First bank receives CRA rating of ‘substantial non-compliance’ in 2018

For the first time this year, a bank received a rating of “substantial non-compliance” for its fulfilment of requirements under federal community reinvestment rules, the federal bank deposit insurance agency reported Friday.

The Federal Deposit Insurance Corp. (FDIC) said that Reynolds State Bank of Reynolds, Ill., received the “substantial non-compliance” rating. The report was made in the FDIC’s May 2018 list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA),

The CRA is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations, according to the FDIC. As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990, the agency notes.

The FDIC has released its 2018 ratings of banks through May for CRA compliance. Overall, the agency has listed CRA evaluations for 382 banks; nearly all (just under 93%) of the banks have received ratings of “satisfactory.”

By contrast, Reynolds Bank is the only institution, so far in 2018, to receive the “substantial non-compliance” rating – 0.3% of all ratings publicly released so far this year.

The agency defines “substantial non-compliance” as an institution that “has a substantially deficient record of helping to meet the credit needs of its assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities.”

Reynolds had about $100 million in assets as of mid-year, according to FDIC call report data.

On the other hand, six banks received ratings of “outstanding” from FDIC for CRA compliance, according to the May report. (“Outstanding” is defined by the agency as an institution that has “an outstanding record of helping to meet the credit needs of its assessment area, including low- and moderate income neighborhoods, in a manner consistent with its resources and capabilities.”) The banks are:

  • Beardstown Savings S.B., Beardstown, IL
  • BankPlus, Belzoni, MS
  • Comenity Bank, Wilmington, DE
  • The Bank of Castile, Batavia, NY
  • Comenity Capital Bank, Salt Lake City, UT
  • Merrick Bank, South Jordan, UT

So far this year, the agency has awarded the “outstanding” rating to 18 banks (or 4.7% of all evaluations it has publicly released).

The May report also lists three banks rated “needs to improve” (defined as a bank that “needs to improve its overall record” of helping to meet the credit needs of its assessment area, etc.).

The banks receiving the “NI” rating are:

  • Horizon Bank, Waverly, NE
  • Union County Savings Bank, Elizabeth, NJ
  • CTBC Bank Corp. (USA), Los Angeles, CA

The number of banks receiving “satisfactory” ratings (which are defined as those which have satisfactory records of helping meet the credit needs of their areas, etc.) predominate, by far, in the monthly release by the agency. In the five months of the ratings released, 355 were given the “S” score. In all but one month, banks receiving the “S” rating accounted for 93% or more of the ratings issued.

May, however, is the outlier – with just under 88% of the banks receiving the “satisfactory” rating (that is, 72 out of 82 ratings released for the month).

FDIC Issues List of Banks Examined for CRA Compliance

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