Community Bankers Group Asks CRA Investigation of NCNB Unit

WASHINGTON - Stepping up its attack on interstate banking proposals, the Independent Bankers Association of America has asked regulators to investigate the community reinvestment record of NCNB Corp.'s Texas subsidiary.

Citing newspaper reports and complaints from some members, the trade group argued that NCNB has used Texas deposits to fund its $17.8 billion bond portfolio rather than to make loans to local businesses.

Complaint May Be a First

In what may be the first complaint by a trade association alleging noncompliance with the Community Reinvestment Act, the IBAA said NCNB Texas National Bank's loan policies are hurting the state's economy. The trade group, reflecting animosity among Texas bankers toward NCNB, also called for the bank's CRA rating to be downgraded.

In a brief response, NCNB noted that the community bankers group represents "some of our competitors."

"NCNB is extremely proud of its record of involvment in and commitment to every one of its communities, including Texas, and we welcome review of our activities," the company said.

In the midst of a congressional debate over the Bush administration's banking reform bill, the IBAA has sought to portray interstate banking as harmful to small communities. The trade group, which represents 6,200 community banks, is making those arguments in citing NCNB.

Effect on Southeast Bid?

North Carolina-based NCNB, which entered Texas by taking over the failed First Republic-Bank, has also emerged as the lone bidder for troubled Southeast Banking Corp. of Miami. A finding that NCNB must improve its community reinvestment record could delay the regulatory approvals that would be required.

In letters from executive vice president Kenneth Guenther, the IBAA asked both the Federal Reserve Board, which regulates holding companies, and the Office of the Comptroller of the Currency, which oversees national banks, to investigate NCNB.

"At a minimum, it appears that NCNB Dallas [sic] is not serving the local credit needs of its Texas communities," the letter said. It accused the bank of not making the commitment required of all institutions to fuel a recovery in Texas.

"As far as anyone here can tell, it's the first time any trade group has asked for a CRA investigation," said Lenora Cross, a spokeswoman for the Comptroller. "We get requests from community groups, of course, but not industry trade groups."

Comptroller's Office Undecided

The agency has not decided how to deal with the complaint, Ms. Cross said. Ordinarily, "it depends on how recently we have done a CRA exam."

Ms. Cross said she was unsure when NCNB was last evaluated. The agency assigns a grade based on the consolidated organization, rather than NCNB's individual banks, she said.

The IBAA letter came only a week after a House subcommittee voted to exempt small banks from the Community Reinvestment Act and to toughen CRA standards for large, multistate institutions.

Guenther on Bank's Role

"The business of banking is more than taking deposits from a community," Mr. Guenther wrote. "It is also a commitment to lend those deposits back to the community.

"Without this commitment, local community development, small business, small farmers, and the average citizen suffer."

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