We are a large bank with two counties as our assessment areas. This summer we will open a new branch in another county. Our loan committe would like to designate secondary trade areas for the new branch. Is it neccessary to designate secondary trade areas at all? They want to include this in our loan policy. I can't find anything on secondary trade areas and I know little about CRA.

In answer to your question, there is no necessity, at least no regulatory requirement, to have a secondary trade area. But it would be helpful to know what the loan committee's objective is in designating a secondary trade area. That would help us formulate better advice for you.

Until that's answered, I'll amplify my answer a bit. I hate to get too technical here, but then I AM an examiner!

Your trade area isn't necessarily the same thing as the assessment area you designate for CRA purposes. I know this may be a mind blower for some of you, but this is one of the nuances of the current CRA reg that has been lost over the years.

A CRA assessment area is simply the area in which your CRA performance will be judged. (See the definition of AA in the regulation, in paragraph .41, and the discussion of AA in the preamble to the regulation in FR 60, No. 86, pages 22170-22171.) Because of that, regulators purposely espoused bigger, rather than smaller, assessment areas to make the process easier, with examiners using the so-called performance context to explain away any parts of this larger area that you may reasonably not be serving. So, your actual trade or marketing area may be something smaller.

Back in 1995 when the current CRA regulation went into effect, banks were concerned about this from a PR standpoint, e.g., a community group might not decipher or care about the difference between trade area and assessment area, and complain that a bank isn't serving all of its CRA assessment area. Such complaints, however, didn't really come to fruition, so I'd say that the risk of this occurring now is low. And again, there is no regulatory requirement to designate a secondary trade area.

Let us know what the objective is with that designation, though, and you might get some different advice. AR.

Thank you for your help. The loan officers would like to name the secondary trade areas. Their thoughts are that we couldn't possibly provide services to all the adjoining areas. The adjoining counties are huge, and since we are a community bank that just might not be possible. I thought that we would simply name our assessment areas and if loans were made to other areas they would just be considered out of area loans. Maybe I am wrong, that is why I need some help.

I suggest that you just name the entire county in which the new branch is located as your assessment area, and forego naming a secondary trade area. CRA examiners will put your CRA performance into context and you won't be dinged for not serving the entire county, if that isn't reasonable, from your new branch location.

For example, if your branch is in the SW corner of the county, it may not be reasonable for you to be servicing the NE corner of the county, depending on the size of the county and the ease in traveling between those two corners of the county. Rather than gerrymandering a really finite assessment area, it's easier just to name the whole county. As I said in a previous post, the risk of public complaint over this is low. AR.

You have been a great help. Thank you.