Do banks that receive “outstanding” ratings in their Community Reinvestment Act exams know something other banks don’t? According to executives at some local banks that have received the top score from the Massachusetts Division of Banks, there is no secret formula to explain their success, just a commitment to meet the financial needs of the communities in which they operate.

According to the Office of Comptroller of Currency’s Web site, the CRA was enacted in 1977 to prevent redlining and to encourage banks and thrifts to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods.

According to David Cotney, senior deputy commissioner of the Massachusetts Division of Banks, examinations are conducted at varying intervals, based on a bank’s size and rating. For example, if a bank has an “outstanding” rating, it is examined less often.

Cotney said state-chartered banks are examined by the Federal Deposit Insurance Corp. or the Federal Reserve, as well as the state DOB. Federal regulators, like the OCC, examine federally chartered banks.

The Massachusetts DOB recently released a list of CRA ratings that were made public in December. The DOB rates banks in five performance levels: outstanding, high satisfactory, satisfactory, needs to improve and substantial noncompliance. Natick-based Middlesex Saving Bank, examined in 2001, received an outstanding rating. Senior Vice President and CRA Officer Dana Neshe said community reinvestment is simply part of how the bank does business.

“We try to be responsive to the community,” Neshe said. “We try to integrate CRA into [the bank’s] culture. CRA and responsiveness to the community is part of our culture.”

Neshe said employees are trained to embrace community reinvestment.

“It permeates everything we do,” Neshe said.

Tom Unsworth, senior vice president and CRA officer at Lee Bank in western Massachusetts, said it is natural for the banks in that area to give back to the community. Lee Bank was examined in 2002.

Like Middlesex Savings, Lee Bank’s employees have an interest in CRA.

“It starts with the management being committed to it,” Unsworth said.

Rockland Trust Director of Compliance and CRA Officer Christopher Burgess said the bank’s innovative product set is one way it sets itself apart. Having a staff that matches products to a borrower’s needs is another. Rockland Trust, another recipient of the outstanding CRA rating, was examined in 2003.

Bank executives say building relationships with local organizations is key to their CRA success.

“We try to foster partnerships with community development corporations [such as] the Beverly Affordable Housing Coalition,” said Kevin Noyes, vice president of compliance at Danversbank, which was examined in 2002 and rated as outstanding.

Noyes said the bank tries to offer programs that are competitive, while still offering flexible financing for low–and moderate-income borrowers.

Neshe said Middlesex Savings tries to be responsive to affordable housing needs in Middlesex County.

“It comes down to being responsive to the needs we see,” said Neshe.

Effectively tapping into local housing agencies and programs is one tactic that Lee Bank uses. Unsworth said the bank works with Berkshire Housing Development Corp., as well as MassHousing. Because the bank has contacts with local Realtors, it quickly became aware of the area’s growing Latino population in the last decade.

With this knowledge, the bank hosted a first-time homebuyer program in Spanish.

“We try to effectively use outside programs,” said Unsworth. “For the size of the bank, we’ve done what a bank our size is able to do.”

On Track

Small businesses in Middlesex Savings’ service area also benefit from CRA requirements. Neshe said the bank is one of the founding institutions of the Frederick A. Rubin Micro Loan Fund, which began approximately five years ago. The program began as a response to input by small-business owners who said they needed greater credit options.

“It basically provides simple term loans [to small businesses],” Neshe said.

Rockland Trust is also heavily involved in lending to small businesses. The bank ranks second in Massachusetts for Small Business Administration 504 lending. The program provides businesses with long-term, fixed-rate financing for major fixed assets.

Rockland Trust also participates in the New Market Tax Credit program that allows investment in businesses in low-income areas to generate economic growth and job creation. This program is offered through the U.S. Department of Treasury.

Another aspect of CRA is volunteering, and many bank employees offer their own time. At Danversbank, each employee is given 24 hours of paid time to volunteer each year. Noyes, who tracks this data, said approximately 50 percent of the bank’s employees have volunteered in some capacity in the last year.

Citizens Bank, examined in 2002, also pays its employees to volunteer with local organizations. The Citizens Sabbatical allows bank employees to volunteer full-time for three months while still receiving their bank salary, said Julie Connelly, director of community relations at Citizens.

Connelly said many employees also give their time at the Pine Street Inn in Boston, as well as local food banks.

While the banks may contribute to their communities, some bankers say keeping track of their institution’s CRA progress is just as important as contributing.

“The key is tracking everything,” Noyes advises.

Noyes said tracking where loans are given and where volunteers work is important to see the impact on the areas the bank serves.

“[Examiners] can see clearly you’re taking an active approach,” Noyes said.

Boston-based Eastern Bank, examined in 2001 and rated by the DOB as outstanding in meeting its CRA requirements, does some tracking of its own. According to Cindy Merkle, senior vice president and chief officer of mortgage banking and community reinvestment, Eastern Bank measures the bank’s lending patterns on a quarterly basis to determine where loans are being made.

“Looking at the lending process is the key to success,” said Merkle.

If the bank notices a lending program with less activity, Merkle said the bank will analyze the product.

While some banks may expand their community reinvestment outside their market area, Connelly and Burgess both said Citizens and Rockland Trust take a local approach to CRA.

“Our focus is very local,” Connelly said.

Connelly added that Citizens is able to respond to community needs quickly. Rockland Trust, meanwhile, has a high percentage of residential and small-business loans in its market area. Burgess said approximately 90 percent of mortgages and small-business lending is done within the bank’s retail footprint. Most banks originate between 50 percent and 90 percent of such loans within their operational footprint, he said. Burgess said because the bank does such a high percentage of its lending withinin its market area, that sets Rockland Trust apart from other institutions.

Neshe said one key to CRA success is not to approach it as a means to an end. While Unsworth said creating an environment where the bank would contribute to the community, even if CRA did not exist, is important.

“CRA gives us a target,” Unsworth said.

Noyes offers similar advice.

“You have to do charitable contributions that are just the right thing to do,” Noyes said.
Jennifer Jope may be reached at jjope@thewarrengroup.com.