2. Breaking Down the CRA Exam
Josh Silver, Vice President of Research and Policy, NCRC
April 20, 2012
3. Breaking Down the CRA Exam
Federal Agencies Conducting CRA Exams
• Federal Reserve Board http://www.federalreserve.gov
• Federal Deposit Insurance Corporation http://www.fdic.gov
• Office of Thrift Supervision (ceased operations but still has exams on
wepbage) http://www.ots.treas.gov
• Office of the Comptroller of the Currency http://occ.gov
• Federal Financial Institutions Examination Council http://www.ffiec.gov
4. Breaking Down the CRA Exam
CRA Exams: Frequency & Ratings
• CRA exams scrutinize banks about once every two years
for banks or thrifts with assets > $250 million. Once every
four or five years for small banks with assets < $250 million
• Banks and thrifts receive one of four grades: Outstanding,
Satisfactory, Needs-to-Improve, and Substantial Non-
Compliance
• Possible Low- and High-Satisfactory Ratings for
component tests and geographical areas
5. Breaking Down the CRA Exam
How to Find Out About CRA Exams
• Every
3 months, the federal agencies publish a
schedule of CRA exams.
• Obtain the schedule from the federal agency
websites or from NCRC.
• Locate regional office of agency conducting CRA
exam – NCRC can help
6. Breaking Down the CRA Exam
Small Banks
• Less than $250 million
• Lending test only
• Five factors including responses to public
complaints
• No reporting of CRA data on small business or
community development lending
7. Breaking Down the CRA Exam
Intermediate Small Banks
• Banks and thrifts with assets between $250 million
and $1 billion.
• Lending and community development (CD) test.
• Not required to report CRA data on small business
or farm lending
8. Breaking Down the CRA Exam
Large Bank CRA Exams
•Large bank exam – banks with assets above $1
billion
• Lending, investment, and service test.
• Large banks must report CRA small business,
farm and CD loan data.
9. Breaking Down the CRA Exam
Exams for Wholesale and Limited
Purpose Banks
• Community Development Test
• Strategic Plan – in lieu of regular exam, mostly
used by non-retail banks
10. Breaking Down the CRA Exam
Parameters for CRA Exams
• Assessment Areas – Make sure do not exclude
LMI areas
• Affiliates – Bank can choose to include/exclude
affiliates
• Performance context – make sure examiners
adequately asses needs; don’t excuse poor
performance on poverty rates, or lack of investment
opportunities
11. Breaking Down the CRA Exam
Performance Measures
• Do the measures fairly and rigorously measure performance?
• Lending Test – Bank’s percent of loans to LMI compared to all lenders,
as a group. Consistently above or below? OCC – Market share analysis
– Bank’s share of loans in LMI market compared to bank’s overall
market share
• Investment Test – investments to Tier 1 capital or assets; in addition to
quantitative measures, are investments innovative or responsive
• Service Test – any quantitative information on number of bank
accounts; percent of branches in LMI neighborhoods compared to peers
or demographics?
12. Breaking Down the CRA Exam
Words Used by Examiners
• Excellent - corresponds to Outstanding
• Good – corresponds to High Satisfactory
• Adequate – corresponds Low Satisfactory
• Poor – corresponds to Needs to Improve
• Very poor – corresponds to Substantial
Noncompliance
13. Breaking Down the CRA Exam
Why Being Active on CRA Exams is Important
• CRA has leveraged trillions of dollars in loans, investments, and
services since 1977; studies have demonstrated positive impact in
increasing safe and sound loans and investments: Federal Reserve,
Harvard University, NCRC
• Comments on CRA exams can influence ratings overall or in one or
more geographical areas or component tests; lower ratings on any of the
exam components are motivation for banks to improve
• Merger application process – more likely bank will make reforms or
make a specific pledge if members of public comment; $180 billion
Capital One pledge, for example.
• On-going discussions with bank CRA officials in your community
14. THANK YOU!
To follow up with the speaker:
Josh Silver, Vice President of Research and Policy
National Community Reinvestment Coalition
202-464-2708 or jsilver@ncrc.org
Presentations will be available at www.ncrc.org/conference
by
April 30, 2012
