CRA - Large Bank Part 2 PDF

XI. Community Reinvestment Act — Large Bank d. e. 6. reported loans made in middle- and upper-income geographies within the assessment area(s); The number and dollar amount of multifamily loans in each geography compared to the number of multifamily structures in each geography; f. The number...

XI. Community Reinvestment Act — Large Bank d. e. 6. reported loans made in middle- and upper-income geographies within the assessment area(s); The number and dollar amount of multifamily loans in each geography compared to the number of multifamily structures in each geography; f. The number and dollar amount of small business and farm loans in each geography compared to the number of small businesses/farms in each geography; and g. Whether any gaps exist in lending activity for each income category, by identifying groups of contiguous geographies that have no loans or those with low penetration relative to the other geographies. If there are groups of contiguous geographies within the institution’s assessment area with abnormally low penetration, the examiner may determine if an analysis of the institution’s performance compared to other lenders for home mortgage loans (using reported HMDA data) and for small businesses and small farm loans (using data provided by lenders subject to CRA) would provide an insight into the institution’s lack of performance in those areas. This analysis is not required, but may provide insight if: a. 7. The number and dollar amount of its home purchase, home refinancing, and home improvement loans, respectively in each geography compared to the number of one-to-four family owner-occupied units in each geography; The reported loan category is substantially related to the institution’s business strategies; b. The area under analysis substantially overlaps the institution’s assessment area(s); c. The analysis includes a sufficient number and volume of transactions, and an adequate number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s); and d. The assessment area data is free from anomalies that can cause distortions such as dominant lenders that are not subject to the CRA, a lender that dominates a part of an area used in calculating the overall lending, or there is an extraordinarily high level of performance, in the aggregate, by lenders in the institution’s assessment area(s). Using the analysis from step #6, form a conclusion as to whether the institution’s abnormally low penetration in certain areas should constitute a negative consideration under the geographic distribution performance criteria of the lending test by considering: a. XI–4.4 The institution’s share of reported loans made in lowand moderate-income geographies versus its share of b. The number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s); c. The reasons for penetration of these areas by other lenders, if any, and the lack of penetration by the institution being examined that are developed through discussions with management and the community contact process; d. The institution’s ability to serve the subject area in light of (i) the demographic characteristics, economic condition, credit opportunities and demand; and (ii) the institution’s business strategy and its capacity and constraints; e. The degree to which penetration by the institution in the subject area in a different reported loan category compensates for the relative lack of penetration in the subject area; and f. The degree to which penetration by the institution in other low- and moderate-income geographies within the assessment area(s) in reported loan categories compensates for the relative lack of penetration in the subject area. 8. Review any analyses prepared by or for and offered by the institution for insight into the reasonableness of the institution’s distribution of lending by borrower characteristics. Test the accuracy of the data and determine if the analyses are reasonable. If areas of low or no penetration were identified, review explanations and determine whether action was taken to address disparities, if appropriate. 9. Supplement with an independent analysis of the distribution of the institution’s lending within the assessment area by borrower characteristics as necessary and applicable. Consider factors such as: a. The number, dollar amount, and percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper-income borrowers; b. The percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper- income borrowers compared to the percentage of the population within the assessment area who are low-, moderate-, middle-, and upper-income; FDIC Consumer Compliance Examination Manual — September 2015 XI. Community Reinvestment Act — Large Bank c. The number and dollar amount of small loans originated to businesses or farms by loan size of less than $100,000; at least $100,000 but less than $250,000; and at least $250,000 but less than or equal to $1,000,000; d. The number and amount of the small loans to businesses or farms that had annual revenues of less than $1 million compared to the total reported number and amount of small loans to businesses or farms; and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). b. e. If the institution adequately serves borrowers within the assessment area(s), whether the distribution of the institution’s lending outside of the assessment area based on borrower characteristics would enhance the assessment of the institution’s overall performance. NOTE: Refer to the appendix for additional guidance on addressing activities at the state or multistate MSA, or institution level. 12. Evaluate whether the institution’s performance under the lending test is enhanced by offering innovative loan products or products with more flexible terms to meet the credit needs of low-and moderate-income individuals or geographies. Consider: 10. Review data on the number and amount of the institution’s community development loans. Using information obtained in the performance context procedures, especially with regard to community credit needs and institutional capacity, evaluate the extent, innovativeness, and complexity of community development lending to determine: a. ii. The broader statewide or regional area that includes the assessment area(s) that support organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the institution’s assessment area(s). b. The institution’s responsiveness to the opportunities for community development lending; and d. The extent of leadership the institution has demonstrated in community development lending; and The innovativeness or complexity involved. 11. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in step number 10, consider: a. The degree to which the loans serve low- and moderate-income creditworthy borrowers in new ways or loans serve groups of creditworthy borrowers not previously served by the institution; and b. The success of each product, including number and dollar amount of loans originated during the review period. 13. Discuss with management the preliminary findings in this section. 14. Summarize your conclusions regarding the institution’s lending performance under the following criteria: The extent to which community development lending opportunities have been available to the institution; c. e. a. The number and amount of community development loans in: i. The institution’s assessment area(s); or The number and dollar amount of community development loans in the broader statewide or regional area that includes the assessment area(s), but: The extent to which these loans enhance the institution’s performance. a. Lending activity; b. Geographic distribution; c. Borrower characteristics; d. Community development lending; and e. Use of innovative or flexible lending practices. 15. Prepare comments for the performance evaluation and the compliance examination report. Refer to the appendix for guidance on addressing community development activities in the performance evaluation. Investment Test 1. i. Will not benefit the assessment area(s); and FDIC Consumer Compliance Examination Manual — September 2015 Identify qualified investments by reviewing the institution’s investment portfolio, and at the institution’s option, its affiliate’s investment portfolio. As necessary, obtain a prospectus, or other information that describes the investment(s) and the geographic area(s) or population(s) served. This review should encompass qualified investments, including investments in a broader statewide or XI–4.5 XI. Community Reinvestment Act — Large Bank regional area and in nationwide funds, that were made since the previous examination (including those that have been sold or have matured) and may consider qualified investments made prior to the previous examination still outstanding. Also, consider qualifying grants, donations, or in-kind contributions of property since the last examination that are for community development purposes. Determine: 2. a. i. Will not benefit the assessment area(s); and a. Whether the investments have been considered under the lending or service tests; and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). b. Whether an affiliate’s investments, if considered, have been claimed by another institution. iii. The extent to which these investments enhance the institution’s performance. NOTE: Refer to the appendix for additional guidance on addressing activities at the state or multistate MSA, or institution level. Evaluate investment performance using information obtained in the performance context procedures, especially with regard to community needs and institutional capacity. Determine: a. 4. Discuss with management the preliminary findings in this section. 5. Summarize conclusions about the institution’s investment performance after considering: The number and amount of qualified investments in: i. The institution’s assessment area(s); or ii. The broader statewide or regional area that includes the assessment area(s) that support organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the institution’s assessment area(s). NOTE: A large institution with a nationwide branch footprint typically has many assessment areas in many states. Investments in nationwide funds are likely to benefit such an institution’s assessment area(s), or the broader statewide or regional area that includes its assessment area(s), and provide that institution with the opportunity to match its investments with the geographic scope of its business. b. The extent to which qualified investment opportunities have been available to the institution; c. The institution’s responsiveness to opportunities for qualified investments; d. e. 3. The number and dollar amount of qualified investments in the broader statewide or regional area that includes the assessment area(s), but: The use of any innovative or complex investments, in particular those that are not routinely provided by other investors; and The number and dollar amount of qualified investments; b. The innovativeness and complexity of qualified investments; c. The degree to which qualified investments are not routinely provided by other private investors; and d. The responsiveness of qualified investments to available opportunities. Prepare comments for the performance evaluation and the compliance examination report. Refer to the appendix for guidance on addressing community development activities in the performance evaluation. Service Test Retail Banking Services 1. The degree to which investments serve low- and moderate-income areas or individuals, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies, and the available opportunities for qualified investments. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in step number 2, consider: XI–4.6 6. a. 2. Determine from information available in the institution’s Public File: a. The distribution of the institution’s branches among low-, moderate-, middle-, and upper-income geographies in the institution’s assessment area(s); and b. Banking services, including hours of operation and available loan and deposit products. Obtain the institution’s explanation for any material differences in the hours of operations of, or services available at, branches within low-, moderate-, middle-, and FDIC Consumer Compliance Examination Manual — September 2015