Federal Reserve Board Denies Application on CRA Grounds

Fair Lending Alert No. 95-7-19
July 19, 1995

Federal Reserve Board Denies Application on CRA Grounds

On July 12, 1995, the Board of Governors of the Federal Reserve System
(the "FRB") denied an application by Totalbank Corporation of Florida, a
bank holding company, to acquire Florida International Bank. Although the
FRB stated that financial, managerial and competitive factors were
consistent with approval of the application, the FRB denied the application
based on the poor record of performance under the Community Reinvestment Act
(the "CRA") of Totalbank Corporation's two subsidiary banks, Totalbank
("Totalbank") and Trade National Bank ("Trade Bank"), both in Miami.

Both Totalbank and Trade Bank received "needs to improve" ratings in
their most recent CRA examinations. The FRB noted that Totalbank's CRA
examination report indicated that the geographic distribution of Totalbank's
credit extensions, credit applications and credit denials reflected
disparate lending patterns; its activities to ascertain community credit
needs and to market its products and services within its delineated
community were inadequate and that there were weaknesses in Totalbank's
overall implementation of CRA policies and programs, e.g., there was no
board of director oversight of CRA activities. Trade Bank's most recent CRA
examination report indicated that Trade Bank had not developed a CRA program
to ensure it is satisfying its CRA responsibilities; its activities to
ascertain community credit needs and to market its products and services
were limited, and it has not participated in local community development or
redevelopment projects or programs.

The FRB's decision noted that Totalbank Corporation has identified
initiatives undertaken at both Totalbank and Trade Bank to address
deficiencies in their CRA performance records. After reviewing the
initiatives undertaken by Totalbank, the Federal Deposit Insurance
Corporation, the bank's principal federal regulator, concluded that
additional efforts by Totalbank would be required to address all the
deficiencies in the bank's CRA performance record. The Office of the
Comptroller of the Currency, which reviews the CRA performance of Trade
Bank, concluded that the initiatives were relatively new and have not been
in place for a sufficient period of time to adequately evaluate their
effectiveness. The FRB stated that banking organizations should address
their CRA responsibilities, and that the policies necessary to ensure
compliance with the CRA should be in place and working well,before the
banking organization files an application to expand its deposit- taking
facilities.

The FRB also stated that Totalbank's CRA examination report cites
technical violations of the Fair Housing Act, the Equal Credit Opportunity
Act and the Home Mortgage Disclosure Act. The FRB reiterated its position
that disregard for these fair lending laws provides a separate basis for
denying an application, even if an applicant has a satisfactory CRA
performance record.

This action illustrates the importance of an institution's CRA
performance record to the applications process. Institutions considering
expanding their deposit-taking facilities should have established well-
developed formal CRA compliance programs before filing an application.

Please contact us if you would like a copy of the FRB's Order relating
to Totalbank Corporation's application.

Thomas P. Vartanian Robert H. Ledig David L. Ansell Alisa Babitz

(202) 639-7200 fairlending@ffhsj.com

1995 Fried, Frank, Harris, Shriver & Jacobson.
All Rights Reserved.
Fair Lending Alert is a trademark and servicemark
of Fried, Frank, Harris, Shriver & Jacobson.



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