We currently have a LPO in another state. Because it is only a LPO (no deposits accepted, no ATM), we do not include that area in our CRA Assessment Area. However later this year we will open a full service branch in that county, and will then close the LPO. When this happens we will expand our CRA Assessment Area to include the county that the branch is located in.

Am I correct that we cannot expand our AA until the day we open the branch? If so, can you please direct me to the section in the reg that states that?

Thank you!

I don't know that you can find the chapter and verse you want. But there is clear language with reference to an LPO not being a branch, so you could get to it from that angle.

How do you identify your AA? Free form based on logical geographies, whole geographies such as a county line, the entire MSA? That will to a great extent determine whether you would expand the AA prior to opening the branch.

The new AA will include a new county in a different state. We do not have any branches or ATMs in this state. Therefore I'm thinking the new AA will begin the day the branch opens. Does that sound correct?

You are correct, until you open a deposit-taking branch in another state you can't designate that area as an AA (although I could make a good argument that the Regulation and the Q&A's are silent about requiring a deposit-taking facility as a sine qua non for AA delineation). But the timing of the designation is somewhat academic unless you are talking about 2 different years. The fact of the matter is that the Regulators will know how you delineate your AA's only when you file your annual CRA data or when you are examined for CRA purposes. When you are examined and your performance in the new AA is evaluated an important performance context factor for the first year and the immediately following years will be when during the year did the branch open. This will help explain your performance. But the examiners are not going to bifurcate your lending activity during the year as a priori and a posteriori the branch opening. Just make certain the new branch has an AA map delineating the new AA the day it is opened.

Could someone explain this for me:



So the consensus is if we open a Loan Production office in a new state. We can't include that area in our assessment area?

Just want make sure I am on the right bus.

Correct.

I'm not sure either, NSFW. But I did find this response to a 2013 post from Len S (who also answered above):

"There is nothing in the Regulation or in the Q&A's that explicitly says that you cannot have an Assessment Area without a deposit-taking facility. Nevertheless the Agencies have enforced the regulation as if that is required. The OTS made exceptions, but they are no longer around.

The Q&A's do state that you must include any area in which you maintain a deposit-taking branch, but they do not say that you must have such a facility nor do they say that you cannot have an AA without a branch. However, the practice by the Agencies has been to insist that at least one depository facility must be maintained within any AA.

This is becoming more of a problem every year because more and more banks are deviating from the classic bricks and mortar approach which is the assumption built into the 1977 Act that implemented the Community Reinvestment Regulation.

I have worked with banks that have reverted to the CRA Strategic Plan approach if the LPO starts causing problems with the Assessment Area ratio test. There also are other ways to deal with this problem. But you should be aware of the potential threat to your CRA Performance Rating that can be created by a successful LPO and it is wise to plan to address the problem before it is a problem".

What the regs say is that IF you have a deposit taking branch/ATM, then that area must be in your AA. They do not say the opposite, but that is the practice.

Of course, the rules also mention about the lending, but crossing state lines opens a whole host of issues.

The big issue with LPOs is they are not branches so you don't have to include in the AA, but you absolutely must monitor the inside/outside ratios as you can get out of whack quickly.

The rules are:

"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 (including home mortgage loans, small business and small farm loans, and any other loans the bank chooses, such as those consumer loans on which the bank elects to have its performance assessed).

(d) Adjustments to geographic area(s). 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. An adjustment is particularly appropriate in the case of an assessment area that otherwise would be extremely large, of unusual configuration, or divided by significant geographic barriers.

(e) Limitations on the delineation of an assessment area. Each bank's assessment area(s):
(1) Must consist only of whole geographies;
(2) May not reflect illegal discrimination;
(3) May not arbitrarily exclude low- or moderate-income geographies, taking into account the bank's size and financial condition; and
(4) May not extend substantially beyond an MSA boundary or beyond a state boundary unless the assessment area is located in a multistate MSA. If a bank serves a geographic area that extends substantially beyond a state boundary, the bank shall delineate separate assessment areas for the areas in each state. If a bank serves a geographic area that extends substantially beyond an MSA boundary, the bank shall delineate separate assessment areas for the areas inside and outside the MSA. "

Are you in a multi-state MSA?