Wholesale or Limited Purpose Institutions | Ratings

1. Review the analyses of the institution’s performance in each assessment area examined, considering only those community development activities that benefit the assessment area(s) and the broader statewide or regional area(s) that include the assessment area(s).

2. Group the analyses of the assessment areas examined by MSA1 and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas in that MSA.

3. Summarize conclusions about the institution’s performance in each MSA and the nonmetropolitan portion of each state in which an assessment area was examined using these procedures. If two or more assessment areas in an MSA or in the nonmetropolitan portion of a state were examined using these procedures, determine the relative significance of the institution’s performance in each assessment area by considering:

a. The significance of the institution’s activities in each compared to the institution’s overall activities;

b. The community development opportunities in each;

c. The significance of the institution’s activities for each, particularly in light of the number of other institutions and the extent of their activities in each; and

d. Demographic and economic conditions in each.

4. For assessment areas in MSAs and nonmetropolitan areas that were not examined, consider facts and data related to the institution’s community development lending, investment, and service activities to ensure that performance in those areas is not inconsistent with the conclusions based on the assessment areas examined.

5. Assign a preliminary rating for an institution with operations in one state only using the Community Development Ratings Matrix. For an institution with operations in more than one state or multi-state MSA, assign a preliminary rating for each state, using the Community Development Ratings Matrix. To determine the relative significance of each MSA and nonmetropolitan area to the institution’s overall rating (institutions operating in only one state) or state-wide or multi-state MSA rating (institutions operating in more that one state), consider:

a. The significance of the institution’s activities in each compared to the institution’s overall activities;

b. The community development opportunities in each;

c. The significance of the institution’s activities for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

6. For institutions with operations in more than one state or multi-state MSA, assign a preliminary rating for the institution as a whole. To determine the relative significance of each state or multi-state MSA consider:

a. The significance of the institution’s activities in each compared to the institution’s overall activities;

b. The community development opportunities in each;

c. The significance of the institution’s activities for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

7. If the institution is adequately meeting the community development needs of each of its assessment area(s), consider those community development activities, if any, that benefit areas outside of the assessment area(s) or a broader statewide or regional area thatincludes the assessment area(s). Determine whether those activities enhance the preliminary rating. If so, adjust the rating(s) accordingly.

8. Consider an institution’s past performance if the prior rating was “Needs to Improve.” If the poor performance has continued, an institution could be considered for a “Substantial Noncompliance” rating.

9. Review the results of the most recent compliance examination and determine whether evidence of discrimination or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s preliminary composite rating or the preliminary CRA rating for a state or multistate MSA.2 If evidence of discrimination or other illegal credit practices by the institution in any geography, or in any assessment area by any affiliate whose loans have been considered as part of the bank’s lending performance, was found, consider the following:

a. The nature, extent, and strength of the evidence of the practices;

b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices;

c. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from selfassessment; and

d. Any other relevant information. 1

0. Assign a final composite rating to the institution, considering the preliminary rating and any evidence of discriminatory or other illegal credit practices, and discuss conclusions with management.

11. Write comments for the public evaluation and examination report.

12. Prepare recommendations for supervisory strategy and matters that require attention for follow-up activities.

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1 The reference to MSA may also reference MD.

2 “Evidence of discriminatory or other illegal credit practices” includes, but is not limited to: (a) Discrimination against applicants on a prohibited basis in violation, for example, of the Equal Credit Opportunity Act or the Fair Housing Act; (b) Violations of the Home Ownership and Equity Protection Act; (c) Violations of section 5 of the Federal Trade Commission Act; (d) Violations of section 8 of the Real Estate Settlement Procedures Act; and (e) Violations of the Truth in Lending Act regarding a consumer’s right of rescission.
SOURCE:  Wholesale/Limited Purpose CRA Examination Procedures | OCC, FRB, FDIC, and OTS | July 2007

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