Eastern Shore Bank of Md. fails U.S. fair-lending exam

December 24, 1992|By David Conn | David Conn,Staff Writer

The Eastern Shore Bank of Maryland, which performed poorly on a federal fair-lending exam two years ago, has failed the exam outright, according to a report from federal banking regulators.

The 6-year-old Eastern Shore Bank, with $70 million in assets and two branches in Cambridge, was in "substantial noncompliance" with the requirements of the federal Community Reinvestment Act, according to the Federal Deposit Insurance Corp., which conducted the exam.

The FDIC said it found no evidence of "redlining," or failing to make credit available because of applicants' neighborhoods or incomes. Instead, it criticized the company for failing to set up some of the formal assessment and training programs required by the CRA law, and for failing to document compliance with the law.

"We know we're in compliance, but because we didn't have it on form 'such-and-such,' " the examiners would not recognize it, said bank President Harold S. Robbins.

The CRA is a 15-year-old law that is intended to identify and penalize banks that deny credit to certain segments of their communities, typically low-income neighborhoods.

Of the 6,189 banks examined since July 1990, 46 -- less than 1 percent -- have received the lowest rating. About 10 percent were "outstanding," 82 percent "satisfactory" and 7 percent "needed improvement," the FDIC said.

The agency gave the Eastern Shore Bank the lowest of the four ratings in an April examination, which was released this month after an extensive review process, an FDIC spokeswoman said. That followed a 1990 exam that found that the bank "needs to improve."

In essence, the FDIC said the company complied with the spirit, but not the letter, of the law.

The bank has complied with the "substantive provisions of anti-discrimination laws" relating to lending, by making credit available within all segments of its community, according to the examination.

But examiners chastised the bank for failing to establish written procedures to help it determine the credit needs of the community and protect against discrimination.

Although Mr. Robbins said he is in constant contact with community leaders, the CRA exam showed that "many of the community groups and organizations have only been contacted on a limited basis by bank management since the previous examination as of Aug. 18, 1990."

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