When considering "surrounding geographies" for an assessment area, what would constitute a "substantial portion of loans"? And the current loans have an influence, don't they? (in which the bank has originated or purchased....)

If you have a census tract (not LMI) adjacent to one in which you have a branch, and haven't focused lending efforts there for 5 years, can you exclude it, or do the loans on the books have a bearing on the "substantial" portion?

Loans on the books do not have any bearing on your AA. Look at where you are currently lending, and then look to the make up of that AA and how that will effect your Services portion of the test.

I like to do a dot matrix on the file of current deals (completed that year, ALL types of loans). You'll see if you need to adjust your AA based on that map pretty quickly. You can exclude areas, but only if it makes sense (ie following the rules). I'd caution you not to exclude, include, exclude, etc., any one area. I adjust my AA very rarely, normally only after an exam. Bouncing tracts in and out looks bad, and is difficult to analyze as well.

The portion of loans looked to for your % of loans in AA test is the loans reported (LAR and LR) DURING the exam period. While prior period AA's could be mentioned if the examiner has issues with them, or the % figure due to a market change, the actual figure used is the current figure. You book 10,000 loans in a 3 year period...it's the % of those 10,000 loans that are within your AA which are reviewed.

Basically an assessment area includes geographies in which the bank has its main office, its branches, and deposit taking ATMs, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans.

A substantial portion to one agency is more than 50%. Some examiners/agencies like to see 70% or more. Ask your examiner what "substantial portion" means to them.

The tracts need to be contiguous. Designating a whole county is usually preferred by examiners.

If you don't select a whole county then you must be sure to include all census tracts within a municipal boundry or political sub-division such as cities or towns

You must be sure that the designated assessment area does not arbitrarily exclude low or moderate income geographies, and does not extend beyond a CMA or state boundary.

In most cases you should not exclude an LMI tract that is adjacent to the tract your branch is in. About the only time I can think that would be acceptable is if you are in one of those areas that has very large tracts and your branch really is miles from the LMI tract. But you have to be really careful not to create the appearance you are avoiding the tract because it is economically depressed. If you haven't loaned in the tract, you still may be ok as long as you have been lending in other LMI tracts inside the AA. You are not required to lend in each and every tract (even LMI tracts) inside the community. Again, we urge our clients to study the reported lending in the CRA and HMDA data. This data is readily available for very little money in reports that will show you market rank, market share, etc of all reporting lenders in any area. One of the reports we distribute is called the Key Performance Benchmark Reports that details in a series of tables much of the data you need to really understand your market. If you are not lending at least 65% of your reported loans inside the AA the market data may substantiate that there are not adequate lending opportunities. Conversely, it may show you there are pockets of activity that demonstrate viable loan markets in areas you may not have been focused on. Or it may show you (as Dawnie mentions) that you should expand or redefine your AA. Having the Performance Benchmark data is indispensible for a really serious CRA program.

Thanks alot! There are certain tracts in our assessment area which are not focused on for some reason or the other. We are going to try to get the lending powers to sit down and tell us yay or nay on these areas (all middle income).

So you are saying that the phrase "has originated or purchased.." is not all inclusive, but may refer only to the current year's or current exam cycle's originations?

I would do a dot density map, but we don't have that many loans and one dot per 100 loans wouldn't register much.

Do one per loan Chris It's still going to give you a good picture.

Are you using some software programs for this? (Since you seem to be able to produce a dot matrix I'm guessing yes).

I'd want to do some individual review of the areas you're not lending to that are in your AA at this point, as well as chat with lenders. There are reasonable explainations...ie a military base, or no housing, but you'll want to document this when you change the AA. WHile the AA is up to the bank...the examiners do have a say, so when making changes you really do want to clearly show the "why". I like to do that with pictures...because examiners like pretty colors

Another mapping technique that is useful is to do color themes using Quartiles. This will show you where the greatest and least volume of your lending is occuring almost instantly. You should do it both in terms of loans and loan $. The regulators are looking for "unexplained conspicuous gaps in contiguous tracts". In other words, they are looking for clusters of tracts with little or no lending exhibited by your bank inside the AA. Your maps may show you are extending a large number of loans in certain areas outside your currently defined AA. If that represents a long term pattern, then you should reevaluate your AA. As Dawnie points out, and I have noted in a previous thread, the performance context data can be a very important factor in explaining the lending patterns. You don't make decisions in a vacuum (or you shouldn't anyway). So be familiar with the demographics and loan market data.

Thanks- I'm using CRA Wiz, but the default seems to be 100 loans per dot, and I'd have to do one for real estate and on for small business.

Chris that used to be the default on 5.0 Wiz, but you could change it. I an NOT a regular user (I emphasize that because I don't want my staff to know I know how to use it) so I would highly suggest you post a question about the dot matrix on 6.5 on the Wiz forum tech section. If we can't adjust down to 1 or 10 per dot, we'll be sure they fix that!