who defines assessment areas

Retail lending distribution tests ratios for the borrower distribution and geographic distribution tests for each major retail lending product line in each applicable assessment area. A combination of lending, demographic and economic criteria could be used to designate underserved counties. hYYo~}}rV}&~hr&_.Tz~T~}1P,U$^4W^~:}a%E*_~X} T/?ba/g~.}e` Cq|hN!ejUuGR5%^;3_-/HJ_0su~n/UqO]Qc#jEaADZWFe~"HiF^Z>O#N`L\jyc:GO1Isyw^vO7Q~Tn%3_8Vh.iH5%V(`v~yQ T|p^9W"}pa #SL~I6SQ(PDBD#""P57 TOoNU-nN\)HAzA%?1Y@#fzqs/pZNlTvT\Uk. Combat grade inflation on the investment test: In the sample of the 50 largest banks, 60% scored Outstanding on the investment test, which is a much higher percentage than those that scored Outstanding overall or on the lending test.

It is this emphasis on local needs and conditions that is key to CRAs success in leveraging a high level of loans and investments that are responsive to the needs of LMI communities.

Written evaluations of the CRA statute, https://www.law.cornell.edu/uscode/text/12/2906, 15 Definition of community development in the CRA regulations, see the Definitions section, 25.12, https://www.ffiec.gov/cra/regulation.htm, 16 To access the databases, see https://www.occ.gov/topics/community-affairs/resource-directories/public-welfare-investments/national-bank-public-welfare-investment-authority.html, Copyright 2022 NCRC. The last 16 banks have assets ranging from $13 billion to $28 billion.

According to an ABA Banking Journal Article https://bankingjournal.aba.com/2017/02/redlining-everything-old-is-new-again/ , they cited, While the concept of REMA is not new, the focus on REMA as an additional component of a fair lending redlining risk assessment and analysis may be new for some institutions.

From state and national associations to implementation and referral partners, we work with some of the bestfind out how you can join our partner team!

Reform proposals must consider the likelihood of gaming and must ensure that banks are making investments outside AAs only when they have met local needs in AAs.

It concluded that the incidence of community development financing outside AAs appears to be higher than one would guess based on the grousing and complaining about examiner inconsistency regarding favorable consideration outside AAs.

In basic terms, the accuracy of your peer comparisons, redlining risk analysis, in-out ratios, CRA credit and more depend on those geographic area definitions. Creating Experiences Leading to Outcomes - ensuring that students have experiences both in and outside their courses that help them achieve the intended learning outcomes. An Interagency Question and Answer (Q&A) document contains the most detail about treatment of community development financing outside of assessment areas. However, in this sample of the largest banks, the below median performers were not enhancing relatively good performance in their AAs, but might have been using outside AA investments to boost their mediocre performance on the quantitative criteria.

This report found that about three-fourths of the banks in the sample were examined in a three-year period, which is customary.

These banks were not included in the studys calculations because the exams did not present aggregate community development lending outside of the AAs.

The median dollar amount of outside AA investments was almost $51 million. Any other information deemed relevant by the FDIC. In contrast, 20% of the same banks received Outstanding on the Lending Test.

The median community development lending amount for the banks in this study was $1.76 billion dollars.

The Final Rule retained the current regulations requirement that banks delineate assessment areas that include their physical deposit-taking locations and added a requirement to include as an assessment area those areas generating deposits outside of the physical locations.

Assessment areas usuallyconsist of one or more metropolitan statistical areas (MSA); metropolitan divisions; or one or more contiguous political subdivisions, such as counties, cities, or towns. (Assessing Student Learning and Development: A Guide to the Principles, Goals, and Methods of Determining College Outcomes by Erwin 1991), Assessment is the systematic collection, review, and use of information about educational programs undertaken for the purpose of improving student learning and development.

The reader of an exam would have to comb through hundreds of pages of evaluations for states and AAs in order to tabulate these figures.

Instead, NCRC recommends that outside of AA activities be guided by additional data on community development financing and the designation of underserved counties. NCRC has produced two proposals immediately below that we believe will avoid new complications. Another issue with AAs has been bank interest in pursuing community development loans and investments beyond AAs.

In contrast, community development leading did not present this type of gaming. This data would be collected on a census tract and county level. Were here to help.

Instead, this paper recommends an incremental approach.


The largest banks were more likely to include affiliates, with the top 25 banks including 94% as opposed to two-thirds of the bottom 25 banks. However, the deposit-based assessment area cannot overlap a physical deposit-taking location assessment area. A must-read for banking industry professionals who care about creating value and building resilient institutions.

Info about lending, investment and service opportunities in the bank's assessment area(s); Past performance and the performance of similarly-situated lenders; The bank's public file and any written comments/complaints about CRA performance submitted to the bank or the FDIC; and. Using Robo-Calling and Robo-Texting for Marketing? The counties receiving underserved designation could be updated annually as is the case now with rural underserved and distressed tracts. Better data presentation on CRA exams: On several OCC exams, the narrative indicated that banks received favorable consideration for community development lending and investment outside AAs but the exam did not provide aggregate data on community development activity overall or outside AAs. Community development lending: Southern bank. According to the regulation, the following are some components of performance context: MSA stands for Metropolitan Statistical Area, and isa geographical region with a relatively high population and a close-knit economic network that connects it. While on the surface, the concept of distinct AAs for community development financing and retail lending has appeal, the separate AAs may create new problems for local areas in terms of ensuring that banks meet their needs.

Our integrated software and services help to ensure comprehensive, continuous exam readiness for your financial institution.

It eked out Low Satisfactory on its Investment Test due to its high level of outside AA investments. Can it define its AA using, say an entire county, even though it only lends in a portion of the county?

Given these findings, NCRC recommends a more incremental reform instead of a wider-ranging reform such as separate AAs for retail and community development activities. NCRC believes that these proposals have shortcomings that could allow community development outside of AAs when banks have not met needs inside AAs.

Should the cap be at median levels or higher?

The Office of the Comptroller of the Currency (OCC) Community Reinvestment Act (CRA) final rule (Final Rule) effective October 1, 2020 includes updated requirements on the delineation of assessment areas, annual reporting, and records to be maintained for a CRA evaluation.

Itis used when discussing Fair Lending analysis, particularly, Redlining analysis.

In contrast, banks above the median investment percentage were making a lower percentage of their investments (9%) outside of their AAs. Also, it provides an opportunity for a bank not passing muster in the first year after its previous exam to improve during the second year and become eligible for outside AA community development activities. In contrast, under the proposed community development assessment area approach, more of the banks with branches in Aberdeen, South Dakota, for instance, might be inclined to make such a community development loan with confidence it would get CRA consideration. Is your website compliant with Americans with Disabilities Act (ADA)? Some have asserted that examiners are inconsistent in determining when banks have met needs in their AAs and when they received favorable consideration for community development financing outside of their AAs. ), whether any communities are expressly excluded (and why geographic delineations?

0000001207 00000 n https://ncrc.org/increasing-community-development-financing-data-a-necessary-component-for-cra-reform/, NCRC used data from the FFIEC webpage to calculate dollar value of community development lending and small business data in low- and moderate-income census tracts.

The example in the governors speech about the Pine Ridge Reservation was puzzling considering that existing AA procedures allow community development financing in a state or regional area after meeting needs in AAs.

It includes whole geographies where an institution has deposit-taking facilities such as a branch or ATM, and/or where a substantial portion of loans are made. Over the years, banks have complained about examiners inconsistently applying the Q&A guidance regarding outside AA community development financing.

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A few factors that may determine the REMA are: This is the geographic area that will be used to assess CRA compliance that is defined by the lender. Nfairlending,

Banks with a high percentage of investments outside of AAs included one bank at 71%, one bank at 31%, one bank at 30% and one at 29%.

NCRC has advocated for several years that AAs must be retained for geographical areas where branches are located and be added for geographical areas where banks are making considerable numbers of loans beyond their branch networks.

It seems inconsistent with the interagency Q&A that banks with relatively low ratios of investments to assets were the banks making a higher percentage of investments outside of AAs. The Community Reinvestment Act: How Can We Preserve What Works and Make it Better?

Retail domestic deposit data including the value and associated address of each retail domestic deposit account as of the close of business on the last day of each quarter during the evaluation period. The report finds that the great majority of home and small business lending occurred in AAs.

The splits were similar for the top and bottom 25 banks.

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The component tests have possible High and Low Satisfactory ratings in contrast to the overall ratings.

Black or Hispanic. Examiners conduct performance context analysis, which determines the impacts of demographic and economic factors on credit needs in AAs. aberfoyle cropping

%%EOF This report was unable to definitely determine whether AA procedures prevent needed community development financing.

However, it would seem that the number of geographical areas assigned as AAs for the largest banks in the country with tens of billions of dollars of assets is a reasonable examination scope that these banks can withstand without undue cost. However, military banks must designate the entire United States and its territories as their assessment area.

Precedents for this data collection include OCC databases on public welfare investments that are produced every quarter and can be downloaded.16.

Stakeholders have had animated discussions about AA coverage of retail lending. Some critical needs, such as those on Native American reservations, are overlooked.

Favorable consideration for outside AA financing must be reserved for banks that are meeting needs in their AAs. The performance context isdefined bythe CRA regulation Part 345.21(b) and the CRA Q&A .21(b)-1 as "a broad range of economic-, demographic-, and institution- and community-specific information" that the examiner willreview in order to understand the context in which the institution operates. In this short post, we will share some practical definitions for some of these basic terms.

She then hinted that banks of a certain scale could have AAs for community development activities that would include states in which banks have branches. Five banks were downgraded due to violations of fair lending or consumer compliance laws.

Other examples include investments in Low Income Housing Tax Credit (LIHTC) developments or Small Business Investment Corporations (SBICs).

It is debatable whether these banks have first met needs in their AAs. Banks could be encouraged to develop infrastructure in certain cases by investing in and/or providing technical assistance to nonprofit organizations and/or local agencies serving the AAs. It can make a huge difference, not only for understanding your performance context, but also seeing how you compare to peers and identifying any disparities. For example, would an examiner look at retail and community development activity within a rural county and consider whether both retail and community development lending complement each other in a way to successfully revitalize the rural county? 0 ), as well as the quantified dollar value of the banks CRA activities and the average quarterly retail domestic deposits.

The top 10 banks had a median number of 122.5 assessment areas.

When completed, it will include single-family and multifamily housing units, a boarding house for visitors, a community center and a retail shopping area in a community where residents currently must drive an hour to reach a grocery store. Finally, make sure that your fair lending, CRA and Redlining analysis tools account for these geographic definitions in their analysis. Public comments about needs and conditions inform examiner performance context analysis.

The redlining analysis focuses on the institutions decisions about how much access to credit to provide to different geographical areas.

Given this high percentage, it is questionable whether a complete overhaul of AA procedures are necessary. The REMA term comes into play with Fair Lending Exams.

Narrowing the sample size, 20% of large banks (with assets above $1.226 billion) had Outstanding ratings.5 The very large banks in this study beat out their slightly smaller counterparts, with 30% receiving Outstanding ratings. See Joint Press Release, Agencies release annual CRA asset-size threshold adjustments for small and intermediate small institutions, December 29, 2016, https://www.federalreserve.gov/newsevents/pressreleases/bcreg20161229a.htm. Hopefully, underserved county designation would alleviate the issue of hotspots and deserts by directing community development financing to places most in need.

In addition, seven banks overseen by the OCC sought and received outside AA favorable consideration but the CRA exams did not present aggregate data on dollar totals for community development financing overall or financing outside AAs.

The limitation to this finding, however, is that it does not consider affiliate activity since the CRA regulation does not allow consideration of affiliate retail lending when calculating the percentage of lending in AAs. Black, Asian, Hispanic, Asian-Pacific Islander, and/or Native American. An increasing amount of lending has been occurring outside of branch networks via brokers, the internet and loan officers located outside of branches.

In other words, a bank is permitted to make a community development loan in the same state or regional area that contains their AAs. This report did not attempt to do this). Critical analysis of CRA exams would be necessary to make this determination.

Banks have also stated that CRA examiners are inconsistent in their application of AA procedures. Perhaps, examiners may feel pressure from their regulatory agencies to pass banks. Some of the affiliates could be large loan volume mortgage companies. (Assessment Essentials: planning, implementing, and improving assessment in higher education by Palomba and Banta 1999). |fO`Mi/eROlpL b3GAV@ w]

The process of delineating one or more assessment areas is detailed in 25.09 of the Final Rule.

Ncontracts and QuestSoft Lending Compliance customers can find their respective support resources and contacts here! When analyzing your lending for Community Reinvestment Act(CRA) or fair lending compliance, defining the geographic area you'll be analyzing is one of the first steps you have to take. This section of the report developed various measures of community development lending and investment. In the last few years, the OCC implemented reforms in order to produce more timely exams, but continued progress is needed.

Current investments refer to investments occurring in the period covered by the current CRA exam.

When a bank is below median performance, presumably the bank needs to work harder to increase investments in its AA. If a threshold was to be chosen, this study directs the agencies to look more critically at CRA exams with about 30 to 100 AAs to see if there was a fall-off in quality of community development financing above a certain size. The agencies could then conduct follow-up stakeholder interviews to review findings of the data analysis and to dig deeper into the real impediments to community development financing.

(Assessing Academic Programs in Higher Education by Allen 2004), Assessment is the process of gathering and discussing information from multiple and diverse sources in order to develop a deep understanding of what students know, understand, and can do with their knowledge as a result of their educational experiences; the process culminates when assessment results are used to improve subsequent learning.

This possibility of outside AA consideration contributing to grade inflation is consistent with the disproportionate percentage of banks receiving Outstanding ratings as described above. Thirty-four banks had below 50 AAs, and 26 banks had below 30 AAs.

For all banks in the sample that included affiliates on their exams, 41% included retail lending affiliates while 76% included affiliates engaged in community development financing.

This study scrutinized the CRA exams of the top 50 largest banks in terms of assets.

At the time of its CRA exam conducted by a Federal Reserve Bank, the southern bank had $21.6 billion in assets, 198 branches and operated in 35 AAs across seven southern states.

As stated above, the CRA reform discussion has prominently featured the issue of favorable consideration of community development financing outside AAs.

Not all AAs will have this readily available infrastructure; as a result, banks may resort to easier activities.

Also, another objective would be to ensure that smaller metropolitan areas and rural areas have a fair share of AAs that are full scope.

This would be the most effective way for preserving and improving the success of CRA in combating redlining and promoting reinvestment in LMI neighborhoods.

Yes, so long as that portion of the county does not reflect illegal discrimination or arbitrarily exclude low- and moderate-income geographies. Another issue has been whether several AAs such as 50 or 100 may result in banks finding easier activities to finance such as purchasing MBS rather than responding to pressing or unique needs in each AA.

The facility-based assessment areas are those areas that include where the bank maintains a main office, a branch, or a non-branch deposit-taking facility that is not an ATM, as well as surrounding location(s) in which the bank originated or purchased a substantial portion of qualifying retail loans.

The agencies should have first conducted their own baseline research using their resources (which collectively would overwhelm the resources of one senior analyst at NCRC that conducted this study) to conduct data analysis similar to that in this report.

The question going forward is whether the agencies will engage in careful research and data analysis when developing CRA regulatory reform proposals.

These proposals include automatic consideration of community development outside AAs when a bank had a previous rating of Satisfactory, a cap on the amount or percentage of community development outside AAs and separate AAs for community development and retail activities.

In addition, regulators need to approve taking of partial counties; if you believe you have a justifiable business reason for taking a partial county, get in touch with your regulator. The REMA is used to evaluate lending and level of services in majority-minority census tracts for potential redlining. Banks with at least Satisfactory ratings: A cap of outside AA community development financing: Separate AAs for retail lending and community development lending: Add underserved areas and collect CD data. Likewise, banks have issued more than 27 million small business loans totaling just over $1 trillion in LMI communities since 1996.1.

Decades of industry and software experience all coming together to serve you. The Performance Lending Standards and the Presumptive Rating are to be reported to the OCC at the end of the evaluation period. Make it easy to keep your employees up to date by managing and organizing the most current and important company information in one place.

Here is a summary of a series of recommendations: More timely CRA exams: A key element of public accountability for meeting the needs of communities is timely CRA exams. The banks dollar amount of community development lending was $602 million and $164 million of it was outside of its AAs.

0000001337 00000 n Twelve exams constituted 24% of this reports sample. Assessment data also guides revision at the program and course levels designed to enhance student learning.

Since 1996, banks have made more than $1 trillion in community development loans, which finance affordable housing, economic development projects and community facilities for LMI communities. Perhaps a tolerance could be established such as no less than 20% below median for engaging in community development in underserved counties. The west coast bank serves 30 AAs in the five states of Oregon, Washington, California, Idaho and Nevada. aircraft stealth rcs intechopen figure multi

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