Guidance from the nation’s leading CRA expert and author.

Meet Dr. Kenneth H. Thomas

As the nation’s leading CRA expert, author and consultant, Dr. Thomas is a thought leader in the community reinvestment and development field with a unique academic, regulatory, banking and investing background.  The fact that he was born and raised in a redlined neighborhood in Detroit’s inner city gave him an even better understanding of life in a distressed and underinvested community.

Dr. Thomas’ thought leadership in the CRA field has led to several recommendations that have been implemented in current CRA regulations. From the U.S. Treasury Department to representatives of Congress to a community bank’s Board of Directors, Dr. Thomas advises on high impact investing from multiple vantage points.

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CRA Exam Case Studies

Intermediate Small Bank: Southwest

Type of bank: Intermediate Small Bank
Location: Southwest
CRA Issue: A community bank with a nontraditional business model resulting in almost all of its lending outside its Assessment Area received repeated Needs to Improve ratings, which were adversely impacting its business model and operations.
Assistance: Dr. Thomas used a unique community contact strategy to convince examiners the bank was adequately meeting community credit and banking needs within its Assessment Area, so the bank could properly be given credit for its community development activities in the Broader Statewide and Regional Area.
Result: Instead of waiting two years for its next CRA exam, the regulator agreed to an immediate exam that resulted in a Satisfactory rating.

Intermediate Small Bank: Northeast

Type of bank: Intermediate Small Bank
Location: Northeast
CRA Issue: Examiners advised the bank of a likely Needs to Improve rating due to its ongoing low (30- 40%) Loan to Deposit (LTD) ratio.
Assistance: Dr. Thomas used relevant Performance Context factors to explain to the examination team the reason for the perennial LTD ratio, including the fact that the bank’s home county had the highest unemployment and poverty rates as well as the lowest income levels in the state. Also, he showed that the bank’s non-performing loan and advertising expense ratios were higher than the state average, thus helping to document the bank’s position that it was truly attempting to make loans but many of them became non-performing.
Result: The bank received a Satisfactory rating.

Large Bank: South

Type of bank: Large Bank
Location: South
CRA Issue: Upon the announcement of a major merger, local community groups backed by a highly visible national coalition requested that the bank negotiate a Community Benefits Plan, similar to other multibillion-dollar plans done in major M&A deals.
Assistance: Dr. Thomas submitted an opinion to the bank that carefully explained to them and their attorneys and regulators that there was no such requirement under CRA, especially considering the resultant bank’s record of repeated Outstanding CRA ratings.
Result: The regulators of both banks agreed with Dr. Thomas’ opinion, and the merger was approved without any such required plan.

Intermediate Small Bank: Midwest

Type of bank: Intermediate Small Bank
Location: Midwest
CRA Issue: Examiners advised the bank of a likely Needs to Improve rating, which it had previously received, due to its very low Assessment Area (AA) penetration ratio (under 10%), a result of the bank’s nationwide lending strategy
Assistance: Instead of pursuing the Strategic Plan option as suggested by the bank (and even their examiner), Dr. Thomas recommended the Bank opt to be examined under the Large Bank retail instead of the ISB CRA exam procedures, since most of the nonlocal loans had a Community Development (CD) purpose. In addition to substantial CD investments and services, the strong CD lending helped offset the low AA ratio in the Lending Test, in addition to the fact that a significant portion of deposits emanated from outside the AA.
Result: The bank received a Satisfactory rating.

Intermediate Small Bank : Northeast

Type of bank: Intermediate Small Bank
Location: Northeast
CRA Issue: Examiners advised the bank of a pending downgrade from an Outstanding to a Satisfactory rating, primarily because of its shift from multifamily permanent lending to construction lending for affordable housing, since there were no rent rolls or income data to establish the low- or moderate-income nature of likely residents of the units under construction.
Assistance: Dr. Thomas respectfully explained to the examiners that CRA examination procedures allow for Community Development loan credit for such construction lending if it can be documented by demographic, economic, market, and other relevant factors that the newly constructed units would primarily accommodate low- or moderate income individuals, which the bank was able to do.
Result: The bank’s Outstanding rating was maintained.

Large Bank: South

Type of bank: Large Bank
Location: South
CRA Issue: With a pending CRA exam and a record of previous Outstanding ratings, the bank wanted to make sure it received full credit for its significant PPP lending, since it made an extraordinary effort to assist its community during the Pandemic.
Assistance: Dr. Thomas analyzed the PPP lending of all banks in the state and created a “PPP Loan Community Responsiveness Index,” which measured the amount of PPP lending in the state by each bank relative to their deposits obtained from within the state. The subject bank ranked very high compared to other local banks, nonlocal regional banks, and especially the “Big Four” giant out-of-state retail banks.
Result: The public Performance Evaluation cited the bank’s “extensive use of innovative and/or flexible lending practices” and its “excellent responsiveness” to the credit needs of its community during the Pandemic.  This CRA “Extra Credit” helped the bank maintain its Outstanding rating.  Dr. Thomas’ PPP Loan Community Responsiveness Index was later adopted by a national business journal publication and replicated in all of its local business journals throughout the country.

Small Bank: Northeast

Type of bank: Small Bank
Location: Northeast
CRA Issue: As a small bank transitioning from a non-lending institution to a traditional retail bank, it had relatively low LTD and LMI ratios with an overall Satisfactory CRA rating.  The bank was concerned about a possible downgrade with its pending exam.
Assistance: Although not required as a small bank, it invested in The Community Development Fund to benefit from Dr. Thomas’ CRA expertise.  In addition to providing a CRA and Fair Lending Seminar for the bank’s Board, he provided specific recommendations as to the best way to present the bank’s three years of performance data to its examiners.  Dr. Thomas was available to answer questions from both the bank and the EIC during the exam.  
Result: While the bank would have been happy with another Satisfactory rating, they were pleasantly surprised to receive their first Outstanding rating, which specifically noted the bank’s “excellent responsiveness” to AA credit needs with a primary focus on affordable housing.

Intermediate Small Bank: Southwest

Type of bank: Intermediate Small Bank
Location: Southwest
CRA Issue: A community bank with a nontraditional business model resulting in almost all of its lending outside its Assessment Area received repeated Needs to Improve ratings, which were adversely impacting its business model and operations.
Assistance: Dr. Thomas used a unique community contact strategy to convince examiners the bank was adequately meeting community credit and banking needs within its Assessment Area, so the bank could properly be given credit for its community development activities in the Broader Statewide and Regional Area.
Result: Instead of waiting two years for its next CRA exam, the regulator agreed to an immediate exam that resulted in a Satisfactory rating.

*Note: These case studies may not be representative of the experience of other investors and are no guarantee of future such results.

CRA Exam Case Studies

Intermediate Small Bank: Southwest

Type of bank: Intermediate Small Bank
Location: Southwest
CRA Issue: A community bank with a nontraditional business model resulting in almost all of its lending outside its Assessment Area received repeated Needs to Improve ratings, which were adversely impacting its business model and operations.
Assistance: Dr. Thomas used a unique community contact strategy to convince examiners the bank was adequately meeting community credit and banking needs within its Assessment Area, so the bank could properly be given credit for its community development activities in the Broader Statewide and Regional Area.
Result: Instead of waiting two years for its next CRA exam, the regulator agreed to an immediate exam that resulted in a Satisfactory rating.

Intermediate Small Bank: Northeast

Type of bank: Intermediate Small Bank
Location: Northeast
CRA Issue: Examiners advised the bank of a likely Needs to Improve rating due to its ongoing low (30- 40%) Loan to Deposit (LTD) ratio.
Assistance: Dr. Thomas used relevant Performance Context factors to explain to the examination team the reason for the perennial LTD ratio, including the fact that the bank’s home county had the highest unemployment and poverty rates as well as the lowest income levels in the state. Also, he showed that the bank’s non-performing loan and advertising expense ratios were higher than the state average, thus helping to document the bank’s position that it was truly attempting to make loans but many of them became non-performing.
Result: The bank received a Satisfactory rating.

Large Bank: South

Type of bank: Large Bank
Location: South
CRA Issue: Upon the announcement of a major merger, local community groups backed by a highly visible national coalition requested that the bank negotiate a Community Benefits Plan, similar to other multibillion-dollar plans done in major M&A deals.
Assistance: Dr. Thomas submitted an opinion to the bank that carefully explained to them and their attorneys and regulators that there was no such requirement under CRA, especially considering the resultant bank’s record of repeated Outstanding CRA ratings.
Result: The regulators of both banks agreed with Dr. Thomas’ opinion, and the merger was approved without any such required plan.

Intermediate Small Bank: Midwest

Type of bank: Intermediate Small Bank
Location: Midwest
CRA Issue: Examiners advised the bank of a likely Needs to Improve rating, which it had previously received, due to its very low Assessment Area (AA) penetration ratio (under 10%), a result of the bank’s nationwide lending strategy
Assistance: Instead of pursuing the Strategic Plan option as suggested by the bank (and even their examiner), Dr. Thomas recommended the Bank opt to be examined under the Large Bank retail instead of the ISB CRA exam procedures, since most of the nonlocal loans had a Community Development (CD) purpose. In addition to substantial CD investments and services, the strong CD lending helped offset the low AA ratio in the Lending Test, in addition to the fact that a significant portion of deposits emanated from outside the AA.
Result: The bank received a Satisfactory rating.

Intermediate Small Bank : Northeast

Type of bank: Intermediate Small Bank
Location: Northeast
CRA Issue: Examiners advised the bank of a pending downgrade from an Outstanding to a Satisfactory rating, primarily because of its shift from multifamily permanent lending to construction lending for affordable housing, since there were no rent rolls or income data to establish the low- or moderate-income nature of likely residents of the units under construction.
Assistance: Dr. Thomas respectfully explained to the examiners that CRA examination procedures allow for Community Development loan credit for such construction lending if it can be documented by demographic, economic, market, and other relevant factors that the newly constructed units would primarily accommodate low- or moderate income individuals, which the bank was able to do.
Result: The bank’s Outstanding rating was maintained.

Large Bank: South

Type of bank: Large Bank
Location: South
CRA Issue: With a pending CRA exam and a record of previous Outstanding ratings, the bank wanted to make sure it received full credit for its significant PPP lending, since it made an extraordinary effort to assist its community during the Pandemic.
Assistance: Dr. Thomas analyzed the PPP lending of all banks in the state and created a “PPP Loan Community Responsiveness Index,” which measured the amount of PPP lending in the state by each bank relative to their deposits obtained from within the state. The subject bank ranked very high compared to other local banks, nonlocal regional banks, and especially the “Big Four” giant out-of-state retail banks.
Result: The public Performance Evaluation cited the bank’s “extensive use of innovative and/or flexible lending practices” and its “excellent responsiveness” to the credit needs of its community during the Pandemic.  This CRA “Extra Credit” helped the bank maintain its Outstanding rating.  Dr. Thomas’ PPP Loan Community Responsiveness Index was later adopted by a national business journal publication and replicated in all of its local business journals throughout the country.

Small Bank: Northeast

Type of bank: Small Bank
Location: Northeast
CRA Issue: As a small bank transitioning from a non-lending institution to a traditional retail bank, it had relatively low LTD and LMI ratios with an overall Satisfactory CRA rating.  The bank was concerned about a possible downgrade with its pending exam.
Assistance: Although not required as a small bank, it invested in The Community Development Fund to benefit from Dr. Thomas’ CRA expertise.  In addition to providing a CRA and Fair Lending Seminar for the bank’s Board, he provided specific recommendations as to the best way to present the bank’s three years of performance data to its examiners.  Dr. Thomas was available to answer questions from both the bank and the EIC during the exam.  
Result: While the bank would have been happy with another Satisfactory rating, they were pleasantly surprised to receive their first Outstanding rating, which specifically noted the bank’s “excellent responsiveness” to AA credit needs with a primary focus on affordable housing.