Question: How does a bank go about defining its assessment area for the purpose of the Community Reinvestment Act?
Answer: A bank’s assessment area should include the geographies in which the bank has its main office, its branches, and its deposit-taking ATM’s, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans. An assessment area will generally consist of one or more metropolitan statistical areas or metropolitan divisions or one or more contiguous political subdivisions, such as counties, cities or towns. A bank may adjust the boundaries of its assessment area to include only the portion of a political subdivision that it reasonably can be expected to serve based on its business model and asset size.
Question: Once defined, would senior management have a reason to alter or change its assessment area?
Answer: Senior management should periodically review its assessment area to ensure that it is still reasonable, particularly as the bank experiences growth, either through acquisition or the geographic expansion of its loan volume.
Question: Are there limitations on the delineation of an assessment area? Answer: The assessment area is based on geographic considerations and must consist only of whole geographies. It may not reflect illegal discrimination; may not arbitrarily exclude low- or moderate-income geographies; and may not extend substantially beyond an MSA boundary. Also an assessment area may not extend beyond a state boundary unless the assessment area is located in a multistate MSA. It is important to note that a minority-owned bank may not identify a specific ethnic group rather than a geographic area as its assessment area and should ensure that it does not exclude other minorities or non-minorities that reside within its assessment area.