Weathering the Storm: A Framework for Meeting CRA Obligations

Template for Banks to Tell Their CRA Story

Section A: Background

I. Your mission and/or purpose

II. Your geographic market(s)

Discuss demographic data related to income, deposit market share, Home Mortgage Disclosure Act market share, Community Reinvestment Act (CRA) small-business/small-farm share and identified needs. For demographic information, a bank can use Census Bureau data, disaster-recovery plans, government revitalization or stabilization plans and economic development plans.

III. Define the CRA

Below is sample text.

• “Under the Community Reinvestment Act (CRA), it is our responsibility to identify and invest in low- and moderate-income (LMI) communities. These activities must benefit both our financial institution and these communities.”
• “The CRA defines community development as that which encompasses affordable housing (including multifamily rental housing) for LMI individuals; community services targeted to LMI individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration’s Development Company or Small Business Investment Company programs or have gross annual revenues of $1 million or less; or activities that revitalize or stabilize LMI geographies, designated disaster areas or distressed or underserved nonmetropolitan middle-income geographies designated by the Federal Reserve Board of Governors, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC).”

IV. Examples of how your financial institution has met its CRA obligations

Below is sample text.

• “On (date) (list cities/communities in your assessment area) were impacted by (name of weather event) and declared a designated disaster area by the Federal Emergency Management Agency (FEMA) (see FEMA designation letter attached naming counties in our assessment area). Although the storm impacted communities across various socioeconomic statuses, this is how LMI people are affected … Our work with (give name of partner, such as nonprofit, economic development center or school) to bring emergency care packages, furniture, home repair materials, etc., to (list of LMI communities where the nonprofit worked) allowed these LMI communities and individuals to revitalize and stabilize the LMI geography …” (Provide evidence of impact on affordable housing—e.g., repairing homes and apartment units—reopening of small businesses and restored infrastructure.)
• “In collaboration with (list organizations), a consortium of public, private and nonprofit stakeholders, we developed a disaster-recovery plan for the local community. We provided a grant (dollar amount) to assist with costs associated with the completion of the plan. Additionally, we have contributed (dollar amount) to a revolving loan fund being administered by (administering agency) to replace the city’s affordable-housing stock that was destroyed during the storm as well as rebuild public facilities within the community. Below are some of the results to date as well as projected future outcomes of this program …”
• “We provided an equity equivalent investment (EQ2) to a Community Development Financial Institution (CDFI) community loan fund (name) that will in turn finance small businesses with loans for infrastructure repairs and operational expenses in the following census tracts (list tracts), which are LMI geographies located within the designated disaster area.”
• “We worked with a community development housing organization (name) to provide home-repair loans for affordable housing and LMI residents that helped to fund energy-efficient upgrades.” (Share success stories.)
• “Specifically, after hearing about increased mortgage delinquency rates in the designated disaster area, namely (list communities and census tracts and reference which are LMI), we provided a grant (amount) to a community development corporation (name) to provide case-management services, housing counseling, mortgage modification assistance, credit counseling and training for community housing counselors on foreclosure prevention.”
• “We provided a revolving loan fund to CDFIs (list names, dollar amounts and specific time period) to make credit available to LMI microbusinesses and small businesses within the designated disaster area. These businesses include …” (Share success stores and the impact of the additional capital on the small businesses and the community.)
• “In an LMI community that did not have access to a brick-and-mortar bank, we worked with the local nonprofit (name) to provide access to banking and check-cashing services to both our customers and noncustomers using our mobile banking center. We also used our mobile banking facility to distribute water, food and emergency needs to the community in partnership with this nonprofit. We were able to serve (insert number of persons) from the following LMI census tracts (list census tracts or demographic information). Below are the results of our efforts …” 
• “Local community leaders have identified a need for developing more resilient affordable-housing strategies that will reduce the impact of flooding within LMI communities as well as on LMI residents. We have joined a collective-impact initiative to help facilitate flood-mitigation strategies in the region more specifically …” 
• “When (name), a community development corporation serving (list areas and statistics), did not have facilities to store and distribute goods to the community following the disaster, we worked with this nonprofit to open one of our closed branch locations and allowed the organization to use the branch location for (state period of time and cost associated). This in-kind contribution allowed the nonprofit to serve …” (Share outcomes.)
• “We invested in community development loan funds that…”
• “We used New Markets Tax Credits to (describe how the credits were used). Our partners were … (list public, private and nonprofit organizations). The projected impact ...”

Section B: Our Current Area(s) of Focus

I. Background: Disaster Recovery

Below is sample text.

• “Due to the devastating impact of (name disaster) on communities in our assessment area, especially those that are LMI, we are now using the Dallas Fed’s ‘Weathering the Storm: A Framework for Meeting CRA Obligations’ to help guide our community development strategy.”
• “Natural disasters disproportionately impact LMI communities, and in community development work, we remain committed to ensuring all communities and neighborhoods have adequate resources to rebuild and recover following these types of events. We are working with local nonprofits, CDFIs and community leaders to identify the most critical needs of communities and small businesses within our assessment area. In an effort to be responsive, we have developed a specific line of capital in anticipation of increased lending needs for individuals and businesses within our assessment area. Based on insight we have acquired working with external stakeholders in our assessment area, it is evident that many small businesses will need access to additional capital to return to predisaster levels.”

II. Our Community Development Focus

Below is sample text.

• “LMI communities are disproportionately affected by natural disasters. The outlook for small businesses is equally as dire. As noted by FEMA, ‘40 percent of small businesses never reopen their doors after a natural disaster strikes.’ At (name your financial institution), we are working to change these indicators by supporting (nonprofit, CDFI, revolving loan fund) … This area consists of … (Define the geographic area).” 
• “To identify the unmet needs within the area as well as major impediments to recovery within our assessment area, we conducted substantial research that reveals several opportunities for (name of your financial institution) to become involved in disaster recovery. This is how we conducted this research.” (Give specific examples. Information should be included from Part Three: Identifying Opportunities Within Disaster Recovery and CRA from the Dallas Fed’s “Weathering the Storm: A Framework for Meeting CRA Obligations.”)
• “We decided to focus on the following disaster-related activities within our assessment area … (List your partnerships and activities.)”

Section C: Our Projected Impact

Note: The following information and sample text may be helpful in sharing your community development story with internal management, customers, community partners, target communities and bank examiners. 

• “We decided to focus on disaster recovery because it not only provides an opportunity for us to be responsive to the needs of our assessment area and assist local efforts that revitalize and stabilize LMI geographies, but also fulfills a primary purpose of the CRA—for banks to serve the communities in which their branches are located. As noted in ‘Weathering the Storm: A Framework for Meeting CRA Obligations,’ our disaster-recovery-related activities provide meaningful opportunities for our financial institution to help impacted communities recover after natural disasters as well as stimulate local economies.”
• “The return on investment (ROI) is expected to be strong for both our financial institution and the communities in which we invest. Outlined below are estimates of the financial returns.
• Financial ROI to your financial institution: (Explain who calculated this, how it was calculated and the estimated time frame.)
• Financial ROI to your community partners: (Explain who calculated this, how it was calculated and the estimated time frame.)”
• “It will generate a savings that is estimated to be … (Explain who calculated this, how it was calculated and the estimated time frame.)”
• “The impact is expected to be positive for both our financial institution and the communities in which we invest. Written below are estimates of the financial and social impacts.
• Financial impact to your financial institution: (Explain who calculated this, how it was calculated and the estimated time frame.)
• Financial impact to your community partners: (Explain who calculated this, how it was calculated and the estimated time frame.)
• Financial impact to your community: (Explain who calculated this, how it was calculated and the estimated time frame.) 
• Social impact to your financial institution: (For example), ‘Our community development activities entail developing and maintaining strong community partnerships, which are vital to building mutual trust and respect between us and the community.’
• Social impact to your community partners: (For example), ‘This is what our community partners are saying about our community development activities.’
• Social impact to the community: (Explain who calculated this, how it was calculated and the estimated time frame.)”
• “The financial impact of our investments in disaster recovery on our institution is neutral/negative in the short term. However, the positive regulatory impact and the financial impact of creating an economy in the region where entrepreneurship can recover and thrive and where individuals at all income levels have access to safe and sound credit solutions are projected to generate a positive financial impact in the long term. Specifically, the people we help today will grow into our customers tomorrow. Here’s how … (Explain your strategy/plan.)”

Section D: Our Leadership Role

I. Our Specific Leadership Role 

Below is sample text.

• “We are exhibiting leadership in our assessment area by supporting the community development best practices identified by (cite source; e.g., the Federal Reserve Bank of Dallas, Enterprise Community Partners, Local Initiatives Support Corp., etc.) and introducing our community partners to the community development best practices. Here’s how … (List specific examples.)”
• “Given the significant impact of natural disasters on the communities in our assessment area—especially those that are LMI—we stepped up to help. We met with community leaders, local nonprofits, philanthropy members and private-business leaders … The description of our efforts is outlined below …”

II. Putting Our Leadership Role in Context 

Below is sample text.

• “All levels of government recognize that disaster recovery has an impact on every area of community development, including educational attainment, workforce development, small-business development and access to financial services. During the period that follows a natural disaster, lack of capacity and resources to adequately recover has impeded the economic, educational and job outlook for countless regional economies.”

Note: Financial institutions should touch base with their examiner throughout the planning and execution of their CRA strategy to ensure they have the data needed to receive community development credit for their project(s). Banks should also reassess the community development needs in their assessment areas every 12 to 18 months and refresh their plan on an ongoing basis.

Next: Appendixes »