Has anyone done or started a community needs assessment to be proactive with the CD part of the ISB exam? If so, how extensive did you get - polls? Internal or external surveys?

I am confused about this "needs assessment".
The Interagency Questions and Answers Regarding Community Reinvestment state that the agencies doe not intend that intermediate small banks prepare a particular "needs assessment" solely for purpose of its CRA evaluation under the community development test.

Although they state that they do not intend that an ISB prepare a particular "needs assessment" solely for the CRA evaluation under the community development test the Q&A states "Appropriate levels of each of these activities would depend on the capacity and business strategy of the bank, community needs, and number and types of opportunities for community development."

How would you know, more less be able to prove, what your community needs and opportunities are if you do not first do a community needs assessment?

Oh, and to answer the first question, we have not started our "formal" needs assessment as we are most likely going to stay with large bank status.

Our assessment area only has 7 moderate census tracts, no low income census tracts, no rural areas, disaster areas, Zones of any kind, on and on. Affordable housing? Well, in this county that is a joke, I could spout off all of the statistic but lets just say it is a sad subject in this county.

Our CD Investments are pretty good, our services are OK and our small business loans are good and I am darn handy with a computer so I think we will stay large bank for now.

We do plan to start working on a more formal needs assessment and possibly switch over in the future.

Any ISB that does not develop a Needs Assessment would be very foolish because your entire CRA PE hangs on passing the CD Activities test. The standards against which you will be evaluated are performance context data which means you can't really form an intelligent analysis of your CD performance until you know and understand your market. How confident can you be in your performance if you don't have the same basis for judging it as the examiners, i.e., performance context data? So even if regulators are not insisting on a formal written needs assessment it would be foolhardy not to have a pretty reliable collection of data on your community to put your performance into "context". How would you feel if you assured your president that your CRA performance was satisfactory only to find out from an examiner there were community development opportunities you were not even aware of. I would be afraid to risk my PE and my job without some serious documented assessment.

Contrary to what you will hear, there is no requirement for banks to develop a needs assessment for an ISB exam. If you are asked for one and don't have a "formal" one, you can rely on the regulation which doesn't require you to have a formal one.

Another point worth considering is, all the examiner's conclusions are to be discussed with you before the final PE is written. That is one of the many opportunities you have to review the logic and reasoning (and performance context) considered by the examiner in reaching their conclusions.

There is no need to "seriously document an assessment." Examiners rely heavily on bankers for performance context issues. Also, each FBA has community development/affair officers who can assist you in needs assessment. These same officers help the examiners in developing information about needs.

You really shouldn't spend your limited time "seriously documenting an assessment" when it's not required or expected. More than likely you already have the information in your bank that describes the needs of your assessment area. Examiners will use that information in forming their conclusions.

Actually there was a requirement for each ISB to contact organizations in the community and write a separate Community Needs Assessment from which the bank would develop its programs to meet the needs of the community.

Then we heard that if the needs had been written in the banks Marketing Plan that would be acceptable. Apparently that has been changed again, and this is the first public disclosure of it.

From you comments one can conclude that you are with a regulatory agency. Can we take your statement to now be regulatory policy?

It sounds like the community development/affairs officers have decided what the community development needs banks should concentrate on. It would save a lot of time if you would indicate what they are.

AEA: Let's say you've no community development loans or investments and only a cd service or two. Would you feel comfortable risking your entire PE on your undocumented opinion that there are no opportunities in your market? Would an examiner take your word that you "know your community" without insisting on some proof or documentation to substantiate your position? I've seen too many bankers who "knew their community" only to be surprised at the lending activity they subsequently learned had been going on for years right under their nose! I've yet to see an examiner accept such a casual approach.

I second Len's question.

I am in an affluent area, have decent CD investments but only one small CD loan and questionable services, our examiner threw almost all of them out during our last examination. We ARE a community bank, our officers ALL live in the community, most of us for all our lives. We KNOW our community and know there are very few opportunities. Some of the very large local banks have had opportunities in our area, opportunities that they bought out from under us smaller banks.

Can we be sure this will be good enough? If I don't have a needs assessment showing I looked, I tried and I failed, how will I prove that I did anything at all?