Strategic Plans

Question 1

What does a strategic plan enable the bank to do?

Answer 1

A strategic plan enables the institution to tailor its CRA
goals and objectives to address the needs of its community consistent with its business strategy, operational focus, and capacity and constraints.

Question 2

What must and institution submit to the FDIC in order to be evaluated as a strategic plan bank?

Answer 2

The bank must develop and submit for approval by the FDIC a strategic plan for addressing its responsibilities with respect to CRA.

Question 3

What are the required components of establishing and creating a strategic plan? (5)

Answer 3

• Setting a Public Review and comment period on the bank’s Plan
• Including in the plan defined assessment areas.
• Including in the plan measurable goals that determine which goals to meet and levels at which those goals must be set to justify the proposed ratings
• Establishing performance context
• the term of the plan including the effective date of the plan.

Question 4

What must be included in the strategic plan with regard to the public review and comments?

Answer 4

• Copy of the public notice, and names where is was published for each AA covered by the plan.
• Verification that comments were solicited for a minimum of 30 days.

Question 5

Does the bank need to include public comments in the strategic plan?

Answer 5

No, Public comments are not required to be included in the strategic plan. However, copies of all written comments received during the comment period and the bank’s responses to those comments must be submitted with the plan to the FDIC.

Question 6

If after submission, the FDIC requires the bank to revise the plan, is the bank required to resubmit the revised plan for public review and comment?

Answer 6

No, changes need not be released again for public comment unless they significantly alter the content of the original submission.

Question 7

In what different ways can a bank obtain public input on the strategic plan?

Answer 7

• Holding meetings with community groups and other interested parties.
• Seeking comments from customers through branch notifications and mailing statement stuffers to customers.

Question 8

When reviewing a strategic plan submission, why does the FDIC review public comments, and the bank’s responses?(3)

Answer 8

The comments and responses help determine:

• if the bank considered input from the community
• The degree of support for the bank’s goals
• the appropriateness of the goals.

Question 9

What is required to be included in the strategic plan regarding assessment area delineation?

Answer 9

• The bank must define AAs and list them in the plan

- Only whole geographies should be included (CTs, block numbering areas, or block groups)

Question 10

What are the requirements for delineating an AA? (3)

Answer 10

• should consist of one or more MSA or one or more contiguous political subdivisions (counties, cities, towns)
• Should include geographies where it has its main office, branches, and deposit taking remote service ATMs and POS terminals.
• Should include surrounding geographies in which it has originated or purchased a substantial amount of its loan portfolio, including home mortgage, small business, small farm, and consumer loans.

Question 11

What must an institution include regarding measurable goals in a strategic plan? (2)

Answer 11

• Which goals to include in the plan.

- Levels which these goals must be set to justify the proposed ratings.

Question 12

What should banks refer to when determining the measurable goals portion of the strategic plan?

Answer 12

• CRA examination procedures

- CRA regulation to establish performance criteria for lending, investments, and services.

Question 13

What criteria should examiners use to evaluate a strategic plans measurable goals? (5)

Answer 13

• Extent and breadth of lending or lending-related activities, including geographic and borrower distribution of loans.
• Extent of community development lending.
• Use of innovative or flexible lending practices.
• Amount, innovativeness, complexity and responsiveness of qualified investments.
• Availability and effectiveness of retail services and the extent and innovativeness of community development services.

Question 14

What should each measurable goal aim to accomplish?

Answer 14

To help meet the credit needs of the AA, particularly needs of LMI geographies and individuals, through lending, investments, and services.

Question 15

Does a strategic plan need to focus on any specific CRA activities?

Answer 15

Measurable goals should generally emphasize lending and lending related activities. However, a different emphasis may be appropriate provided it is clearly explained and substantiated based on the characteristics and needs of the AA and the bank’s capacity, product offerings, and business focus.

Ex: demonstrable intense loan competition in the AA, so bank concentrates its efforts on making qualified investments and CD services.

Question 16

Can a strategic plan include affiliates or other depository institutions?

Answer 16

The plan can include affiliates as long as the name is includes and a description of how it is affiliated.

A joint plan for multiple depository institutions can be submitted as long as it includes measurable goals for each institution.

Question 17

What must be included in a joint strategic plan?

strategic plan that covers multiple depository institutions

Answer 17

• Measurable goals for each bank
• address the credit needs of each bank’s AAs
• approval from the appropriate regulatory agency for each bank’s respective portion of the plan.

Question 18

For multiple banks that operate under a joint strategic plan, how can CRA activities be allocated?

Answer 18

They can be allocated at their option, provided the same activities are not counted for more than one bank.

Question 19

Once a bank determines which goals to include in the plan, what should be established?

Answer 19

Once an institution decides which goals should be included in its plan, it must establish levels for each of these goals. The balance is a delicate one: the goals must be realistic and
achievable, yet sufficiently high to warrant the proposed Satisfactory
or Outstanding ratings. In determining whether the
goals are consistent with the ratings, the institution should take into account the factors typically considered during a CRA examination.

Question 20

What should be included in the performance context section of the plan? (2)

Answer 20

• any information developed in the bank’s normal business planning that it would like the FDIC to consider regarding lending, investment, and service opportunities for each AA covered by the plan.
• any legal constraints that affect the type of loans, investments, or services that the bank offers.

Question 21

What is required of the term section of the plan?

Answer 21

• The bank must set a term not to exceed 5 years, during which the plan will be in effect.
• if the term is longer than 1 year, interim goals must be established for each year of the plan. (yearly adjustments based on performance context)
• proposed effective date, which should be at least 90 days after the plan is submitted to the FDIC.

Question 22

When can a bank begin being evaluated under a strategic plan?

Answer 22

A bank will not be evaluated under a strategic plan option until it has been operating under an approved plan that has been in effect for at least one year.

Question 23

Is a strategic plan confidential or public?

Answer 23

Strategic plans are available to the public upon request to the FDIC. this includes any written correspondence between the bank and the FDIC regarding the plan.

A bank may request confidential treatment if they submit a request in writing concurrently with the filing of the strategic plan, which must discuss the justification for confidentiality. (harm the could result from public release of the information)

Question 24

What if a bank fails to meet the strategic plan goals for a satisfactory rating?

Answer 24

The bank may elect in its plan to be evaluated under an alternative assessment method (lending, investment, or service tests for large bank, small bank standards, or the CD test)

Question 25

Would a plan need to change if there were mergers, acquisitions, branch closing/opening, economic issues or market issues?

Answer 25

Any of these things may significantly impact the context in which the bank operates and some may hamper the bank's ability to meet the projected goals and activities in the plan. A plan does not need to change if these things happen. HOWEVER, a bank may request an amendment if material changes develop that were not anticipated in the initial performance context. Depending on the magnitudes of the proposed changes, the amended plan may require another public comment period.

Question 26

What is the required time frame for the FDIC to review a strategic plan? What if the FDIC does not meet the timing requirement?

Answer 26

The FDIC will act upon a plan within 60 calendar days after the FDIC receives the complete plan and other material required under the regulation. If the FDIC fails to act within this time period, the plan shall be deemed approved unless the FDIC extends the review period for good cause.

Question 27

Can a strategic plan be returned denied or incomplete, why?

Answer 27

If the FDIC requests additional information and it is not supplied by the bank, the plan may be returned incomplete. The bank may resubmit the plan but this will restart the 60 day period. A plan can be denied, at which point the bank may request the FDIC reconsider its decision within 30 days of receipt of the notice of denial. The FDIC will determine if adequate information that was not included in the original submission is justification to reverse the denial.

Question 28

What is the first thing an examiner should review when evaluating a strategic plan bank?

Answer 28

Whether the goals were met.

Question 29

True or false: The procedures do not permit an institution to receive a satisfactory rating if it has not fully met each of the goals in the plan.

Answer 29

False: A bank can receive a satisfactory rating even if it has not fully met each of its goals in the plan. Examiners consider whether the goals have been substantially met when assigning a rating.

Question 30

True or false: A bank must develop the strategic plan to include each assessment area it serves.

Answer 30

False: The institution may develop plans for a single assessment area that it serves, for some, but not all, of the assessment areas that it serves, or for all of them.

Question 31

What should examiners consider when determining if a bank has substantially met its plan goals? (3)

Answer 31

Circumstances beyond the control of the bank: - economic and market conditions - events that have impacted the bank's ability to perform. - updated performance context and assessment area information

Question 32

What should examiners review to determine the scope of the CRA evaluation?

Answer 32

For bank's with more than one AA, analyze prior performance evaluations, community contact materials, and lending and demographic data to identify AAs for full scope reviews.

Question 33

What should examiners consider when identifying areas for full vs. limited scope review? (7)

Answer 33

a. The level of the institution’s lending, investment and service activity in the different assessment areas, including LMI areas, designated disaster areas, or distressed or underserved areas. b. The number of other institutions in the different assessment areas and the importance of the institution under examination in meeting credit needs in the different assessment areas, particularly in areas with a limited number of financial service providers; c. The existence of apparent anomalies in the reported lending data for any particular assessment area(s); d. The time since the assessment area(s) most recently received a full scope examination; e. Performance that falls short of plan goals based on a review of available data; f. The institution’s prior CRA performance in the different assessment areas; and g. Comments from the public regarding the institution’s CRA performance.

Question 34

For interstate institutions, a rating must be assigned for each ____ where the bank has a ____ and in every _______ ____ where the bank has branches in ____ or more of the states that comprise the Multistate MSA.

Answer 34

State Branch Multistate MSA two

Question 35

How should examiners select the number of full scope reviews for interstate institutions?

Answer 35

examiners should select one or more AAs in each state for full scope examination.

Question 36

What four procedures should be followed when establishing performance context? (4)

Answer 36

- review public file form comments and responses - consider information the bank provides on its record of meeting plan goals. - community contact information on the bank's records of meeting plan goals. - consider info the bank or other locals provide on the local community and economic conditions that may affect the bank's ability to meet plan goals or otherwise assist in the evaluation.

Question 37

What should examiners do to evaluate the bank's performance? (5)

Answer 37

- Review the approved plan and any approved amendments - Review the agency's approval process files and - Review written comments from the public that the bank/agency received since the plan became effective. - Determine if the bank achieved its performance goals for each AA examined - If any goals were not met, form a conclusion on if the plan goals were "substantially met"

Question 38

What steps should examiners follow to determine if the bank achieved its performance goals for each AA examined? (3)

Answer 38

- Review the plans measurable goals for each performance category and AA - Obtain info and data about the bank's actual performance for the evaluation period. - compare the plan goals for each AA reviewed to the bank's actual performance since the LX to determine if all the plans goals have been met.

Question 39

If a bank did not meet all of its plan goals, what should examiners consider when determining if a bank has "substantially met" its goals? (4)

Answer 39

- The number of unmet goals - the degree to which the goals were not met - the importance of those goals to the plan as a whole - reasons why the goals were not met (factors beyond the bank's control?)

Question 40

How should examiners assign ratings if not all of the bank's AAs are covered under the strategic plan? (i.e. some areas were reviewed under the strategic plan while others were reviewed under other CRA procedures)

Answer 40

The analysis of the performance of the AAs covered by the strategic plan must be combined with the analysis of AAs that were subject to other assessment methods in order to assign a rating.

Question 41

How should examiners group the analyses of AAs for ratings?

Answer 41

Group the analyses of the assessment areas examined by MSA and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas that are in that MSA.

Question 42

If a bank has substantially met its plan goals, what next steps should examiners take to begin assigning ratings? (2)

Answer 42

If the institution has substantially met its plan goals for a satisfactory rating or, if applicable, an outstanding rating, in all assessment areas reviewed: - summarize conclusions about the institution’s performance in each MSA and the nonmetropolitan area of each state in which an assessment area was examined using these procedures. - Assign the appropriate preliminary rating for the institution and, as applicable, each state or multistate MSA

Question 43

If a bank did not substantially meets its plan goals, what next steps should examiners take to begin assigning ratings? (3)

Answer 43

- Determine if the bank elected in its plan to be evaluated under an alternate assessment method. - If so, perform the appropriate procedures to evaluate and rate the bank's performance in those AAs where the bank did not meet plan goals. - If NOT, assign a needs to improve or substantial non compliance rating to those AAs in which plan goals were not substantially met, depending on the number of goals missed, the extent to which they were missed, and their importance to the plan overall.

Question 44

What should examiners consider when determining how to weight the AA performance for conclusions and ratings of each MSA and NonMSA within each State or Multistate MSA? (4)

Answer 44

Examiners should consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The lending, service, and investment opportunities in each; c. The significance of the institution’s loans, qualified investments, and lending-related services, as applicable, for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Question 45

When should examiners assign an area a preliminary rating?

Answer 45

For an institution operating in multiple MSAs or nonmetropolitan areas in one or more states or multi-state MSAs, assign a preliminary rating for each state and multi-state MSA. Then assign a preliminary overall rating for each state considering the relative weight of each MSA/nonMSA or multistate MSA preliminary rating.

Question 46

What two things should examiners consider when assigning a final rating to the institution, state, or multi-state MSA?

Answer 46

- The preliminary ratings | - Any evidence of discrimination or other illegal credit practices.

Question 47

What are the required elements in the public file for a strategic plan bank? (11)

Answer 47

- Copy of the approved strategic plan - public comments and bank responses from the last two years - most recent CRA PE - Map of each AA showing boundaries and on map or list the geographies contained in the AA. - list of the bank's branches, opened and closed in prior two years, street addresses, and geographies - list of services (loan and deposit products, fees, hours of operation at each branch) including a description of any material differences in availability or cost of services between locations. - CRA disclosure statements for past two years. - Quarterly reports of the bank's efforts to improve record if LX received a less than Sat rating. - HMDA disclosure statements for prior two years (affiliate if applicable) - number and dollar of consumer loans for large banks if applicable - LTD ratio for small banks