQueen are trying to figure out. I'm stumped as well!
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#367761 - 06/03/05 08:49 PM Re: Inside/Outside Ratio
Len S Offline
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Joined: Oct 2004
Posts: 1,859
Connecticut
I believe what you are looking at is the ratio for each state you are in. The FFIEC A&D database has these calculations. So a multi-state lender can have a number of Assessment Area Concentration ratios based on the lending in the assessment areas inside a given state and outside those AA in the same state.
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#367762 - 06/03/05 11:09 PM Re: Inside/Outside Ratio
HRH Dawnie Offline
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Anchorage Alaska
I'm with Len on this guessing game. You wouldn't calculate an inside/outside ratio on each assessment area (waste of time and it's too variable to be of value given a million ways to calculate) But, they could pick...say the state of Virginia, and calculate the loans in your AA in Virginia and the loans outside of your AA in Virginia. They'd do the same for Texas, etc., giving them an idea oif there is a concentration of loans outside of your AA's in any one particular area that needs to be addressed.
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#367763 - 06/07/05 01:22 PM Re: Inside/Outside Ratio
AnonRegulator Offline
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Joined: Mar 2002
Posts: 451
Everywhere, USA
Quote:

I could ask the regulator, but I don't want to. I'm losing sleep over this because I should be able to figure this out.




I don't know how they would calculate it either. I suggest you overcome your pride as a seasoned CRA officer and ask your examiner about this. There's a reason that a seasoned CRA officer doesn't know the answer to this. The conversation should be very interesting, as I'm speculating the examiner will see the flaw in their calculation. AR.

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#367764 - 06/07/05 04:20 PM Re: Inside/Outside Ratio
Anonymous
Unregistered

Ok, Seasoned, too-much-pride CRA Officer here (the poster formerly known as Anonymous).

Thanks everyone for the responses. I see the logic in calculating a state inside/outside, but I also see a flaw there as well. Using Dawnie's example, if they calculate the Virginia I/O as Inside being all loans in Virginia and Outside being all loans outside that state, what happens to the loans outside the state of Virginia that are in another one of my assessment areas? It wouldn't be correct to measure those loans as outside an assessment area because they are not. (My bank is relatively large - several billion - we are in multiple states. And "Outstanding" by the way )

Again, thanks for all of the responses. However, I'm taking the advice of our sage AnonRegulator and having this conversation with my examiners. I don't feel quite the fool now.

Gulp gulp (sound of pride being swallowed).

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#367765 - 06/07/05 04:57 PM Re: Inside/Outside Ratio
Anonymous
Unregistered

I read Dawnie's post to say that look at loans made in just Virginia. Compare loans inside of the Virginia AA with loans that are outside of the Virginia AA, but still inside the Virginia state lines. Am I right Dawnie?

-arye (sorry, not logged in again )

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#367766 - 06/07/05 06:06 PM Re: Inside/Outside Ratio
HRH Dawnie Offline
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Joined: Aug 2002
Posts: 7,353
Anchorage Alaska
Yes Arye That is what I was saying. I can see a regulator calculating the inside/outside ratio in a particular state to see if the AA is appropriate. Say in Virginia you ended up with an I/O ratio of 42% in and 58% out, but in other states you're more in the 80% in and 20% out range. They might want to know why your AA in the lower state was what you'd chosen.
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#367767 - 06/08/05 03:07 AM Re: Inside/Outside Ratio
Len S Offline
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Joined: Oct 2004
Posts: 1,859
Connecticut
The Inside/Outside ratio is calculated in the annual A&D database released by the FFIEC. The calculation is done for the entire institution and also is done state by state. In the later case, the regulators take all the bank's loans inside a state and compare that with their loans inside the AA in that state. In other words, the calculation considers only the loans in a given state. In the case of a multi-state lender a ratio can be calculated for each state in which the lender has an assessment area. This is almost certainly the type of calculation that confused the original questioner.
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#367768 - 06/08/05 05:43 AM Re: Inside/Outside Ratio
Princess Romeo Offline

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#367769 - 06/08/05 05:45 PM Re: Inside/Outside Ratio
AnonRegulator Offline
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AnonRegulator
Joined: Mar 2002
Posts: 451
Everywhere, USA
Sorry that my earlier post came off so sarcastically. I was really trying to get across the point that a seasoned CRA officer couldn't know the answer to the question because I don't believe there is an answer to the question. So, you shouldn't feel bashful about asking questions here or with your examiners.

Trust your instincts and knowledge. Politely challenge the examiner on how they came up with the in/out ratio for individual AAs. AR.

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#367770 - 06/09/05 03:58 AM Re: Inside/Outside Ratio
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Quote:


Trust your instincts and knowledge. Politely challenge the examiner on how they came up with the in/out ratio for individual AAs. AR.




Ahh...the days of politely challenging an examiner......

Doesn't work these days in a BSA exam however......

Hopefully CRA exams are still civil.
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