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#55874 - 01/22/03 07:36 PM CRA: Establishing contribution budget
Bartman Offline
Diamond Poster
Bartman
Joined: Oct 2000
Posts: 1,191
Springfield
Management is taking a fresh look at our charitable contributions program, and I've been asked to gather information on how community (or other) banks determine their contributions / donations budget for the year.

I've worked for some banks that say 1% of net profits is the maximum we'll contribute. Others have said "we'll give $120,000 this year - unless the Board wants to do something else".

What criteria do you use? Percentage of assets? Percentage of pre- or post-tax profit? Flat amount? Seat-of-the-pants?

As a sub-category, do you acknowledge CRA in the process? My last bank expected 20% of it's donated funds to be given to CRA-qualified projects. Dawnie noted in a previous post that she aims for 40% of the contributions budget. Do you consider CRA separately, or together with other donations?

I appreciate your responses - if you'd rather not post publicly, please send a private message, or e-mail me at bjonker@bcsbank.com.
Last edited by mbguard; 01/23/03 08:50 PM.
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Opinions are Bartman's, not those of my employer. "A noble spirit embiggens the smallest man."

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General Discussion
#55875 - 01/22/03 08:00 PM Re: Establishing contribution budget
HRH Dawnie Offline
Power Poster
HRH Dawnie
Joined: Aug 2002
Posts: 7,353
Anchorage Alaska
Actually our standard is a minimum of 35% of all contributions going to CRA, but...we had a little problem with the budgeting this year and the number was lower. (I got a bit grumpy) So...for the next two years (during exam period) we are requiring 45% of our contributions to CRA qualified entities or events.

We do this because the Investment Test is the hardest test for us to meet. Our Net Tier 1 capital is nearly three times that of the average bank of our size, which leads the OCC to want to see huge figures in CRA investments, since obviously we can afford it. The flip side is that the opportunities in Alaska are few and far between. There is actually no possible way to invest the amounts they would like to see in CRA without giving away a quarter of our net tier one...and that...the president, nor the shareholders would approve. (Although the charities in town would love a $100MM infusion of cash annually wouldn't they?)

For this reason, we set the 35% budget on our donations. We meet once a month to determine who we donate to from the many requests we see, and if the program or chairity is CRA qualified, it does sway the vote. (I sit on the committee of five staff and determine the qualification process).

If I had the option of purchasing a bunch of Fannie Mae's or Freddie Mac's...I wouldn't put the time into qualifying the donations prior to the meeting, but on the plus side, the process allows me to document all donations that do qualify for submission at exam time.

Our actual budget is determined on several factors. We try to take into consideration what the other banks in the area are doing. We don't feel the need to be WAY over their head, but also don't want to be WAY under. We add in the amount of Tax Exempt College funds allowed by the IRS ($200M) as well as any long term committments we've made. An additional consideration is our matched funds for United Way. All in all, we tend to be somewhere in the neighborhood of $1 to $1.5MM annually.

I break down the budget to determine what amount goes to what communities by determining their impact on the bank's bottom line. IE: Our Adak branch might have 1% of the loan portfolio and 2% of the deposit portfolio, averaging a total of 1 1/2% of market share annually between the two products. They would then receive 1 1/2% of the budget for their area.

To answer your question, I guess our method is a mix of seat of pants, what the board is in the mood for, and what the competitors are doing, with a mix of profits added in.
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Dawn Coursey VP/CRA Queen

CRA Rating is in...Oh who cares...I'm home with the baby.

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#55876 - 01/23/03 09:53 PM Re: CRA: Establishing contribution budget
Uncle_Milty Offline
Gold Star
Joined: Jun 2002
Posts: 434
New Jersey
Ours is seat of the pants. When they come asking that's exactly where we kick when we show them the door.

Actually, the same few local groups can count on us for a contribution each year. Most are CRA related.

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