CRA STRATEGY DEVELOPMENT. Housing Now! Conference October 15, 2015

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April Fisher
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1 CRA STRATEGY DEVELOPMENT Housing Now! Conference October 15, 2015

2 Exam Types Small bank Less than $305 million in assets as of last two year ends Intermediate small bank (ISB) Assets of a least $305 million, but less than $1.221 billion as of last two year-ends Large bank Assets of billion or greater as of the last two year-ends Wholesale and Limited Purpose Strategic Plan

3 Understanding CRA Evaluation Criteria Determine Bank Evaluation Criteria Small Bank Small Bank Evaluation Criteria - Lending Intermediate Small Bank Small Bank Evaluation Criteria Lending Community Development Large Bank Large Bank Evaluation Criteria Lending Test Service Test Investment Test

4 Primary Purpose In order to receive consideration under the CRA, loans, qualified investments, and services must have a primary purpose consistent with the definition of community development

5 Defining Community Development Affordable Housing for LMI individuals (single & multifamily) Community Services targeted to LMI individuals Activities that promote Economic Development by providing financing for small businesses or small farms that meet SBA or Small Business Investment Company (SBIC) eligibility requirements or have gross annual revenues of $1 million or less

6 Defining Community Development Activities that revitalize or stabilize LMI geographies Designated disaster areas Distressed or underserved nonmetropolitan middle-income geographies Loans, qualified investments, and services that support, enable, or facilitate Neighborhood Stabilization Program (NSP) eligible activities in designated target areas

7 Performance Context A broad range of economic, demographic, institution and community-specific information that an examiner reviews to understand the context within which an institution s record of performance should be evaluated.

8 CRA Goals and Objectives Understand and communicate the role and function of CD activities CD products generate revenue; CD initiatives can expand a bank s market; CD initiatives may complement existing product lines; CD risks can be mitigated and managed. Consider costs!

9 Defining Community Development Examples of CD Loans Affordable housing rehabilitation and construction Loans to mission-driven nonprofit organizations serving LMI individuals Loans in support of community facilities Loans to CDFIs, CDCs or minority- and women-owned financial institutions Loans to governmental entities Loans to finance environmental cleanup or redevelopment of industrial site

10 Defining Community Development Examples of Qualified Investments Grants to or Deposits or Shares in: Financial intermediaries Organizations engaged in affordable housing Organizations promoting economic development Organizations supporting economic empowerment Low-Income Housing Tax Credits

11 Defining Community Development CD Service Examples: Technical assistance to organizations serving LMI housing needs Executive loan program Credit, home ownership, financial, or small business counseling or coaching Financial planning to promote CD School savings programs

12 Real Life Example To support affordable housing in the state, including the bank s assessment area, ABC Bank made qualified community development investments in the Genesis Community Loan Fund, Inc., a statewide CDFI that provides resources to affordable housing entities in the state. The Genesis Community Loan Fund supports community development corporations, community land trusts, housing authorities, and social agencies in developing housing for low-income families and individuals.

13 Real Life Example XYZ Bank made an equity investment of $2 million, which, along with other investors, provided $50 million in equity for the a New Markets Tax Credits Fund, a CDE. The CDE is the for-profit subsidiary of a certified CDFI loan fund. This CDFI loan fund was founded by a consortium of banks and corporate investors to provide loans for the construction and permanent financing of affordable rental housing.

14 Real Life Example A coalition of Colorado banks founded the Funding Partners for Housing Solutions, a CDFI dedicated to affordable housing. Through the partnership, the banks provide mortgage products, and local housing agencies provide financial education and client support. Bank staff also serve as the board president and member of a loan committee for the CDFI. Some banks also maintain an equity investment in the CDFI and still others grant funds to the effort.

15 Real Life Example DG Bank directs most of its community development loans and investments to affordable housing initiatives. Since the bank does not conduct any direct commercial or retail lending and thus has no infrastructure to support those activities, it partners with other financial institutions, including CDFIs, and non-profit partners to carry out its community development lending and investing using loan participations. All CDFI loan participations are on a senior basis, with various risk sharing structures, and serviced by the CDFI.

16 CRA STRATEGY DEVELOPMENT Housing Now! Conference October 15, 2015

Upon completion of this session you should: Become more familiar with the history/purpose of CRA;

CRA Basics Objectives Upon completion of this session you should: Become more familiar with the history/purpose of CRA; Become more familiar with terms and definitions under the CRA regulation; Introduce