My FI is an intermediate small bank with 25 branches in 9 different counties some of which are in an MSA and some are not. 8 of the counties are contiguous and also happen to be in 4 different MSAs. Can the 4 different MSAs and the other 4 counties which are not in an MSA but are part of this contiguous ‘chain’ of counties be grouped together to form one assessment area?

If so, the areas are very different ranging from very rural in some counties to highly urban in the MSAs. Is it still a good idea to lump all of these into one assessment area?

IMO consider each of the MSA's as a seperate AA. Each has it own unique characteristics and should analyzed as such,

If you have 9 counties of which 8 are in 4 msa's that leaves 1 county not in an MSA. So I'm not sure what you mean when you say

"Can the 4 different MSA's and the other 4 counties which are not in an MSA"

Or am I reading this incorrectly?

Sorry for not making myself clear. I have 8 contiguous counties. 1 separate county. Of the 8 contiguos counties 4 of the counties are in an MSA and 4 counties are not in an MSA, they are just counties.

Without knowing what the counties are, and seeing a map, MY GUESS is the 4 MSA's would each be a separate AA, the 4 contiguous non MSA counties would be an AA, and the non contiguous non MSA county, would be an AA for a total of 6 assessment areas.

Looking at my map that makes sense. Thanks for your help Don.

The 2001 Q&A's address a similar issue as follows:
§ll.41(e)(4)–2: Can an institution
delineate one assessment area that
consists of an MSA and two large
counties that abut the MSA but are not
adjacent to each other?
A2. As a general rule, an institution’s
assessment area should not extend
substantially beyond the boundary of an
MSA if the MSA is not located in a
CMSA. Therefore, the MSA would be a
separate assessment area, and because
the two abutting counties are not
adjacent to each other and, in this
example, extend substantially beyond
the boundary of the MSA, the
institution would delineate each county
as a separate assessment area (so, in this
example, there would be three
assessment areas). However, if the MSA
and the two counties were in the same
CMSA, then the institution could
delineate only one assessment area
including them all

AHA! That makes it very clear. I had not gone back to the 2001 Q&A's, I'm fairly new to this...I haven't really been referring to anything that came before the Sept. 2005 changes. I will from now on. Thanks for your help guys!

One of our AAs consist of an MSA and a county that is not in the MSA. The county abuts the MSA and does not touch any other AA. The OCC approved this.

As Len and KC are suggesting, you could put the contigeous counties together, into one combined assesssment area. One MSA and an adjacent county would work.

While combining areas may be allowable, one should always consider the demographic diversity of the areas being combined. So just because it can be done, doesn't mean its a good idea to do so.

Keep in mind that the Core Based Stastical Areas established in 2004 that replaced the CMSA's the 2001 Q andA mentioned, are entirely different. The demographic characteristics that make up what is a Metropolitian Division are not the same as what the old MSA's were. Knowing what the characteristics are would certainly help in deciding how many assessment areas to divide the banks market area into.

As the poster has 4 MSA's plus 8 other counties, at a minium it would be a 12 county assessment area.

IMO that would be far to large an area to be a single assessment area, Especially, as it sounds like it would encompass most of northern California.

So IMO the response to the question posed would be to make multiple assessment areas that would be manageable and provide the best means to analize the loan and demographic information of this very diverse area.

Interestingly the regulators appear not to have enforced this element within CRA all that strictly. We have produced assessment area maps for many banks and in many cases we observed violations of the assessment area rules as interpreted in the Q&A's as cited above. Frequently bankers will tell me their regulator has not criticized the violation. Just today I did maps for a PA bank that had this problem. When they discussed the issue with their regulator (at my suggestion) the regulator confirmed the requirement even though the field examiners had not criticized the bank before. My client told me the regulator could only shrug her shoulders when asked why the issue had not come up in the previous CRA performance evaluation. So go figure! The only thing that is clear is the regulation does not allow significant encroachment of Assessment Areas into multiple MSA's as explained in the Q&A I cited earlier.

I have a number of banks that have had multiple assessment areas for years. Several have in excess of 15 assessment areas. They are a mixture of OCC and FDIC regulated banks.

Some examiners have told the banks not to mix MSA and non msa counties. Some banks have chosen not to mix very rural counties with counties that have larger population centers where it is feasable to do so.

Here's one for you:

What do I do with two non-contiguous counties within the same MSA when we are not taking the entire MSA? We have two tiny branches in a HUGE metro area (one is an LPO being converted to a new branch, hence the need for the additional area)so there is no way we could feasibly serve the whole area. And the other monkey wrench in the works - we already have the county contiguous to the one being added, but it is in a different MSA than the two referenced above.

Anyone have any suggestions for justifying adding only specific census tracts instead of an entire county?

My head is spinning on figuring this lay out, but the certainty is you can select specific census tracts, and not the whole county. You just have to be careful that in selecting them, you do not give the apperance of excludeing LMI tracts by stopping short or going around an area that has them, Its a balanceing act.

Whole geographies are encouraged just so LMI tracts in a municipality have to be included. However there are exceptions as long as you can make a case to justify the exception and sell it to examiners

It would help if you had a map that had the tracts of the county color coded so you could see the area you were selecting and the proximinity of LMI tracts to it.

I know of one bank that called their examiner and asked if the assessment area could be made smaller as the bank could not serve the whole county of Los Angeles which was their current assessment area. Supposedly the examiner and the bank agreed on a 30 mile circle. They then listed all the census tract within the 30 mile circle as their new assessment.

The first thing the examiner asked about at the next exam was what kind of research did the bank do on the census tracts just outside the circle to make sure they did not discriminate on adjacent LMI tracts.

Thst what you will be faced with by selecting individual tracts.

Any ideas on how to handle the two non-contiguous counties within one MSA? One county we've already got one as a whole, the other we'll probably only be taking selected census tracts. FWIW, the two branches involved will be approx. 25 miles apart.

I guess I am more infavor of including a county inbetween to non-contiguous counties so I have one AA rather than two. We have a county that has no branches but the counties surrounding it do. While we don't have a lot of loans there we do have some and get to count them as in the AA. I believe in keeping it simple.