What are the disadvantages to opting to be examined as a small intermediate bank for CRA exams to always being examined in the past as a large bank. Pros/Cons etc.

The disadvantages to being a intermediate small versus a large? For one, on the ISB exam, you must receive a satisfactory on both the lending test and the community development test in order to receive a satisfactory overall. Whereas, on the large bank exam we didn't do so hot in one area during one exam but performed outstanding in others so we still received a good rating. That might not have been the case in the ISB exam.

Comply, as our last exam, we were ISB size. Our investments lacked A LOT to be desired, therefore we opted to be looked at as an ISB. By doing so, all community development aspects of the exam were lumped together (services, retail, investments, loans and donations). It actually saved us as our examiners told us that we would have failed as a large bank.

I had the same experience as Rizzy. My examiner told me that they really don't expect as much in the way of CD activities from an ISB as they would if they were examining you as a large bank. We did better because of the ISB exam.

I can tell you I have several new clients who were examined as ISB's and they all felt the ISB exam was brutal. In fact two of the banks failed the test this year. One told me that they had no problems when examined as a Large Bank but community development was their downfall on the ISB exam. I have encouraged them to write about their experiences on BOL, but so far I haven't seen any posts from them. I will try to encourage them to write soon because I think they have an important experience to share.

But in my opinion, the emphasis on CD in an ISB exam makes it far more difficult unless you have a strong CD program. Let me explain that the Large Bank point system allows you to get "0" points on the Investment test and "0" points on services and still get a composite "satisfactory" rating. In fact, the examiners manual for the Large Bank exam says that the lack of CD lending cannot reduce the Bank's rating on the other test for Large Banks, the Lending Test!!! This is far better than the "flexibility" inherent in the application of community development for an ISB.

We had a horrible CD program and that's what saved us. Rather than having it all seperate, it's merged into one test giving it greater strength. It was the only thing that saved us.
For any bank considering ISB versus Large, talk to your regulator. See what insight they can offer you.

We are an ISB that opted to be examined as a Large Bank since we lack a strong community development program, specifically with investments and loans. We knew that our loan data would be enough to earn us a Satisfactory rating overall with the Large Bank test. For reasons that Len pointed out, we doubted that we would do so well with the ISB exam. Our examiner confirmed to us off the record that we made the right choice. Since then, our community development program has improved, but we're still sticking with the Large Bank test since it works for us and we're approaching the Large Bank threshold anyways.

This is a related question. Let's say a bank has an upcoming CRA exam in Third Quarter, 2009. For 2006 and 2007 the bank crossed over the ISB threhold and had year-end assets of $260MM and $280MM. In 2008 the bank ended the year at $240MM.
As I read the regulation it looks like the bank would go back to being a small bank. At the 2009 CRA Exam can the Examiners force the bank up to being examined as an ISB or since the bank met the technical definition of a small bank on Dec. 31, 2008 can they state they want to be examined as a small bank? And I have the same question if a bank was over and then under (for one year but the year before the exam) the ISB and large bank threshold- for 2006 they were at $1.1 Billion, 2007 1.2 Billion and then at the end of 2008 they were at $900MM and the CRA Exam was at some point in 2009?
Several years ago an examiner alluded to me that they have some wiggle room as to how the bank is to be examined and the regulation seems quite clear to me. Either you meet the threshold or you do not.

Thanks for any replies.

You would be examined in 2009 for what you were as of December 31, 2008.

Thnak you Rizzy for your reply. Just one last hypothetical. Lets say your bank had the following year end numbers:

2006- over the threshold (let's say of a small bank to a ISB)
2007- over the threshold
2008- under the threshold (you went back to a small bank)
2009- over the threshold (you are now back to an ISB)

Exam date is January, 2010. Would you be considered a small bank or a ISB?

Thanks for any responses

Page 5 of the CRA Guide:
For the purpose of collecting and
reporting small business and smallfarm
loan data, a small institution is a
bank or thrift that, as of December 31
of either of the prior two calendar
years, had total assets of less than
$250 million
You crossed over in 2009 to ISB and are examined in 2010, you are an ISB.

Thank you again Rizzy, but I still don't get it,

I'm sorry for being so dense, but in 2010 wouldn't we still be considered a small bank- not an ISB because in 2008 we were less than $250 million and the guide says in either of the 2 prior calendar years we were less than $250 million (small bank)?

Therefore, shouldn't we be examined in 2010 as a small bank?

Laketime you are correct you would be a small bank. You need to be above the threshold for two consecutive year ends.

Thanks Bubs, I've finally got it. I promise to stop asking for clarification!