If you’re new to the Community Reinvestment Act (CRA), you may have seen some of the dry, boring government guides on the topic. Informative? Yes. So boring they make you want to bang your head on the desk? Also yes. But that’s not this guide. We’ll try to keep it fun and light, so maybe you’ll actually learn something. There’s a lot to cover, so buckle up (grab your armrests?) and let’s get going.
Here’s what we’ll cover:
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What is the Community Reinvestment Act?
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Who has to comply with the Community Reinvestment Act?
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How does the Community Reinvestment Act work?
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The three regulators of the CRA
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The CRA Officer’s role
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Why bank size matters
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The four tests of the CRA exam
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What are CRA assessment areas?
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How banks manage CRA data (and how they should)
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What qualifies for Community Reinvestment Act credit?
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The CRA exam process
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The future of CRA
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Helpful resources
What is the Community Reinvestment Act?
First things first…what is the Community Reinvestment Act (CRA)? Before the CRA, banks used to get away with “redlining” community members, or refusing to lend to them based on race or where they lived. Bankers saw these low-to-moderate income individuals as too risky, so instead of helping them out, they decided to simply turn their backs. Naughty bankers.
This redlining practice led to the Community Reinvestment Act of 1977 (CRA). The CRA ensures that banks meet the credit needs of everyone in their communities, not just the wealthy or “less risky” individuals. Now banks must reinvest capital by giving equal access to credit and other banking products while providing safe and sound loans, services, and investments. The key here is “safe and sound.” Banks aren’t forced to lend to just anyone who asks. That would defeat the purpose of a bank, wouldn’t it? The CRA rewards banks that help people living in low-to-moderate-income (LMI) communities, but doesn’t force banks to make bad investments or waste money.
Now that you know the purpose of the Community Reinvestment Act, let’s get to the how.
Who has to comply with the Community Reinvestment Act?
Until recently, the CRA has only ever applied to federally insured banks. That has slowly started to change, and some credit unions and mortgage companies are now also subject to CRA-style rules.
As of March 2026, a small number of states have implemented CRA-style requirements that apply to, or may extend to, state-chartered credit unions. These states are:
In addition, New York state recently expanded its CRA framework to include non-bank mortgage lenders.
For the purposes of this article, we will assume that you work at a federally insured bank and are subject to the 1977 Community Reinvestment Act. If you work at a credit union and want to know more about the CRA, check out this article. And if you work at a mortgage company in New York, check out this article.
How does the Community Reinvestment Act work?
Knowing that banks have to comply with the CRA is all well and good, but what does that actually mean? Honestly, it’s a little complicated, and there’s no one rule that determines exactly what counts. It’s all pretty subjective, actually…
Every 3 years or so (depending on your last CRA rating and regulator), each bank goes through a CRA exam. These exams can take months, and in very basic terms, examiners look at the bank’s community development loans, investments, and services and give the bank a rating (it’s a lot more complicated than that, but this will do for now). These ratings are public, so anyone can look up their bank and see how it’s helping the community. Understandably, banks want to score well.
There are four CRA ratings:
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Substantial Noncompliance
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Needs to Improve
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Satisfactory
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Outstanding
Scoring an Outstanding rating is kind of like winning a marathon. It happens, but it takes A LOT of work and months of preparation. Most of this preparation falls on the CRA Officer.
Of course, not everyone wants to win, or even run, a marathon. Many banks are happy with a Satisfactory, and that’s all they’re expected to get. But if a bank wants to go above and beyond and really show that they serve their community, they may chase that Outstanding rating.
The three regulators of the CRA
There are three primary federal regulators that oversee CRA examinations. The regulator assigned to a bank depends on its charter type and organizational structure.
The three main regulators of the CRA are:
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Office of the Comptroller of the Currency (OCC): Primarily supervises national banks and federal savings associations
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Federal Reserve System (the Fed): Primarily supervises state-chartered banks that are members of the Federal Reserve System, as well as bank holding companies
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Federal Deposit Insurance Corporation (FDIC): Primarily supervises state-chartered banks that are not members of the Federal Reserve System
The CRA Officer’s role
The CRA Officer is the person managing the CRA program and setting the bank up for success. They’re also the bank’s first line of defense during the CRA exam. The CRA Officer has many jobs:
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Identifying community development loans, services, and investments
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Performing a self-assessment and keeping the CRA program on track
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Managing all the data (and there’s A TON of data to manage)
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Reporting to stakeholders and the board of directors (ideally with some fun graphics and easy-to-understand charts)
And that’s just before the exam. CRA Officers also work directly with examiners and provide any follow-up information, often spending hours digging through data and finding that one kernel of info they need. And then they go through examiner notes, review the rating, and plan for the next exam. CRA Officers are really just heroes in disguise.
And to make it even harder, every bank’s CRA program is different. No two programs are the same, and a large part of that has to do with a bank’s asset size.
Bank size matters
A bank’s asset size determines what tests it must go through during the CRA exam and how much data has to be tracked. There are three asset tiers: Small, Intermediate Small, and Large. Every year, bank sizes are reassessed and requirements potentially changed. Imagine finally getting the hang of things and then jumping an asset tier. So much work!
Here are the asset tiers for 2026:
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Small: assets of less than $412 million (as of December 31 of either of the prior two calendar years)
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Intermediate Small: assets between $412 million and $1.649 billion
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Large: assets above $1.649 billion
Each bank size is subject to different parts of the CRA exam. Large banks are subject to four separate tests, while other banks may only be subject to one or two tests. And the bigger the bank, the more data there is to manage.
The four tests of the CRA exam
There are four basic parts to a CRA exam, and the tests a bank goes through depends on its size. They are:
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Lending Test
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Community Development Test
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Investments Test
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Services Test
There are a lot of nuances and regulations that complicate these tests, but here are some very basic descriptions:
Lending Test
The Lending Test evaluates how well a bank helps meet the credit needs of its assessment areas through lending activity. This is the most heavily weighted portion of the CRA exam and applies to banks of all sizes, although the methodology differs depending on institution size.
During the Lending Test, examiners may review:
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Home mortgage lending
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Small business lending
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Small farm lending
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Community development lending
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Consumer lending (if it represents a substantial portion of the bank’s business)
Examiners also analyze factors such as:
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Lending in low- and moderate-income (LMI) census tracts
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Lending to LMI borrowers
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Geographic distribution of loans
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The bank’s responsiveness to community credit needs
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Loan-to-deposit ratio
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Use of innovative or flexible lending practices
Community Development Test
The Community Development Test evaluates a bank’s community development activities, including community development loans, qualified investments, and community development services.
This test primarily applies to Intermediate Small Banks (ISBs), as well as wholesale and limited-purpose banks (which we won’t get into here).
Unlike large banks, which are evaluated under separate Investment and Service Tests, ISBs are evaluated under a combined Community Development Test framework.
During this test, examiners review activities such as:
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Community development lending
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Investments in affordable housing or community development initiatives
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Donations or grants to qualifying organizations
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Community development services, such as financial literacy programs or technical assistance provided by bank staff
Examiners evaluate the responsiveness of these activities to local community needs, particularly activities that benefit low- and moderate-income (LMI) individuals and communities.
Investments Test
The Investment Test evaluates a bank’s qualified investments that support community development activities. This test generally applies only to large banks.
Examples of qualified investments may include:
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Investments in affordable housing projects
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Low-Income Housing Tax Credits (LIHTC)
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Municipal bonds supporting community development
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Grants or donations to community development organizations
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Investments in Community Development Financial Institutions (CDFIs)
Examiners evaluate:
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The dollar amount of investments
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Responsiveness to community needs
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Innovativeness and complexity
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Leadership within the community
Services Test
The Service Test evaluates how well a bank provides retail banking services and community development services within its assessment areas. This test generally applies only to large banks.
The Service Test has two major components:
Retail Banking Services
Examiners review:
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Distribution of branches
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Accessibility of branches in LMI areas
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Branch openings and closings
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Hours and services offered
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Alternative delivery systems (such as online and mobile banking)
Community Development Services
Community development services are activities that:
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Relate to the provision of financial services or use the financial expertise of bank staff, and
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Have a qualified community development purpose
Examples include:
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Financial education
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First-time homebuyer counseling
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Serving on nonprofit loan committees
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Providing technical assistance to small businesses or nonprofits
To count under the CRA, these services must be related to the provision of financial services or the expertise of bank staff and must have a community development purpose (i.e., fall under one of the four hooks, which we’ll discuss later).
Whew. That was a lot. Let’s take a breather. Here’s a handy dandy chart to help see which banks are subject to which tests.
What are CRA assessment areas?
A CRA assessment area (AA) is the geographic region where a bank is expected to meet the credit needs of its communities. Regulators evaluate a bank’s lending, investments, and services within these boundaries to determine how well the institution is serving its market.
A bank’s assessment area must:
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Reflect where the bank has branches and deposit-taking ATMs
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Include the geographies where the bank makes a substantial portion of its loans
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Consist of whole geographies such as entire census tracts, counties, or MSAs (no partial geographies)
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Not reflect illegal discrimination or exclude low- or moderate-income (LMI) or majority-minority neighborhoods
In other words, a bank’s CRA assessment areas show where the bank does business and where regulators expect it to make an impact.
Here’s an example of a mapped CRA assessment area showing geocoded activities:
How banks manage CRA data (and how they should)
Believe it or not, most banks use spreadsheets or difficult-to-use software to manage all this CRA data. Large banks might have hundreds of CD loans, dozens of investments, and tons of service hours every year. And the CRA Officer has to capture SO MUCH data, like who the service impacts, who volunteered, why he or she believes it qualifies for CRA credit, and so much more.
As you can imagine, this is a ton of work. And really, spreadsheets just don’t cut it anymore. So why are so many banks still using spreadsheets to track and manage their CRA data? Honestly couldn’t tell ya.
A much better option is Kadince. Kadince is CRA management software built specifically for financial institutions. It’s perfect for most banks’ CRA programs! Kadince makes it easy to track, manage, and report community development data, including loans, investments, and services, not to mention volunteer hours, events, and more. All activities are automatically geocoded, and because everything is tracked in one place, you’ll always be ready for your next CRA exam.
If given the choice between archaic, difficult-to-use spreadsheets and easy, time-saving software, we know which one we’d pick.
Here’s a sneak peek at the Kadince loan dashboard. If you want to learn more, schedule a 30-minute demo. We promise not to go all salesy on you.
What qualifies for Community Reinvestment Act credit?
Above, we mentioned getting CRA credit. Now, “CRA credit” isn’t a technically correct term. The proper way to say it is “this qualifies under the Community Reinvestment Act.” But that’s boring! “CRA credit” is a good alternative, and this term is widely used and understood (even if not government-approved). So that’s what we’ll use.
Banks can get CRA credit by providing community development (CD) loans, services, and investments. As long as the loan, service, or investment falls under one of the four community development hooks (pictured below), there’s a good chance it will count under the CRA. And the more CD loans, services, and investments a bank has, the more likely it is to score an Outstanding. (Although there’s no magic number. Wouldn’t that be nice?)
Check out this article for ideas on what might qualify for CRA credit.
The CRA exam process
Before the exam
There’s a lot of work that goes into preparing for a CRA exam. And as we mentioned above, most of this work falls on the CRA Officer. Some CRA Officers may be the only member of the bank’s CRA department, while most Officers are part of a small CRA team.
Before the CRA exam, the CRA Officer or another member of the CRA team has to:
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Create a CRA strategy and action plan (optional, but helpful)
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Conduct a CRA self-assessment to see how the CRA program is doing (also optional, but VERY helpful)
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Mine for community development loans (i.e., go through every commercial bank loan looking for potential CRA credit and cry a little bit)
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Collect and manage all the necessary data
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Gather all documentation and build reports for CRA examiners
Preparing for a CRA exam takes a lot of time. Some CRA Officers hire an intern or engage a CRA committee so they can spend less time preparing for the exam. They still have other duties, after all.
During the exam
Whether the exam is on-site or online, the CRA Officer will likely be very involved in the process. From weekly chats with examiners to defending the bank’s CRA performance, the CRA Officer has quite a busy time. If an exam is on-site, the CRA Officer may even be responsible for reserving private conference rooms, coordinating parking and building access, and finding local menus to support lunch breaks! Told you they were heroes.
After the exam
Once the exam is over, CRA Officers immediately start preparing for the next one (after a much-needed vacation or some PTO, of course).
To begin, they examine their results. Whether they achieved a Satisfactory, Needs to Improve, or Outstanding rating, there’s always something to improve the next time around. Now is the time to reflect on the program’s performance and build a plan for the future.
If CRA Officers have any questions about their rating or why they didn’t get credit for that impactful community initiative, they can reach out to their examiner and ask. Having a good relationship with their examiner is a critical part of building a lasting CRA program.
They should also revisit their CRA strategy, action plan, and self-assessment. Chances are, the executive team or board of directors will want a report, and it’s a good idea to share these documents with them and pitch your plan for the future.
The future of CRA
Believe it or not, the Community Reinvestment Act hasn’t been significantly updated since it was enacted in 1977. A new rule was proposed in 2023, and it got close to becoming a reality. In the end, the updated rule was officially rescinded in 2025, and bankers are expected to follow the legacy rule.
Honestly, we don’t know exactly what the future will hold for the CRA. Will another update be proposed? If it is, will it make it through all the legal reviews? Nobody knows, and we likely won’t know for a long time.
One thing we do know is that banks need to track more data than ever before, and spreadsheets just aren’t going to cut it going forward. CRA Officers will need robust data-tracking systems, and now is the perfect time to start exploring options (shameless plug for Kadince) and asking for a larger budget.
You’ve got this!
Check out these helpful resources
Here are some resources to help you learn more about the CRA:
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Kadince webinars (most are eligible for CE credit from the ABA)
Thanks for sticking with us! Hopefully you learned a little something about the CRA. Was that really so bad?
This is a general, simplified overview of the Community Reinvestment Act. For more in-depth training, check out the CRA Hub.
None of Kadince, Inc., its affiliates, or its respective employees, directors, officers, and agents (collectively, “Kadince”) are responsible or liable for any content or information incorporated herein. Read full disclosure.
