Pub. 8 2017 Issue 3

Fall 2017 21 West Virginia Banker CRA-Qualifying Loans and Investments Can Do a World of Good When They Support Local Seniors By Ed Gentry, CRA Partners and Jim Reber, ICBA A lot is expected of community banks. The regulators expect management to operate them in a safe and sound manner. The public expects them to be partners in commu- nity service and to make credit available to those who qualify (and sometimes to those who don’t). Shareholders, we are reminded, expect an attractive return on their investments. And Congress, since 1977, statutorily expects commu- nity banks to lend and invest in projects that benefit low- to moderate-income consumers. This last piece is, of course, the Com- munity Reinvestment Act (CRA). As if community bankers didn’t have enough on their plates, CRA requirements can force banks to reallocate limited resourc- es to comply with the regulations, lest the bank be tagged with “substantial noncompliance” status. There is some good news to relate. Through the use of certain CRA-quali- fying investments, and by participation in a unique program administered by CRA Partners, community banks can find legitimate ways to meet their CRA requirements and at the same time operate in a safe and sound manner that further creates a marketing niche. Even though the CRA is now 40 years old, many hundreds of community banks don’t realize that certain investment securities can be considered CRA-qual- ifying. What’s even better is that they may be very similar to some bonds that your bank currently owns. In general, a bond may be considered a CRA-qualify- ing credit if it has community develop- ment as its primary purpose. This could include affordable housing, community development or support for organiza- tions that help finance small businesses. There are two investment sectors that potentially would supply such securities. Certain tax-free municipal bonds that help finance affordable housing are an example. In some cases, such invest- ments are of the “bank qualified” vari- ety, which provides a further tax advan- tage. Secondly, agency-issued mortgage backed securities (MBS) can be built with loans to homeowners that meet low- to moderate-income definitions. Loan level detail of census tracts and median income percentile is available to support the investor’s case. Be aware that all of these issuers, and the broker-dealers who help you locate these investments, make it clear that it’s up to you to make the case that a given bond should be considered CRA-qualify- ing to your regulator. CRA Partners provides a meaningful CRA compliance program powered by the Senior Housing Crime Prevention Foundation. Funded exclusively by the banking industry, Senior Crimestop- pers is a nationwide crime prevention program educating and safeguarding against theft, abuse and neglect. By utilizing CRA Partners, your communi- ty bank can satisfy its CRA requirements, boost its community relations profile and develop new business relationships, while ensuring safe, secure senior-living environments in nursing homes, HUD communities and state veterans homes at no cost to the facilities. Your community bank can get involved through CRA-qualified community development loans, investments and grants to CRA Partners. All loans and investments are fully collateralized by CRA-qualified securities selected by par- ticipating banks. The yield on the loans and investments is based on the yield paid on the security used to collateralize the loan or investment, less than 1.25 percent is retained by CRA Partners to support its programs. The program is a 100 percent turnkey solution with no administrative burden or ongoing monitoring. CRA Partners will also provide annual detailed low- to moderate-income documentation for your community bank’s CRA exam file. Participating banks can also obtain CRA service credit consideration by using the Preventing Elder Financial Abuse Toolkit and documenting the number of low- to moderate-income attendees at each session. By participating in the CRA Partners program while investing in securities that your regulators accept as CRA-qualify- ing, a community bank can accomplish a lot. First, the investments are liquid and meet most community banks’ safety and liquidity standards. At least as impor- tantly, a portion of your CRA obligations can be addressed. In addition, the Community Reinvest- ment Act requires banks to enhance the lives of low- to moderate-income citizens in their communities in a variety of ways. Banking regulators have ap- proved banks’ participation with CRA Partners and the Senior Housing Crime Prevention Foundation as an acceptable way to meet a portion of these federally mandated requirements. The Senior Crimestoppers platform helps prevent abuse, neglect, theft, van- dalism, substandard care, fraud and un- ethical behavior of any type that affects vulnerable older adults. The program delivers to our nation’s senior housing facilities that improve the residents’ overall quality of life. CRA Partners is endorsed by the West Virginia Bankers Association and 30 other state bankers associations. These strong banking relationships allow us to offer meaningful and effective CRA credit options in your community.  For more information please visit www.SHCPFoundation. org or contact Sue Shaffer at 877-232-0859 or email her at Sue.Shaffer@SHCPFoundation.org Ed Gentry ( ed.gentry@shcpfoundation. org) is president and CEO of CRA Partners, which provides its bank partners with a turnkey CRA compliance program. Jim Reber (reber@icbasecurities.com) is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks.