Developing and Documenting a CRA Assessment Area

A critical component in every bank's CRA program is the delineation of its assessment area. Examiner's are required to use the assessment area drawn by the bank, unless the bank failed to follow the required steps in the process.

The assessment area, when properly drawn, can improve the institution's CRA rating. For example, a bank is evaluated, in part, on the percentage of loans within its assessment area. Drawing the area to include a higher the percentage of loans in the assessment area generally improves results. However, a higher percentage can be offset if the bank does not have a good distribution of loans based on the demographics (race, ethnicity and income) of the census tracks in the area. The challenge is find the sweet spot that maximizes the percentage of loans in the assessment area and also assures a solid distribution of loans throughout the area.

This program focuses on the proper method of delineating an assessment area. In addition to reviewing the basic building blocks of an assessment area the program also considers the impact of the assessment area on the CRA performance evaluation. The program also compares the assessment area to the reasonably expected marketing area (REMA). The REMA has risen in importance in the past few years.

Every bank is required to delineate one or more assessment areas. Since you have to it anyway it makes sense to conduct the delineation in a fashion that will benefit your institution's CRA performance. The delineation should be reviewed periodically to assure that it continues to position the institution to obtain the best CRA rating.

Covered Topics

  • Which geographies must be included in the assessment area;
  • Whether to adopt one or more assessment areas;
  • When to include only a portion of a geography in an assessment area;
  • The limitations on the delineation;
  • How to document the assessment area;
  • The need to conduct periodic delineations;
  • What is a reasonably expected marketing area;
  • What is included in a REMA; and
  • How examiners use the REMA.

Who Should Attend?

The program is designed for management of the loan department, Compliance Officers, CRA Officers, marketing staff and auditors.