Orders issued under Bank Holding Company Act

Federal Reserve Bulletin, Summer, 2004 by Robert DeV. Frierson

B. CRA Performance Evaluations

As provided in the BHC Act, the Board has evaluated the convenience and needs factor in light of the appropriate federal supervisors' examinations of the CRA performance records of the relevant insured depository institutions. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed, on-site evaluation of the institution's overall record of performance under the CRA by its appropriate federal supervisor. (35)

JP Morgan's lead bank, JP Morgan Bank, received an "outstanding" rating at its most recent CRA performance evaluation by the Federal Reserve Bank of New York, as of September 8, 2003. JP Morgan's other subsidiary banks also received "outstanding" ratings from the OCC at their most recent CRA evaluations: Chase USA, as of March 3, 2003, and JP Morgan Trust, as of November 4, 2002.

Bank One Corporation's lead bank, Bank One, which accounts for approximately 75 percent of the total consolidated assets of Bank One Corporation. It is the successor to Bank One, N.A., Illinois, Chicago, Illinois ("Bank One-Illinois"), which received a "satisfactory" rating at its most recent CRA performance evaluation by the OCC, as of March 31, 2000 ("Bank One Evaluation"). (36) All of Bank One Corporation's other subsidiary banks received either "outstanding" or "satisfactory" ratings at the most recent evaluations of their CRA performance. (37)

C. CRA Performance of JP Morgan

1. JP Morgan Bank

Overview. As noted above, JP Morgan Bank received an overall "outstanding" rating for performance under the CRA during the evaluation period. (38) The bank also received an "outstanding" rating under the lending test. Examiners concluded that JP Morgan Bank's lending activity showed excellent responsiveness to retail credit needs in its assessment areas, as measured by the number and dollar amount of HMDA-reportable and small business loans originated and purchased in each area. In particular, examiners characterized lending activity in the bank's primary assessment area, which included New York City, Long Island, Northern New Jersey, and parts of Connecticut and Pennsylvania as excellent and lending activity in the Texas and upstate New York assessment areas as good.

During the evaluation period, the bank and its affiliates originated or purchased more than 266,000 HMDA-reportable and small business loans totaling approximately $32.8 billion. (39) Examiners also noted that overall loan volume had increased 44 percent since the bank's previous examination. Although a significant part of the growth was attributable to the volume of refinancings, small business lending increased 22 percent. Examiners also reported that the overall geographic distribution of HMDA-reportable and small business lending reflected good loan penetration in LMI geographies across all assessment areas reviewed.

Examiners noted that JP Morgan Bank's LMI Mortgage Subsidy Program helped increase the bank's mortgage loan penetration in LMI geographies. Under this program, borrowers purchasing properties in LMI geographies of the bank's assessment areas are eligible for a 2 percent subsidy, up to a maximum of $4,000, on loans of up to $200,000. More than 5,200 loans were made under this program during the examination period. Examiners also concluded that various innovative and flexible lending products enhanced lending to LMI borrowers and small businesses, noting that JP Morgan Bank's Residential Lending Group ("RLG") worked with local community organizations to develop new lending products and enhance existing products designed for LMI families. Many of RLG's flexible lending products provide lower downpayment requirements to first-time home buyers. During the examination period, more than 12,000 such loans were originated in the bank's assessment areas. Examiners also concluded that JP Morgan Bank's performance record for community development lending was outstanding overall and in each assessment area; the bank made more than $1.3 billion in community development loans during the examination period. Examiners stated that this type of lending was responsive to the credit needs identified by the bank's community contacts and that affordable housing initiatives totaled $927 million or 70 percent of its community development lending. Overall, JP Morgan Bank's community development lending sup-ported the financing of more than 11,500 units of afford-able housing throughout its assessment areas.