As banks prepare for their CRA (Community Reinvestment Act) Examinations, many can take advantage of submitting a Performance Context to improve their CRA rating. The Performance Context is a written component of the CRA examination that offers quantitative and qualitative data on a bank’s assessment areas, including their community’s credit and lending needs, service opportunities, demographics, labor market and overall economy. It is a grassroots-level review of a bank’s market that CRA Regulators use to interpret the bank’s activity.
A Performance Context offered by a bank, while not required, can result in an improved CRA rating through increased understanding by regulators of the environment in which the bank operates. For example, a bank may have fewer home improvement loans to report. In their Performance Context, the bank can explain that the recession hit their neighborhoods hard, resulting in fewer home improvement loan applications as homeowners prioritize refinancing. This micro-level information is something banks can offer to their examiner that would otherwise be missed, hurting their chances for a better rating.
Not only is a Performance Context good for CRA Examination, but as publicly available data, it’s also a great way to attract strategic partners. Many non-profits review Performance Contexts of banks in their communities to see where partnerships should be pursued. To prepare for their Performance Context, banks should collect data on their customers on a regular basis as well as research and write about the conditions in their community and how it affects the bank’s opportunities and strategies.
FUND Consulting offers banks the ability to prepare and write their Performance Context and increase their chances of an improved CRA rating through the following services:
• Market Analyses – FUND gathers data on the economic environment that the bank operates in and presents the findings in a written report that can be used in the Performance Context.
• Market Surveys – FUND surveys bank customers to see where the bank is meeting needs and where there are opportunities for the bank to serve them better. This shows the CRA examiners that the bank is thinking strategically.
• Data collection planning – FUND helps banks come up with a plan and implementation steps to make sure that data capture is a regular, systematic process and prevents back-end work at the time of CRA examination.
These services are often already a part of FUND Consulting’s strategic packages for bank clients that successfully apply for CDFI Certification, Recertification and CDFI award programs. They are also major components of our Strategic Plans. Having the right data, research, and written reports in hand are not only a part of getting ready for a CRA Examination and earning a good CRA rating, but also a necessary part of any bank’s strategic planning and business longevity.