Full and Limited Scope Reviews

Question 1

When would examiners need to identify AAs for full or limited scope reviews?

Answer 1

When the PE involves interstate and Intrastate banks with more than one AA.

Question 2

What is a full scope review?

Answer 2

A full scope review is accomplished when examiners complete all of the steps outlined in the interagency procedures for an assessment area.

Question 3

What is the minimum number of full scope reviews that must be conducted?

Answer 3

For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate metropolitan statistical area/metropolitan division (MSA/MD), must be reviewed using the full scope examination procedures.

Question 4

What factors should examiners consider during the CRA scoping process to determine if an area should be given a full or limited scope review? (10)

Answer 4

• CD opportunities in the different AAs, particularly areas where the need for CD activities is significant
• Level of the bank’s CD activity in different AAs including LMI areas, disaster areas, or distressed and underserved areas.
• number of other institutions in the different AAs and the importance of examined bank in serving those areas
• comments and feedback received from community groups and public on CRA performance.
• size of population
• existence of apparent anomalies in the CRA or HMDA data for any particular AA.
• length of time since the AA was last examined using a full scope review.
• Bank’s prior CRA performance in different AAs
• Examiner’s knowledge of the same or similar AAs.
• Issues raised in CRA PEs of other bank’s and prior community contacts in the AA or similar areas.

Question 5

AAs with greater needs and opportunities should receive greater consideration as ____ _____ reviews.

Answer 5

Full scope

Question 6

When scoping, in addition to the determining level of CD activities in different AAs, examiners should consider what?

Answer 6

In addition to the level of lending, investment, and service activity, examiners also should consider significant changes in the level of activity in the different assessment areas since the last performance evaluation.

Question 7

If a particular assessment
area has experienced a significant increase in lending since the previous evaluation due to the bank offering a new product that met an identified credit need, that assessment area
may receive increased consideration for a ___ ____ review.

Answer 7

Full scope

Question 8

After reviewing information on the number of other institutions in different assessment areas and the importance of the bank under examination in serving different areas, in what areas would it be appropriate to consider a full scope review?

Answer 8

Areas where the bank has a high concentration of its activity or maintains high market share should be strongly considered for a full scope review. In evaluating the importance of the institution in the area, examiners are encouraged to consider market share data.

The level of an institution’s lending activity in a particular assessment area should be weighed
against the overall level of lending activity in the area, not solely against the overall lending activity of the subject bank.

Question 9

The scope section of the PE should include what regarding full and limited scope reviews?

Answer 9

Which areas were selected for full or limited scope reviews and the reasoning for selecting them as such.

ex: “Bank of Anytown has 12 assessment areas within
Anystate. Assessment areas A and B were chosen for full scope review due to the greatest level of lending, deposits, and branches in these assessment areas. Assessment area C was chosen due to a CRA comment that raised issues with the bank’s lending in this assessment area. During the scope of the examination, it was identified that some of Bank of Anytown’s
assessment areas were not reviewed using the full
scope examination procedures in the last two examinations. In an effort to ensure that an institution’s CRA performance in these infrequently reviewed assessment areas is regularly evaluated, assessment area D was selected at random from a list of those assessment areas infrequently reviewed under the
full scope examination procedures.”

Question 10

Why is the size of the population an important consideration in selecting areas for full or limited scope reviews?

Answer 10

The size of the population can indicate the number of potential customers within the AA relative to other AAs. However, examiner’s should not overlook AAs for full scope review solely because they have a small population.

Question 11

If a focal point review is under way for an assessment
area(s) (e.g., redlining or marketing), examiners are
strongly encouraged to select that same area for a ____ _____ CRA review.

Answer 11

Full Scope

Question 12

When considering the length of times since the AA was last examined using a full scope review, examiners should give the most weight to selecting which areas?

Answer 12

In considering this factor, examiners should give greater weight to selecting established assessment areas that were not recently evaluated with the full scope examination procedures. Conversely, new or recently added (in less than twelve months) assessment areas are typically not weighted as heavily.

Question 13

Assessment areas where the institution has shown ____ performance in the past should receive greater consideration for ____ _____ review relative to those assessment areas with __________ performance at the previous evaluation.

Answer 13

Weak
Full Scope
Reasonable

Question 14

What should be done at every exam to avoid establishing AAs that are infrequently reviewed under full scope examination procedures?

Answer 14

In an effort to ensure that an institution’s CRA performance in these infrequently reviewed assessment areas is regularly evaluated, examiners
must conduct one additional full scope assessment area review unless examiners already selected an assessment area that did not receive a full scope review during the previous two CRA evaluations based on the factors discussed above.

If an additional full scope assessment area must be selected, it would be selected at random from the pool of assessment areas that have not received a full scope review during the previous two CRA evaluations.

Question 15

How should examiners select AAs for full scope reviews in the following example?

An institution has seven assessment areas which
have not been evaluated using full scope procedures for the last two CRA evaluation periods.

Answer 15

The examiner must randomly select one of these seven for full scope review unless one of the assessment areas already selected for review using the
factors above had not been assessed using full scope procedures at the previous two CRA evaluations.

Random selection ensures that any infrequently reviewed assessment area has an equal chance for full scope review. This encourages institutions to consider the needs of all their assessment areas, rather than concentrating on those most likely to be reviewed as full scope.

Question 16

For limited scope reviews, the bank’s performance in each AA should be compared to what for examinations with at least one full scope review within the MSA or NonMSA in the State?

What about for examinations with no full scope reviews in the MSA or NonMSA portion of the State?

Answer 16

Examiners should ensure performance is consistent with the conclusions of the AA examined using full scope procedures within the same MSA or NonMSA portion of the state. And indicate the impact on the rating.

Examiners should form a conclusion on the bank’s lending and CD activities and weight the performance in this AA if there are other AAs in the same MSA or NonMSA. Then examiners should include in the PE a comment on the performance in the AA(s) relative to the performance at the overall or state level and indicate the impact on the rating.

Question 17

What should examiners do if the bank’s performance in a limited scope AA is materially inconsistent with the lending, investment and service performance in the applicable full scope AA?

Answer 17

In cases where an examiner considers
the performance in a limited scope reviewed assessment area to be materially inconsistent with the lending/ investment/service performance in the applicable area, examiners should expand their review to full scope examination procedures for that assessment area. Materially inconsistent
differences are those that are considered significant
enough to affect the overall rating for a rated area (i.e., state) of the institution.

Question 18

What are the primary differences between full and limited scope reviews?

Answer 18

The primary difference between full scope and limited scope assessment area reviews is the inclusion
of qualitative factors and presentation of full performance context in the performance evaluation for full scope assessment areas.

For limited scope assessment area(s), examiners should review sufficient information about each assessment area to ascertain whether performance is consistent with the institution’s performance at the rated area level (state or multi-state MSA). In most cases, a review of the demographics and the quantitative information regarding the lending, investment, and service activity will be sufficient to make this evaluation. However, examiners should be aware of any significant differences pertaining to products, services, and investments along with any
key or unique performance context information within the limited scope assessment area.

Question 19

At a minimum what should be included in the PE for limited scope reviews in each area?

Performance context
Lending test
investment test
service test 
Narrative in the PE

Answer 19

Performance Context
 Analysis of performance in light of relevant comparable demographics
 Key and unique performance context information

Lending Test
 Volume/activity
 Borrower & geographic distribution
 Community development lending (numbers & dollars only)

Investment Test
 Level and trend only

Service Test
 Branch distribution
 Branch openings and closings
 Community development services (volume only)

Narrative in PE
 Analyze numerical data – evaluate anomalies
 State whether performance is “consistent with”, “stronger than”, or “weaker than” the rated area

Question 20

At a minimum what should be included in the PE for Full scope reviews in each area?

Performance context
Lending test
investment test
service test 
Narrative in the PE

Answer 20

Performance Context
 Analysis considering full performance context

Lending Test
 Volume/activity
 Borrower & geographic distribution
 Community development lending
 Conspicuous gaps
 Qualitative factors (innovation, complexity, leadership,
flexibility)

Investment Test
 Level and trend
 Qualitative factors (innovation, complexity)

Service Test Service Test
 Branch openings and closings
 Hours of operations 
 Gaps in operations and services
 Community development services
 Qualitative factors (responsiveness)

Narrative in PE
 Analyze numerical data – evaluate anomalies
 Discuss qualitative factors