CRA: An Examiner's Perspective
Tips in Transitioning: Intermediate Small to Large Bank

Many banks find the transition from intermediate small (ISB) to large bank status to be overwhelming, as staff are sometimes apprehensive about the additional work this might entail. This article is designed to give some best practices for banks experiencing that transition.

The first thing banks should know is that the transition, unlike the one from small to ISB, is not instantaneous upon exceeding the asset threshold. The asset size threshold (as of Dec. 31, two consecutive years) classifies the bank as large, which triggers the requirement of CRA data collection beginning Jan. 1 of the following year. CRA data is collected during that given year but reported in arrears, meaning that a bank transitioning from ISB to large has an extra year before it can be examined as a large bank under CRA procedures. For example, if a bank exceeds the large bank asset threshold as of Dec. 31, 2015, and Dec. 31, 2016, it is defined as a large bank beginning Jan. 1, 2017, and must collect 2017 CRA data beginning on that date. That data is reported on March 1, 2018. Once reported, the bank can be examined as a large bank under the CRA.

When transitioning to this level, processes and systems should not be developed overnight. Using the example above, as the bank anticipates crossing the asset threshold at the end of 2016, the bank’s senior management and CRA staff should understand the requirements of large banks well ahead of time and develop a timeline for implementing, testing and training staff on data collection software and its compatibility with current platforms. This should be done early enough to have this process in place and tested prior to the first day a bank is required to collect CRA data—Jan. 1, 2017, in the example above. Some entities offer training for this transition; the Federal Financial Institutions Examination Council (FFIEC) has step-by-step guidance on its website, and outside consultants also offer this service for varying fees.

Finally, the bank should be aware of examination expectations and their effect on the bank’s administrative functions. Large bank footprints often span numerous geographies with several assessment areas across one or more states. While manual collection of community development (CD) activities may have sufficed before, most large banks find this inefficient. As banks are developing or testing software for CRA data collection, they should look for more streamlined, electronic ways to track CD activities across the institution. These methods should be integrated into existing platforms where possible to reduce problems. As a general rule, front-line loan officers or loan administration personnel are the best real-time staff to point out potential CD loans because they enter the information into the loan platform and have direct communication with borrowers. Those employees should be flagging loans in the loan system as they are booked, and CRA staff should be running periodic reports to check those loans for appropriate documentation. This requires lending and CRA staff to have a strong understanding of what qualifies as CD. CD investments, donations and services should be tracked in a similar way. The CRA Questions and Answers is the primary resource to assist financial institutions in identifying CD activities. Additional guides for identifying CD activities for large banks can often be obtained through the bank’s primary regulator.

In conclusion, preparation (including advance training and development of processes) is the key to achieving your CRA performance goals when transitioning from ISB to large bank examinations.

Dustin L. Sanders is an examiner at the Federal Reserve Bank of St. Louis.