Distribution of Credit Within the Assessment Area(s)
1 – Determine whether the number and income distribution of geographies in the assessment area(s) are sufficient for a meaningful analysis of the geographic distribution of the institution’s loans in its assessment area(s).
2 – If a geographic distribution analysis of the institution’s loans would be meaningful and the necessary geographic information (street address or census tract numbers) is collected by the institution in the ordinary course of its business, determine the distribution of the institution’s loans in its assessment area(s) among low-, moderate-, middle-, and upper-income geographies. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
3 – If a geographic analysis of loans in the assessment area(s) is performed, identify groups of geographies, by income categories, in which there is little or no loan penetration. Note that institutions are not expected to lend in every geography.
4 – To the extent information about borrower income (individuals) or revenues (businesses) is collected by the institution in the ordinary course of its business, determine the distribution of loans in the assessment area(s) by borrower income and by business revenues. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
5 – Identify categories of borrowers by income or business revenue for which there is little or no loan penetration.
6 – If an analysis of the distribution of loans among geographies of different income levels would not be meaningful (e.g., very few geographies in the assessment area(s)) or an analysis of lending to borrowers of different income or revenues could not be performed (e.g., income data are not collected for certain loans), consider possible proxies to use for analysis of the institution’s distribution of credit. Possibilities include analyzing geographic distribution by street address rather than geography (if data are available and the analysis would be meaningful) or analyzing the distribution by loan size as a proxy for income or revenues of the borrower.
7 – If there are categories of low penetration, form conclusions about the reasons for that low penetration. Consider available information from the performance context, including:
a – Information about the institution’s size, branch network, financial condition, supervisory restrictions (if any) and prior CRA record;
b – Information from discussions with management, loan officers, and members of the community;
c – Information about economic conditions, particularly in the assessment area(s);
d – Information about demographic or other characteristics of particular geographies that could affect loan demand, such as the existence of a prison or college; and
e – Information about other lenders serving the same or similar assessment area(s).
8 – Discuss the preliminary findings in this section with management.
9 – Summarize in workpapers conclusions concerning the geographic distribution of loans and the distribution of loans by borrower characteristics in the institution’s assessment area(s).
SOURCE: Small Institution CRA Examination Procedures | OCC, FRB, FDIC and OTS | July 2007