I've read the posts concerning how the in/out assessment area ratio is calculated for banks with multiple assessment areas in a state. Our AA includes only areas in KY.

I want to provide some loan numbers to ensure I understand the calculation correctly since we recently expanded our AA.

Our assessment area is as follows:
1. 2 contigious counties in a MSA (50 loans)
2. portion of one county that is in a different MSA in a different part of KY (10 loans)
3. portion of a county in a different part of KY that is not in a MSA (5 loans)

Let's assume we made a total of 100 loans in KY (65 loans in the AA & 35 loans outside the AA) Let's also assume that we made an additional 50 loans outside KY.

Am I calculating the in/out ratio properly?
65/100 = 65% in the AA. We just disregard the 50 loans that were made out of KY?

Thanks.

Your calculation would be 65/150 = 43% The loans outside of KY are still loans you made, and would be included in your CRA Data and on the call report so it will need to be counted. IMO

I see where you make that assumption. I believe in one of the posts about multiple assessment areas it talked about calculating the percentage by state, however, at some point you have to account for all of your loans, regardless of what state they are in.

So, bubs63 is correct, it would only be 43%.

When you are doing your calculation, do you include ALL loans you have made during the year or just those that would count for CRA?

We make a large number of loans all over the country that do not count for CRA reporting (would not be types 01-08). They are exclued because of size. When I calculate my In/Out ratio, I exclude these and only include loans that are CRA reportable or that we chose to have the examiners review (03-08). I believe this gives a more accurate reflection of our CRA activity.

What do others do?

The revised in/out calculation makes sense to me since we need to account for the loans made outside of KY.

Can some straighten me out about the post in "lending oustide of our assessment area" (http://threads.bankersonline.com/showflat.php/Cat/0/Number/551140/an/0/page/2#Post551140) that addresses this calculation? What am I not understanding?

Thanks.

Let me try to clarify.
The CRA Aggregate & Disclosure database released by the FFIEC has a table that shows the Assessment Area concentration ratio for each and every reporting lender. The ratios in that table are calculated by taking the combined reported loans in the combined assessment areas within a state and dividing that number by the total loans made within that state. If a lender has multiple assessment areas in multiple states the calculation would be done by combining all loans in all the assessment areas within each state as described above and dividing by all the loans made within each state. In the case of an assessment area that straddles multiple states the loans in the portion of the assessment area within each state are divided by all the loans within each state. That is how the computation for assessment area ratios is done in the table within the official FFIEC database.

One of the first elements measured under the CRA lending test is the the percentage of a bank's loans within its assessment area as a portion of all its loans being examined. The point is that banks should be lending most of their funds within the community(s) they have designated as their market. If you have only one assessment area within a state, the simple approach would be to take all the loans you have extended within that assessment area as a percentage of all the loans within that portfolio (including those made out-of-state) so bubs calculation would be correct. But if you were to compare that to the calculation done in the A&D there will be a difference. Nevertheless, bubs computation would be a more accurate measure of your performance under this test. I believe method used in the FFIEC database probably is due to the complications of having to have a unified and consistent approach for multiple assessment area situations. In those situations all the loans in other assessment areas are outside any one particular assessment area. Thus the simple calculation that would be done in the one assessment area situation would be grossly distorted.

Thanks for explaining the A&D calculation. I didn't realize that's how the % was calculated.

I'll use bubs63's calculation method for our internal analysis.

Thanks again.