If we are a small bank under CRA and our assessment is a bit odd, what implications are there from an examiner and consumer group risk assessment.
Here is the assessment area issue- our main office and first branch are in medium towns or rural areas- so our assessment are is set up as a 15 mile radius from each location. Our new branch is in a mertropolitan area--very highly populated--lots of businesses and ethnic groups in very condensed areas---it will be set up as a 20 mile radius---is this a problem? How will the testing work?

The CRA regulations set up a protocol for determining an Assessment Area. You start with the MSA in which your branch, or branches, are located.

Note, a single Assessment Area cannot go beyond a Consolidated Metropolitan Statistical Area (or whatever they're being called now) and if you have branches located in far flung MSA's, then you may need more than one Assessment Area.

If that's too large, you move down to the contiguous county level, then the city or town(s) or other contiguous political subdivisions in which your bank has it's main office and branches.

Your area should be where you originate a majority of your loans.

You can adjust these boundaries to include only the portion of a political subdivision that you can reasonably serve if the above parameters would produce an area that is extremely large or of an usual configuation or divided by significant geographic barriers.

You must include entire census tracts, and cannot arbitarily exclude low- or moderate-income census tracts, or reflect illegal discrimination (red-lining.)

Simply drawing a 20 mile circle around your branch is a bit like playing pin-the-tail on the donkey. You're probably doing it blindfolded because you don't have the information you need to make an informed determination.

Even for a small bank, what you should do is geocode your loans and then see where your loans are made. If you do a fair job of covering a whole town, then make that town your assessment area. If the town is too large, then include those contiguous census tracts where your loans are made, and make sure your not leaving out immediately adjacent minority or low/mod income census tracts.

If you don't feel comfortable taking the entire town or county where your branches are located, then you might try contacting Don Narup about doing a quick analysis so that you have an understanding where you are lending.

Your CRA Performance Test for a Small Bank will basically consist of:
*The examiners reviewing your loan to deposit ratio. I have heard it should be at least more than 50%.
*The examiner reviewing how many of your loans are made inside vs. outside your Assessment Area. Again, you really should have more than 50% of your loans INSIDE your AA.
*The examiner will review the dispersion of loans made to borrowers of different income levels and businesses and farms of different sizes.
*The examiner will review the dispersion of your loans among the various census tracts income levels. If the majority of your loans are in middle and upper income census tracts, then you need to be able to explain why. Perhaps your town has no low income census tracts, or there are no loan opportunities for your type of lending. That can be a very tough explanation to make.

We are a de novo bank and I just finished my first CRA exam ever. One thing I learned is that Census tracts have recently changed based on the results of the 2000 Census. Even the tract our bank is in changed! Luckily we had an understanding examiner and she did not hold this against us. I called our state Department of Commerce to get new maps which only cost a few dollars.

We are in the small bank category and we use our county as our assessment area. You should be prepared with information on your area's economic background. I pulled data from our economic development group's website. She wanted to know who our competitors are and who our major employers are.

Here's another great resource I found - http://factfinder.census.gov. You can type in an address and find out what census tract it's in instead of trying to locate it on the map. It's good to know your census tracts because they will ask you why your loans are low in certain areas. It may be because there are no residences in that tract. Good luck!

As we opened new branches in supermarkets I would initially use the "draw a circle" method and then include the whole geography of those you reasonably touch. Then, as your experience in loans and deposits increases (emphasis on loans) for that area, you refine the assessment area. This is workable when you really don't know what to expect and it is separate from your existing area.

We have hired MAPSCO in the Dallas Area to map the circle for us. What the plan is at this time is to draw the circle- insert the zip codes that the circle touches then go back and add the census tracts for each zip coded area.

Does anyone find an issue with this plan? And, can I use 15 miles for our smaller towns and rural areas (to avoid Aunt Betty's cow needing a loan) but in our heavily populated big city areas use 20 miles to be sure we get a fair assessment of where we are lending.

Our concern is that one is too big for the small town and the other is too small for the densly populated big city area.

There is no specific answer to the methodology described that is an everybody do it this way. Drawing circles will effect different institution differently, and it is an iffy way to establish an assessment area. One of the requirements is that the AA must include all census tracts in a municipality. Its possible by just drawing a circle that some tract in a municipality will be ignored.

A circle may exclude a Low or Moderate income tract that falls just outside a circle. So you need to know the tract classifications to make sure you are not exclusionary.

Your lending patterns do not follow a circle drawn on a map. The number and income clasifications of tracts within a 20 mile circle AA, will have an effect on several important analysis calculations. IMO take a look at loan distribution and configure the AA to meet the regulatory guidelines and to include the tracts where the majority of loans are being made.

Forget zip codes as they have no demographic meaning for CRA Assessment Area or Analysis purposes.

Another consideration is using a whole county. This is usually what regulators prefer as it eliminates all the exclusionary questions, and makes an analysis easier. Its just a question of seeing how including all trcats in a county will effect the analysis numbers. If there is an effect you don't want then you can look to cutting down the AA

This is not difficult to do and rather than have a committee spend days figuring it out, consider spending $100.00 with a vendor and getting the information needed to make the best decisions of what an assessment area should be.

Getting back to the original question, there is not a problem with using a different radius around your different offices, except for the problem of including whole geographies as the regulation requires. So you could do what Mr. Zavoina suggested, i.e., draw your circle then decide whether to include or exclude those geopraphies that are split by the circle.

Mr. Narup is correct, too, in that it is my suggestion that you simply designate as an AA the entire county in which your main office is located. For your new branch, you could name a separate AA that is simply the entire MSA in which it is located. If those AAs are rather large for your bank and it isn't reasonable for you to service the entire AA, the examiners will take that into account with so-called contextual information. It shouldn't hurt your rating. AR.

I am looking at our CRA file and we have an OCC audit in December. Where do I find the CensuTract/Block Number Area for 2000?

If you have the old census tracks numbers, we had Don Narups company - CRA Information Services, create a new map for us that recreated our AA with new census tract numbers. It is color coded to indicate the low, moderate, and high income census tracts. This is a helpful tool because there are no surprises when the examiners want to know this information and you are knowledgable about your assessment areas and where you are lending. The website is: crahelp.com

My institution is an OTS-supervised institution that does a significant call center-based credit card business. (You could say we are a credit card bank). We conduct business in a great many states where we do not have deposit-taking branches -- and of course this is allowed for OTS-regulated institutions. In our most recent examination, I saw a renewed regulatory emphasis on the percentage composition of WHO an institution lends to, versus WHERE the institution lends. In other words, an institution that extends credit to over 20% of its borrowers who are at or below the median for low- mod-income should -- and is -- viewed more favorably than an institution that has considerable form over substance -- but that otherwise has a low lending level to low- mod-income populations. Should the original poster also be conscerned to concentrate on showing the composition of the credit recipients (i.e., percentage of low-mod at or below median), or am I thinking too far outside the box because I'm from a different CRA conceptual framework? It just seems like a lot of hard work and worry over trying to subscribe to form -- versus demonstrating the makeup and composition of the borrower (as shown in the geographical distribution reporting).

Who and Where, are both important elements. Regulations do define how an assessment area should be set up. So those rules need to be followed.

An examination determines WHO the institution is lending to in the "conforming to regulations" assessment area.

You can lend to LMI borrowers who reside in Middle and upper income classified census tracts, but if you excluded Low and Modertate income classified tracts from the AA, it is a matter that will cause serious problems with examiners.

Anon (credit card bank) Actually your standards are much different than the standards applied to a small and large financial institution (operating under a typical CRA exam). Our focus is both geographical and borrower based, and very concentrated on meeting the needs of our stated Assessment Areas. Your exam is focused on the value you provide to a broad borrower base, and your community development activities.

For this reason, focus on the particular AA we define is imperitive to a good exam. With new tract information out there, we're all scrambling to see how we sit given the 2000 changes. I'd love to have a 20% ratio of low income borrowers as my challenge, verses a geographic challenge, but I'd bet you probably are challenged to provide products to those borrowers (At least I hope so...it's supposed to be a fair exam between you and I)