FAQs
Question: We recently uploaded our Community Reinvestment Act (CRA) public file to our website as required by the revisions to the CRA Rule. Now that the mandatory deadline to post our CRA public file to our website has been extended by the federal agencies from April 1, 2024, to Jan. 1, 2026, do we need to remove our CRA public file from our website?
Answer: The interim final rule extending the mandatory compliance date for posting of the CRA public file to the bank’s website did not address whether or not the banks that had already posted their CRA public file should remove it or not. You may want to reach out to your prudential regulator to get their opinion on this issue.
That being said, if your bank elected to remove the paper copy of your CRA public file from your branches after posting it to your website, the IBA recommends replacing it. With the agencies’ interim final rule, the long-standing, current paper public file requirements remain in effect until Jan. 1, 2026. Under the current rule, your full public file must be available for public inspection at your main office, and if you are an interstate bank, at one branch office in each state. In addition, at each of your branches, you must maintain a copy of the public section of your most recent CRA Performance Evaluation and a list of services provided by the branch.
Question: What information needs to be updated in our CRA Public File each year and what is the deadline for completing the updates? Are all banks, regardless of their size, subject to the CRA public file requirements?
Answer: The deadline for updating the public file is April 1 each year. So, if your bank has not already completed this project, you need to complete the update ASAP. The public file requirements are found in Regulation BB, § 228.43. All banks are subject to the public file requirements but the requirements vary a bit depending upon the size of your bank and whether or not your bank is subject to HMDA reporting. The IBA has developed a checklist to assist member banks in updating their public files, see CRA Public File Checklist.
Question: We are in the process of acquiring a new branch location and as a result, revising our CRA Assessment Area. This new branch is located in a new market for us and a larger market than we are accustomed. Can our CRA AA include only portions of a Political Subdivision (county, city, or town)?
Answer: Yes — but only under certain circumstances. The CRA regulation does allow a bank to adjust the boundaries of its AA to include only the portion of a political subdivision that it reasonably can be expected to serve. The regulation further states that an adjustment may be particularly appropriate if the AA would otherwise be extremely large, of unusual configuration, or divided by significant geographic barriers. However, excluding a portion of a political subdivision may increase potential discrimination risk, and/or the risk of arbitrarily excluding low- or moderate -income (LMI) geographies.
As part of its analysis of the CRA AA designation, regulators suggest banks should consider using American Community Survey five-year statistics from the U.S. Census Bureau, which provides relevant demographic data by census tract. The FFIEC provides convenient access to these data on their website, including the census tract LMI status. These data can support an understanding of whether LMI tracts or protected-status populations are concentrated in particular areas of the political subdivision.
For this boundary analysis, institutions are encouraged to also take into consideration the appropriateness of the adjustment. For example, banks may want to consider an adjustment to an AA based on the bank’s business strategy in the context of the CRA AA. If the bank accepts loan applications online, why does it consider portions of the political subdivision extremely large/too far? It may be helpful to reflect on the information in the Interagency Questions and Answers regarding Community Reinvestment that specifies the Agencies do not expect that, simply because a census tract is within an institution’s AA, the institution must lend to that census tract. Rather, regulators are likely to raise questions if there are conspicuous gaps in loan distribution that are not explained by the performance context. Similarly, if an institution delineated the entire county in which it is located as its AA, it would not be inconsistent with CRA’s requirements to lend only in that portion of the county it can reasonably serve so long as that portion does not reflect illegal discrimination or arbitrarily exclude LMI geographies.
The Q&As also note that an institution may adjust the boundaries of an AA when there are significant geographic barriers. Examples of such barriers in the Q&As include rivers, mountains, or major highway systems. However, in considering whether an adjustment to the AA should be made on this basis, a bank should analyze whether the barrier is actually significant. For example, a small river or non-arterial highway that people can readily cross may not be a significant barrier.
Ultimately, when adjusting the boundaries of the bank’s AA as permitted by the regulation, a best practice is to regularly assess the designated CRA AA, documenting the analysis, including steps the bank took to determine that the CRA AA does not exclude LMI areas or reflect illegal credit discrimination. If you have questions regarding designating a CRA AA, reach out to your federal regulator or community affairs specialist for assistance.
Question: We have an upcoming CRA exam and are a bit concerned. We are a “small bank” under the CRA rule and therefore, as part of our CRA Performance Evaluation, our loan-to-deposit ratios are reviewed. The evaluation procedures under the lending test include a determination of whether our loan-to-deposit ratio exhibits effective use of depositor funds being reinvested into the community. Because of the COVID pandemic, we have experienced significant changes in our customers’ behaviors, specifically a decrease in consumer spending and increase in consumer savings. Because of that behavioral change, we have experienced an increase in deposits and a corresponding decrease in consumer lending balances. Do you think this will impact our bank’s CRA rating? What action can we take to strengthen our position with our regulator?
Answer: Your concerns are valid. A recent study of the past seven quarters of publicly released CRA Performance Evaluations for small or intermediate small banks indicate that if a bank fails to maintain a reasonable loan-to-deposit ratio, it can be a significant contributing factor to the bank receiving an unsatisfactory rating in the lending test. The unsatisfactory rating in the lending test may result in the bank receiving an overall rating of “Needs to Improve.”
An important part of the CRA evaluation is the bank’s ability to explain the context of its performance under the CRA to its examiners. Small and intermediate small banks are tasked with maintaining the loan-to-deposit ratio as part of its public file. Consequentially, if your bank is witnessing a downward trend in the loan-to-deposit ratio as documented in your public file, consider taking the time to document your performance context in relation to the loan-to-deposit ratio.
According to the CRA Interagency Q&A, “[t]he performance context is a broad range of economic, demographic, and institution – and community-specific information that an examiner reviews to understand the context in which an institution’s record of performance should be evaluated.” So document and tell your bank’s story. If there are relevant current economic or community factors that are contributing to the decline in loans relevant to deposits, determine and document these factors now. Section 228.21(b)(4) of Regulation BB, which implements the CRA, indicates the performance evaluation should include an assessment of “institutional capacity and constraints, including the size and financial condition of the bank, the economic climate (national, regional, and local), safety and soundness limitations, and any other factors that significantly affect the bank’s ability to provide lending, investments, or services in its assessment area(s).” There is no doubt the COVID-19 pandemic has changed the economic climate and impacted the bank’s ability to provide services so documenting the bank’s efforts to continue to serve the changing needs of its assessment area during the pandemic will be vital to your CRA evaluation. (May 2021)