Government Lending

It’s getting harder to get an “Outstanding” rating on CRA performance evaluation

Only 2.1% of small institutions received the rating in 2020

A 10-year study by QuestSoft revealed that since 2019, the percentage of “Outstanding” ratings on Community Reinvestment Act performance evaluations dropped across the board for large, intermediate and small institutions.

However, the decline was greatest for large institutions, which saw a 10.4% drop, compared to a 2.32% drop for intermediate institutions and a 4.44% drop for small institutions.

The 2010 to 2020 study reviewed 14,765 CRA performance evaluations on large, intermediate and small institution exams from the Federal Reserve Bank, Federal Deposit Insurance Corporation, Office of the Thrift Supervision and Office of the Comptroller of the Currency with recently appointed acting head, Brian Brooks.

Even with their 10% drop, the report revealed large institutions were more than three times as likely to receive an “Outstanding” rating on CRA performance evaluations when compared to small institutions.

Large institutions were also more than twice as likely to receive an “Outstanding” rating compared to intermediate institutions, though nearly 79% of large institutions received a “Satisfactory” rating.

In 2020, small institutions bottomed out on the percentage of “Outstanding” ratings at 2.11% — the lowest percentage of “Outstanding” ratings in the 10-year study.

The number of small Institutions that had received an “Outstanding” rating in 2020 was more than three times lower than the prior year, and more than two times lower than the 10-year average. 

“While some lawmakers have criticized CRA for being too easy on institutions, the data shows earning an ‘Outstanding’ rating is an exceptional accomplishment,” a release from QuestSoft said.

According to the report, the percentage of institutions that had received an “Outstanding” rating is lower than the prior four years and “Needs to Improve” ratings have increased for intermediate institutions. As a result, the data suggests current examination benchmarks and examiner focus may be shifting, the report said.

In August 2018, the OCC sought feedback on its announcement that it was looking to “modernize” the CRA. By May of 2020, it announced its final rule on CRA changes without the backing of the FDIC and Federal Reserve – with agencies calling it “untimely” given the state of the pandemic.

Several companies within the industry, including the American Banking Association, the National Community Reinvestment Coalition and the National Housing Conference, expressed concern about data collection challenges and the effect they would have on lower-income communities.

Concurrent with the announcement of the CRA’s final rule, then-Comptroller of Currency Joseph Otting stepped down to be succeeded by then-COO Brian Brooks.

“With the Office of the Comptroller of the Currency (OCC) going at it alone on CRA reform, it is evident that there will be a change in approach across agencies. It is more important than ever to be focused on regulatory examination outcomes,” the report said.

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