WASHINGTON - The CRA Qualified Investment Fund, a mutual fund designed to help banks satisfy the Community Reinvestment Act's investment component, announced a big win Monday that it claims has significantly increased interest among potential bank investors.

San Diego National Bank - the first of the fund's handful of bank investors to undergo a CRA exam - was upgraded to an "outstanding" rating, and the Office of the Comptroller of the Currency's report lauded as "innovative" the $1.3 billion-asset bank's $2.1 million stake in the CRA Qualified Investment Fund. In San Diego National's March 1997 CRA exam it got a "satisfactory" rating.

That stake "certainly helped us in the investment test, but it takes more than the investment test to get an 'outstanding' rating," said Karen Brassfield, a senior vice president at San Diego National.

The 1977 reinvestment law requires banks with more than $250 million of assets to prove compliance by meeting a three-part test on lending to, service of, and investment in local communities. The investment component only makes up 25% of a bank's CRA grade, but many banks have had a tough time finding eligible investments.

When it was launched in June 1999, the mutual fund was heralded by experts as a great way to help banks comply with the CRA, but it has been nowhere near as successful as predicted. "To bring in that first investor was really difficult," said Neil Solomon, principal of CRAFund Advisors, the mutual fund's investment adviser. "We spoke to 800 [banks] and got one."

At the end of its first year the fund had gotten just 13 banks to invest $13 million. But since San Diego National's successful CRA exam, marketing has become much easier for the bank, a unit of FBOP, a $5.12 billion-asset holding company in Oak Park, Ill.

"We sent out a direct marketing piece to 2,000 banks and got 200 responses," Mr. Solomon said. Eight banks have signed on in the last six weeks, bringing the total to 21 banks in 15 states, with a combined investment of $20 million, he said. The minimum investment is $250,000.

When the fund launched, Mr. Solomon predicted assets under management would grow to $1 billion by yearend 2000, and said it could "easily be $10 billion."

"Every time I read it, I cringe," he said Monday. The fund's new asset goal: $100 million by the end of next year.

The fund holds AAA-rated securities that yield roughly 8% a year. A bank that invests in the fund owns a pro rata share, but its investment is matched dollar for dollar with investments in its CRA assessment area.

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