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We are an intermediate small bank regulated by the FDIC. Our current assessment area is in non-MSA’s and we are not HMDA reportable. The Bank is considering opening an LPO in an MSA outside of our assessment area where it will not disburse funds nor will it take deposits. All loans originated in this office will be sold to the secondary market including servicing and will not be in our books. For CRA purposes, I understand that we won’t have to include the LPO in our assessment area as long as it is not taking deposits and is not considered a “branch” by the FDIC. Will this effect anything else for CRA? What about the lending test for the percentage of loans within and outside of our assessment area? Anything else we need to consider for CRA as management considers their options?
Your analysis is accurate. The geography in which a LPO is located does not have to be included in your assessment area. As you note, loans originated by your LPO are apparently located in areas not included in your assessment area and depending on the success of the LPO could hurt your bank’s performance on the lending test that focuses on the percentage of loans located in the assessment area.
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