In the podcast, Len Suzio from GeoDataVision LLC and Dean Stockford of M&M Consulting delve into the topic of CRA (Community Reinvestment Act) Assessment Area delineation. Len emphasizes the critical importance of banks updating their CRA assessment area maps, particularly in light of changes to census tracts that were officially adopted by the FFIEC on January 1, 2022. He is alarmed to find that many banks haven't updated their maps, which is a mandatory requirement. Len further elaborates on the "performance context" in the CRA regulation, which is pivotal in determining banks' performance expectations. This context includes the unique characteristics of the bank, the demographics of the communities within the CRA assessment area, and the credit markets in local communities.
Len explains the various CRA lending tests, such as the Assessment Area ratio, the conspicuous gaps in contiguous tracts test, the LMI tracts penetration test, and the “borrower characteristics” test. He emphasizes that the configuration of the assessment area can significantly impact performance standards, as examiners will evaluate demographic and credit market variables. Len also touches upon the regulatory flexibility banks have in defining their assessment areas and urges banks to review and evaluate their current areas to avoid inflating their CRA performance standards. The conversation concludes with Len and Dean encouraging listeners to take the topic seriously and consider the implications of their assessment area delineations.