How is an intermediate small bank (ISB) examined?
The ISB is subject to the existing small-bank lending test, along with a new community development test. The lending test consists of five performance criteria:
- Loan-to-deposit ratio
- Lending in and out of the assessment area
- Geographic distribution of loans
- Borrower distribution of loans
- Responses to complaints
The community development test evaluates an ISB’s community development lending, qualified investment, and community development services. An ISB’s community development performance is evaluated according to the following criteria:
- The number and amount of community development loans
- The number and amount of qualified investments
- The extent to which the bank provides community development services
- The bank’s responsiveness through such activities as community development lending, qualified investment, and community development service
What does an intermediate small bank have to do to earn a “satisfactory” or “outstanding” rating?
An ISB must achieve a “satisfactory” rating on the lending and the community development tests to earn an overall “satisfactory” CRA rating. An ISB that receives an “outstanding” rating on one test and at least “satisfactory” on the other test may receive an overall rating of “outstanding.” If an intermediate small bank receives a “needs-to-improve” rating on either the lending or the community development test, it will receive an overall “needs-to-improve” rating.
Does an ISB have to be examined under the new intermediate small bank examination criteria?
No. Any bank may elect to be evaluated as a large bank under the three-part lending, investment, and service test as long as it collects and submits the required loan data, as outlined in the regulation. See 12 CFR 25.21(a)(3).
When can an intermediate small bank stop collecting CRA loan data for small business, small farm, and community development loans?
Intermediate small banks were permitted to stop collecting the CRA loan data on September 1, 2005.
Does an intermediate small bank have to submit CRA loan data collected in 2005?
What if the bank is unsure about whether to elect examination under the large bank test? Can it voluntarily submit the CRA loan data just in case?
Yes, the agencies will accept voluntary submissions to preserve the large bank option. If the bank is unsure whether to stay under the ISB test or opt for the large bank test, it should collect and submit the data. Without the submission of the required data, it cannot be examined as a large bank.
Will the examiners use the CRA loan data collected in 2005, but not submitted, by an intermediate small bank in our next CRA exam?
Yes. For example, if the examiner is evaluating an intermediate small bank, or a regular small bank’s business lending practices, the examiner typically must pull a loan sample to get the data for the analysis. If the bank has data on its business lending portfolio and the examiner is confident that the 2005 collected data are reliable, the examiner may use the 2005 data instead of sampling loans originated or purchased in 2005. Note that the examiner will look at more than one year of loan data.
What examination cycle will the intermediate small banks use?
The OCC’s CRA examination cycle is based on the asset size of the bank. All banks with assets over $250 million are on a risk-based cycle in which examinations are ordinarily started 36 months after the close of the last CRA examination. Banks with total assets of $250 million or less are on a different examination cycle, as mandated by the Gramm–Leach–Bliley Act (GLBA). The GLBA-mandated examination cycle requires the OCC to examine a bank of this size that has a “satisfactory” rating no sooner than 48 months after the close of its last CRA examination, and if it has an “outstanding” CRA rating, no sooner than 60 months after the close of its last CRA examination.
Is a bank with assets of less than $250 million that is owned by a large holding company still considered a large bank for CRA purposes?
No. As of September 1, 2005, such a bank is considered to be a small bank.