Just thought I would share some information from our very recent CRA exam. Previously, we had nine branches in low or moderate-income geographies in our AA. And, for the service test, this compared very well to the income level and geographic location of our customers. Well, that changed with the most recent Census data. 7 out of 9 of those branches are now in middle-income tracts. This affords us a slightly negative slant in our public evaluation, for reasons completely out of our control, i.e.change in the income level of our branch census tracts.
I guess for some banks, the census data changes had a positive impact. We are one of the unlucky ones.

The realignment of the MSA's implemented in 2004 had many effects including the one you have cited. Another big effect was the HUD EMFI numbers. I have one client whose HUD EMFI went down $20,000 thereby disqualifying many mortgage applicants that would have been classified as low or moderate income. Furthermore, some non-reporting HMDA banks became reporters because branches outside MSA's previously were now inside MSA's (and vice versa). So you really need to stay on top of these external factors even though you have no control over them. You still have to recognize their impact on your performance and make adjustments. Don't get caught by surprise during your next exam. Every bank should have an on-going CRA self-assessment program that monitors internal numbers (loans) and external factors (market data) and constantly compares the two.

The regulation certainly does not mandate a self-assessment process. However, given the potential impact of an adverse CRA PE it would be very prudent to maintain some type of self-assessment program. Without a self-assessment program how can you recognize and correct performance shortcomings and how can you respond to examiner questions about your performance meeting the need for credit services in the community? A bank that is passive about CRA is much more vulnerable to criticism. Moreover, a genuine self-assessment program incorporates market data that should be used by the bank for improved market performance as well as better compliance ratings. In fact a good CRA self-assessment program can be a profit center, not a cost center because you will know more about your loan markets and competition and you will be better prepared to capture more of your market share.
Technically, you don't have to have a self-assessment program, but you really should have one.