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Community Developments Investments (August 2013)

Community Reinvestment in Indian Country

Ammar Askari and Vonda Eanes, Community Affairs, Office of the Comptroller of the Currency

The Community Reinvestment Act of 1977 (CRA) provided a framework for financial institutions, state and local governments, and community organizations to jointly promote the provision of financial services to all members of a community, including residents of low- and moderate-income (LMI) neighborhoods.1

Financial institution regulatory agencies (agencies) issue regulations that explain a financial institution’s obligations under the CRA and how the agencies evaluate the financial institution’s performance. The regulations describe the types of activities that qualify for CRA consideration, including those that meet the definition of community development (CD), such as lending, investment, and services in LMI areas or distressed or underserved nonmetropolitan middle-income geographies. A financial institution may undertake various types of CD activities, depending on factors such as its size, location, capacity, and opportunities to lend, invest, and provide services.

There are several broad categories within which CD activities fall, and most of them apply to large parts of Indian Country. The following questions can help determine whether an activity qualifies for consideration under the CRA:

  • Does the banking activity serve LMI individuals or benefit LMI areas?
  • Does the activity serve an economic development purpose?
  • Does the activity serve distressed or underserved nonmetropolitan middle-income areas?
  • Is the bank’s CD activity innovative, flexible, complex, responsive, extensive, or not provided by other sources?
  • Are the beneficiaries of the activity located in the financial institution’s assessment area, or within the same state or region as the assessment area?

To answer these questions, financial institutions and their Native American customers need to understand what, exactly, is involved.

What Is an LMI Area?

A geographic area is considered LMI based on definitions provided in the CRA. A low-income census tract has a median family income (MFI) of less than 50 percent of the MFI for the metropolitan statistical area (MSA) or the statewide nonmetropolitan area where the tract is located; a moderate-income tract has an MFI of 50 percent to less than 80 percent. (A middle-income tract has an MFI of 80 percent to less than 120 percent, and an upper-income tract has an MFI of 120 percent and above.)

What Is an Assessment Area?

A financial institution’s assessment area(s) is generally based on the location of its deposit-taking facilities. The assessment area is the geographic area within which bank examiners evaluate a financial institution’s record of helping to meet community credit needs. The areas typically follow the boundaries of a metropolitan area or political subdivision and must not reflect illegal discrimination or arbitrarily exclude LMI areas.2

What Are Small, Intermediate Small, and Large Banks?

The vast majority of national banks and federal savings associations (collectively, banks) are divided into three categories by asset size: small, intermediate small (ISB), and large. The agencies publish annual adjustments to these asset size thresholds.3 As of January 1, 2013, a small bank is one that has assets of less than $1.186 billion on December 31 of either of the prior two calendar years. ISBs are a subset of small banks. An ISB is a small bank with assets of at least $296 million as of December 31 of both of the prior two calendar years. Large banks are those with assets of at least $1.186 billion as of December 31 of both of the prior two calendar years.

What Is a Community Development Activity?

A bank loan, investment, or service has a purpose of community development if it supports one or more of the following:

  • Affordable housing for LMI individuals.
  • Community services targeted to LMI individuals.
  • Economic development by financing businesses or farms that meet certain size requirements.
  • Revitalization or stabilization of LMI areas, designated disaster areas, or distressed or underserved nonmetropolitan middle-income areas.
  • Activities that meet certain “eligible uses” criteria in designated target areas in conjunction with the Neighborhood Stabilization Program (NSP).4

A bank can fund a variety of community services through CD loans or investments or may provide a more limited range of services directly. CD services that a bank provides directly must generally be related to the provision of financial services. This includes, for example, providing technical assistance on financial matters to nonprofit, tribal, or government organizations serving low- and moderate-income housing or economic revitalization and development needs.5

Activities are considered to promote economic development if they support permanent job creation, retention, or improvement for LMI people, or if they support permanent job creation, retention, or improvement either in LMI geographies or in areas targeted for redevelopment by federal, state, local, or tribal governments.6

Activities that help to attract new or retain existing businesses or residents are considered to revitalize or stabilize an LMI, disaster, or distressed or underserved nonmetropolitan middle-income area. Bank examiners presume activities help revitalize or stabilize an LMI geography if the activities are consistent with a federal, state, local, or tribal government plan for the revitalization or stabilization of the LMI geography.7

What Are ‘Distressed or Underserved’ Areas?

A distressed area is a nonmetropolitan middle-income area that meets one or more of the following conditions:

  • Unemployment rate at least 1.5 times the national average.
  • Poverty rate of 20 percent or more.
  • Population loss of 10 percent or more between the previous and most recent decennial censuses or a net migration loss of 5 percent or more over the five-year period preceding the most recent census.8

An underserved area is a nonmetropolitan middle-income area that meets criteria for population size, density, and dispersion that indicate that the population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs.9

The agencies publish updated lists of distressed and underserved nonmetropolitan middle-income geographies annually.10

How Does the CRA Apply to Government Guarantee Programs?

A bank can receive consideration under the CRA for participating in loan guarantee programs designed to help meet the credit needs of LMI individuals, small businesses, or small farms in Indian Country. The following are a few examples of some of the loan guarantee programs:

The U.S. Department of Housing and Urban Development’s Section 184 Indian Home Loan Guarantee Program is available to enrolled members of federally recognized tribes or for tribally designated housing entities. The program encourages lenders to underwrite mortgages in Indian Country. Most banks receive CRA consideration under the lending test for home mortgage loans originated under this program. An ISB may choose to have home mortgage loans that have community development purposes evaluated as community development loans if these loans were not reported by the bank under the Home Mortgage Disclosure Act (HMDA).11

The U.S. Department of the Interior’s Office of Indian Energy and Economic Development administers the Indian Loan Guarantee, Insurance, and Interest Subsidy Program (ILGP). This program provides up to a 90 percent guarantee on a qualifying loan’s unpaid principal balance and is open to federally recognized American Indian tribes or Alaska Native groups, individually enrolled members of such tribes or groups, or a business organization with no less than 51 percent ownership by American Indians or Alaska Natives. In general, banks may receive CRA consideration for small business loans originated under the ILGP for loans in amounts of $1 million or less, or for loans greater than $1 million that also have a community development purpose. As with home mortgage loans, an ISB has the flexibility to choose to have a loan of any amount that has a community development purpose considered as a community development loan.

The U.S. Department of Agriculture's Rural Development’s Business and Industry (B&I) Guaranteed Loan Program can help lenders finance tribal and tribal member businesses, both on tribal trust land and off the reservation, in rural areas that have populations of 50,000 people or less.

Large banks evaluated under the lending, investment, and service tests may receive consideration for innovative or flexible lending practices by participating in these programs. For all banks, home mortgage and small business loans generally must be located in a bank’s assessment area(s) to receive consideration. The regulations do provide some flexibility to consider loans based on borrower characteristics beyond the assessment area. Community development loans must be located in a bank’s assessment area(s) or the broader statewide or regional area that includes the bank’s assessment area(s).


Tribal nations have experienced high levels of unemployment and poverty along with low levels of access to capital and economic growth for decades. Nevertheless, where there is a challenge, there is an opportunity. Banks can lend, invest, and perform community development services successfully in Indian Country. In addition, several federal programs are designed to reduce the banks’ risk of doing business in Indian Country.

Banks that invest and lend in Indian Country have a real opportunity to garner CRA consideration. In doing so, not only do banks help their bottom lines, they also help one of the most disadvantaged populations in the United States to grow and prosper.

Banks that have further CRA-related questions should contact the OCC supervisory office in their region.

Contact Ammar Askari at; contact Vonda Eanes at .

1For more information, see the OCC’s CRA Web page.
2See 12 CFR 25.41 (national banks) and 12 CFR 195.41 (federal savings associations).
3See OCC Bulletin 2013–3, “Small and Intermediate Small Bank and Savings Association Asset Thresholds Regulatory Revision” (January 25, 2013).
4For the definition of community development, see 12 CFR 25.12(g) (national banks) and 12 CFR 195.12(g) (federal savings associations).
5See 75 Federal Register 47 (March 11, 2010), “Questions and Answers on Community Reinvestment (Q&A),” page 11650, 12(i)-3.
6Ibid, page 11646, .12(g)(3)-1.
7Ibid, page 11647, .12(g)(4)(i)-1.
8Ibid, page 11647, .12(g)(4)(iii)−1.
10See the FFIEC Website for current and historical lists.
11See “Q&A,” page 11648, .12(h)-2.