Many L.A. banks still lacking in minority lending.

Inner-city groups still awaiting post-riot exam results

Most Los Angeles County-based banks and savings and loans are doing a "satisfactory" job complying with the federal Community Reinvestment Act, but a number of the institutions are still getting less-than-satisfactory grades, according to figures from federal regulators.

Of the 67 banks in L.A. County examined by the Federal Deposit Insurance Corp. since July 1990, 39 were rated "satisfactory" 27 were rated "needs to improve," and one was rated "substantial non-compliance," according to public figures released by the FDIC.

Marina State Bank in Marina del Rey was rated "substantial non-compliance" on April 29, 1991, according to the FDIC.

The FDIC, which regulates 7,500 state-chartered banks that are not members of the Federal Reserve, oversees more reinvestment-act programs than any of the four federal agencies overseeing government-insured financial institutions, said a FDIC spokesman.

The Community Reinvestment Act was passed by Congress in 1977 to prevent financial institutions from discriminating against low and moderate-income neighborhoods.

Sal Serrantino, president of California Research Corp., a Santa Monica-based banking consulting firm, which has worked on reinvestment act compliance programs at 48 area banks, said he recalls the days of redlining when financial institutions actually marked off "bad neighborhoods" with a red pen.

He said the 1977 law was virtually ignored, however, until a sweeping bank reform bill -- the Financial Institutions Reform, Recovery and Enforcement Act -- was passed in 1989.

FIRREA not only made ratings public, but it gave federal regulators the power to issue enforcement actions, which radically increased the number of CRA examinations, he said.

FIRREA requires the regulatory agencies to evaluate the performance of financial institutions.

Financial institutions are rated on a number of factors, including ascertaining the credit needs of the community, lending within the geographical area of the community, marketing products to all segments of the community, being aware of community development needs and compliance with federal consumer protection laws.

The four regulatory agencies responsible for examining banks and S&Ls for compliance with CRA are the FDIC, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve.

Financial institutions are assigned one of four grades: "outstanding," "satisfactory," "needs to improve" or "substantial non-compliance."

"Anyone getting a less-than-satisfactory rating means there is something wrong with their effort in lending," said Joe Westfall, a national bank examiner with the OCC.

Of the 16 banks in L.A. County rated by the OCC since 1990, 10 were rated "satisfactory" and six were rated "needs to improve." Two of the banks rated "needs to improve" are headquartered in Beverly Hills: City National Bank and World Trade Bank.

Of the seven local banks rated by the Federal Reserve since 1990, five were rated "satisfactory," one was rated "needs to improve" and one was rated "outstanding."

The Federal Reserve upgraded Long Beach-based Farmers & Merchant Bank to "needs to improve" in April 1991, after the bank had been given a "substantial non-compliance" rating in 1990. First Interstate Bank of California was rated "outstanding" in August 1990.

Of the seven federal S&Ls in L.A. County rated by the Office of Thrift Supervision in 1992, five were rated "satisfactory," one was rated "outstanding," and one was rated "needs to improve."

First Global Bank was given a "needs-to-improve" rating and Western Federal Savings and Loan in Marina del Rey was given an "outstanding" rating.

Banks given a "needs to improve" rating are given an outline of how to improve their CRA rating, which the directors of the financial institution sign-off on, and that institution is re-evaluated in a year, said regulators.

Regulators said it is too early to tell just what effect the April riot has had on any particular bank or S&L's CRA rating. It takes about three weeks for one examiner to investigate a bank's CRA rating, said the OCC's Westfall. And the number of financial institutions far exceeds the number of examiners.

However, there have been some positive signs. For example, a coalition of 40 banks, thrifts and other lenders have formed a grass-roots nonprofit community banking-and-redevelopment organization committed to rebuilding Los Angeles by increasing ownership of minority businesses. The group, called Operation Hope, has committed $7 million worth of deals. Three of those deals were loans, and one was a deal in which $6 million in federally seized assets were purchased from the Resolution Trust Corp. for resale to minority-owned businesses, said John Bryant, the coalition's 26-year-old founder.

He said the coalition is financing the "15 percent of businesses which should have gotten a loan, but couldn't."

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