Why A Bank Serves A Geographic Area - 1524 Words

If a bank serves a geographic area that extends substantially beyond a state boundary, the bank must 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 must delineate separate assessment areas for the areas inside and outside the MSA. PERFORMANCE TESTS AND STANDARDS The Regulatory Agencies evaluate a bank’s CRA performance under various standards depending on whether the bank is a large or small banks, is a wholesale or limited purpose bank, or is operating under a strategic plan. CRA ratings are publicly available. Therefore, a poor rating may have an effect on a bank’s reputation. There is no monetary fine or other direct†¦show more content†¦A large bank is graded on each of the tests as Outstanding, High Satisfactory, Low Satisfactory, Needs to Improve, or Substantial Non-compliance. The three grades are then melded into a single grade for the bank. A high rating under one of the tests can offset a low rating on one of the other tests. Lending Test In assessing a bank’s lending activities, the Regulatory Agencies review the following information: †¢ Lending activity: The number and dollar amount of home mortgage, small business, and small farm loans in the bank’s assessment area(s). The general standard is that 80% in number and dollar amount of a bank’s loans should be in its assessment area(s). This number is not a regulatory requirement; it is more of an industry best practice. If the number is less than that, the bank has probably been too restrictive in defining its assessment area. †¢ Geographic distribution: The geographic distribution of a bank’s mortgage, small business, small farm, and consumer loans including: o The proportion of lending in the bank’s assessment area(s); o The dispersion of loans across the bank’s assessment area(s); and o The number and amount of loans in low , moderate-, middle-, and upper-income areas in the bank’s assessment area(s). †¢ Borrower characteristics: The demographics of the bank’s borrower’s including: o Mortgage loans to low-, moderate-, middle-, and upper-income individuals; o Small business and small farm loans to small businesses and small farms