ACT Deposit Program Can Help Improve Your Bank’s CRA Rating

For many bank executives, meeting the Community Reinvestment Act requirements can feel like solving an intricate puzzle.

But a new initiative offers a safe, straightforward solution to one key aspect of CRA compliance.

Launched this past year by the Community Development Bankers Association (CDBA) and the National Bankers Association (NBA), the Advancing Communities Together^SM Deposit Program provides banks with a secure and efficient way to fulfill their CRA obligations. By placing deposits into Community Development Financial Institutions (CDFIs) or Minority Depository Institutions (MDIs), your bank can earn credit toward the CRA’s community development and investment tests.

“The ACT Deposit Program is a promising new tool for community and regional banks to earn CRA credit,” says Brian Blake, CDBA’s Chief Public Policy Officer and a former bank CRA officer, “ACT excels at meeting both the spirit and the letter of the CRA, and I believe it is very competitive compared with more complex, costly, or time-consuming alternatives.”

The ACT Deposit Program uses IntraFi’s ICS®, or IntraFi Cash Service®, so your bank’s deposit is eligible for millions of dollars in aggregate FDIC insurance at network banks. The minimum deposit under the program is $1 million for banks with $10 billion or less in assets and $5 million for larger banks. And the deposits earn interest.

Note: IntraFi is not an FDIC-insured bank, and deposit insurance covers the failure of an insured bank. A list identifying IntraFi network banks can be found at IntraFi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply.

Regulators define CRA “qualified investments” to include bank deposits with a primary purpose of community development. Under this definition, and subject to considerations such as the asset size and assessment area of the bank seeking CRA credit, deposits placed at CDFI and MDI banks qualify for CRA consideration.

While CRA guidelines require CDFIs to be located within a bank’s assessment area to qualify for the credit, deposits into any MDI bank qualify regardless of geographic location. Currently there are 34 MDIs and 64 CDFIs¹ operating in 31 states participating in the ACT Deposit Program. You can see a full list here.

Blake notes that these deposits will help CDFIs and MDIs do even more to help underserved communities.

“ACT program deposits put capital to work in communities that need it most,” he says. “Because CDFI and MDI banks operate in low-income or low-wealth communities, their funding options are limited—but they excel at financing affordable housing and small businesses, creating jobs, and expanding neighborhood facilities in low-income communities.”

Blake adds that ACT deposits offer banks qualitative benefits when it comes to CRA ratings, since the deposits meet standards of being responsive, flexible, and innovative. He concludes that “when leveraged by CDFI and MDI banks, ACT deposits go to very good use.”

If your bank is looking for a secure, effective way to meet CRA’s community development or investment tests, learn more from this recent case study or by visiting the ACT Deposit Program website at https://www.intrafi.com/act-deposit-program or email Diane Ellis at dellis@intrafi.com.

¹ Fifteen ACT Deposit Program banks are both CDFIs and MDIs.

Deposit placement in the ACT Deposit Program within ICS (“Program”) is subject to the terms, conditions, and disclosures in applicable agreements, including the ACT Addendum to the ICS Deposit Placement Agreement. A portion of a deposit placed in the Program may be allocated to IntraFi network banks that are not CDFIs or MDIs. The interest rate earned on Program deposits will likely be lower than the interest rate available on deposits outside of the Program. IntraFi and ICS are registered service marks, and ACT is a service mark, of IntraFi LLC.