SARC-99-02 (February 4, 1999)
On January 28, 1999, the Supervision Appeals Review Committee ("Committee鈥) of the Federal Deposit Insurance Corporation (鈥湺啾τ蜗废略剽) considered the appeal by [Bank] (鈥淏ank鈥) of the Community Reinvestment Act (鈥淐RA鈥) rating and the compliance examination findings resulting from the 多宝游戏下载鈥檚 examination of the Bank dated April 13, 1998.
After carefully considering the issues raised in the Bank鈥檚 appeal letter dated November 30, 1998, the Committee concluded that the CRA rating and the examination findings should be affirmed.
As you know, the CRA regulations were revised in 1995 and became finally effective in 1997 following a two-year transition period. Prior to 1997, large retail institutions were evaluated using process-based criteria. Under the 鈥渘ew鈥 CRA regulations, however, large retail institutions are evaluated based upon the institution鈥檚 actual performance under lending, investment, and service tests. In turn, each of the three performance tests prescribed certain criteria against which an institution鈥檚 performance is measured. The changes to the CRA regulations were made in order to promote consistency in evaluations and to eliminate unnecessary burdens associated with process-based evaluations. As a result of the changes, however, many of the community development activities and donations that the Bank previously received credit for are no longer considered during a CRA performance evaluation.
As a result of the examination, the Bank was assigned an overall CRA composite rating of 鈥淪atisfactory.鈥 This composite rating was based upon the Bank鈥檚 combined performance under the three performance tests. The Bank was rated Highly Satisfactory under the lending test; Low Satisfactory under the investment test; and Outstanding under the service test. Aside from the CRA rating, the Bank received a consumer compliance rating of 鈥2鈥 in the examination. It is evident that certain aspects of the Bank鈥檚 performance under the applicable performance criteria were quite strong. However, the Bank鈥檚 overall performance was not sufficient to merit a CRA composite rating of Outstanding.
With regard to the lending test, there are many factors to be considered when rating an institution under this test, including lending activity, assessment area concentration, geographic distribution, and borrower characteristics. Although the Bank performed well with regard to certain components of the lending test, the Bank鈥檚 overall performance was not sufficient to warrant an Outstanding rating in the lending category. For example, the Bank鈥檚 lending in low- and moderate-income areas and to low- and moderate-income individuals within all of its assessment areas is generally at or below the aggregate percentages; the Bank鈥檚 performance in comparison to aggregate lending within each Metropolitan Statistical Area (鈥淢SA鈥), not just in the Syracuse MSA, were contributing factors to the rating of Satisfactory. Please be advised that the violations cited in the examination report did not impact the Bank鈥檚 assigned CRA rating.
In reference to the Bank鈥檚 investment performance, although the Bank may be making more community development investments than their competitors, this not the standard used in assigning a rating under the investment test. To receive an Outstanding rating under the investment test, an institution must have an excellent level of qualified community development investments and grants (particularly those that are not routinely provided by private investors), often in a leadership position. The institution must exhibit excellent responsiveness to credit and community economic development needs and make extensive use of innovative and/or complex investments. The Bank's qualified investments did not meet these criteria.
The Committee also concluded that the composite 鈥2鈥 compliance rating is appropriate given the violations cited at the examination, which were determined to be valid, and the Bank鈥檚 deficiencies in its compliance program at the time of the examination.
Lastly, the Bank expressed concerns that the Satisfactory CRA rating will adversely affect the Bank. A Satisfactory CRA rating will not have an adverse impact on applications to enter a new market or on the Bank鈥檚 efforts to expand services in an existing one. In fact, those institutions which have a Satisfactory or better CRA rating and have compliance rating of 鈥1鈥 or 鈥2鈥, which includes your institution, are eligible for expedited application processing. The Committee acknowledges the Bank鈥檚 statement that it is committed to community development and affordable housing and encourages the Bank in its efforts to meet community credit needs.
This determination of the Committee is considered a final supervisory determination by the 多宝游戏下载.
By direction of the Supervision Appeals Review Committee of the Federal Deposit Insurance Corporation.