1. TALHFA’S ANNUAL EDUCATIONAL CONFERENCE 2015 OCTOBER 21, 2015 HOSTED BY TEXAS ASSOCIATION OF LOCAL HOUSING FINANCE AGENCIES DALLAS, TX Community Development and CRA: Partnering for Success

2. Objectives Upon completion of the CRA Basics presentation, you will:  Understand the purpose of the CRA;  Be familiar with some of the technical requirements of the regulation;  Understand how your activities may help banks meet their CRA requirements and what type of support they may offer your organization and initiatives;  How you can work with banks to meet community credit and banking needs. Office of the Comptroller of the Currency

3. What Is CRA? CRA Statute --12 USC 2901 et. al Enacted to prevent redlining and to encourage financial institutions to help meet the credit needs of all segments of their communities, including low- and moderate-income (LMI) neighborhoods Office of the Comptroller of the Currency

4. What is CRA? The CRA requires regulators of federal financial institutions to assess the record of each bank and thrift in helping to fulfill their obligations to the community and to consider that record in evaluating applications for charters or for the approval of bank mergers, acquisitions, and branch openings CRA applies to federally insured depository institutions: national banks and federal savings associations; state-chartered banks and savings associations The federal financial institution regulators are:  Board of Governors of the Federal Reserve System (FRB) Board of Governors of the Federal Reserve System  Federal Deposit Insurance Corporation (FDIC) Federal Deposit Insurance Corporation  Office of the Comptroller of the Currency (OCC) Office of the Comptroller of the Currency

5. What is CRA? Banks are evaluated using specific criteria for either:  Small Banks (under $305 million)*  Intermediate Small Banks (ISB) ($305 million to $1.221 billion)*  Large Banks (assets over $1.221 billion)  Wholesale & limited purpose banks  Banks with approved CRA strategic plans * As of 12/31/2014 - Asset thresholds are updated annually. Office of the Comptroller of the Currency

6. History of CRA Regulatory Reform 1977 1989 Community Reinvestment Act Financial Institutions Reform Recovery & Enforcement Act 1992 Federal Housing Enterprises Finance Safety & Soundness Act 1994 Riegle-Neal Interstate Banking & Branching Efficiency Act 1995 Regulatory Reform 1999 Gramm-Leach-Bliley Act 2005 2008 Higher Education Opportunity Act 2010 Foreclosure Prevention Office of the Comptroller of the Currency

7. Key Definitions Assessment Area Each bank is evaluated on how well it serves its “assessment area” Assessment area:  Geographies in which bank has its main office, branches, and deposit taking ATMs  Surrounding areas where bank has originated or purchased a substantial portion of its loans  Must consist of “whole geographies” Office of the Comptroller of the Currency

8. Key Definitions LMI LMI is an acronym used to refer to “low- and moderate-income” families or geographies (census tracts) Income designations are based on the median family income (MFI) for a given geographic area  Low-income: < 50% of area MFI  Moderate-income: 50% - < 80% of area MFI  Middle-income: 80% - < 120% of area MFI  Upper-income: 120% or more of area MFI MFI is an income figure for which there are as many families with incomes below that level as there are above that level  For metro areas use the MSA’s Median Family Income (MFI)  For rural areas use the Statewide MFI Office of the Comptroller of the Currency

9. Key Definitions Community Development Affordable housing for LMI individuals Community services targeted to LMI individuals Activities that promote economic development by financing small business or small farms Area revitalization or stabilization  Low- or moderate-income geographies  Designated disaster areas  Distressed non-metropolitan middle-income geographies  Underserved non-metropolitan middle-income geographies Activities that support “eligible uses” in targeted areas under the Neighborhood Stabilization Program (NSP) Office of the Comptroller of the Currency

10. Key Definitions Qualified Investment Lawful investment, deposit, membership share, or grant that has community development as its primary purpose Examples:  Financial intermediaries that lend in LMI areas or to LMI individuals in order to promote community development  Organizations that promote economic development by financing small business  Facilities that promote community development in LMI areas for LMI individuals  Projects eligible for low-income housing tax credits. Office of the Comptroller of the Currency

11. Types of CRA Examinations Exam Types  Small Bank  Intermediate Small Bank (ISB)  Large Bank  Wholesale/Limited Purpose  Strategic Plan http://www.ffiec.gov/cra/examinations.htm Office of the Comptroller of the Currency

12. Large Bank Service Test Retail services and branch distribution Community development services  Has as its primary purpose community development.  Is related to the provision of financial services to LMI people, including through branches and other facilities in LMI areas. Examples:  Providing technical assistance on financial matters to nonprofit, tribal or government organizations serving LMI housing or economic revitalization and development needs.  Serving on a board of organizations facilitating affordable housing construction and rehabilitation or development of affordable housing.  Developing and teaching financial education curricula for LMI individuals. Office of the Comptroller of the Currency

13. Example Qualified Service Description Branch locations and alternative delivery systems such as ATMs and drive-thru banking facilities are readily accessible to the bank’s geographies and individuals of different income levels in its assessment areas. Many of the bank’s branches are located in or in close proximity to LMI geographies or middle-income distressed or underserved geographies. In addition, off-site delivery channels such as 24-hour telephone banking, online banking, and mobile banking are available to bank customers. The bank is a leader in providing community development services. Bank-wide, employees contributed approximately 1,459 hours of community development services to community organizations whose primary focus is LMI individuals or economic development. Office of the Comptroller of the Currency

14. CRA Ratings A bank’s record of meeting community needs is considered during an application review for a merger, acquisition, or branching Outstanding Satisfactory Needs to Improve Substantial Noncompliance Office of the Comptroller of the Currency

15. Good CRA Opportunities for Banks Loans, services and investments that clearly benefit qualified populations and geographies. Loans, services and investments related to community development activities. For large banks more innovative or complex activities. Office of the Comptroller of the Currency

16. What Banks Look for in Partners Capacity Proven Performance Sustainability Assessment and Responsiveness Innovation Target Market Penetration Recordkeeping and Accountability Office of the Comptroller of the Currency

17. CRA Challenges Documentation of eligibility and impact. Capturing income data related to activities. Ensuring activities fulfill intended outcome. Training and technical expertise in development programs. Adequate documentation for underwriting. Outreach to underserved and unbanked markets and populations. Identification of banking and development needs. Office of the Comptroller of the Currency

18. How your community activities may help banks meet their CRA obligations. Office of the Comptroller of the Currency

19. Bank Decision Factors Assessment Area Risk Cost Response to assessed need Business/skill alignment Leverage Value to overall CRA strategy/portfolio Business development potential Office of the Comptroller of the Currency

20. Examples of CRA Treatment of Loan A nonprofit developer requests financing for the $4 million rehab portion of a condo conversion. 70% of the units will be sold to LMI homebuyers that are already pre- approved for a mortgage subsidy. After the project is completed and closing begins, there are only 40% units sold to LMI borrowers and the rest are sold to higher income borrowers that can secure financing more easily. Is this a qualified community development loan? What would increase the CRA eligibility of this project? Office of the Comptroller of the Currency

21. Example of CRA Treatment of Service A credit counseling agency wants to develop closer ties with its target market of LMI individuals in an LMI neighborhood. The agency decides to host a Spring Fest to bring residents out to visit their new office and sign up for future counseling services. A local bank is asked to sponsor the food and beverages for the event. Is this a community development service? Office of the Comptroller of the Currency

22. Treatment of CRA Investment A local bank is asked to participate in a small business loan fund that will help to revitalize mom & pop businesses in an historic section of an LMI neighborhood. The fund is raising $500,000 that will be used to finance $1,000 - $5,000 loans. The fund also needs bank lenders to join the loan committee and help write the underwriting standards for the loans. What type of CRA consideration may be given on a project of this type? What do you think the bank would consider in deciding whether to fund this initiative? Office of the Comptroller of the Currency

23. Are You a Partner? How you can work with banks to meet community credit and banking needs. Office of the Comptroller of the Currency

24. Public File for All Institutions Full file at the main office and at one office in each state Limited file at branch locations All written comments for the current year and two previous years Most recent public evaluation List of all branches - address and geographies List of services Map of Assessment Areas Last two years HMDA Disclosure Statement Office of the Comptroller of the Currency

25. Resources OCC Community Affairs Publications: http://www.occ.gov/topics/community-affairs/publications/index-ca- publications.html http://www.occ.gov/topics/community-affairs/publications/index-ca- publications.html FFIEC Community Reinvestment Act Page http://www.ffiec.gov/cra/ FFIEC Guide to CRA Data Collection and Reporting http://www.ffiec.gov/cra/guide.htm FFIEC Guide to HMDA Reporting http://www.ffiec.gov/hmda/guide.htm Federal Reserve Bank CRA Guide http://www.dallasfed.org/assets/documents/cd/pubs/craloan.pdf FDIC CRA Statue & Tools http://www.fdic.gov/regulations/community/community/ FFIEC CRA Q & As March 11, 2010 http://www.ffiec.gov/cra/qnadoc.htm Office of the Comptroller of the Currency

26. Contacts Office of the Comptroller of the Currency Marvin E. Cure, CRCM Southern District Compliance Lead (Acting) Marvin.Cure@occ.treas.gov Scarlett Duplechain District Community Affairs Officer Scarlett.Duplechain@occ.treas.gov Aaron Satterthwaite District Community Affairs Officer SATTERTHWATA@occ.treas.gov Office of the Comptroller of the Currency