Proposed CRA Changes: What You Need to Know - Social Assurance
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Proposed CRA Changes: What You Need to Know

January 21, 2020
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The Way You Record May Change Under New Rules

CRA is primed for its biggest change since 1995. From service activities to assessment areas, reporting standards and more, here’s what you should know!



More Exacting Standards: Removing ambiguity is one of the key objectives of the proposal and services are primed to have an associated financial value.

Contest Broadening Standards: Under the proposed rules, financial institutions no longer have to have financial expertise associated with qualifying service activities.


Assessment Areas

Modern-Day Banking: Assessment areas are changing to reflect the technological and innovative advancements in the financial industry, such as mobile and online banking.

Deposit-Based Assessment: Banks might have to expand their assessment areas to include locations where they receive a significant amount of deposits.



Update Practices: Expand the scope of your workflows to include the tracking of activities that don’t involve financial expertise.

Compliance Deadlines: After the final rule is enacted, there will be a one year grace period to comply with assessment area, data collection and recording keeping requirements. There will also be a two year grace period to comply with reporting requirements.

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Ben Pankonin 0:00
banking in here is the founder and CEO joined with Alexander. And we’re going to be talking all things CRA and compliance. So as we kind of take a quick step back to understand where we’re at with the changing regulations, I think it’s important for us to see a little bit of the history of CRA. So for many of you, this is going to be a little bit of new knowledge because we’re going way back way, way back. For those of you who don’t know CRA has really been around since it’s been talked about since the early 70s, and was formally enacted in 1977. The original purpose of CRA was designed to kind of meet the talks about needing to address the problems of redlining, which was the practice of some institutions to avoid certain neighborhoods because of their income status or because of their credit rating. And ever since then, it’s been used to try to help meet the credit needs of low to moderate income neighborhoods. Since 1977. There have been a couple of key changes Most notably, that happened in 1995, and 2005. But those are kind of nothing in comparison as to what we’re going to talk about today, Ben.

So realistically, unless your career in CRA has spanned 41 years or longer, this is the biggest change we’ve seen.

Alexander Lahargoue 1:18
Oh, by far. Absolutely. So I

Ben Pankonin 1:21
think this is an important thing to sort of put in that type of context that, that really fundamentally things are having to shift. Now we’re going to talk a lot about the different reasons for some of those changes, and really, how they how they affect different areas of banking. But I think it’s important just to just to realize in the context of the last 41 years, this is by far the biggest change to this legislation. So when we’re talking about this, again, we’re going to be talking about proposed changes. So these proposed changes are not setting summit. We’re really sharing this because we’ve spent a lot of time with you know with many of you Are CRA officers helping to understand how you’re interpreting some of these changes as well as how you’re interpreting things today? And certainly, you know, we’ve spent quite an extensive amount of time studying both the proposed changes as well as a lot of the current legislation. So what I will caveat all of this is that this isn’t final. But we are seeing a little bit clearer picture to where things are going. And really what we do know today is we are in almost now the middle of a 60 day response period. For the CRA regulations

correct. This 60 day period follows anytime a regulatory agency announces a proposal of new regulations. I believe this proposal, this window started back in the middle of December, you have December

Alexander Lahargoue 2:49
12 or 13th. Yeah,

Ben Pankonin 2:51
yeah, exactly. So we still have some time to go. Now. It’s also possible for that 60 day window to expand. It’s purely at the discretion of the regulators and what they hear back in their office. And period.

Alexander Lahargoue 3:00
Right. And we did see some letters, you know, thousands of letters have been issued as response. You know, notably icba Aba, both responded with extensions. So they did want to delay that a little bit longer until the actual regulation comes out because it is a about a 260 page document. Exactly. Yeah, you know, so there’s there’s plenty to read there. Certainly ate up most of weekend for me. So, um, you know, when we think about, you know, what’s happening, I think it’s important to note that things are changing. that’s inevitable, something is going to change. But it’s not definitive as to the very specifics, but what we want to do is give you some of this overview for multiple reasons. One of those is some of what is being proposed to change. You may be asked to collect information For the period we’re in right now, depending on when your assessment periods lay out, you may be asked to report on information you’re gathering now, in an in an assessment in two years, so I think it’s really important that we’re collecting the right information. For one,

Ben Pankonin 4:19
correct. I mean, even though changes have still yet to come starting to prepare for them now would not hurt at all.

Right. So, um, you know, what, one of the things that we’ve been talking about at length, as well is, you know, what are the marketing sort of implications for CRA, and one of the things we had some responses to early on was, well, how should we be talking about CRA? So one of the things that I think is important to note is that your customers don’t necessarily know that CRA exists. And we don’t necessarily have to tell them that there are additional incentives for you to be generous in your community. to volunteer, to even do loans and investments to low to moderate income individuals. We don’t necessarily have to broadcast that as a regulatory challenge. We can broadcast that as a community development opportunity. Exactly right.

Alexander Lahargoue 5:17
Yeah. I mean, with every challenge, there’s a new opportunity to do something new. I think that’s a great point you just made.

Ben Pankonin 5:21
So I think I think part of you know, the messaging when we when we wrap our minds around how we’re involved in these things, really is to help link you know, marketing and CRA together. Now, there’s some other things from a marketing and advertising section that I’m going to talk a little bit more about when we get into assessment areas, because I think there’s some, some really interesting, maybe, you know, not so foregone conclusions in that area that we just don’t know yet. But I think they’re going to have some potential hurdles for marketers as well. So, current regulatory shortcomings, so For all of you who are spending a large amount of time tracking CRA activities, you know that there’s a lot of ambiguity over qualifying activities, you know that, you know, there’s some problems where, you know, we’re not necessarily addressing the technology technological challenges that we’ve overcome already. Oh, yeah. Especially in the banking industry making just so much different today than it was back in 1977. Right. And and, you know, we’re doing business oftentimes in locations where we don’t have branches. And you know, that is not something that we were taking into account in 1977. And none of the updates to CRA took that into account at all. So that’s definitely something that the new legislation is at least attempting to address in several ways. So first things first, start starting off with services, and a little bit of what we want to understand with that, you know, really I’ll open this up within an opportunity really, when we’re tracking services. Well, what we see is a great opportunity to engage a young, young demographic. Most of the bank conferences, I go to have some element of how are we retaining and passing along leadership across our organization, all the way into, you know, younger millennials who are joining the bank, you know, in their first careers. I think it’s really important. This is great survey data that says 63% of millennials, who workers under 35 said, The primary purpose of of businesses it should be improving society, instead of generating profit. Now, this is the big critique back in the 70s, when CRA was written, yep, yes, CRA really gives us that opportunity to say, Hey, you know, we’re tracking this for compliance reasons, but there is no reason why we wouldn’t collect this information. If we weren’t a financial institution that had to comply with CRA. The reality is that information is very valuable in communicating to purpose driven employees who want to do good in the community.

Alexander Lahargoue 8:13
Right. There’s a lot of positive spillover effects from this point of regulation. I think we’re gonna get into some of them and a presentation here.

Ben Pankonin 8:18
So, yeah, you know, I mean, even even to the point that 57% of millennials wish there were a company wide service days, you know, we have those opportunities, whether it be a day or, you know, an hour a week, or whatever that is, that we’re offering for CRA opportunities. If we message this correctly, HR can be can play a very valuable role in our CRA investments. Now, you know, here’s some of the current regulation, which again, we have some some vague standards around services.

Alexander Lahargoue 8:53
Yeah, we do. Basically the letter of a law kind of evaluate bang space on the extense in the innovativeness of Community Development Services, now, if you’re kind of confused by that language, that’s perfectly okay. So are a lot of people. And that’s kind of the chief problem that the new proposed rules are trying to solve. So what this looks like in practice is that all the services and the degree to which the services are provided are trying to meet the needs of low to moderate income neighborhoods. But there’s no real parameters set on the range of services, no rent, no parameter set on the range of how innovative the products have to be. And this kind of causes problems when these institutions come up and come under the scrutiny during the examination period. Because what really is the best way to report these services?

Ben Pankonin 9:41
Yeah, you know, I think you’re absolutely right. We we certainly have some some challenges to overcome there.

Alexander Lahargoue 9:47
And then if we look at how it’s currently playing out a key right part of the regulation requires every bit of service to have some aspect of financial expertise. So we see here for more examples, at These institutions are using their expertise financially to educate the public to help out their schools help out those who fit the requirements of CRA, the lmia individuals neighborhoods, and always tailoring back to that financial expertise aspect, which is helpful, but it does kind of hinder the number of activities that you can do to help your community.

Ben Pankonin 10:20
Yeah, we’ve all experienced this where we’ve gone to record some opportunity, we’ve done a food drive, here at the bank. And on the one hand, if you have if you’re on the board for the food bank, you can record that our board meeting, but then all of a sudden, you’re doing additional activities that are really beneficial in your community. And under current legislation, you’re not able to qualify those activities, you know, without being able to check that box, not just for lmia, but also for, you know, some level of financial knowledge being used. So, you know, changing regulations will allow us To do that in the future, exactly right. So when we look at, you know, the proposed legislation, it actually goes a step further than I expected it to, in that the future regulation says, even including manual labor.

Alexander Lahargoue 11:15
Yeah, the big takeaway is that there was no longer going to be that expectation of having a financial expertise requirement. It could be really anything that you’re doing to help the community and just your efforts can all now be counted towards what’s qualifying activities.

Ben Pankonin 11:31
Right. Right. So I think that’s going to be a big shift. And we’ll we’ll track some more of that. But, you know, gathering the information that you have today is already a challenge. So, you know, for for many of the banks, we did a survey six months ago, you know, bank marketing compliance survey. And among that, you know, we noticed that 47% of marketing and compliance teams listed CRA compliance as a key area for focus and 66% indicated that community services hours were the most difficult areas to track. Now, if we throw another curve on there, I think the other curve says, Well, right now, we’re only tracking activities that would qualify under current legislation. If now we’re including things that would include manual labor. If we’re including, you know, opportunities that don’t use our financial literacy that is potentially a much larger bucket of services.

Alexander Lahargoue 12:31
Oh, yeah, the range of things that you can do to help your community is going to expand tenfold.

Ben Pankonin 12:35
So we’re going to be gathering a whole lot more service opportunities. Additionally, in the new legislation, the proposed legislation, it’s also suggesting that we’re going to tie a value to each one of those hours worked. So today, you know, like in our system, you’re tracking an hour and you’re saying your bank president recorded one hour for a board meeting that has the same sort of same weight, as if we spent an hour teaching financial financial literacy, you know, at, you know, a school? Well, the differences, we’re going to start to break those out Bye, bye pay grades. So each pay grade is going to be multiplied by that hour, which I think is a significant change in the proposed legislation, because now we’re going to actually put dollars towards those service opportunities, which is going to change things substantially.

Alexander Lahargoue 13:36
Exactly. I mean, they’ve never done that before. And I think what they’re trying to do is get rid of that ambiguity by by associating the dollar value to everything that’s being done for services. And I think the proposed rules that that the valuation will be conducted based on the Bureau of Labor Statistics, national average. So, again, that’s not yet set in stone. It was just a proposal mentioned, but we’re in definitely keep a close eye to see how that’s gonna play. out over these next 60 days.

Ben Pankonin 14:01
But yeah, for those of you who are tracking hours in a system like ours, part of what we’re doing to future proof for some of those is entering in that job class. So that now we could say, Hey, here’s this is an entry level employee, this is executive, this is, you know, where do they fit in the organization. So then we could always take, you know, the hours that are volunteered at for, you know, February of 2019. And we could multiply those times those same, you know, Labor and Statistics dollar amounts, to get an accurate dollar amount. So, I think that’s an interesting thing, to sort of take forward with that. So proposed legislation, you know, activities are still targeted towards lmia areas. And your, you know, any activity, you know, I think has some different changes when we think of, you know, how they’re no longer related just to financial services. They have illustrative examples. So we’ll share some of those. But they actually have detailed and giving us examples of what qualifies. And what does. Oh, yeah.

Alexander Lahargoue 15:09
And not only that, but they’re going to be adding to it quarterly based on some of the submissions that they received through exams.

Ben Pankonin 15:16
So the nice thing is, we have a little bit less of that waiting to an exam period, and then hoping we can qualify something and instead, being able to look to some of those lists and say, Hey, here’s here’s something we can cite.

Alexander Lahargoue 15:29
Yeah. And then beyond that, too, there was a mention there in the proposal about how there’s going to be a formal Question and Answer process whereby institutions can ask their regulators about specific questions saying, Hey, here’s my service. These are the hours that I had this qualify for CRA credit, which has never been able to have happened before.

Ben Pankonin 15:48
Yeah, yeah, I think that’s going to be a huge so this is actually right from the the first page that had come out in you know, in December 13 of 2019. But I think this is actually there’s some interesting different areas here. You know, everything from, you know, things like, you know, you know, providing mentoring or tutoring services to a nonprofit organization that serves lmia youth, right? Yep. Right from the middle, you know, volunteer service to serve meals at a homeless shelter. Right. Clearly, that’s something today, that wouldn’t qualify, but there are they are looking to qualify those kinds of activities in the future. Exactly. Right. So, so really interesting. Yeah, we can cite some other examples. But again, I think part of the message there is, you know, right now, you may have employees who are doing some of these activities, this broadening of opportunity to track those could be really interesting to your organization long term. Because typically, we’ve wanted to save ourselves some time and say, Hey, you know, regulators, you don’t want to see activities that wouldn’t qualify for CRA right. Well, now Now they’re starting to look for other opportunities. So I think that’s going to change a lot of that reporting, and especially the gathering of information.

Alexander Lahargoue 17:08
Now, then we’ve talked about how this is going to change things from a compliance standpoint, do you think this these kind of changes are also going to affect things from a marketing standpoint?

Ben Pankonin 17:18
Yeah, you know, I think I think the way we talk about it right, it opens us up to not just talk about financial literacy, I think there’s a large number of, of people who have looked at our activities in particular in schools in which we’re teaching financial literacy. And, and I’ve, I’ve, I know, a lot of bankers who do this on a regular basis, and say, you know, they get, you know, a great opportunity to speak to students, right about financial literacy is a really important component. But I think the community oftentimes thinks that that somehow it’s a bait and switch. Yeah. And, you know, I think by being able to market a wider range of activities, I think that’ll really help.

Alexander Lahargoue 17:58
It’s a great point. helps them DC more as a truly community bank in some respects.

Ben Pankonin 18:03
Yeah, yeah. So you know, a few things to be thinking about doing today. Obviously, you know, thinking about, you know, having employees involved in community service activities. You know, this is sort of a widening approach, but also saying, hey, maybe we should collect more of those activities. Obviously, the way you’re looking to track all of those activities does get to be important. You know, being able to bring those into a central spot gets to be important. And then, you know, leveraging that involvement to to showcase what you’re doing to all of your community, from a marketing standpoint, has has a lot of benefits. So I really key area that is changing. Also just as significant as services is the way that assessment areas are built, tracked, recorded. I think this is this is also good gonna be a really big change for

Alexander Lahargoue 19:02
all of us. It is it’s really kind of modernizing for how technology and business practices are today.

Ben Pankonin 19:09
Yeah, so so one of those are you benefiting areas without branches? Right. So when we think about, you know, places that don’t have a branch, one of the figures that’s given in the proposed guideline guidance is anywhere that’s more than two miles from a branch location. Well, if you’re from where I’m from, everything’s two miles or more. Right? That’s just to say it’s just two blocks over basically, is two miles. You know, if you’re from, you know, rural America, there’s a whole lot of opportunities in those rural communities to do loans. Now, they’re also improving some opportunities from a lending capacity to raise the dollar amounts on those rural loans as well.

Alexander Lahargoue 19:56
Yeah, which doesn’t really benefit those areas, I think.

Ben Pankonin 19:59
Yeah. Well, in you You start thinking of a cost of a combine or something right? You wouldn’t loan that as an opportunity. But now if it’s a smaller farm, and I have a definition for a small farm, but those loans go up to 2 million. So that starts to be a more realistic opportunity to do lending to rural farms.

Alexander Lahargoue 20:22
Yeah, I mean, that expanding number of available loans not only helps the community but also helps our institutions meet their compliance requirements.

Ben Pankonin 20:30
Right. Right. Yeah, there’s, I think it’s going to expand a lot of opportunities that we never looked at, for CRA. A number of banks that I’ve spoken with have said, Hey, we, we have some assessment areas that are in you know, rural America, and we can’t qualify very many activities for loans, and especially for investments in some of these locations, because like they’re, they’re all farming and and it just isn’t, it isn’t a very easy way to qualify something. So little bit about current legislation actually like to how you describe this as hotspots of cold spots?

Alexander Lahargoue 21:07
Yeah, you’re right.

Because like I mentioned earlier in the slides, the CRB get based on how the qualifying activities are designed in CRA banks are only really incentivize to do activities that are within their assessment areas. And so, like I mentioned earlier with the rural areas, there can oftentimes be just deserts, where there is really a need for some of the services that are offered by banks, but they’re really banks aren’t necessarily incentivized to do it, since it won’t count for credit. Right.

Ben Pankonin 21:36
Yeah. So so we kind of have this these opportunities where, yeah, where we do have weird gaps.

Alexander Lahargoue 21:44
Exactly. And so we’re gonna look at how assessment areas are done today. We found a great example with Walden Savings Bank. They are now in their 22 days of giving back over the holidays that just ended. And I believe that all of their institutions that they’re assisting All fall within their assessment areas. It’s not necessarily a bad thing. They’re still giving back to the community. They’re still helping. But the new changes, I think are addressed with change how this is done.

Ben Pankonin 22:09
Right? Absolutely. So proposed legislation start to take our our maps and our assessment areas and treat them very differently, right now sorts of expand where we have areas where banks conduct conduct a significant volume of retail lending,

or significant amount of deposits, right.

Alexander Lahargoue 22:29

Ben Pankonin 22:31
That starts to be of a very different picture for a lot of banks that you’re doing business, not near a branch location,

Alexander Lahargoue 22:40
right? Because previously before this, what they were doing was based solely on what’s called facility based geography. And that’s basically where the bank bank headquarters is the branches. The ATMs, wherever a bank has a physical footprint, really it was where they’re being evaluated. Right now. We’re looking Much more about where we’re doing business much more than where we have a branch location. So not to pick on a bank like ally but but hate to pick on a bank like ally, right? That is essentially a branchless bank. I mean, back in 1977, I don’t think anybody could have really fathom the idea of a bank without any physical branches. So since ally does exist, and that has been having to abide by the old regulation, what they’ve been doing so far is they’ve been basing all of their care activity on where their headquarters is, which is, of course in Salt Lake, Utah. And so what they’ve been doing is that they selected one assessment area, and then the seven surrounding areas. And that’s where they’re being evaluated on for cyriac for CRA credits. Now, does that necessarily mean that they don’t have customers outside of salt lake? No, if a customer is all over the country, but currently they’re not being evaluated where they where they gain their deposits, based on the proposed regulation? That is looking like it’s going to change?

Ben Pankonin 23:58
Right, right. So for banks, like ally. And for banks that are a hybrid role, like many of you are in more of a hybrid role where maybe you have a lot of activity that happens closely associated with branches. But then you have those opportunities where maybe you have a vertical niche, whether that’s a construction area or a certain part of Ag lending or whatever that might be, that don’t exist near branch. Now, we’re going to have to expand that assessment area to account for that. Exactly. So I think that that actually, to answer a question that I saw come in a little bit ago about, yeah, how does that affect, you know, some areas of marketing, especially for kind of targeted marketing? Well, we haven’t really thought about that yet. Right? We haven’t really thought about that in the proposed legislation, because now if we’re reviewing advertising material, and we’re advertising to where we have branch locations, but we’re not advertising those opportunities, to places where maybe we have deposits but no loans or something like that. We might have some additional scrutiny that I don’t see any example in the 240 page document, that that really detail that

Alexander Lahargoue 25:13
right. I mean, it was kind of silent on that point, which kind of indicates that there might be more to come even after the final rules are released.

Ben Pankonin 25:19
Right. Right. So, so definitely, that’s some stuff that we’ll want to stay on top of as we consider, you know, how that might have some implications there. But yeah, certainly the way we think about assessment areas is going to change. I think for those of you who have opportunities in ag lending, this could mean some loans that you’re already doing, could be qualifying. So I think that’s, that’s a particular interest. Additionally, if you’re, if you’re doing some loans in low to moderate income areas, but they’re not associated, you know, near one of your branch locations, that might just be a new assessment area for you to consider. Right.

So, so definitely some interesting things. Now, as we start thinking about reporting, obviously, we’ve been talking about collecting a lot of that information, what happens when we go to report on it? Quite a bit has changed. I think the last really third of that proposed legislation was about reporting. Some of that being electronic reporting. So there are going to be some additional ways to communicate more directly with regulators, which I think is encouraging as well.

Alexander Lahargoue 26:33
Yeah. And a key thing to keep in mind too, is that, as with the other areas of the updates, a key objective with the reporting changes is that they are wanting to streamline it and remove ambiguity so that when the exams and the audits come down, they’re able to be conducted much faster.

Ben Pankonin 26:48
Yeah, yeah. I mean, our hope for all of us is to have a more exacting view of it. One of the things to note with reporting is that we do have different requirements like one of the The things that I think we oftentimes overlook is the opportunity not just to just to do reporting on the CRA requirements, you know, in each of the core areas, whether, you know, those are loans, investments, services, you know, donations, whatever that might be. Certainly we have requirements and reporting. But we also have additional opportunities to do better reporting to executives, to let them know, here’s what we’re doing. Here’s the type of activities we’re conducting. And here’s the benefit to our communities. I think that’s an area of reporting that oftentimes, we overlook a little bit. And then I think also, as we talk again, about employee engagement, these are the opportunities to remind employees that the bank is doing great things, the people to their left into their right are doing great things in their bank, and this is a great place to work. So I think I think sometimes we overlook that aspect because we’re required to do so. Much that oftentimes we overlook what we can do for the people sitting around us. So a little bit about current legislation and regulations, essentially, today, you know, we have a much narrower view of how we would collect this information. Most people are doing it by Excel spreadsheets, grab that certainly the vast majority of the banks that we talk to are doing most of this activity by Excel spreadsheets. Now, they might be collecting some of that from a core system and pulling that out for some some loan activity, things like that. But then it’s ending up in a lot of Excel spreadsheets. Now, moving forward, one of those current struggles, oftentimes is collecting right collecting all of the time activities if we’ve got 1000 employees, and we’re trying to collect all of those actions tivities into, you know, Excel spreadsheets or, you know, that’s certainly, you know, a time intensive problem. And obviously, we don’t have a, you know, an objective standard for each of those. So it’s really difficult oftentimes, for us, even if we’re really good at Excel to pull all of that information back and be able to tell you, you know, the average employee volunteers X number of hours, here’s what they’re doing, and here’s what they’re doing over time. The other thing that we’re starting to see change is, as people change their assessment areas, that creates a really difficult reporting problem, where if you change your assessment area every year, and you change, you know, so, as banks are acquired, or divested, either way, we’re sort of changing those assessment areas. And so those become fluid. You know, products like Excel don’t like that fluidity because all of a sudden now we change the, the way that we assessed from last year to the next year. That creates an additional complexity.

Alexander Lahargoue 30:02
Yeah, I mean, our reporting structures have to be agile enough to adapt to the new changes, you know, I mean, and then knowing what we know about the upcoming changes, Ben, what do you think are going to be some of the more key or essential hurdles that our listeners are gonna have to overcome in order meet the new changes?

Ben Pankonin 30:19
Yeah, I mean, I think one of those is really collecting all of this information and making it a more central business function to make sure that we’re staying on top of that information. The collection, I think, is the primary issue, but then I think the way we report on it, you know, it’s going to be a more real time, right? So we’re, we’re having some annual check ins with the proposed legislation. So you’re not going to have necessarily a full audit every year, but you are going to have opportunities to convey that information on an annual basis to check in with regulators. So I think I think that’s great. To put a little bit of an additional burden on being more timely with the way we report on it. So I wish I think overall is healthy, right, it changes our workload, because we don’t have that sort of every couple years to sort of think about putting it all together. I think that’s going to change some of that workload.

Alexander Lahargoue 31:19
Yeah. But having a more robust system and or at least process will be helpful and making sure that you’re able to adjust the upcoming changes, right.

Ben Pankonin 31:27
Also, yeah, I think I think it’s important to note that today, the reporting standards have not changed, right, like, right, yeah, you don’t necessarily have to do anything today from a reporting standpoint, but from the way that we’re tracking that information, if we’re going to be asked to report on information that’s happening now. You know, we see a lot of challenges in gathering that information, specifically, the information from employees, you know, loans, we can always go back and look, but employees are really difficult to start. Six months down the road and ask them what sort of volunteer activities they were doing in January. Right? That’s a great point. Right? So I think, yeah, those types of things are really important. Getting them just a more coordinated effort across the board. You know, we’ve, we’ve really looked at, you know, the types of solutions that that banks are using to record some of those, you know, we found it really important that employees could could simply click and and enter in information, you know, rather than have to have, you know, separate logins or, you know, be able to navigate a lot of different complexity. They’re having them already have this dashboard available for them. Yeah, it’s been a really valuable component.

Alexander Lahargoue 32:43
So with that in mind, how do you think future exams are going to look like?

Ben Pankonin 32:48
Good question I, you know, I think when we look at exam periods, my hope is that we will sort of I think we all talk around this sort of imaginary orange line right? Her sort of says, You know what, we’re up, we’re above that orange or red line, and we feel confident in where we’re at with our CRA activities. We know that we’ll get outstanding this year. And I my hope, with a proposed legislation is that we will have CRA officers say, this year, I will have an outstanding rating and know that to be true, that that’s not been the case. Well, you know, with CRA, you know, it’s poor regulation, right. It’s poor regulation, when when you don’t know going into it, where you stand. And I think we’re going to get a lot closer to being able to say, Yes, I know where I stand. You know, we made the necessary investments, loans, we had the activities that you know, are certainly in a category that we comply with, and whether or not we’ll get there on the first you know, that first exam. You know, I’m I’m doubtful of that, but yeah, But I do think that over time, as we build that reputation of good, accurate data collection and reporting will be there.

Alexander Lahargoue 34:09
Gotcha. So it sounds like we should have more peace of mind going into these exams under the new rules.

Ben Pankonin 34:14
You know, it’s it’s hard to say, Alexander that new regulation will give us peace of mind. Let’s, let’s be honest, like that’s, that’s a difficult thing to say. But it couldn’t be, you know, more ambiguous. That’s true. So. So I think I think there is an opportunity to have more clarity. And I think that’s the important part for us to think about. So, you know, when does this head right, reminder, we’re in that 60 day review period, just right at 30 days into that 60 day review period. Yeah, my guess is it probably gets extended another 30 days, you know, I mean, it’s covered Yeah, government doesn’t move fast. Like that’s, that’s probably to be expected. But you know, then We have one year to be compliant with assessment area data collection and record keeping requirements. So that’s the first thing that we have to keep in mind. Those record keeping requirements and assessment area data collection, right, like that’s all the critical area, then two years to comply with the reporting requirements after a final rule. So at the earliest, we’ve got 30 days from now plus one year, that you have to be compliant with the assessment area and data collection, all of that component, right. And then two years from that date, you know, to be compliant with the reporting requirements. But again, I think to reiterate what we’re recording now, if we’re talking one year, one year in one month from now, you know that we’re going to have to be compliant with assessment area and data collection. We need to start thinking about where we’re storing our data and how we’re pulling that in. Are we pulling in enough data? You know, I think we’re All of the things we do in big data, that’s the that’s the thing. A lot of times that we asked, we can’t go back and get more data. Like that’s that’s the problem, right? We’re limited by how much data we pull in.

Alexander Lahargoue 36:12
I see. So taking a step back and taking into account the assessment area data collection, the qualifying service activities, what would be your plan of action today? If you were in one of our listeners position?

Ben Pankonin 36:24
certainly part of what I would look at is, are we collecting the kind of data that we’re going to be required to do in the proposed legislation, like, if we’re not collecting that data, then we need to look at how we could collect that. We also know that if you’re collecting that it’s going to be increasingly difficult to do that with manual entry. So you know, if we’ve got the model of a CIA officer having to enter in all of employees activities in addition to, you know, loans investments, every donation request, if if we’ve got one person trying to enter in all of that information, regardless of the size of your financial institution, that’s going to be really time intensive. It’s going to create an additional burden. So I think figuring out how you want to collect that information and bring that in, you know, certainly, you know, we’re happy to present the opportunities that we have for doing that. But I think, you know, I think that’s really something to consider how we’re bringing that information in. Additionally, if you’re partnering with somebody, or you’re looking for that, you need to find somebody who’s staying on top of new regulations like it’s going to be changing. So, you know, the ways that we’ve done it, or kind of punching, reset, right, like, the way that you’ve done it in the past is is going to be fundamentally different. So, so I think, yes, we do have the same, you know, similar requirements. We want to look for low to moderate income, you know, we want to track things by census tract, all of those sorts of things and principles still apply. But the amount of information we gather is going to go up, the burden of reporting is going to go up. And we’re exchanging that for hopefully better clarity. Gotcha. So, you know, we’re always glad to have a conversation, talk with you about the ways that you’re tracking CRA today, if there’s anything that we could help improve for you on that. That’s certainly a conversation. We’re always willing to have and, and bring you in and, you know, certainly take a look at some of that data and the way we could help organize that. So I think for all of you, I noticed we had a few questions. I think we’ve tried to hit all of the questions that have come in. But if you have additional questions, feel free to shoot us an email, you know, to myself or Alexander, you know, we’re glad to take some of those emails. Try to help bring some clarity to you before this legislation, you know gets live before they vote on it hopefully in another 30 to 60 days. But again, stay tuned, we’ll be doing a recap, you’ll once we have more clarity on our end to know exactly what that legislation contains, how much it varies from this proposed legislation. We’ll be doing some additional webinars, we’ll be disseminating some more information, but always glad to do a call and answer questions as well. So Alexander, thank you so much for putting together a lot of research behind this. I know you helped at length, dropping a blog out on social insurance site as well. Yes, detailing a bunch of proposed changes as well. So what’s on tap Next, you’ve got some more writing to do as well. We do,

Alexander Lahargoue 39:53
though, is kind of the end of our webinar. This is not the end of the information that we’re going to be disseminating. We kind of have blocks stacked up over the next couple of weeks getting going a little bit more in depth on these key topics. So be sure to follow us on social media, visit our website, we’re gonna be releasing all the information. And it’ll be readily accessible what you need to be looking out for, as these new proposals kind of progress through the 60 day comment period.

Ben Pankonin 40:18
Well, thanks again so much for your work. And thanks to everyone who stopped to listen in. Again. We’d love to chat with you over this coming year about all of these changes and more.