Whether you view the past few years of Community Reinvestment Act (CRA) compliance as an excellent adventure or a long, strange trip, there’s no question the journey toward modernization has been anything but straightforward. It began with a 2018 Treasury memo and continued with multiple rounds of proposed and final rules from the bank regulatory agencies—all aimed at updating how CRA compliance and examinations are conducted. Yet despite those efforts, including a comprehensive final rule issued in 2023, the agencies ultimately announced their intent to rescind that rule. As a result, we continue to operate under the 1995 amended final rule, which forms the foundation of the current CRA examination framework (“current CRA framework”). So where does that leave us today as we consider the future of CRA?
A brief history of CRA modernization
The CRA was first enacted in 1977 in response to patterns of a lack of lending in urban cities largely impacting low and moderate-income neighborhoods. Following the enactment, the CRA underwent several revisions and expansions, with the most substantive rewrite occurring in 1995. The 1995 final rule created the current CRA framework under which banks are examined today, supported by additional interpretive documents, such as the Interagency Questions & Answers on Community Reinvestment (CRA Q&As), which were last updated in 2016[i].
Cognizant of the evolution of banking operations and consumer banking patterns, on April 3, 2018, the U.S. Department of the Treasury issued a memo containing its recommendations for CRA modernization. The recommendations called for updates to the regulation’s provisions such as Assessment Area (AA) delineation as well as enhancements to the examination process to provide greater clarity and flexibility[ii].
In response, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB), collectively the bank regulatory agencies, commenced a years-long process to develop a new CRA regulation. The agencies’ efforts culminated in proposals issued for public comment, and ultimately a final interagency rule issued on October 24, 2023 (“2023 rule”). The text of the final rule was published in the Federal Register on February 1, 2024 and provided for an effective date of April 1, 2024. However, in response to industry feedback and litigation challenging aspects of the 2023 rule, the bank regulatory agencies announced on March 28, 2025, their intent to rescind the 2023 rule and reinstate the prior CRA framework.
Where do we go from here?
Given the many proposed changes over the past few years, it’s important to revisit the core components of the CRA framework currently in effect as we plan for the future in light of the 2023 rule’s rescission. A return to the existing CRA framework means continuing to operate under the current definitions and processes. Let’s revisit some of the key requirements that were slated for change under the 2023 rule and how they’ll be evaluated under the current CRA framework.
How will CRA activities be evaluated?
For most banks, continuing under the current CRA framework means performance evaluations will remain based on their asset size. Banks are generally categorized into one of three CRA asset categories as of December 31st for each of the prior two calendar years. These thresholds are updated annually.[iii]
These asset-based designations will continue to guide the methodologies used in CRA examinations. While the 2023 rule also relied on asset categories, its thresholds were set higher than those in the current framework. As of 2025, the three designations are:
- Small Banks: Banks which had less than $391 million in assets in both of the prior two calendar years
- Intermediate Small Banks: Banks which had at least $391 million in assets in both of the prior two calendar years, but less than $1.609 million in assets in either of the prior two calendar years
- Large Banks: Banks which had assets of $1.609 million or more in both of the prior two calendar years.
Essentially under the asset-based bank designations, institutions will continue to be subject to one or more performance tests during CRA examinations, as prescribed by the existing detailed interagency CRA examination procedures.[iv] Examinations will continue to focus as follows:
Small, Intermediate and Large Banks: Lending will continue to be a priority for all asset-based bank categories. Evaluations will consider the volume of lending, the extent lending is concentrated in the bank’s defined AAs, the geographic distribution of loans as well as the dispersion of lending across borrowers of difference income or revenue size, (collectively the Lending Test). The assessment will continue to be based on the bank’s major product lines, determined by examiners with input from the bank before the examination.
- Intermediate Small Banks and Large Banks: Community development will continue to be a mandatory performance component for Intermediate Small Banks and Large Institutions. The evaluation will continue to assess whether bank activities meet the qualifying criteria for four community development purpose categories prescribed under the current CRA framework (“core four” CD purposes) The assessment of bank activities will continue to seek qualifying community development loans (“CD Lending”), community development investments inclusive of donations (“CD Investments”), and financial-related services such as employee volunteer activities (“CD Services”) .
For Intermediate Small Banks, these activities will continue to be evaluated collectively under a standalone Community Development Test. The community development performance for Large Banks will continue to be assessed under standalone tests, i.e., Investment Test and Service Tests, with community development lending continuing to be evaluated as an additional part of the overall CRA Lending Test.
- Large Banks: In addition to community development activity, Large Banks will also continue to be subject to an evaluation of their retail services inclusive of delivery systems, as well as an assessment to determine the extent bank offerings are innovative or flexible to respond to community needs.
Finally, outside of the asset-based bank categories, the current CRA Framework continues the separate specialized bank designations of Limited Purpose and Wholesale Bank, the latter of which was removed and merged under Limited Purpose in the 2023 rule. These designations are granted by bank regulatory agencies to accommodate unique business models or offerings and allow performance evaluations to be limited, i.e., a Community Development Test. In addition, regardless of size, banks may also continue to elect to have their performance evaluated under a CRA Strategic Plan which sets forth specific measurable performance goals for a multi-year period adopted by the bank, subject to public comment, and approved by its bank regulatory agency.
Where should the bank’s CRA activities be focused?
A key component of the 2023 rule redefined CRA Assessment Areas (“AAs”) for performance evaluations. The 2023 rule provided for continued consideration of lending in markets defined around deposit taking facilities (facility-based assessment areas) and also introduced AA designations where deposit taking facilities were not included in the market ( i.e., retail lending assessment areas, and outside retail lending area ).
However, under the current CRA framework. performance assessments will continue to be limited to a focus on activity in a bank’s facility-based assessment area — that is, markets that include a main office, branches or deposit-taking or remote-service facility (such as an ATM or ITM), as well as any surrounding geographies where the bank has originated or purchased a substantial portion of its loans.
Notwithstanding the focus on activity inside the AA, the current CRA framework will also continue to consider performance activity such as community development investments and services that support organizations outside of the bank’s AA if they have a broad service market that includes the bank’s defined CRA community. Typically these entities are regional or statewide service organizations.
What counts for community development consideration?
It is important to remember that in all cases, a bank’s activity must have a primary purpose of community development in order for it to receive consideration at the bank’s CRA examination. For most community development activities, the majority of dollars or beneficiaries (more than 50 percent) must meet a qualified CRA purpose or the activity otherwise must have a bona fide intent to create a community development impact in its structure and delivery.
Regarding lending, banks should evaluate loans originated, renewed, or purchased during the examination period to determine if a loan supports a primary purpose of community development and thus could be considered a “Community Development Loan” (CDL) during examinations. Generally, CDLs must align with one or more of the core four community development definitions and have not been reported on the bank’s HMDA Loan Application Register or CRA Loan Register. One exception is available for multifamily housing loans with five or more units that have a supported affordable housing purpose, which can be jointly reported on the bank’s HMDA Loan Application Register (LAR) and considered as a CDL during a CRA examination.
For bank investments, including equity investments, grants, and donations, the bank must also support that the primary purpose of the donation meets CRA requirements to receive CRA consideration. Specific to bank investments, banks can also receive credit for any investment made in a prior period to the bank’s current examination period, as long as the prior period investment is outstanding at the time of the bank’s examination. Banks can also submit in-kind donations for consideration during CRA examinations, utilizing a generally acceptable fair market value approach for determining the value of any in-kind donation.
Bank employee service is also an important component during CRA examinations. Bank employees often provide thousands of hours of service to community organizations throughout an examination period. To receive credit under the CRA, the bank must first ensure that service activities are provided for a qualified community development purpose, organization, or population. Additionally, specific to service activities, bank employees must also ensure that they are representing the bank in the performance of the service and that they are providing financial expertise or unique expertise related to their position (e.g., legal, marketing, etc.) at the bank in the delivery of the service.
How should I approach community development?
Community development will continue to be an element of CRA regulations. However, rather than considering nearly a dozen specific community development categories as outlined in the 2023 rule, CRA evaluations will continue to focus on the “core four” purpose categories, namely:
- Affordable housing, including multifamily rental housing for LMI individuals.
- Community services primarily targeted to LMI individuals or specific geographies.
- Economic development activities including financing businesses or farms that meet the size eligibility standards and the purpose test outlined in the CRA rule; and
- Revitalization and stabilization activities in LMI geographies, designated disaster areas[v], or distressed and underserved nonmetropolitan middle-income census tracts[vi]
The current CRA framework does not provide an illustrative list of qualifying examples of CD loans, investments, and services to rely on as provided for in the 2023 rule. Therefore, it will continue to be important to remember the qualification requirements when reviewing individual activities. Specifically, a bank’s CD activity must have a primary purpose of community development in order to receive consideration at the bank’s CRA examination. For most community development activities, the majority of dollars or beneficiaries (more than 50 percent) must meet a qualified CRA purpose, or the activity otherwise must have a bona fide intent to create a community development impact in its structure and delivery.
The CRA Q&As continue to align with the current CRA framework and provide helpful examples and details on the types of activities a bank can undertake to receive community development consideration. In addition, a review of CRA performance evaluations serve as a “current” reference to keep abreast of activities that examiners are considering as qualified CD activities when conducting CRA examinations. Below are a few examples drawn from 2024 PEs:
Community development loans:
- Provided to an organization offering emergency shelter, housing assistance, and supportive services for victims of domestic abuse, as well as affordable housing for low- and moderate-income (LMI) families.
Community development Investments:
- Made in an organization that partners with public and private developers to facilitate the construction, rehabilitation, and preservation of affordable housing for LMI families.
- Placed in a Community Development Financial Institution (CDFI) or Minority-Owned Institution (MDI), such as a certificate of deposit.
Donations:
- Given to a nonprofit that provides school clothing to LMI individuals and families.
- Granted to a community organization that serves LMI immigrants through workforce development, adult education, and free legal services.
Services and volunteer hours:
- Providing financial education to business start-ups to support their affordable access to credit
- Serving on boards and committees focused on regional economic development, especially in distressed or underserved areas or majority LMI communities
- Supporting organizations that offer microloans to small businesses
- Delivering financial education programs at schools where the majority of students are eligible to receive free or reduced-price lunch.
What other bank activities receive attention under CRA?
Banks should also evaluate any innovative or flexible products or services offered during the examination period and provide descriptions of those offerings, along with usage data, to examiners for consideration. Bank examiners will also consider a bank’s overall branch composition, including the presence of branches in LMI census tracts; alternative retail services such as mobile or online banking; and branch hours and operations during CRA examinations.
What does the future hold?
In their March 2025 announcement, the federal bank regulatory agencies stated their intent to issue a proposal that would both rescind the 2023 rule and reinstate the current CRA framework. As of the writing of this article, that proposal had not yet been issued. While it remains unclear whether any changes to the existing framework will be included, banks should continue to follow internal management practices that align with the regulatory expectations set forth under the 1995 Rule.
To prepare effectively for upcoming CRA examinations, banks should take proactive steps to demonstrate strong compliance. This includes addressing any performance gaps or weaknesses identified during the prior examination and assessing CRA performance since the last review.
Institutions should consider how recent market developments—such as economic challenges, evolving community needs, shifts in credit demand, and the current competitive landscape—may have impacted their CRA performance and its responsiveness to identified community needs. It is essential for banks to clearly document the impact of these developments on their capacity to meet CRA obligations. Providing this context will help examiners fairly evaluate the institution’s performance and its efforts to serve community credit needs.
ABOUT THE AUTHOR Brian Waters, CRCM, is the President, COO and Co-Founder of findCRA, which offers both online services for banks to identify and document CRA-qualified nonprofit relationships and build instant performance context, as well as traditional CRA consulting and training services. He has over 20 years of experience in banking compliance and community development and is a resident of Louisville, KY. Contact him at brian@findCRA.com.
[i] https://www.ffiec.gov/data/cra/interagency-qa
[ii] https://home.treasury.gov/news/press-releases/sm0336 ; https://home.treasury.gov/sites/default/files/2018-04/4-3-18%20CRA%20memo.pdf
[iii] https://www.federalreserve.gov/newsevents/pressreleases/bcreg20241219a.htm
[iv] Exam procedures are available on the websites of bank regulatory agencies. They are all available from the Federal Financial Institutions Examination Council (FFIEC) at https://www.ffiec.gov/data/cra/examinations
[v] FEMA-designated major disaster areas may receive CRA consideration for up to three years after a disaster designation are listed on the agency’s website at https://www.fema.gov/disaster/declarations.
[vi]A listing of distressed or underserved census tracts is published annually by the FFIEC on its website.
This article originally appeared in the July / August 2025 issue of the ABA Risk and Compliance Magazine published by the American Bankers Association.