The investment portion of the CRA test is one which I find hardest to understand. Those who manage our banks investments struggle with to great a proportion of the overall portfolio being tied up in these (usually) lower performing investments. Our investment area has asked me if we can sell previous CRA investments and buy new to improve our portfolio. I'm really lacking in understanding of this and would appreciate any assistance, including any FRB/OCC docs that would help. Thx!

Yes you can sell and invest in others, you are not locked into investments permanently. However, you need to pay attention to maintain a level of investments, including new investments, to retain a satisfactory or outstanding rating - whichever is your goal. You should be seeking investments/grants/donations that have an impact in your community.

Thanks Kathleen - that makes sense

You will want to consider “replacing” investments that have matured or been sold during the current exam period, ensuring that new investments benefit the same assessment area where investments were called, matured or sold. What I mean is if you sell one investment in the Cleveland MSA then purchase one in the Cleveland MSA and not in the Toledo MSA.

You always have to monitor your investments to make sure you covering your needs and your goals. Make sure you understand your region. In some highly populated areas like NJ, multiple MSAs roll up to one CSA, giving you more flexibility in allocation.

You also might be dealing with MDs that are actually in the same MSA.

Kathleen...what are MDs?

MDs are metropolitan divisions, high population areas. You will see the FFIEC refer to MSA/MD.

Los Angeles MSA is made up of two MDs...LA County and Orange County. Each have their own data but are actually in one MSA. The FFIEC data treats them separately.

https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf

Here are the geographic definitions.

https://www.census.gov/geo/reference/gtc/gtc_cbsa.html

Thanks....so the example you cited above and assuming you had a branch in each county, would it be two separate Assessment Areas based on MDs or one Assessment Area based on MSA?

It would be one AA due to one MSA.

Wow, this strayed from the original topic but I learned alot. Thanks.

Yes, I find a lot of banks don't know about the "MDs" that are actually part of MSAs, and you could take the entire MSA as your AA if you chose.

Or if you have multiple MSAs (like in NJ where they are a dime a dozen) that roll up to one CSA, you can call it one AA.

KB is correct that you can designate multiple MD's in the same MSA as one AA, but the practice in the field by examiners has been to break out AA's into separate MD's (in fact the Large Bank examination guidance instructs examiners to break out into separate AA's when an AA boundary extends "substantially" across a MSA or MD boundary) . So if you want to mimic the examiners' approach for your CRA self-assessments you may want to break out the AA's in the same MSA based on separate MD's (assuming you have at least one branch in each MD). But there is no technical violation to designate the entire MSA with multiple MD's as one AA if you want.

To me, it is important for banks to understand the difference between MDs, MSAs, and CSAs because it is key to getting credit for loans, services and investments. (It might not be in your MD but it is in your MSA, or it is outside of your immediate MSA but in your CSA.)

Many banks don't even know of the existence of these distinctions yet a full understanding can help them make the case for certain loans/services/investments to CRA "credit" in their examination.

This importance in knowing the existence and the difference is really why I brought it up.

Banks need to understand just what MSAs they are really in when applying the rules and presenting reasons why "things count".

Len, to pickup on my previous post (see below),based on the Large Exam Procedures should we have two separate Assessment Areas based on MDs or one Assessment Area based on MSA?

Originally Posted By Kathleen B

MDs are metropolitan divisions, high population areas. You will see the FFIEC refer to MSA/MD.

Los Angeles MSA is made up of two MDs...LA County and Orange County. Each have their own data but are actually in one MSA. The FFIEC data treats them separately.

https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf


Thanks....so the example you cited above and assuming you had a branch in each county, would it be two separate Assessment Areas based on MDs or one Assessment Area based on MSA?

Many many banks have them as one AA but in their analysis look at each individually. And in many exams, I have seen them treated as one. Other banks will have them as two (and of course analyze separately.)

As we have seen with examiners rolling multiple outside of MSA areas into one AA even when they are not contiguous, much depends upon how complex the bank is and how the examiners decide to roll things together or not.

I know banks in NJ, which has many MDs and MSAs, put everything that is in the CSA for central and northern Jersey into a "NJ AA", and their PA area that is in the Philadelphia area CSA (multiple MDs and MSAs) into the "PA AA". And the examiners treat it that way.

Look at some exam reports in your area. How are the examiners rolling MDs and MSAs together (or not)?

More examples of the subjectivity of not only individual examiners within the same agency, but then among the different agencies as well.