Orders issued under Bank Holding Company Act - Legal Developments - acquisition of RBC Centura Bank by Royal Bank of Canada

Federal Reserve Bulletin,  August, 2002  by Robert DeV. Frierson

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This commenter, however, also expressed concern about Bank's lending in certain areas, noting some MSAs in North Carolina where Bank had fewer home mortgage applications from African Americans than lenders in those MSAs in the aggregate, and MSAs where Bank's denial disparity ratios for African Americans had increased. The commenter also contended that Bank has been inconsistent in improving its services to LMI home mortgage borrowers in North Carolina, lending less of its portfolio to LMI borrowers than lenders in those MSAs in the aggregate. The commenter also expressed concern about Bank's level of community development loans from 1999 to 2000, and its possible involvement with payday lenders. (15)

Another commenter criticized, among other things, the subprime lending activities of the parent holding companies' mortgage lending subsidiaries. This commenter also advocated denial of the proposal based on Tucker's CRA rating and expressed concerns about Bank's plans to improve Tucker's CRA performance in the assessment areas served by Tucker. (16)

A. CRA Performance Evaluations

As provided in the CRA, the Board has evaluated the convenience and needs factor in light of examinations by the appropriate federal supervisors of the CRA performance records of Bank and Tucker. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed, on-site evaluation of the institution's overall record of performance under the CRA by its appropriate federal supervisor. (17)

Bank received a "satisfactory" CRA rating at its most recent CRA performance examination, as of February 28, 2000, by the Federal Reserve Bank of Richmond. Tucker received a "needs to improve" CRA rating at its most recent CRA performance examination, as of February 22, 2001, by the OTS. Examiners found no evidence of prohibited discrimination or other illegal credit practices at either institution and found no violations of the substantive provisions of fair lending and consumer protection laws.

B. Bank's CRA Performance Record

Examiners reported that Bank primarily served its assessment areas through direct lending and offered a variety of credit products, including residential mortgage, residential construction, home improvement, small business, commercial, consumer, agricultural, and community development loans. (18) Examiners noted that 96 percent of the bank's loans are provided to businesses and consumers in its assessment areas. Examiners found that overall, Bank's dispersion of small business and small farm loans, loans subject to the Home Mortgage Disclosure Act (12 U.S.C. [section] 2801 et seq. ("HMDA"), and consumer loans in LMI areas was reasonable. (19) In addition, examiners found that Bank's distribution of loans to businesses and farms with revenues of $1 million or less was generally reasonable. Although Bank received an examination rating of "low satisfactory" under the lending test for the review period in its most recent CRA performance evaluation, examiners found that the volume of HMDA-reportable and consumer loans to be adequate. Examiners also noted that Bank's use of specialized lending programs and its participation in government subsidized loans showed that the bank was making efforts to help meet the credit needs of its assessment areas. (20)