South End Savings, a $35 million-asset savings and loan founded in 1914, has been told by regulators that it “needs to improve” on its lending to low- and moderate-income areas.
The Homewood-based institution was one of nearly 100 U.S. banks with grades released Thursday on their compliance with the Community Reinvestment Act, a 1977 law intended to encourage insured banks and thrifts to serve low- and moderate-income neighborhoods.
Lenders may receive one of four grades: outstanding, satisfactory, needs to improve, and substantial non-compliance.
In the latest batch of grades released by the Federal Deposit Insurance Corp., only three received “needs to improve” grades, with every other lender getting “outstanding” or “satisfactory.”
South End received satisfactory in its four previous exams dating back to 1996, according to FDIC records.
But in its latest exam, the FDIC said the bank’s ratio of loans to deposits was low, at 47 percent, compared with 59 percent during its last exam.
“The decline has resulted from a substantial decrease in lending activity while deposits remained relatively constant,” the FDIC said in its 13-page report on South End.
Andrew Lindstrom, South End chief executive, said it’s tough to find potential borrowers in a “bad” economy.
“There’s not a lot happening in the mortgage market,” Lindstrom said. “To get a ‘needs to improve’ is frustrating because this is not an exciting market, especially on the south side,” and other lenders are also vying for the same business.