CRA

Question 1

T/F: The CRA compliance officer or compliance committee is responsible for seeing that the CRA policy is carried out on a day-to-day basis.

Answer 1

True

Question 2

T/F: All large retail banks are required to collect data about each small business or small farm loan they originate or purchase.

Answer 2

True

Question 3

T/F: A bank’s CRA rating is affected adversely if examiners find evidence of discriminatory or other illegal credit practices.

Answer 3

True

Question 4

T/F: Only members of the public who are properly authorized by federal regulators may review the public section of a bank’s CRA Performance Evaluation.

Answer 4

False

Question 5

Which one of the following is NOT one of the seven criteria considered when examiners develop a CRA performance context?

a. CRA public file and written comments
b. Customer surveys
c. Past performance of the institution
d. Lending, investment and bank service opportunities

Answer 5

b. Customer surveys

Question 6

T/F: A bank’s CRA rating reflects its financial condition.

Answer 6

False

Question 7

T/F: A bank’s assessment area does NOT include deposit-taking ATMs.

Answer 7

False

Question 8

All employees of banking institution covered by the CRA should know:

a. The name of the person(s) serving as the compliance officer or committee
b. How to handle customer requests regarding the CRA with respect and courtesy
c. The location of the CRA public file
d. All of the above

Answer 8

d. All of the above

Question 9

T/F: The CRA recognizes that CRA responsibilities should be addressed in keeping with safe and sound banking practices.

Answer 9

True

Question 10

T/F: A bank that chooses to develop its own strategic plan for CRA evaluation must include measurable goals. solicit public input and obtain approval from its primary federal regulator.

Answer 10

True

Question 11

T/F: The CRA public notice posted at a branch indicates where the complete public file is available for review.

Answer 11

True

Question 12

Poor performance on CRA examinations can result in:

a. Criminal penalties
b. Revocation of a federal banking charter
c. Denial of applications for mergers, acquisitions or expansions

Answer 12

c. Denial of applications for mergers, acquisitions or expansions

Question 13

When regulators assess a large retail bank under the investment test, criteria include:

a. The number and dollar amount of qualified investments
b. The innovativeness or complexity of qualified investments
c. The degree to which qualified investments are nto provided by private investors
d. All of the above

Answer 13

d. All of the above

Question 14

T/F: A bank’s CRA performance rating must be made available to regulators but not to the public.

Answer 14

False

Question 15

When regulators assess a large retail bank under the lending test, they examine the lending record in terms of:

a. The geographic distribution of the loans.
b. Borrower characteristics.
c. The use of innovative or flexible lending practices to address the credit needs of low- and moderate-income individuals
d. All of the above.

Answer 15

d. All of the above.

Question 16

T/F: Noncompliance with the CRA does NOT jeopardize a depository institution’s efforts to establish or relocate branch facilities.

Answer 16

False

Question 17

All institutions affected by the CRA must compile and make available a public file that contains:

a. The most recent CRA Performance Evaluation
b. All written comments received from the public in the current year and the past two years relating to CRA efforts
c. Lists of branches and services provided at each location
d. All of the above

Answer 17

d. All of the above

Question 18

T/F: HMDA requires documentation of mortgage applications and dispositions.

Answer 18

True

Question 19

Under HMDA, a bank ____ notify the public that its HMDA data is available for review.

a. may
b. must
c. is not required to

Answer 19

c. is not required to

Question 20

In assigning a CRA rating, examiners considered:

a. The type of community served
b. The expertise of the institution
c. Local economic conditions
d. All of the above

Answer 20

d. All of the above

Question 21

Redlining is the perceived practice of

a. Refusing to lend money to people in poorer neighborhoods
b. Rejecting credit applications from non-creditworthy customers
c. Refusing to honor credit applications from customers outside a local community
d. None of the above

Answer 21

a. Refusing to lend money to people in poorer neighborhoods

Question 22

What banks does CRA apply to?

Answer 22

All federally insured commercial banks, savings banks and savings associations that are in the business of providing credit to the public.

Credit unions and some special purpose banks (that don’t perform commercial or retail banking services by granting credit to the public in the ordinary course of business) are exempt from CRA provisions.

Question 23

Big City Bank loses thousands of dollars each year in bad loans to residents of a government-sponsored housing project. Compliance officer Bill Freeman is aware of these losses but continues to encourage lending in this area as a means of complying with CRA. Bank President Harold James disagrees with Freeman, maintaining the institution should take a more guarded approach to lending — regardless of the area. Who should you agree with?

a. James
b. Freeman

Answer 23

a. James

CRA compliance does not require an institution to make loans that are inconsistent with safe and sound banking practices.

Question 24

Depository institutions and community groups that make CRA-related agreements must disclose the terms of those agreements if they involve loans of more than $____ or grants of more than $____.

Answer 24

$50,000

$10,000

Question 25

HMDA requires the collection of an applicant’s ethnicity, race, sex and income for all ORIGINATED mortgage loans.

Answer 25

Partially correct. It’s required for ALL mortgage applicants, not just those who are actually granted credit.

Question 26

What institutions does the CRA apply to?

Answer 26

FDIC-insured institutions

Question 27

Assessment areas for BANKS must include what 2 things?

Answer 27

• One or more MSAs, metropolitan divisions, or one or more contiguous political subdivisions (counties, cities or towns); and
• Include the geographies in which the bank has its main office, branches and deposit-taking ATMs, as well as surrounding areas where the bank has originated a substantial portion of its loans.

Question 28

Assessment areas for wholesale or limited purpose banks must include what?

Answer 28

• One or more MSAs or metropolitan divisions, OR
• One or more contiguous political subdivisions, such as counties, cities or towns in which the bank has its main office, branches or ATMs.

Question 29

Large banks must collect and maintain data on small business and small farm loans _______ or _______.

Answer 29

Originated

Purchased

Question 30

A small bank means a bank that, as of December 31 either of the prior two calendar years, had assets of less than $__________.

Answer 30

$1.221 billion

Question 31

An intermediate small bank is a small bank that, as of December 31 of both the prior two calendar years, had assets of at least $__________ but less than _________ as of December 31 of either of the prior two calendar years.

Answer 31

$305 million

$1.221 billion

Question 32

A large bank is a bank that, as of December 31st of both of the prior two calendar years, had total assets of $___________ or more.

Answer 32

$1.221 billion

Question 33

What 4 pieces of data must be collected for small business and small farm loans?

Answer 33

• A unique number or alpha-numeric symbol to identify the loan file
• The loan amount at origination (report the entire amount of a line of credit)
• The loan location (physical address of the business or physical address of where loan proceeds were used)
• An indicator whether the loan was to a business or to a far with gross annual revenues of $1 million or less.

Question 34

Do loan renewals for small business or small farm loans have to be reported?

Answer 34

Yes, but renewals should be reported only once each year, unless new funds are advanced.

Question 35

What loans are optional for data collection and reporting?

Answer 35

Consumer loans, such as auto, credit card, HELOAN, HELOC, or other unsecured or secured loans that don’t fit into any of the aforementioned categories.

Question 36

If a bank elects to collect data and report consumer loans, what data must be maintained?

Answer 36

• A unique number or alpha-numeric symbol
• The loan amount at origination or purchase
• The loan location (physical address)
• The gross annual income of the borrower that the bank considered in making the credit decision

Question 37

Which of the following is NOT a requirement of CRA?

a. To delineate the bank’s assessment area(s)
b. To collect loan data
c. To approve the bank’s CRA statement at an annual board meeting
d. To report small business loan data

Answer 37

c. To approve the bank’s CRA statement at an annual board meeting

This requirement is not in the regulation as described in the outline at Section II. It used to be a requirement, but was eliminated in the CRA reform regulation of 1995.

Question 38

Which of the following is the best method for a large bank to use in monitoring its CRA performance?

a. Review the effectiveness of marketing materials.
b. Evaluate approval and denial rates for minority loan applicants.
c. Perform a quarterly evaluation of the bank’s loans-to-deposits ratio.
d. Perform a geographic analysis of lending levels and dispersion of loans.

Answer 38

d. Perform a geographic analysis of lending levels and dispersion of loans.

This method results in an objective look at the bank’s lending pattern and can give the bank a realistic picture of its CRA efforts.

Question 39

Which of the following criteria accurately describes a small business loan for which a large bank must annually collect and report data?

a. A loan to a business that employs fewer than 50 people
b. A line of credit to a business with assets of less than $5 million
c. A loan with an original principal amount of $1 million or less to a business
d. A loan to a business that does not generally have access to regional or national credit markets

Answer 39

d. A loan to a business that does not generally have access to regional or national credit markets

CRA requires large institutions to report data on small business loans. The reporting requirement is limited to business loans of $1 million or less.

Question 40

Which of the following must a “large” bank maintain as part of its CRA program?

a. A record of director, officer, and employee community involvement, and a listing of loans made to low- and moderate-income individuals
b. Description of its assessment area, written comments and responses, and the public portion of the regulator’s most recent CRA performance evaluation
c. Copy of the bank’s CRA Notice and the bank’s most recent five years of CRA disclosure statements
d. A comprehensive record of all CRA-related training completed by employees during the past two years

Answer 40

b. Description of its assessment area, written comments and responses, and the public portion of the regulator’s most recent CRA performance evaluation

This information must be maintained in the institution’s public file.

Question 41

A bank received a signed letter criticizing its performance in meeting the credit needs of the community, but not adversely reflecting upon any individual bank employee’s reputation. What must the bank do with this letter?

a. Have it reviewed and discussed by the board of directors
b. File it with the regional office of the bank’s federal regulator
c. Retain it in the CRA public comment file
d. Answer it within 10 business days

Answer 41

c. Retain it in the CRA public comment file

CRA does not require the bank to answer the writer, nor to take specific actions, such as reporting it to the board of directors or sending it to its regulatory agency. However, the bank must place the comment in its CRA public file. The bank may place a response to the comment in the file also. However, if the comment or bank response would adversely affect the good name or reputation of a person other than the bank, or if it would violate a law (for example, the privacy regulation) it should not be placed in the file.

Question 42

Which of the following is true of a bank’s CRA strategic plan?

a. It must be limited to a one-year term.
b. It must have measurable goals.
c. Affiliates must have their own plans.
d. Even if the bank has multiple assessment areas, it must have one strategic plan.

Answer 42

b. It must have measurable goals.

If the plan has multiple years, there must be interim, measurable goals.

Question 43

In evaluating a bank’s CRA performance, to what do bank examiners give the greatest consideration?

a. Efforts to analyze the geographic origins of its deposit base
b. Efforts to establish communication with members of the community regarding credit needs
c. Participation of the bank’s board of directors in formulating CRA policy
d. Extensions of credit the bank has made where the financing benefits low- and moderate-income borrowers or neighborhoods

Answer 43

d. Extensions of credit the bank has made where the financing benefits low- and moderate-income borrowers or neighborhoods

The purpose of CRA is to encourage lending in low- and moderate- income level neighborhoods.

Question 44

Which of the following institutions is exempt from the coverage of CRA?

a. State National Bank of Ashgrove, a $15 million bank in a rural community, not located in an MSA
b. Trust Company, Inc., an institution offering only trust services located in a large urban area
c. ACME Savings Association, a federal thrift institution located in a medium-sized midwestern city, included in an MSA
d. First National Bank, a $250 million bank located in a rural area, not in an MSA

Answer 44

b. Trust Company, Inc., an institution offering only trust services located in a large urban area

Certain special purpose banks that do not perform commercial or consumer banking services are exempt from the coverage of CRA.

Question 45

QRS State Bank is being examined under the lending test. Which of the following is the most relevant criteria for the lending test?

a. The distribution of the bank’s small business loans
b. The racial and gender characteristics of QRS’s lending staff
c. The location of QRS’s branches
d. The services QRS offers to its community

Answer 45

a. The distribution of the bank’s small business loans

The other criteria could be important for other tests, such as fair lending or the community development service test; however, they are not part of the lending test.

Question 46

A bank has been criticized by an examiner for less than satisfactory CRA performance. The bank must show improvement in its commitment to CRA. For the examiner, what would be LEAST effective in demonstrating the change?

a. Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority
b. Giving the examiner an updated CRA public file
c. Showing the examiner a list of community groups with which the bank has met in the past 24 months to discuss credit needs
d. Showing the examiner results of the bank’s most recent geocoding analysis, indicating parity in the number of loans made in each census tract

Answer 46

a. Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority

A regulatory examiner would not be impressed with a bank’s admission that CRA is not a priority.

Question 47

ABC National Bank, an independent bank with $120 million in total assets located in a large urban area, is in the process of determining its option for its CRA evaluation. Which of the following options is NOT open to ABC Bank?

a. The small bank performance standard
b. The lending, investment, and service tests
c. The community development test
d. The strategic plan option

Answer 47

c. The community development test

This option is available only for wholesale and limited-purpose banks. ABC Bank can choose any other option.

Question 48

Which of the following institutions could be examined for CRA under the intermediate small bank performance standard?

a. Bank A, a $230 million bank
b. Bank B, a $700 million bank
c. Bank C, a $50 million bank
d. Bank D, a $2 billion bank

Answer 48

b. Bank B, a $700 million bank

To be an intermediate small bank, the bank itself must have more than $305 million and less than $1.186 in assets

Question 49

In the small bank performance standard, which of the following is NOT a criterion?

a. The bank’s CRA strategic plan
b. The bank’s loan-to-deposit ratio
c. The geographic distribution of loans
d. The percentage of loans within the bank’s assessment area(s)

Answer 49

a. The bank’s CRA strategic plan

Under the small bank performance standards, the bank is not required to have a CRA strategic plan.

Question 50

Which of the following statements is true about a delineated CRA assessment area?

a. A bank can have only one CRA assessment area
b. The CRA assessment area is a separate performance criterion
c. The CRA assessment area mush consist of whole geographies
d. The CRA assessment area must be an equidistant circle area with the bank’s main office at the center

Answer 50

b. The CRA assessment area is a separate performance criterion

Question 51

Under CRA, a large bank has the option to report:

a. Small farm loans
b. Affiliate loans
c. Community Development loans
d. Small business loans

Answer 51

b. Affiliate loans

Question 52

In evaluating investments under the CRA Investment Test, examiners would consider:

a. The bank’s record of opening and closing branches
b. The innovativeness of the investment
c. The number of bank customers affected by the investment
d. The length of time the investment has been on the bank’s books

Answer 52

b. The innovativeness of the investment

Question 53

When designating its CRA assessment area, a bank should:

a. Draw an equidistant circle around the bank’s main office large enough to include all branches
b. Designate a separate assessment area for each bank office
c. Include at least 80% of the bank’s loan customers in the assessment area
d. Include the geographies in which the bank has its main office, branches, and deposit-taking ATMs and surrounding areas where the bank has originated a substantial portion of its loans

Answer 53

d. Include the geographies in which the bank has its main office, branches, and deposit-taking ATMs and surrounding areas where the bank has originated a substantial portion of its loans

Question 54

Is there any rule or regulation where there can’t be a violation?

Answer 54

Yes, CRA.

Question 55

What is the 3 prong test for large banks?

Answer 55

Lending: Mortgage, small biz, farm loans, CDLs
Investment: activities in the assessment area that benefit the community
Service: extent and innovativeness of delivery channels.

*Rating for each of three above and then one comprehensive rating (4 total)

Question 56

CRA evaluates a bank’s performance in their market. What is the market?

Answer 56

“assessment area’ is delineated by the bank; and

must be “whole” geographies (MSAs or political subdivisions) - must include offices, branches, and deposit-taking ATMs

Question 57

What is the most important test for CRA for large banks?

Answer 57

Lending

Question 58

What are small banks evaluated on for CRA?

Answer 58

Lending activity in LMI areas & distribution only.

Question 59

What are the 4 CRA ratings?

Answer 59

outstanding
satisfactory
needs to improve
substantial noncompliance

Question 60

What is the dollar threshold for small business loans reported for CRA?

Answer 60

Less than $1 million

Question 61

What is the dollar threshold for small farm loans reported for CRA?

Answer 61

Less than $500,000

Question 62

What is a CDL?

Answer 62

Community Development Loan, where the funds primarily assist LMI areaes.

Question 63

For CRA, what is the disclosure statement?

Answer 63

It’s the notice that tells people about the public file.

Question 64

What information is in the public file?

Answer 64

Regulator-supplied CRA notice on performance
Most recent performance evaluation from regulator
HMDA disclosure statement
Map of assessment area
Products and services
Branches

Question 65

Besides the lending, investment and service tests, what is the other OPTIONAL way banks can be evaluated under CRA?

Answer 65

Strategic plan

Question 66

What are the steps for a bank to establish a strategic plan for CRA?

Answer 66

• Seek the public’s suggestions during the initial drafting stage
• Publish notice of the plan and solicit written comments from the public for at least 30 days
• Revise the plan based on comments
• Submit the plan, along with the prior draft the public commented on, to your regulator, along with the bank’s informal efforts to obtain public input to the drafting process and written comments received from the public, and ask for approval of the plan as revised
• Receive agency approval