Federal regulators have hit Riggs National Corp. of Washington, D.C., with a "needs to improve" rating under the Community Reinvestment Act for its performance during the past two years.

The Office of the Comptroller of the Currency cited Riggs for inadequately serving low- and moderate-income neighborhoods. Those neighborhoods consist of more than half the city's population and 13% to 20% of the suburbs'.

The OCC report stressed, however, that the $4.5 billion-asset company has taken aggressive steps in its commitment to these neighborhoods since late 1993.

"Our findings should not be construed as a criticism of the bank's new initiative, but rather as encouragement for the bank to continue in its present course," the report stated.

The comptroller's office ranks banks with one of four ratings: outstanding, satisfactory, needs to improve, and substantial noncompliance.

The OCC acknowledged that the bank's sub-par performance resulted in part from the financial difficulties in the early 1990s, including a $94 million loss in 1993.

Nevertheless, as the bank is improving its financial standing, it has "yet to demonstrate a long-term financial commitment to these neighborhoods," the report said.

Bank officials were quick to point out accomplishments in this area in 1994, including exceeding their goal of $61 million of new loans, committing more than $500,000 to a new micro-loan program, and holding numerous seminars for small businesses and homebuyers. The OCC report praised these efforts.

"Two years ago we were just trying to survive," said James E. Day, Riggs' director of communications. "That was the focus of management, and the good news is we did survive. But in the process we got nixed for this."

The problem areas that the OCC targeted included "negligible" activity in community development projects and a "disproportionately low" level of loan applications and originations in minority neighborhoods.

Of the banks that have been examined in the past year for their community reinvestment performance, less than 10% have received "needs to improve" ratings, according to an OCC spokesperson. Of the 247 banks that were examined in the third quarter of 1994, for example, just seven received this rating, the spokesperson.

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