Up until late last year our small community bank only operated in two adjoining counties. Because of that our assessment area was concentrated in those two entire counties, designating the secondary trade area as portions of the surround counties.

Late in 2010 we acquired a branch in a county that does not adjoin our existing assessment area. In order to update our assessment area I have been advised by senior management to only include a portion of the county (census tract our office is in and the adjoining two counties).

Is it permissible to include only certain census tracts in our assessment area? The census tracts we would be using are all upper income areas with no moderate to low tracts being anywhere close.

What is a good website to use in order to obtain maps necessary for the file? (Tennessee)

Actually, the only mandatory tract is the one where you phyiscally accept deposits (where your branch is). You are also not permitted to arbitrarily exclude low/mod income tracts. It seems reasonable to start out with the one tract where the branch is located, see how the branch does/where the business is, then expand if necessary. If there are no low/moderate income tracts near the branch, you should be ok.

One thing to look at though; if you make loans in the area between your existing AA and the new branch, you might have a harder time justifying your area with just the one tract.

The FFIEC Geo-coding program has basic maps you could use, depending on the desired level of sophisitcation.

Regulator "preference" these days is to take whole counties. They feel it is easier and more logical to explain performance than to explain or justify why you lopped off part of the county. A very large county is a good reason.

You can take a partial county but must justify.

Take a look at where your bank is lending, in the new county and elsewhere. That is a major factor in developing your assessment area.

KB - we have had recent conversations with other banks and consultants and they are saying the same thing - that examiners are wanting to see the entire county in your AA as opposed to census tracts.

We have a limited branch network (3) in a large MSA so we have only specific tracts in our AA - we have used the interstate system as our justification. We have had 3 FDIC CRA exams and no issues from them on our AA delineation. We recently switched to the FRB - does the FRB have a different stance on this?

As long as you can fully support a partial county, it is not a violation. At conferences and in many examinations, the regulators are pushing for full counties but will accept partial if you have good solid reasoning. A very large county (really a huge county) is an example they give of when they will go for a partial county.

Having a geographic boundary (like a major highway) is a good general cutoff.

You will probably be fine but don't be surprised if the subject comes up. Again, it is not a violation, just a new "idea" the past year or 2.

thanks KB

Actually, the "bigger is better" concept to AAs is nothing new to CRA since the advent of the current CRA regulation back in 1995. But in answer to your question as to whether you can include only certain census tracts in the AA, the other responders to this forum gave you the correct answer of yes. I want to expand on that a bit.

The whole point of the AA concept in 1995 was to get away from the problem that arose in the old 12 assessment factor CRA regulation. That problem was that in one CRA exam, the examiners might tell you that your delineated community, as it was known then, was too small and that you should expand it. Then at the next exam, the examiners, maybe even the same ones, would tell you that your delineated community was too big and you should contract it. That drove bankers nuts,leading many to complain to Bill Clinton and his staff during the 1992 campaign. Clinton then directed the federal banking agencies to re-visit the CRA regualtion, which resulted in the current regulation and the AA concept.

A major tenet of that AA concept is that as long as your AA meets the criteria or restrictions in .41 of the regulation, examiners shouldn't be toying with the AA boundaries. End of discussion. These criteria/restrictions are:

o AAs must consist generally of one or more MSAs or metropolitan divisions, or one or more contiguous political subdivisions, such as counties, cities, or towns; and

o Include the geographies in which the bank has its main office, its branches, and its deposit-taking ATMs, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans.

A bank may adjust the boundaries of its assessment area(s) to include only the portion of a political subdivision that it reasonably can be expected to serve; however, the AA:

o Must consist only of whole geographies (defined as census tracts);

o May not reflect illegal discrimination;

o May not arbitrarily exclude low- or moderate-income geographies; and

o May not extend substantially beyond an MSA boundary or beyond a state boundary unless the assessment area is located in a multistate MSA.

Meet all of these and your AA designation should be beyond reproach by examiners. AR.

Unfortunately, toying with AAs seems to be popular again. Not sure why.

An example was actually given by one of the lead regulatory speakers at the 2010 interagency CRA conference of an examiner calling his main office in DC to discuss an AA he wanted to cite as a "violation" because it was not the whole county. After a discussion the examiner was instructed that in this case it was okay because the bank had 1 branch and was located in the very large Clarke County, NV which has about 2,000 square miles.

So, bankers' heads still spin! I generally make them aware that it might come up and to have good reasoning for their AA, assuming it otherwise is in compliance.

We just finished our CRA Exam with OCC. I had included other counties in our Assessment Area. The OCC had me delete some counties and only include one assessment area for the other three counties, based on the amount of loans received from those areas.