Federal authorities have criticized banks in Ohio and Illinois for falling short in their efforts to help low-income communities, affecting their Community Reinvestment Act (CRA) ratings.
In the world of banking, two institutions - Ohio's First Federal Savings & Loan Association of Lorain and Illinois' United Trust Bank - find themselves under the scrutiny of the Office of the Comptroller of the Currency (OCC). Both banks are currently being assessed under the 1995 Community Reinvestment Act (CRA) regulations, as the proposed 2023 CRA final rule has faced litigation and is yet to be implemented.
The OCC recently issued a "needs to improve" CRA rating for First Federal, citing concerns about its community development efforts. The lender's focus on 1-4 family residential mortgage loans has not extended to community development loans within any assessment areas during the evaluation period. Moreover, First Federal did not make any community development donations that could be considered substantial during the same period.
In the case of United Trust Bank, the OCC's concerns are more pronounced. The bank showed a substandard distribution of loans to individuals of different income levels, making no home mortgage loans to low- or moderate-income individuals between 2020 and 2021. Furthermore, the insufficient number of loans in 2022 prevented the regulator from conducting a comprehensive review.
During the evaluation period, United Trust Bank operated under an enforcement action to improve weaknesses in its financial performance. This, coupled with the lack of community development activities, has led to a "needs to improve" CRA rating from the OCC.
Despite these challenges, both banks avoid the increased complexity, compliance costs, and data collection requirements that the 2023 rule would have imposed. The 1995 rules, which evaluate banks’ lending, investment, and services performance within their local assessment areas, focus on meeting community needs, including low- and moderate-income areas.
The evaluation periods for both banks are as follows: First Federal's covers January 2021 to December 2023, while United Trust Bank's evaluation period spans from January 2020 to December 2022. Neither bank immediately responded to requests for comment.
First Federal Savings & Loan Association of Lorain, with approximately $512 million in assets and seven branches, offers various home lending products. On the other hand, United Trust Bank, with about $168 million in assets, one branch, and five loan production offices across Illinois, Florida, Ohio, and Tennessee, serves the entire country.
In the summary of the CRA performance evaluations, the OCC highlighted the need for both banks to improve their community development services. As the banking landscape continues to evolve, these institutions will need to demonstrate good-faith efforts to meet the credit needs of their local communities under the established framework.
[1] https://www.americanbanker.com/news/cra/cra-rule-delayed-until-2026-as-odds-of-rescission-grow [2] https://www.americanbanker.com/news/cra/federal-regulators-propose-to-rescind-2023-cra-rule-and-return-to-1995-regulations [3] https://www.americanbanker.com/news/cra/federal-regulators-propose-to-rescind-cra-rule-and-return-to-1995-regulations [4] https://www.americanbanker.com/news/cra/federal-regulators-propose-to-rescind-cra-rule-and-return-to-1995-regulations [5] https://www.americanbanker.com/news/cra/cra-rule-delayed-until-2026-as-odds-of-rescission-grow
- The financial performance of First Federal Savings & Loan Association of Lorain and Illinois' United Trust Bank has come under scrutiny by the Office of the Comptroller of the Currency (OCC) under the 1995 Community Reinvestment Act (CRA) regulations.
- Both First Federal Savings & Loan Association of Lorain and United Trust Bank need to address the concerns raised by the OCC about their community development services in order to meet the credit needs of their local communities under the established CRA framework.
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