Under Community Development I see the following requirements.

1. An institution should "APPROPRIATELY" assess the needs in its community. (Sounds like a written description is needed)

2, Engage in different types of community development activities.(The bank must establish and actively engage in on going community development activities)

3. Take "Reasonable" steps to "APPLY" its community development "Resources" strategically to meet those needs.
(Must maintain records to show how the bank is addressing the needs of the community)

4. The number and amount of community development loans is a strong consideration in the exam.(Active engagement and record keeping)

5.The extent of the banks efforts to provide Community Development Services to LMI area is measured. ( Record keeping)

6. How well the bank responds to the results on the community development needs and opportunities survey is measured.( Record keeping and analysis)

7, The bank must have a good knowledge of the dremographic and economic conditions of its community. (Another written report that will need to be periodically updated)

There are other consideration that are included in the Community Development Test but thats the meat I think.

Plus the banks loan portfolio will be examined for CRA compliance with the number dollars and percent of loans inside vs outside the assessment area

Loan distribution through out the assessment area and in diferent income levels to individuals and businesses, and in the various geographies in the assessment area.

So IMO you will be required to meet the current CRA Lending Test as well as the Community Development Test.

Examiners will be using the banks HMDA data, augmented loan reports, and ANY other reports that have been generated BY THE INSTITUTION to analyze the extent of its CRA lending activities.

Yes you can dump data collection if you do not want to have any idea how you stand on the Lending Test.

Peformance context and tracking. It's Big Bank Lite They just don't have to bother with the reporting which is nice to say the least.

I guess arguing about the last line is futile. They do have the ability to analyze JUST like the examiners do. The data on "how to" pull the sampling is available to the banks, just as it is to the examiners.

Don, based on my current situation, I agree with you. This bank's strength is small business lending, and I'm not going to allow our CRA evaluation to hinge on publicly-available HMDA data alone. I need the ability to analyze our business lending, and continuing the data collection procedures we've been struggling with for a year is the best way - especially now that I have everyone (and their replacements) trained. And, given our rate of growth, we might end up back in large bank territory inside of 4 years. Why would I ash-can the whole process now?

Again, this applies solely to the position I'm in today. If I'm at a different shop, I might have a different opinion. But as things are right now, this proposal does not reflect regulatory relief at all.

Don,
Your points are well made, and I would point out that the revised regulation makes it abundantly clear that a superficial effort to identify community development opportunities will not be acceptable, "the agencies will expect an institution to make an assessment (regarding Community Development Opportunities) using information normally used to develop a business plan or identify potential markets and customers (emphasis added)." In other words, every intermediate-size bank should a develop a formal written business plan for community development activities and any follow-up should be documented in writing.

The last response was from me. I forgot to sign in on the last post

Len I don't have a formal business plan for development of markets, etc. I'm large bank and have been expected to be making these efforts for several years.

Instead, I document (under CD services) the hours myself and other staff spend at organizations meeting for these purposes. I use that data base to develop my statement (at exam time) about community development opportunities (and my sources for determining their needs). AFter the data base is compiled, it's and easy source to do a write up using it as a guide.

Our organization is a large multi-bank holding company and consists of banks that fall in all three categories. We have been reporting as a large bank. The revised rules appear to let us continue to report as a large bank, but could any of our smaller banks "opt-out" if you will of reporting as a large bank? Or would we, as a holding company, decide that all our banks will continue to report as a large bank? Thank you.

Here are excerpts from the ruling:

The March proposal responded to community banks concerned about regulatory burden by extending eligibility for streamlined lending evaluations and the exemption from data reporting to banks under $1 billion, without regard to holding company assets.

The elimination of the $1 billion holding company threshold as a factor in determining whether banks will be subject to the streamlined CRA examination or the more in-depth CRA examination applicable to larger institutions will affect a limited number of small banks, which are affiliated with holding companies with assets over $1 billion.

Dawnie, I believe that now that Community Development Activities are ABSOLUTELY NECESSARY to pass a CRA exam for an intermediate-size bank, the regulators will enforce a higher standard than in the past when Community Development was just one of a number of considerations in the PE. Now that a passing grade is indispensible and the REVISED REGULATION REITERATED THE EXPECTATION of a BUSINESS PLAN I don't think you can be so casual. Moreover, with everything dependent on a satisfactory community development rating, what CRA Officer in their right mind would not develop and implement an in-depth plan that would incorporate a study of the community development market including identity of potential borrowers and competitors as well as a strategy for success?

If you've been getting one outstanding after the other and don't even need to pass community development I can understand an informal approach. But I don't think that would be appropriate when merely getting an overall satisfactory PE is dependent on doing well on community development. And in light of the large number of intermediate-size banks that didn't make even one community development loan or who earned SNC or NI on the investment test I wouldn't be so sanguine about not having a formal business plan for community development activities.

Don - please help me interpret. So this is saying then that the "small" banks in our holding company can decide on their own to be evaluated as a small bank (or intermediate small bank) and we can't make this decision as a holding company?

"please help me interpret"

I don't know who "HAS" to make the decision.I haven't found anything that gives specific instructions on that. I would think the holding company could decide but its something I would call your friendly regulator on. Its new to them too.

From a holding company point of view, if it were me, I wouldn't want individual banks doing something that's going to disrupt anything I had in place to monitor whats going on. Even if you, or they, elect to do the streamlined exam, you still need to look at their Community Development plan that needs to be written. Plus monitor on some periodic basis that there really are CD activities and loans being made. Something should be in place at the Holding Company level to make sure they have a good chance to get the Satisfactory in CD.

So IMO your monitoring days are not over. I do have questions on how will they examine a Holding Company with banks in all exam categories.

Len I didn't say I was remotely casual about putting together my performance context in any sense. And we are not a bank that has had Outstanding after Outstanding.

I put together a 28 binder package for examination when the time comes. The particular piece in regards to community development activity covers the "why's" on the activities I chose to partake in. It also covers the lack of activities if that is necessary (I might not have much for investments in comparison to my net tier one, but I have an abundance of CD Lending because there was a greater need).

CRA fluxuates constantly. Having a policy in place (maybe you might think of that as a plan) that details your procedures and community outreach efforts is valuable, but it's a document that once created, need not be rewritten constantly. The activities I choose to be involved in are not stagnent and one business plan would NOT cover that multi-year period of exam. You HAVE to be flexible to serve the market.

I don't take the CD portion of the test lightly. I must receive an outstanding in these areas to receive my overall outstanding. From day one of exam period this is in my mind. I'm just saying that wasting time doing a major majket study (mind you that's normally done IN the office) isn't worth half the time spent OUTSIDE the office learning the current and future needs of the market. Analyzing potential borrowers IN the office won't get you a loan. You have to go OUT and interact with those borrowers.

I'm going to quit arguing on this issue because it seems you all want to make rocket science out of a basic performance context, something we ALL (no matter the size) needed to do. Now those who took it casually need to put more effort into it, but it's still not rocket science, I don't care what ya'll say. I've walked into many markets I don't know and helped banks develop one in a few hours. It's a matter of the right head set, and some time IN the market. Then it's presentation to your examiners. Nothing more, nothing less.

Good CRA officers have been doing it for some time. And...I'm the CRA Officer who IS in my right mind that will not waste my time developing and implementing an in-depth plan that would incorporate a study of the CD market including identity of potential borrowers, competitors as well as a strategy for success. I'm too damn busy being successful to spend that time in the office pushing paper.

Don - thank you for sharing your thoughts on this. We had decided to continue to collect the data for all our banks but I think we do need to discuss it with our regulator. It's going to be complicated trying to comply with 3 sets of exam procedures.

I'm going to quit arguing on this issue because it seems you all want to make rocket science out of a basic performance context, something we ALL (no matter the size) needed to do. Now those who took it casually need to put more effort into it, but it's still not rocket science, I don't care what ya'll say. I've walked into many markets I don't know and helped banks develop one in a few hours. It's a matter of the right head set, and some time IN the market. Then it's presentation to your examiners. Nothing more, nothing less.


A-men!

Where can I find the new CRA examination procedures? I have been bogged down in BSA and am just now getting to other areas...

You can find them on the FFIEC's website:

http://www.ffiec.gov/cra/examinations.htm

Thanks! That's life in an intermediate small bank - not only CRA Officer, but BSA, Compliance, and lots of other stuff.