Appeal of Community Reinvestment Act Rating (Fourth Quarter 2024)

Background

A bank supervised by the Office of the Comptroller of the Currency (OCC) filed a formal appeal with the Deputy Comptroller. The bank contested the Community Reinvestment Act (CRA) composite rating assigned in a recently completed performance evaluation (PE).

Discussion

The appeal asserted the CRA composite rating was not reflective of its remedial actions and disagreed with the supervisory office’s (SO) decision. Specifically, the appeal contended that the bank had resolved redlining-related concerns noted in a prior examination, and the SO acknowledged these efforts. The appeal asserted that the SO selectively applied elements of the existing CRA regulation and provisions from the 2023 CRA modernization final rule. Additionally, the appeal objected to the SO’s decision to expand the CRA assessment area (AA) delineation to include an entire county. The appeal argued that its branch presence was sufficient to serve the original AA and that an expanded AA would have conflicted with guidance encouraging prudence during the COVID-19 pandemic due to potential safety and soundness risks.

Supervisory Standards

The Deputy Comptroller conducted a comprehensive review of the appeal using the following supervisory standards in effect at the time of the evaluation:

12 CFR 25, “Community Reinvestment Act and Interstate Deposit Production Regulations”
“Community Reinvestment Act Examination Procedures” booklet of the Comptroller’s Handbook, June 2018
OCC Bulletin 2020-19, “Pandemic Planning: Joint Statement on Community Reinvestment Act Consideration for Activities in Response to COVID-19”
OCC Policies and Procedures Manual (PPM) 5000-43, “Impact of Evidence of Discriminatory or Other Illegal Credit Practices on Community Reinvestment Act Ratings” (made public via OCC Bulletin 2018-23)

Conclusion

The Deputy Comptroller concurred with the SO’s conclusion for the CRA composite rating. The SO appropriately followed the CRA regulation and applied supervisory standards in determining the impact of discriminatory or other illegal credit practices on the bank’s CRA rating, including consideration of all relevant mitigating factors. The SO’s conclusions were based solely on standards in effect at the time and did not involve application of the 2023 CRA modernization final rule.

The Deputy Comptroller found that the SO gave due consideration to the bank’s corrective actions. Although the bank implemented enhancements to its fair lending program, not all corrective actions were completed or proven effective at the time of the CRA evaluation. Under PPM 5000-43, a lower rating may not be warranted if a bank has self-identified violations and taken timely corrective action. In this case, however, the bank has not demonstrated a sufficient period of sustained improvement to warrant a higher rating.

Regarding AA delineation, the Deputy Comptroller determined the SO’s decision to evaluate CRA performance using a different AA was consistent with supervisory standards. The SO expanded the AA to include the full county based on the bank’s volume of lending activity throughout the broader area. The Home Mortgage Disclosure Act data showed the bank was originating loans in portions of the county not included in its self-delineated AA, including low- and moderate-income census tracts. The SO’s decision was supported by data and did not contradict OCC pandemic-related guidance, as the bank was already serving the broader geography.