Bank regulatory agency criticizes Ohio and Illinois banks for Community Reinvestment Act scores.
First Federal and United Trust Bank Receive "Needs to Improve" Community Reinvestment Act Ratings
Two US banks, First Federal Savings & Loan Association of Lorain and United Trust Bank, have recently received "needs to improve" ratings under the Community Reinvestment Act (CRA). The CRA is a federal law that requires banks to meet the credit needs of the communities they serve, particularly those in low- and moderate-income (LMI) areas.
First Federal, with assets of approximately $512 million and seven branches, primarily engages in the origination of 1-4 family residential mortgage loans. The bank offers various home lending products such as purchase, refinance, home improvement, construction loans, home equity lines of credit, and credit cards. However, according to the CRA performance evaluation for First Federal, the lender demonstrated poor responsiveness to community development needs through loans, investments, and services.
In contrast, United Trust Bank, which operates with one branch and five loan production offices in Illinois, Florida, Ohio, and Tennessee, serving the entire country, did not make any home mortgage loans to low- or moderate-income individuals between 2020 and 2021. Additionally, a majority of United Trust Bank's loans were outside its assessment area, according to the OCC. The lender's borrower distribution was also poor, according to the OCC's evaluation.
The CRA framework reinstated in 2025 emphasizes active responsibility by banks to engage in community development lending and fair lending practices to support underserved communities. Community development loans are made for activities that support affordable housing, community services targeted to LMI individuals, economic development through small businesses or small farms, or revitalization or stabilization of LMI geographic areas.
Banks such as First Federal and United Trust Bank must ensure their community development loans clearly address the credit needs of their assessment areas, especially supporting LMI individuals or neighborhoods, meet the regulatory standards for responsible lending, and align with the applicable CRA evaluation method based on their size and business structure.
The Community Reinvestment Act ratings for both banks were issued on separate dates. The rating for First Federal was issued on May 2024, while United Trust Bank received its rating on June 2024. Neither bank responded to requests for comment regarding their CRA ratings.
It is crucial for banks to adhere to CRA regulations to ensure they are meeting the credit needs of their communities, particularly those in LMI areas. By doing so, they can help promote economic development, affordable housing, and revitalization in these communities.
The banking and insurance industry should pay closer attention to CRA regulations, as two recent recipients, First Federal Savings & Loan Association of Lorain and United Trust Bank, have received "needs to improve" ratings under the act. These ratings highlight the importance of business practices that support community development lending, particularly in low- and moderate-income areas, as required by the Community Reinvestment Act.
