The Community Reinvestment Act Building Michigan Communities Conference April 29, 2019 Paul Ginger, District Community Affairs Officer Office of the Comptroller of the Currency

Developing Bank Partnerships Bank Motives for Partnerships: Welfare of the community and the bank Market Share Income and profits Risk Mitigation Reputation Community Reinvestment Act

CRA Basics – Obligations of Banks The Community Reinvestment Act Federal law passed in 1977 that encourages banks to meet the credit needs of the communities they’re chartered to serve Including low- and moderate-income neighborhoods Consistent with safety and soundness

CRA Basics – Bank Regulators CRA applies to banks regulated by: Federal Deposit Insurance Corporation Office of the Comptroller of the Currency Federal Reserve Banks

CRA Basics – Duties of Regulators Congress directed regulators to … Evaluate how well each bank meets the credit needs of its community, and assign one of these public ratings to every bank: Outstanding Satisfactory Needs to Improve Substantial Noncompliance

CRA Basics – Duties of Regulators CRA also requires the regulators to: Issue a public report containing the facts and data underlying each rating Take a bank’s rating into account when reviewing certain applications from the bank Encourage banks to help meet credit needs in their communities

Sizes of Banks Under CRA Small Banks TA <$321 million* (about 70% of all banks) 1 CRA test: Lending Intermediate Small Banks (ISB) $321 million - $1.284 billion* (20% - 25% of banks) 2 CRA tests: Lending + Community Development (CD) Large Banks > $1.284 billion* (5% - 10% of banks) 3 CRA tests: Lending + CD Investments + Services *effective 1/1/2019: thresholds updated annually

CRA – Lending Evaluation 3 main concerns of all bankers monitoring their lending for CRA: Activity – Is the bank actively lending? Geography – Is the bank lending in its Assessment Area and in LMI areas in its AA? Variety – Is the bank lending to borrowers with different incomes in its AA?

Small Bank CRA Exam Lending Test = 100% of rating Evaluation criteria: Loan to deposit ratio In / out ratio Geographic distribution Borrower distribution Responses to complaints

Intermediate Small Bank CRA Exam Community Development (CD) Test Lending Test Criteria: Loan to deposit ratio In / out ratio Borrower distribution Geographic distribution Responses to complaints CD Loans CD Investments CD Services Responsiveness to needs The bank must be rated Satisfactory on both tests to be Satisfactory overall

Large Bank CRA Exam Lending Test Lending activity Geographic distribution Borrower distribution CD Loans Innovative & flexible lending practices 50% of rating Investment Test # and $ amount of CD Investments Innovative, complex, responsive and whether generally available 25% of rating Service Test Retail services provided to people and areas with different income levels CD services

Community Development under CRA Affordable housing for low- and moderate-income persons Community services targeted primarily to LMI persons Economic development activities that help finance small businesses or farms or that provide job training Revitalization or Stabilization activities in: LMI census tracts Underserved nonmetropolitan middle-income census tracts Distressed nonmetropolitan middle-income census tracts Certain designated disaster areas

Community Development Investments Examples of CD investments include … Donations to Housing counseling agencies Affordable housing developers Small business development organizations Workforce development programs Homeless shelters Food banks and soup kitchens Battered women’s shelters Alcohol and drug recovery centers Youth programs targeted to LMI youths Health care facilities that serve primarily LMI persons

Community Development Investments Examples of CD Investments also include: Funding a down payment assistance program Investments in CDFIs Investments in loan pools for LMI borrowers or small businesses Deposits in Low Income Credit Unions Low-Income Housing Tax Credits Small Business Investment Companies

Community Development Services Examples of retail CD Services include: Providing credit counseling to LMI persons Teaching a unit of a homebuyer counseling program A school saving program for kids from LMI families Providing credit-builder loans targeted to LMI persons Providing responsible small-dollar loans

Community Development Services Examples of CD Services to nonprofits include: Participation in an IDA program Service on a board or committee Helping design a loan program Assisting in marketing or fundraising Providing technical skills such as human resources, IT, legal, or other expertise

Steps to Partnerships Understand CRA Understand the local market Understand local banks Identify your sources of influence Talk with bankers

Concentric Circles of Opportunity Actual Market Share Market Share Available with Extra Effort Labor Intensive but Bankable Deals Deals Bankable if Enhanced Universe of Economic Needs

CRA Modernization Timeline to today March 22, 2017 - EGRPRA Report to Congress April 3, 2018 - Treasury Department Recommendations August 28, 2018 – OCC issues ANPR November 19, 2018 - end of 75-day comment period Approximately 1,500 comments received Comments on ANPR are being reviewed now OCC Goal: pursue modernization with the other agencies Watch for a proposed rule and comment period

CRA Resources FFIEC CRA Website OCC CRA Webpage https://www.ffiec.gov/cra/examinations.htm#EX_SCHEDULE Exam Schedules, Procedures, Asset Size Thresholds, Link to Q&As FFIEC CRA Ratings Search: https://www.ffiec.gov/cra/ratings.htm OCC CRA Webpage https://www.occ.gov/topics/compliance-bsa/cra/index-cra.html Resources, Procedures, Examination schedule OCC CRA Ratings Search: http://apps.occ.gov/crasearch/default.aspx OCC Community Affairs Publications https://occ.gov/topics/community-affairs/publications/index-ca-publications.html

CRA Resources What is the Community Reinvestment Act? https://www.youtube.com/watch?v=rdOpsTLvbeY The Small and Intermediate Small Bank CRA Examination https://www.youtube.com/watch?v=qjsjTbGHMIA&list=PLiPo3j0-ZhrzEpXDqg4rnYhzBN-Ip7yfR&index=1   Leading Practices for Effective CRA Programs https://www.youtube.com/watch?v=pxcrYn96Z6w&list=PLiPo3j0-ZhrzEpXDqg4rnYhzBN-Ip7yfR&index=2 CRA Community Development Defined https://www.youtube.com/watch?v=3mE3j8goojY&list=PLiPo3j0-ZhrzEpXDqg4rnYhzBN-Ip7yfR&index=3

Contact Information Contact Information: Paul Ginger, District Community Affairs Officer Office of the Comptroller of the Currency paul.ginger@occ.treas.gov 312-360-8876