1 FDIC San Francisco Region Bankers’ Forum Community Reinvestment Act – Recent Amendments August 31, 2005

2 Overview Provide an overview of the Amendments Provide tips on how to achieve your bank’s optimal CRA performance Questions & Answers

3 Amendments 1) Increased small bank threshold 2) New category: Intermediate Small Banks 3) Expanded definition of “Community Development” 4) Clarified the effects of discriminatory or certain credit practices on CRA rating

4 Existing CRA Tests Small Banks – TA less than $250M Streamlined lending test Large Banks – TA > $250M Includes small banks affiliated w/holding co. exceeding $1B in TA 3 part Test – Lending, Investments, & Services Collected and reported data on small business and small farm loans

5 New CRA Tests Small Banks – No change Intermediate Small Banks – New Test TA $250M to $1 billion Subject to small bank streamlined lending test and new flexible community development test No collection of data for small business/farm loans Large Banks – over $1 billion No change

6 Intermediate Small Banks Two Separately Rated Tests Must receive Satisfactory in both tests New Flexible Community Development Test Innovative and Complexity Asset Size based on Changes to CPI

7 Intermediate Small Banks Not required to collect and report small business and small farm loans Not required to collect and report location of HMDA loans outside MSA

8 HMDA Data An important note for HMDA reporters: The collection of borrower’s race, ethnicity, gender, and income are still required for loans made outside an MSA.

9 Community Development Important to identify and participate Activities must have primary purpose

10 Community Development – Existing Rules Primary Purpose:  Affordable housing  Community services targeted to LMI individuals  Activities that promoted economic development  Activities that revitalize or stabilize LMI geographies

11 Community Development (expanded) Revitalize and Stabilize Revisions to Include: Distressed or Underserved non-MSA middle income rural areas Disaster areas to be eligible FFIEC to publish eligible areas Expanded definition is responsive

12 Discriminatory or Illegal Credit Practices Could Adversely Impact CRA Rating Evidence of Discrimination Illegal Referral Violating Section 8 RESPA TIL Concerning Right of Rescission Unfair or Deceptive Practices violating Section 5 of FTC

13 Discriminatory or Illegal Credit Practices (continued) Compliance Management System may be impacted Bank’s policies/practices Consumers being harmed Management’s corrective actions Historical performance

14 Performance Context Opportunities in assessment area for lending, investments & services Bank’s product offerings and business strategy Bank’s capacity & constraints Size Financial condition Economic climate Safety & Soundness limitations

15 Performance Context (cont.) Past performance Performance of similarly situated lenders Written comments in bank’s Public File Demographic Data

16 Achieving Optimal CRA Performance Only 15% are rated Outstanding Review your assessment area boundaries New branches or office Changes in product mix Review in light of 2000 census tract designations

17 Achieving Optimal CRA Performance (continued) Review your lending distribution Make sure majority of lending is within assessment area Review those areas outside the assessment area

18 Achieving Optimal CRA Performance (continued) Establish and communicate goals for CRA performance Are we striving for an Outstanding? Help examiners understand your area and “performance context” You know your market better than examiners Explain anomalies and unique characteristics of your assessment area

19 Achieving Optimal CRA Performance (continued) Ensure your organization understands the definition of community development Remember – activities must meet definition and primary purpose Develop a mechanism to identify & track community development activities Don’t get credit if you don’t provide for examiners to review Missed or forgotten

20 Achieving Optimal CRA Performance (continued) Promote strong HMDA & CRA (if applicable) loan data integrity Potential civil money penalties Affect compliance management system Strong controls and audit Determine how much community development activity is enough? Every institution is different Compare to performance context Compare to similarly situated banks in your market

21 Achieving Optimal CRA Performance (continued) Measure your bank against similarly situated banks and the market Review banks w/Outstanding CRA rating Ensure that your fair lending program and credit practices are in order Consider CRA implications for opening and closing offices

22 Achieving Optimal CRA Performance (continued) Partnership with Community Groups Be proactive

23 Achieving Optimal CRA Performance (continued) Serving your community Expansion Plans Reputation Opportunities Increase profits

24 Resources Joint Final Rule: CRA Exam Procedures Need Help? Jimmy Nguyen or (415)

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