Federal regulatory agency critiques Ohio and Illinois banks for Community Reinvestment Act evaluations
The Office of the Comptroller of the Currency (OCC) has issued "needs to improve" Community Reinvestment Act (CRA) ratings to two financial institutions - First Federal Savings & Loan Association of Lorain, Ohio, and United Trust Bank based in Palos Heights, Illinois.
First Federal, with approximately $512 million in assets and seven branches, didn't originate any community development loans within any assessment areas during the evaluation period from January 2021 to December 2023. The CRA performance evaluation specifically calls out the lender on the community development front, noting poor responsiveness to community development needs. In contrast, First Federal owns a nonbank real estate management company, Lake Erie Financial Services.
During the same period, United Trust Bank, with about $168 million in assets and one branch, was found to have a substandard distribution of loans to different income levels. The bank, which primarily focuses on the origination of residential real estate loans, operated under an enforcement action during the evaluation period from January 2020 to December 2022. Despite this, United Trust Bank has five loan production offices: one in Illinois, two in Florida, one in Ohio, and one in Tennessee.
Both First Federal and United Trust Bank didn't immediately respond to requests for comment.
For those unfamiliar, the CRA requires banks and savings associations, including First Federal and United Trust Bank, to help meet the credit needs of their entire community, including low- and moderate-income neighbourhoods, consistent with safe and sound operations. The specific areas of evaluation include lending, investment, and services that support community development such as affordable housing, economic development, and revitalization or stabilization of distressed areas.
The requirements for each institution would be tailored to its assessment area(s) and the bank would be evaluated by federal regulators on how well its activities address identified local community development needs. This typically involves lending to low- and moderate-income individuals and neighbourhoods, investments in community development projects or organizations, and providing community development services.
Institutions must regularly submit CRA performance evaluations to the regulators, which are publicly available and specify how well they meet community needs. For more detailed, institution-specific CRA obligations or recent performance reports, these are typically found on the federal regulator’s website (e.g., FDIC or OCC) or via the institution’s CRA public file.
During the evaluation period, First Federal made 10 community development donations that totaled $13,000, while United Trust Bank didn't make any home mortgage loans to low- or moderate-income individuals between 2020 and 2021. In 2022, United Trust Bank made an insufficient number of loans for the regulator to review.
As the CRA ratings for these institutions indicate, it's crucial for banks and savings associations to prioritise their responsibilities towards the communities they serve. It's recommended that stakeholders, including the public, keep a close eye on the CRA performance evaluations of their local banks to ensure they are fulfilling their obligations to the community.
The financial institutions, First Federal Savings & Loan Association of Lorain, Ohio, and United Trust Bank, were given "needs to improve" Community Reinvestment Act (CRA) ratings, highlighting the importance for banks and savings associations to prioritize their responsibilities towards the communities they serve. First Federal, despite owning a nonbank real estate management company, didn't originate any community development loans and made only 10 community development donations, while United Trust Bank, primarily focusing on residential real estate loans, failed to distribute loans to different income levels and didn't make any home mortgage loans to low- or moderate-income individuals between 2020 and 2021.
