Banks in Ohio and Illinois receive lower Community Reinvestment Act ratings from the Office of the Comptroller of the Currency (OCC)
In the realm of banking, two institutions, First Federal Savings & Loan Association of Lorain and United Trust Bank, have recently come under scrutiny for their performance under the Community Reinvestment Act (CRA). The CRA, a federal law enacted in 1977, requires banks to actively help meet the credit needs of their local communities, particularly focusing on low- and moderate-income (LMI) areas, while maintaining safe and sound banking practices.
During the evaluation periods of January 2021 to December 2023 for First Federal and January 2020 to December 2022 for United Trust Bank, both banks faced criticism for their community development performance.
First Federal, whose main line of business is the origination of 1-4 family residential mortgage loans, did not originate any community development loans within any assessment areas during the evaluation period. This lack of community development lending negatively impacted the bank's CRA rating, as outlined in the CRA evaluation report dated May 2024.
On the other hand, United Trust Bank, with an asset value of approximately $168 million and one branch, with five loan production offices in Illinois, Florida, Ohio, and Tennessee, did not make any home mortgage loans to low- or moderate-income individuals between 2020 and 2021. Furthermore, the Office of the Comptroller of the Currency (OCC) did not issue a CRA rating for United Trust Bank during this period, as the evaluation overlapped with an enforcement action ordered by the OCC to improve weaknesses in the bank's financial performance.
The CRA sets specific requirements and expectations for banks like First Federal and United Trust Bank. These include demonstrating responsiveness in community development through qualified loans, investments, and services, maintaining a reasonable loan-to-deposit ratio, ensuring fair lending practices and equitable access to credit, focusing lending and investments on community development needs in assessment areas, and being transparent and responsive to community feedback.
First Federal made 10 community development donations during the evaluation period that totaled $13,000, but this was not enough to offset the lack of community development lending. The bank also owns a nonbank real estate management company, Lake Erie Financial Services.
In the case of United Trust Bank, bank employees spent more time engaged in community development service activities in the Sandusky area than the Lorain area. However, the bank did not provide enough community development services, according to the OCC. In 2022, United Trust Bank made an insufficient number of loans for the OCC to review regarding home mortgage loans to low- or moderate-income individuals.
Both banks have been urged to improve their community development efforts to better serve their local communities and meet the expectations set forth by the CRA. First Federal Savings & Loan Association of Lorain demonstrated poor responsiveness to community development needs, according to the OCC, while United Trust Bank operates under an enforcement action to improve weaknesses in its financial performance.
First Federal offers home lending products such as purchase, refinance, home improvement, construction loans, home equity lines of credit, and credit cards. United Trust Bank's mortgage branches serve the entire country.
The recent regulatory environment has returned to a framework prioritizing community development and equitable lending consistent with historical CRA principles, reinforcing these expectations. Banks like First Federal and United Trust Bank must remain accountable for investing in and lending to their communities fairly and effectively.
Despite their different scopes, both First Federal Savings & Loan Association of Lorain and United Trust Bank have been criticized for their community development performance, falling short in meeting the specific requirements of the Community Reinvestment Act (CRA). First Federal, with its focus on 1-4 family residential mortgage loans, did not originate any community development loans, negatively impacting their CRA rating, as outlined in the CRA evaluation report. In contrast, United Trust Bank did not make any home mortgage loans to low- or moderate-income individuals during the evaluation period and did not receive a CRA rating due to an overlapping enforcement action for weaknesses in financial performance.
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