Banks earn credit under the Community Reinvestment Act in three broad categories: retail lending to low- and moderate-income borrowers, small businesses, and small farms; community development investments such as affordable housing financing and equity stakes in Community Development Financial Institutions; and community development services that apply professional financial expertise to underserved communities. To qualify, an activity has to fit a recognized community development purpose, benefit the right population or geography, and, in most cases, reach into the bank’s defined assessment areas. The CRA, codified at 12 U.S.C. ยง 2901, was passed to counteract redlining and requires federal regulators to evaluate whether depository institutions are meeting the credit needs of the neighborhoods where they operate, consistent with safe and sound banking.1Office of the Law Revision Counsel. 12 USC 2901 – Congressional Findings and Statement of Purpose
Qualifying Retail Lending
Retail lending is the bedrock of most CRA evaluations. Examiners look at home mortgage loans, small business loans, and small farm loans, then analyze how well the bank distributes those products across borrowers of different income levels and across different neighborhoods. A mortgage to a borrower earning below area median income is a textbook qualifying loan. So is a small business loan to a startup in a lower-income census tract. Volume matters, but so does geographic spread: a bank that lends heavily but concentrates its credit in wealthier parts of town while ignoring lower-income neighborhoods will not score well.
Two size thresholds define the small-enterprise lending categories. Small business loans cover credit extensions of $1 million or less to businesses with gross annual revenues of $5 million or less.2eCFR. 12 CFR Part 228 – Community Reinvestment Small farm loans generally cover agricultural debts of $500,000 or less. Those ceilings keep the focus on genuinely small enterprises rather than large corporate borrowers with easy access to capital.
Under the modernized CRA rules that took effect in 2026, large banks that make significant numbers of loans outside their branch footprint now face evaluation in those areas too. A large bank must establish a retail lending assessment area in any metropolitan or nonmetropolitan area where it originated at least 150 closed-end home mortgage loans or at least 400 small business loans in each of the prior two calendar years.3Federal Register. Community Reinvestment Act The change prevents banks from cherry-picking profitable digital lending markets in distant cities while neglecting the areas around their branches.
Qualifying Community Development Investments
A qualifying community development investment is any lawful investment, deposit, membership share, or grant whose primary purpose is community development. Banks commonly meet this test by purchasing equity stakes in Community Development Financial Institutions, investing in Low-Income Housing Tax Credit projects, or providing capital to organizations that build affordable housing. Grants to nonprofits carrying out qualifying activities also count.
The controlling phrase is “primary purpose.” An investment that incidentally benefits a low-income neighborhood but was made for purely commercial reasons will not qualify. The community development benefit needs to be the main point. Examiners weigh both the dollar volume of investments and how responsive they are to actual community needs, so a bank that parks money in a safe, passive vehicle scores lower than one funding a project that addresses a documented gap in affordable housing or small business capital.
Qualifying Community Development Services
The service category rewards banks for applying professional financial expertise to benefit underserved communities. It goes well beyond generic volunteerism. A bank employee painting a school earns nothing. A bank employee teaching a first-time homebuyer class, helping a nonprofit manage its finances, or leading a small business planning workshop earns credit.
The OCC maintains an illustrative list of qualifying service activities that gives a good sense of what examiners look for:4Office of the Comptroller of the Currency. CRA Illustrative List of Qualifying Activities
- Teaching budgeting, credit management, or savings skills at community centers or schools serving low- and moderate-income residents.
- Volunteering through the IRS’s Volunteer Income Tax Assistance Program to help lower-income individuals file returns.
- Helping small business owners develop business plans, prepare financial statements, or understand loan applications.
- Serving on the board of a nonprofit housing authority, community development corporation, or similar organization in a capacity that uses the employee’s financial expertise.
- Guiding first-time buyers through the mortgage process, particularly those earning below area median income.
The emphasis is always on the professional nature of the contribution. A bank officer sitting on a nonprofit board purely as a figurehead does not qualify. That same officer helping the nonprofit restructure its finances, apply for grants, or evaluate loan products does. Under the modernized rules, banks that provide digital banking tools designed to reach low- and moderate-income customers can also receive service credit, reflecting the shift toward online and mobile banking.5Federal Reserve Board. Agencies Issue Final Rule to Strengthen and Modernize Community Reinvestment Act Regulations
What Counts as Community Development
An investment, loan, or service only earns credit when it serves a recognized community development purpose. Regulators define that term through several categories, and a bank’s activity has to fit squarely within at least one.
Affordable Housing
Financing or supporting affordable housing for low- or moderate-income individuals is the most straightforward qualifying purpose. This covers funding construction of affordable rental units, investing in Low-Income Housing Tax Credit projects, and making mortgage loans that expand homeownership for people below 80% of area median income.
Community Services for Lower-Income Populations
Activities that provide services targeted to low- or moderate-income individuals also qualify. Childcare centers, health clinics, workforce training programs, and food assistance organizations serving these populations all fit. The service must be directed at lower-income communities rather than the general public.
Economic Development
Financing small businesses and farms that create or retain jobs qualifies when the businesses meet size-eligibility standards. Under the pre-2026 regulations, that covered businesses with gross annual revenues of $1 million or less or those meeting Small Business Administration size standards. The focus is on enterprises that generate employment opportunities for lower-income residents.
Revitalization and Stabilization
Activities that revitalize or stabilize distressed communities form another qualifying purpose. This includes investment in low- or moderate-income census tracts, designated disaster areas, and distressed or underserved nonmetropolitan middle-income areas experiencing population loss or economic decline.
Disaster Preparedness and Climate Resiliency
The modernized rules added disaster preparedness and weather resiliency as a qualifying purpose. Those activities help communities prepare for, adapt to, and withstand natural disasters or weather-related risks. To qualify, they must benefit targeted census tracts (low-income, moderate-income, or distressed nonmetropolitan middle-income tracts), must connect to a government or nonprofit plan focused on those tracts, and must not result in forced relocation of lower-income residents.6eCFR. 12 CFR Part 25 – Community Reinvestment Act and Interstate Deposit Production Regulations Flood mitigation projects, infrastructure hardening in vulnerable neighborhoods, and energy resilience programs can all count if they meet those criteria.
Who Counts as Low- or Moderate-Income
CRA regulations use precise income definitions tied to area median income to determine who qualifies as a target beneficiary:
- Low-income means individuals, families, or households earning less than 50% of the area median income, or census tracts where the median family income falls below 50% of the area median.
- Moderate-income means individuals, families, or households earning at least 50% but less than 80% of the area median income, or census tracts with median family income in that same range.
Area median income figures vary dramatically by location, so what counts as low-income in San Francisco looks nothing like low-income in rural Mississippi. The FFIEC publishes updated median income data that banks and community organizations use to determine whether a particular borrower or neighborhood falls within CRA target ranges. Those benchmarks apply across every qualifying category, whether the bank is writing a mortgage, funding an affordable housing project, or running a financial literacy program.
Where the Activity Has to Happen
Most qualifying activity has to reach the bank’s defined assessment areas. Every bank must establish facility-based assessment areas that include each county where it has a main office, branch, or deposit-taking remote service facility, along with surrounding counties where it has originated or purchased a substantial portion of its loans.7eCFR. 12 CFR 25.16 – Facility-Based Assessment Areas Each assessment area must consist of a single metropolitan statistical area, contiguous counties within an MSA, or contiguous counties in a nonmetropolitan area of a state. Small and intermediate banks can narrow their boundaries to cover only the portion of a county they can reasonably serve, so long as any partial-county area consists of contiguous whole census tracts. Large banks do not get that accommodation.
Regulators watch assessment area boundaries for signs of gerrymandering. A bank cannot draw its lines to exclude low- and moderate-income neighborhoods while capturing wealthier ones, and the whole-census-tract requirement blocks the irregular shapes such a strategy would need. An activity generally earns credit only when it benefits a defined assessment area. A bank funding an affordable housing project three states away while its own neighborhoods lack affordable units will not impress an examiner. Projects that serve a broader region can still qualify if the region includes the bank’s assessment area, but the connection has to be real rather than theoretical.
What the 2026 Rules Changed About Qualifying Activity
The CRA regulations underwent their largest overhaul in decades with a final rule issued in October 2023, published in the Federal Register in February 2024, and applicable in phases starting January 1, 2026.5Federal Reserve Board. Agencies Issue Final Rule to Strengthen and Modernize Community Reinvestment Act Regulations The core categories of qualifying activity did not change, but three shifts matter for anyone tracking what earns credit today.
First, large banks that make substantial numbers of online or mobile loans outside their branch footprint now face evaluation in those markets through the retail lending assessment area rules described above. Second, digital banking services designed to reach low- and moderate-income customers are now formally recognized under the service test, so mobile apps and online platforms built for underserved users can count. Third, disaster preparedness and climate resiliency was added as a qualifying community development purpose, expanding the range of infrastructure and mitigation projects that can earn credit. Most of the new provisions apply as of January 1, 2026, with some taking effect January 1, 2027.