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FOS Blog

27 Apr
2022

Making the move from a small bank to ISB

Making the move from a small bank to ISB

For bank management, it can be a daunting time: Approaching the $1 billion mark – and soon, your institution will be subject to the ISB (Intermediate Small Bank) CRA Test.

What do you need to do differently? Prepare!
You know it’s coming, and you have some time.  Form a CRA Committee and share the load.  It takes a village to satisfy ISB expectations.  Be sure to include executive management like a Chief Lending Officer, who has the power to address new products and services, even those targeted to LMI areas and people.  The Chief Marketing Officer will need to focus on targeted advertising to low and moderate income (LMI) census tracts and individuals. The Investment Officer will need to seek out community-development opportunities. Personnel who administer your HMDA & CRA software will become more significant in producing useful reports and mapping for committee decisions.

Another key word is “intentional.”  Become well-versed on “community development.”  As an ISB, your CRA exam will be 50% lending and 50% community development.  Loan officers will need to become more focused on nonprofit and community development services.  In understanding their credit and service needs, officers come to understand where the bank can lend a hand.  Properly identifying community development purpose loans will become a critical component of your CRA program – those targeted to affordable housing, providing community services to LMI people, activities that revitalize or stabilize LMI geographies, or activities that promote economic development.  And your investment officer will need to be on the lookout for CRA qualified investments – those that meet the needs of your communities or a larger area that includes your communities.  For an ISB, the community development test encompasses lending, investments, and services in one lump sum and management can allocate its funding across that gamut.

A third key word is tracking.  You need to understand where you currently stand and where you’d like to go.  You need to assess what you currently have in your lending, investments, and services cache.  Look around your communities and take stock of where you might become more involved.  Review the CRA Performance Evaluations of your peers to see how they are getting credit.  What financial or technical skills do your employees have that could add value to these organizations?  Then jump in!

Success comes in waves as you come to better understand the credit needs of LMI individuals and economic development for your small businesses.  Celebrate each and build upon each understanding.  Eventually, you will meet the “community development” test not only to the satisfaction of examiners but more so for the reputation and good will of your bank.

For additional information contact the author at edehmey@fosaudit.com.