Dive Brief:

• The Office of the Comptroller of the Currency has issued a “needs to improve” Community Reinvestment Act rating to Ohio-based First Federal Savings & Loan Association of Lorain, the regulator said Monday.
• The CRA performance evaluation, dated May 2024, specifically calls out the lender on the community development front, saying First Federal “demonstrated poor responsiveness to community development needs” through loans, investments and services.
• The OCC also issued a “needs to improve” CRA rating to Palos Heights, Illinois-based United Trust Bank, it said Monday. A June 2024 performance evaluation said a majority of the bank’s loans were outside its assessment area and the lender’s borrower distribution was poor.

Dive Insight:

First Federal, which counts about $512 million in assets and seven branches, offers home lending products such as purchase, refinance, home improvement and construction loans, home equity lines of credit and credit cards. The bank’s main line of business is the origination of 1-4 family residential mortgage loans. First Federal also owns nonbank real estate management company Lake Erie Financial Services.

The evaluation period covered January 2021 to December 2023. First Federal exhibited lackluster responsiveness to community development needs, considering the bank’s capacity, “and the need, and availability, of such opportunities” in the bank’s markets, the OCC said.

First Federal didn’t originate any community development loans within any assessment areas during the evaluation period, which negatively affected the bank’s rating, the OCC said. 

The bank made 10 community development donations during the evaluation period that totaled $13,000; those benefited low- and moderate-income individuals and households, affordable housing and revitalization or stabilization in low-income areas. 

“Examiners considered the impact of the bank’s lack of profitability on the bank’s capacity and volume of investments during the review,” the OCC noted, but the level of community development investments also negatively affected overall ratings.

The OCC also noted First Federal has room for improvement in providing community development services, and bank employees spent more time engaged in community development service activities in the Sandusky area than the Lorain area. 

United Trust Bank has about $168 million in assets and one branch. It also has five loan production offices: one in Illinois, two in Florida, one in Ohio and one in Tennessee; those mortgage branches serve the entire country. The bank offers loan and deposit products with a focus on residential real estate loans.

The evaluation period covered January 2020 through December 2022. During that time, the bank operated under an enforcement action that ordered the lender to improve weaknesses in its financial performance which were inhibiting its viability and ability to meet the credit needs of its market, the OCC said.

United Trust showed substandard distribution of loans to those of different income levels, the OCC said. The lender didn’t make any home mortgage loans to low- or moderate-income individuals between 2020 and 2021; in 2022, there was an insufficient number of loans for the regulator to review.

Neither lender immediately responded to requests for comment.