This confidential report from Premier Insights analyzes housing credit needs for State Bank. The analysis uses data for a ten-year period, focusing on seven assessment areas. It examines population trends, socio-economic factors, and housing characteristics within those areas, particularly in majority-minority census tracts. Key aspects include comparing lending patterns to peers and analyzing compliance with fair lending and Community Reinvestment Act regulations.
The information in this case study is based on the provided report and is intended to illustrate Premier Insights, Inc.'s analytical capabilities. The names of the financial institution and market areas have been changed for confidentiality purposes.
Project Overview
This case study details a comprehensive market product and gap analysis conducted by Premier Insights, Inc. for State Bank. The project focused on housing credit needs assessment and was implemented using Radiant goal management strategies. This in-depth analysis was undertaken to provide a data-driven understanding of the bank's lending landscape and to inform fair lending practices.
Methodology and Scope
The analysis utilized data for a ten-year period and concentrated on seven distinct assessment areas within a fictional state (the “State”). Key factors considered in the analysis included:
- Population Trends: Examining changes in household numbers and racial/ethnic demographics within each assessment area.
- Socioeconomic Housing Characteristics: Analyzing income levels, poverty rates, housing values, and vacancy rates, particularly within Majority-Minority Census Tracts (MMCTs).
- Historic Lending Trends: Reviewing three-year Home Mortgage Disclosure Act (HMDA) lending data to identify patterns and compare State Bank's performance to peers and overall market trends.
- Overall Market HMDA Application Distribution: Examining how applications are distributed across the assessment areas.
- Product Specific Analysis of HMDA Loan Originations: Analyzing loan originations, including by race and ethnicity of borrower.
- Analysis of CRA Reportable Lending: Focusing on lending within low-to-moderate income (LMI) census tracts.
- Geographic Penetration: Comparing lending penetration in minority and majority tracts.
These factors were analyzed in the context of fair lending and, to a lesser extent, Community Reinvestment Act (CRA) compliance for each assessment area.
Assessment Areas
The seven assessment areas analyzed were:
- Assessment Area 1: Total household numbers declined slightly with both white and black populations decreasing. The Hispanic population saw significant growth. Poverty rates were very high in MMCTs.
- Assessment Area 2: Total household numbers increased slightly, with the black population seeing the largest growth. The percentage of persons below poverty in MMCTs was double the assessment area average.
- Assessment Area 3: Total household numbers declined slightly with both white and black populations decreasing, while the Hispanic population grew dramatically. Median household and family incomes in MMCTs were considerably lower than overall averages.
- Assessment Area 4: Total household numbers increased with both white and black populations seeing increases, and a large increase in the Hispanic population. The poverty rate in MMCTs is much higher than the overall assessment area.
- Assessment Area 5: Total household numbers increased with the white and black populations increasing and a large increase in the Hispanic population. The percentage of persons below poverty is lower in this assessment area.
- Assessment Area 6: Total household numbers increased with the white and black populations seeing increases, and the Hispanic population saw a large increase. Over half the housing units in MMCTs are renter occupied.
- Assessment Area 7: Total household numbers declined with the white and black populations decreasing slightly, while the Hispanic population saw a substantial increase. The majority of the population in this assessment area is minority.
Key Findings
The analysis revealed significant differences in population trends, socioeconomic factors, and lending patterns across the seven assessment areas. Notably:
- Minority Population Growth: Across all assessment areas, the Hispanic population saw significant increases, even as the white and black populations in some areas declined.
- Disparities in MMCTs: Majority-Minority Census Tracts (MMCTs) often exhibited significantly lower median household and family incomes, higher poverty rates, and a greater proportion of renter-occupied housing units compared to the overall assessment areas.
- Varying Lending Patterns: Each assessment area demonstrated unique trends in HMDA lending applications and originations, highlighting the need for tailored strategies.
Value of Premier Insights Services
This case study highlights Premier Insights' capabilities in providing a detailed and insightful analysis of housing credit needs. The project showcases our expertise in:
- Data-Driven Analysis: Utilizing robust datasets to deliver precise and actionable insights.
- Fair Lending Focus: Incorporating fair lending considerations into the assessment.
- Geographic Understanding: Analyzing trends at the assessment area and census tract levels.
- Strategic Recommendations: Providing a foundation for informed decision-making related to lending and community development.
This analysis allows banks to better understand their markets, identify lending gaps, and implement strategies to better serve all segments of their communities.