Changes to 2024 MSAs Have Implications for CRA


In July 2023, the Office of Management & Budget published an update to “Core Based Statistical Areas, Metropolitan Divisions, and Combined Statistical Areas”. That document contains the latest definitions of Metropolitan Statistical Areas or "MSAs" which play a big role in CRA Assessment Area delineation. The FFIEC adopted the new MSAs effective January 1, 2024.

The MSAs play a critical role in the determination of census tract income class and borrower income class. Consequently, every bank in the country needs to review their public file and update their CRA Assessment Area maps that must be updated by April 1, 2024.

However, the CRA Assessment Area issue is complicated by 2 facts.

First, although the new MSAs have been effective since the beginning of the year, the impact on tract income class has not yet been published. The FFIEC has indicated that it will release the 2024 list of census tracts and their income class before March 31, 2024.

Second, the new Facility-Based Assessment Area section §_.16 becomes effective April 1, 2024, and imposes restrictions on CRA FBAA delineation for “large banks”. As currently defined, large banks are banks with assets equal to or greater than $1.564 billion as of December 31, 2022, and December 31, 2023. Until now all banks have been allowed to delineate CRA assessment areas that they “reasonably can be expected to serve”. The new FBAA rules eliminate the reasonable standard and replace it with a rigid “whole county” requirement for large banks.

This has very big (and potentially very bad) implications for large banks subject to the new whole county mandate. Large banks that maintain branches outside, but immediately adjacent to the boundary of a nearby county (that is in the same MSA) where they don’t maintain any deposit-taking branches will need to determine if they should annex or exclude that county in its entirety to their FBAA by April 1, 2024. The best approach would be to determine the implications of their choice under these circumstances. How would their performance look with or without the adjacent county? We suggest that banks facing this decision start the process as soon as possible.

How can a bank best determine what is the best option for including or not including an adjacent county in its FBAA? We suggest that the bank examine the volume of its small business and mortgage lending activity in the adjacent county and how it is distributed among tract income classes as well as between businesses with less than or equal to $1 million of Gross Annual Revenue. Compare that to the market standard for that county and determine how your performance compares. The minimum acceptable result should be that your performance is at least 80% of the market driven standard. If the results are below that benchmark then it would not be advisable to include that county in your CRA assessment area.

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