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Federal Reserve
Bank of Dallas
Community Development

Community Outlook Series
The CRA at 40: Law Remains
a Cornerstone of Community

Outlook Series
Emily Ryder Perlmeter

COS ISSUE 2, December 2017

Federal Reserve Bank of Dallas

Outlook Series

Launched in 2016, the Community Outlook Series features analysis
on a rotating set of community development topics. The series uses
surveys and qualitative interviews paired with secondary data to assess
the needs, successes and challenges of low- and moderate-income
families across Texas as well as the organizations that serve them. The
topic of this report is the Community Reinvestment Act and perceptions of it among CRA officers working for financial institutions.

Reserve Bank of Dallas
The Community Reinvestment Act				2
Introduction							2
The Financial Impact of the CRA				


CRA Banker Poll Findings					7
Introduction							7
Bank-Specific CRA Perceptions 				


CRA Barriers and Impact					9
Barrier Specifics						10
Changes and Recommendations				11
CRA Impact							12
Banker Interviews and Project Highlights			


Conclusions							14

The Community Reinvestment Act
What monetary benefit does the Community Reinvestment Act bring to Texas? The
Dallas Fed analyzed the performance evaluations of Texas banks and polled bankers
to assess how much the 40-year-old law is contributing to communities in need and
whether it should be modified.


Federal Deposit Insurance Corp. (FDIC) and Office of the
Comptroller of the Currency (OCC)— currently examine

This year marks the 40th anniversary of what many

banks on an ongoing basis to enforce this law.

consider an essential community development tool: the

The CRA has faced its share of criticism. Detractors

Community Reinvestment Act (CRA). The CRA, passed

have charged that the act pushes risky lending and was

in 1977, is a federal law encouraging banks to help meet

even responsible for the Great Recession’s housing

the credit needs of all borrowers in the communities

crisis (Box 1).

they serve.

Even ardent supporters question the contributions of

Prior to the CRA, credit access was often unavailable

the CRA in a modern era and whether some of its regula-

for residents of low- and moderate-income (LMI) com-

tions are burdensome. Furthermore, community-based

munities, and the discriminatory practice of redlining

organizations are often uncertain how much community

was common. Redlining refers to the practice of denying

development money is available from banks and what

or severely restricting credit to residents based on

qualifies as an eligible investment.

where they live or their race/ethnicity, regardless of

In light of these questions and the CRA’s 40-year

their qualifications. This restricted access to capital

history, the Dallas Fed launched a study into the com-

contributed to the decay of these communities and to

munity impact of the CRA in 2017. Focused exclusively

urban blight.

on Texas, the following analysis consists of two parts: 1)


The CRA was enacted to combat this discrimination

a quantitative dive into estimates of the CRA’s financial

and encourage banks to lend to all segments of a com-

impact, and 2) a qualitative analysis of successes and

munity. Three regulators—the Federal Reserve System,

challenges from the perspective of bankers.

The Community Reinvestment Act of 1977, known as the CRA, was enacted by Congress to
ensure fairness in lending. But it has run up against its share of criticism over its 40-year history,
giving rise to a number of myths.

Myth 1: The CRA incentivized banks to make the high-risk loans that caused
the 2007 housing crisis.
This is the most common criticism of the CRA, but evidence suggests it is inaccurate.
First, only depository institutions are subject to the CRA. In 1977, most lending was performed by banks
and thrifts. By 2006, however, an estimated 77 percent to 84 percent of mortgage lenders were nonbank lenders.2 Moreover, analysis of Federal Reserve Board data indicates that only one of the 25 top

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


subprime lenders in 2006 was subject to CRA regulations.3 Additionally, Home Mortgage Disclosure
Act (HMDA) data show only 6 percent of higher-priced loans were made by CRA-covered lenders inside
CRA assessment areas in 2005–06.4 Therefore, the majority of loans that defaulted were not orginated
by financial institutions covered by the CRA.
According to a 2009 Dallas Fed report, “data … suggest that the CRA prevented the subprime situation
from being more severe.”5 For instance, an analysis of HMDA data indicated that banks covered by
the CRA were twice as likely to keep their loans on their books, reducing some risks associated with
securitization.6 Other research has indicated that during the crisis, mortgages that CRA banks originated
in their assessment areas saw lower foreclosure rates compared to lenders not covered by the CRA.7

Myth 2: The CRA coerces banks to provide loans to individuals and
businesses who often cannot pay back the loan.
When enacting the CRA, Congress specifically stated that its purpose was to encourage financial institutions to “help meet the credit needs of their communities … in a manner consistent with safe and sound
banking practices.”8
Loans in LMI communities or to LMI people perform just as well as other loans in bank portfolios. A 2000
Federal Reserve report found that mortgage loans subject to the CRA were profitable for most institutions;
many banks saw equal performance between CRA and non-CRA loans.9 Moreover, the CRA has provided
an incentive for banks to pursue those lending opportunities. A joint study by the Brookings Institution
and Harvard University released in 2005 found that, by 2000, the CRA could be credited with around
$620 billion in home mortgage, small business and community development loans to LMI borrowers
and communities.10
Finally, the CRA does not seem to have an impact on delinquencies. Federal Reserve Board data find
almost identical subprime delinquency rates in ZIP codes above and below the CRA threshold.11

Myth 3: Banks have CRA lending and investment quotas waiting for
nonprofits to take advantage of.
The CRA does not direct banks to designate “CRA funds” from which nonprofit organizations can draw.
Rather, it recognizes that banks have an obligation to serve LMI neighborhoods as well as higher-income
areas with its loans, investments (including grants) and financial services.12

See Notes on Page 15 for additional information.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


To qualify as a community development loan, invest-

The Financial Impact of the CRA

ment or service, the activity’s primary purpose must be

Following the methods of a 2015 Federal Reserve
Bank of Atlanta report,13 the Federal Reserve Bank of

community development, and it must fit into one of the
following categories:

Dallas conducted a quantitative analysis to attempt to

• Affordable housing for LMI people: E.g., loans to

answer the following question: How much money flows

developers of affordable housing; investments in city

into Texas communities because of the CRA?

bonds that support LMI housing

Although the CRA touches on an array of activities,
including residential mortgages, small-business loans
and farm loans, the following analysis focuses on
community development dollars—both investments
and loans. Data on other aspects of the CRA are more

• Community services for LMI people: E.g., grants to
nonprofits providing education or child care to LMI
families; loans to health care facilities targeting LMI

widely available, particularly through the CRA and Home

• Economic development for LMI people, small busi-

Mortgage Disclosure Act (HMDA) tools on the Federal

nesses or small farms: E.g., loans to small businesses

Financial Institutions Examination Council’s website.

in amounts over $1 million as part of the SBA’s 504

For community development lending or investment

loan program

activities, available data are limited. Yet it is critical for
community organizations, bankers, regulators and those
in government to understand the monetary benefit the
CRA brings under community development. To address
this issue, the Dallas Fed reviewed and analyzed the
performance evaluations (PEs) that regulating agencies
are required to make public.
Large banks are evaluated on their lending, qualified
investment (grants, shares and deposits) and financial

• Revitalization or stabilization of LMI communities,
underserved rural neighborhoods or disaster areas:

E.g., grants for the renovation of a public school in a
distressed area that includes LMI children; loans for
rebuilding community infrastructure in a designated
disaster area
For more examples and explanation, please see the
OCC’s Fact Sheet on CRA.

service activities in their assessment areas.


Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Before beginning this analysis of PEs, we first gath-

flowing to communities comes in the form of loans, while

ered a list of banks with a deposit market share of at least

the remaining 51 percent is in qualified investments. In

1 percent in Texas. Eleven met that criterion (Table 1).

aggregate, these eight banks provide an estimated

The top 11 range from about $22 billion to more than
$2 trillion in assets and from 5.6 percent to 100 percent in

$1.79 billion of community development lending and
investments every year.

share of deposits in Texas. Together, these banks make
up 69 percent of all deposits in Texas. From this list, we
created a convenience sample of eight of the banks. The
sample is based on the availability and recentness of
the institution’s latest PE. The eight in our Texas sample
are: Bank of America, Wells Fargo, Compass, Frost,
Prosperity, Capital One, ZB (under Amegy in Texas) and

Table 2: Texas Community Development

Lending and Investment Dollars
Texas sample

Comerica. The range of PE community development





investing and lending data is roughly 2009 to 2015.
The data extracted from each PE show a dollar
amount for both loans and investments made in Texas
LMI communities, and those amounts were then annu-

Total community
development dollars*

alized. Although each bank reported different levels
of lending versus investing, the totals for our sample


Texas deposit market share


*Data are annualized estimates.

are similar (Table 2). Forty-nine percent of the money

Table 1: Top Banks by Deposit Market Share in Texas


All markets


Total deposits
(in thousands)

(in thousands)

Market share

Share of
deposits in
Texas (%)

JPMorgan Chase






Bank of America






Wells Fargo






USAA Federal
Savings Bank






Compass Bank






Frost Bank






Texas Capital Bank






Prosperity Bank






Capital One


















SOURCE: Federal Deposit Insurance Corp., Deposit Market Share Report, June 2016.
NOTE: See full list of banks with branches in Texas, their asset sizes and CRA category.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Within the category of qualified investments lies a

lend and invest $4.08 billion community development

subset of funds that are donated without an expectation

dollars annually in Texas. Adding this to the $1.79 billion

of financial return, referred to as grants or contributions.

from our Texas sample, we determine that large banks

Estimating what percentage of qualified investments

provide about $5.88 billion in the form of loans or invest-

is grants is difficult due to the lack of standardized

ments to Texas communities annually (Table 3).

reporting practices in PEs. However, within the Texas
sample, five PEs designated dollar amounts of grants
or contributions. Based on analysis of these reports,
the level of grants is about 1.7 percent of total qualified

Table 3: Estimated Annual Lending and

Investing in Texas Communities Tops
$5.8 Billion

investments (Chart 1).


Chart 1: Grants Make Up Small Share of


All other qualified



Community development
dollars, Texas sample

$1.79 billion

Community development
dollars, other large banks

$4.08 billion

Total community
development dollars

$5.88 billion

NOTE: The estimate total is rounded.
SOURCES: CRA performance evaluations; Atlanta Fed methodology; author’s calculations. See appendix for more.

NOTES: Data are in thousands of dollars. Chart is based on subsample of five Texas sample banks.
SOURCE: CRA performance evaluations.

This number—$5.88 billion—should not be taken as
an exact amount, but rather as an estimate based on
the author’s assumptions. Many factors are involved in

While one should be careful about drawing conclu-

banks’ decision-making for lending and investing in LMI

sions from a small subsample, bank contributions that are

communities that could change yearly, but this estimate

free of expected financial return are, in general, a small

is a start at capturing a dollar amount that benefits

percentage of the investments banks typically make.

Texas annually. This estimate will help policymakers and

Most CRA dollars are loans or investments on which

community development organizations achieve a basic

banks expect to make some kind of return.

understanding of CRA investing and lending. However,

Finally, we were able to estimate the total dollar

this quantitative analysis does little to illuminate details

amount that flows into LMI communities in Texas—wheth-

of the impact of CRA-funded projects, the effectiveness

er loans, traditional investments or grants, using a few

of the regulations and other experiences. To add more

assumptions and a ratio calculated from the Texas sample.

richness to this analysis, we launched a poll to ascertain

To read more about the methodology, see the appendix.

perceived areas of strength and needed improvement

We estimate that the remaining large banks in

in the CRA from the perspective of those who work with

Texas—those not included in our Texas sample—would

it firsthand: Texas CRA bankers.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


CRA Banker Poll Findings
In addition to collecting bank data on the monetary contribution of the CRA in
Texas, the Dallas Fed queried the bankers themselves for more insights on how the
law is working.


Table 4: Bank Sizes and Respondent Per-


In July 2017, the Dallas Fed launched a poll of CRA,
compliance and community development specialists at

Asset range (in prior
two calendar years)

of poll


< $307 million



> $307 million; < $1.226


> $1.226 billion

Bank size

banks across Texas (Box 2). The poll garnered 51 responses from bankers headquartered in 24 counties, reaching
from East Texas to El Paso and from the Panhandle to
the southwestern border. Bank service areas span all 13
service regions as defined by the Texas Department of


Housing and Community Affairs (Map 1).
Fifty-seven percent of respondents represent large
banks, and the remainder are from intermediate-small



(ISB) or small banks (Table 4).


Although banks are not required to have a specifically designated CRA officer position, many interme-

diate-small and large banks do. The type and title of the role may vary depending on the asset size and
complexity of the bank’s operations. Smaller banks may fold CRA responsiblities under one person.
In either case, there will be a specific point of contact at all regulated banks for CRA-related inquiries

and comments. Responsibilities include staying up to date on federal regulations and developing,
implementing and evaluating CRA strategy for the financial institution.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Map 1: Poll Respondents by Service Region
Region 2–Northwest Texas
Region 8–Central Texas
Region 1–High Plains

Region 3–Metroplex

Region 4–Upper East Texas

Region 12–West Texas

Region 5–Southeast Texas

Region 13–Upper Rio Grande

Region 6–Gulf Coast

Region 7–Capital

Region 10–Coastal Bend
Region 9–San Antonio
Region 11–South Texas Border


and over

Number of respondents

The vast majority (88 percent) of these bankers have

communities. Most (80 percent) indicated that senior

branches in LMI areas—ranging from just 1 percent to

management has at least a good basic understanding

100 percent—with most having at least a quarter of

of LMI needs. Thirty-seven percent suggested that CEOs

their branches in these communities. About 30 percent

and other leaders are “well aware” of the needs of the

indicated that their bank has plans to open a new location

LMI communities in their service areas.

in an LMI area. Only one bank not currently operating in


an LMI community indicated plans to do so.

Bank-Specific CRA Perceptions

of respondents, however, stated that
there is “a little work to do” to get bank

management more informed and mindful of the situations of LMI individuals in the areas they serve.

Banks vary greatly in terms of leadership-sponsored

Responses indicating this need for improvement

initiatives or support that can facilitate the ease of CRA

varied regardless of asset size or location and did not

activities or make them a priority. Senior management at

seem to be correlated with having branches in LMI areas

some banks may create programs or processes through

or not.

which CRA activities become a bank focus; others may

We also asked if the respondents’ banks have a formal

view the CRA as just a hurdle to jump over. Therefore, we

application process through which community-based

asked questions to assess the existence of programs or

organizations (CBOs) could apply for CRA-eligible loans,

level of support for CRA activities within banks.

grants or services. These applications could streamline

Without the support and understanding of bank

CRA initiatives or make them more visible to CBOs. About

leadership, fulfilling responsibilities as a CRA officer

a third of bankers in the poll reported that they do have a

can be much more challenging. We asked respondents

formal procedure. Some explained that the application

to evaluate their CEOs’ or senior management’s un-

focuses solely on loans, while others reported a broader

derstanding of the needs of LMI households in their

range of options. The most commonly reported practice

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Chart 2: Banks Participating in Community Coalitions See Use for Meeting CRA Obligations
Percent of respondents



Very useful
Moderately useful



A little useful


Not useful





Perceived use of participation in local coalitions

was an online system through which nonprofit organiza-

Out of the three community development activity

tions can apply for loans, grants or other investments.

tests, respondents indicated the most difficult is fulfilling

Some banks send the website to CBOs to solicit requests.

requirements for loans (Chart 3).

Still, for 68 percent of banks in the sample, there is no
formal process for collecting loan or investment requests.
Finally, we inquired about banks’ participation in
local community development coalitions and how this

Chart 3: Lending Obligations Most Difficult to

Somewhat easy
Very easy

involvement could facilitate finding CRA opportunities.
About 70 percent of the sample is involved in a local

Somewhat difficult
Very difficult

coalition. Of those, the vast majority consider this participation of some use for finding opportunities to meet


CRA obligations (Chart 2).
The remaining 30 percent of respondents do not have
bank representation in local community development


coalitions. Bankers who reported that their senior leadership does not have a good basic understanding of LMI
needs were more likely to indicate that their institutions
are not involved in a coalition.


CRA Barriers and Impact









Percent of respondents

Getting to the heart of the matter, we asked for banker
perspectives on a series of questions relating to regula-

NOTE: “Neutral” responses not included.

tory burden, CRA effectiveness and community impact.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


The majority (54 percent) of the sample described the

we asked about specific types of loans that qualify.

lending requirements of the CRA as somewhat or very

Under community services, child care and education

difficult for them to meet. As Table 5 shows, bankers with

lending was deemed most difficult by 50 and 52 percent

more of their assessment areas in rural communities were

of the sample, respectively. Health services was least

even more likely to indicate difficulty in meeting loan ob-

challenging, with 20 percent of respondents pointing to

ligations—75 percent of those with at least a 50 percent

relative ease. Under economic development, 44 percent

rural assessment area reported difficulty, compared with

of bankers believe small-business lending is at least

50 percent of those with less than a third rural.

somewhat easy; conversely, just 4 percent believe the

Digging into these lending issues, we asked bankers

same of digital broadband access, which was publicly

to evaluate the relative ease or difficulty of making loans

announced as a CRA-eligible infrastructure investment

in four distinct community development categories:

just last year.15 For more information on receiving CRA

affordable housing, community services, economic

credit for broadband investments, see the Dallas Fed

development and revitalization/stabilization.

publication “Closing the Digital Divide: A Framework
for Meeting CRA Obligations.”

Chart 4 shows most respondents believe CRA-eligible affordable housing loans are the most difficult to

Barrier Specifics

make in their communities. The easiest loans to make,
according to most respondents, are for revitalization

Community development CRA requirements can be

or stabilization.
Over a third of respondents said lending for the com-

perceived as difficult to meet for a variety of reasons.

munity services or economic development categories

Compliance officers or CRA bankers may feel there is

is neither easy nor difficult. For these two loan groups,

little opportunity in their region, that nonprofits looking

Table 5: Lending More Onerous for Banks with Large Rural Assessment Areas
Percent of assessment area in rural communities
Less than a third

At least a third

At least half




Percent reporting lending as
“somewhat” or “very” difficult

Chart 4: Housing Loans Most Difficult to Make


Affordable housing



Community services



Revitalization or stabilization






Economic development











Percent of respondents

Federal Reserve Bank of Dallas Community Outlook Series Issue 2




for loans are unable to manage the influx of funds, or the

metropolitan areas. The rural banks don’t have so many

regulatory burden may feel too great. We asked respon-


dents to elaborate on these issues, as shown in Chart 5.

Within “regulatory constraints,” some feel they serve

One-third of the sample selected “lack of opportunity

too many masters, with multiple types of examiners

for impactful and cost-efficient deals that meet demand”

(safety and soundness, along with CRA and fair lend-

as one of the top barriers to CRA activity. For some

ing). Others note a lack of tangible examples for CRA.

bankers, particularly those in rural areas, finding lending

“Interagency questions and answers are helpful,” one

opportunities is difficult. A compliance officer at a large

representative from a large South Texas bank notes, re-

East Texas bank explained:

ferring to guidance documents released by regulators,16
“but there is still so much gray area.”

“The biggest challenge for us is finding opportunities

Just 10 respondents pointed to organizational capac-

with lending. We’ve entered a few partnerships with

ity of local nonprofits or other partners as a large barrier.

organizations for either economic development or

When asked about specific types of organizations in their

affordable-housing programs, but getting partici-

communities, most bankers believed capacities to prop-

pants in those programs so that loans are actually

erly handle a loan or investment were about average.

made has proven challenging. We believe a lot of
the challenge is because of the more rural areas we

Changes and Recommendations

serve. Our presence in urban areas is tiny.”
Another banker had a similar perspective, stating that

Addressing these constraints and barriers, we asked

despite doing everything possible to help communities,

bankers what regulatory changes, if any, would improve

“the prospects for CRA are far greater for banks in large

the CRA. Suggestions fall into four main categories

Chart 5: Bankers See Lack of Opportunity as Greatest Barrier to CRA Activity
Lack of opportunity for deals


Too many regulatory constraints


Too risky/too complicated


Lack of organizational capacity


Need technical assistance




Lack of support from bank leadership










Number of responses
NOTE: Respondents could check up to three boxes.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


(Table 6). The highest number of comments received

importance. The remainder of the comments suggested

relate to improving clarity of the goals or requirements.

clearer expectations and more communication between

Not understanding how to “meet the minimums”
surfaced a few times in the comments. Beyond improving
clarity, some bankers also mentioned the need for certain

bankers and regulators.

CRA Impact

definition or scope changes, such as getting more credit
for all volunteer activities or expanding what qualifies as

The final question asked bankers if they see the

“service” to activities beyond financial services. Rural

impact of CRA activities in their communities. All but four

challenges were highlighted again in the remaining com-

bankers noted some impact, mostly in the moderate or

ments. Some bankers suggested expanding assessment

small category (Chart 6). Representatives of large banks

areas for banks with large rural footprints to increase

were slightly more likely to see moderate or large impacts

opportunities; others wrote that adding a new asset

than small banks or ISBs.

category between ISB and large would help reduce the
burden on rural banks with less than half the asset size
of other large banks.
Finally, we asked about additional resources bankers
might want to help them meet CRA targets. Once again,
respondents discussed improving resource allocations

Chart 6: Most Bankers See Some CRA

Impact in Their Communities
Number of responses

in rural and border communities that include improving


connections to coalitions in these areas.


Other bankers focused on staff needs and training


opportunities, including more interagency roundta-


bles—meetings hosted by the OCC, FDIC and Federal
Reserve System—that give bankers a chance to interact

No real

with regulators and hear about CRA opportunities
and resources. Two respondents wanted to see more




Perceived size of impact

bank staff involved in understanding CRA work and its

Table 6: Recommendations to Improve CRA

Number of

Increase clarity

• Further define what should be included in supporting documentation
• More clarity on minimum expectations for “satisfactory” rating


Expand scope

• Broaden scope to include more volunteer work
• Expand definition of service activities beyond financial expertise


• Add bank asset category between intermediate-small bank and large bank
• Streamline required forms and documentation


• Expand geography for rural assessment areas
• Greater consideration of activities in statewide funds


Other regulatory
Broaden geography

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Banker Interviews and Project Highlights

Bank, a large institution, highlighted the importance of
affordable housing work in San Antonio. “Rarely are de-

Adding further dimension to these findings, a handful

velopers building houses under $150,000,” she noted. To

of poll respondents opted to speak further about chal-

help fill this need, the bank created the Home Advantage

lenges or successes related to their recent CRA loans,

Loan Program through a partnership with Neighborhood

investments or service opportunities.

Housing Services. The minimum borrower contribution

A chief lending officer for an ISB near the southwestern

for a down payment is just $500. Just through June 2017,

Texas border echoed some of the challenges discussed

the program has funded 35 loans to get LMI families into

earlier in this report. He described the difficulties of

affordable and green housing. This program is particu-

rural banks—especially smaller ones—pointing to lack

larly advantageous because it concentrates CRA activity

of staff and lack of opportunities. “Reputational effects,

for maximum impact—and credit. Broadway Bank has

resource allocations, lending opportunities and business

been able to earn credit for this program under lending

structures are not uniform among large and small banks,”

(making loans), investment (donations to fund classes)

he said, adding that this makes it difficult for a smaller,

and service (bankers have served on the board of their

rural bank to get a high rating. The officer specifically

partner nonprofit).

mentioned bonds—the ones his bank can bid for are

A senior officer at Citizens 1st Bank, a small East Texas

typically outside its assessment area, making CRA credit

bank, participates in a fruitful partnership focused on ed-

unlikely. He also mentioned the rarity of “outstanding”

ucation and the workforce. Joining with local foundations

ratings and how difficult they are to obtain. Indeed, of

and the Rusk school district, the bank through its Rusk

the 11 PEs analyzed for the quantitative portion of this

TJC Citizens Promise Program provides scholarships to

report, one had an “outstanding” rating, one had “needs

Tyler Junior College for the top half of graduating high

to improve” and the remaining were “satisfactory.” The

students and includes not just academic programs, but

officer worries that because smaller banks are thought

also vocational training. This collaboration is a prime

to be highly engaged in communities, a “satisfactory”

example of how a bank of any size can tackle workforce

rating could hurt their reputations.

development through the CRA.17 The partnership began

Other bankers, representing financial institutions

in 2014, and through the spring of 2017, more than

of all sizes, discussed positive experiences in lending,

$544,000 had been granted. Citizens 1st was awarded

investment and service. Each gave examples of how

the 2017 Cornerstone Award from the Texas Bankers

important partnerships can be to helping the community

Association for these efforts. The bank hopes to start

and meeting CRA goals. A CRA banker at Broadway

more programs throughout the region and across

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Texas and is interested in helping others start their own

importance of grant writing for communities and banks.

Promise programs.

CRA2U is a two-and-a-half day institute for bankers and

Finally, a CRA officer of Southside Bank in East

nonprofits; goals include fostering better collaboration

Texas spoke about a successful partnership with a local

between the two groups. She said about the program,

nonprofit that created an innovative opportunity in

launched in January of this year, “Nonprofit organizations

nonprofit capacity building. Partnering with A Circle of

commented that they felt empowered to request money

Ten, Southside launched a grant-writing program called

and work closer with banks to fulfill their needs. It gave

CRA2U focused on improving understanding of the

them the tools to change people’s lives.”

The CRA has been a significant and effective tool for ensuring financial investment in many otherwise
underserved communities. The estimated $5.88 billion of community development dollars that Texas
sees every year—mostly in the form of investments or loans with an expectation of a financial return—can
go a long way to funding impactful and innovative community projects such as the ones highlighted
in this report. For bankers, getting support and buy-in from all levels of leadership will continue to
be advantageous to meeting goals. As the American economy modernizes and changes, new and
creative opportunities will become available. Regulatory support of newer eligible opportunities, such
as broadband investment, is an essential feature of keeping the CRA flexible and relevant. Bankers say
this communication with regulatory agencies is helpful and is needed on an even larger scale.
While the CRA is important, it is not always perfect. In fact, the act has been amended numerous times
over its 40-year history. Further research should be done related to respondent suggestions—including
broadening its scope and providing more incentives in the CRA to address rural issues—to maximize the
CRA’s impact, ensure its responsiveness to all communities and reinforce its role as a strong community
development tool for future generations.

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Outlook Series

Federal Reserve Bank of Dallas

Outlook Series

Contact the Dallas Fed’s Community Development Department to find out how to get involved in
CRA initiatives across the state. For more information about this report, email Emily Ryder Perlmeter

Federal Reserve Bank of Dallas

The term “redlining” comes from the practice of outlining particular neighborhoods with red pen. See the Federal Reserve Bank of
San Francisco’s An Introduction to the Community Reinvestment
Act video, available at

“Credit Where It Counts: The Community Reinvestment Act and Its
Critics,” by Barr, M. S., New York University Law Review, vol. 80, no.
4, 2005, pp. 513–652.



“Regulators Scrutinized in Mortgage Meltdown,” by Greg Ip and
Damian Paletta, Wall Street Journal, March 22, 2007.

“Did the CRA Cause the Mortgage Market Meltdown?” by Neil
Bhutta and Glenn B. Canner, Federal Reserve Bank of Minneapolis
Community Dividend, March 2009,


“Private Sector Loans, Not Fannie or Freddie, Triggered Crisis,”
by David Goldstein and Kevin G. Hall, McClatchy Newspapers, Oct.
12, 2008,
Data source is HMDA data from the Federal Financial Institutions
Examination Council.

See “The CRA and Subprime Lending: Discerning the Difference,”
by Elizabeth Sobel Blum, Federal Reserve Bank of Dallas Banking
and Community Perspectives, issue 1, 2009.


“The Community Reinvestment Act: A Welcome Anomaly in the
Foreclosure Crisis,” Traiger and Hinckley LLP, New York, January

“Debunking the CRA Myth—Again,” by Carolina Reid et al., University of North Carolina Center for Community Capital, January 2013,


See “Between a Rock and a Hard Place: The CRA–Safety and
Soundness Pinch,” by Jeffery W. Gunther, Federal Reserve Bank of
Dallas Economic and Financial Policy Review, Second Quarter, 1999.

“The Performance and Profitability of CRA-Related Lending,” Board
of Governors of the Federal Reserve System, July 17, 2000, www.

“The Effectiveness of the Community Reinvestment Act,” by
Darryl E. Getter, Congressional Research Service, Jan. 7, 2015, www.

“Community Reinvestment Act: How Much Is It Worth in the
Southeast?” by Will Lambe and Jessica Farr, Federal Reserve Bank
of Atlanta, September/October 2015,


Because service activities are not captured as a dollar amount, they
are not included in this analysis.


See “Interagency Questions and Answers,” July 15, 2016, FFIEC.

See note 5.

For more information on CRA-eligible workforce investments,
see “Engaging Workforce Development: A Framework for Meeting
CRA Obligations,” by Elizabeth Sobel Blum and Steve Shepelwich,
Federal Reserve Banks of Dallas and Kansas City, www.dallasfed.

The views expressed in this report are the authors’ and do not necessarily reflect official positions of the
Federal Reserve System.



Emily Ryder Perlmeter
Community Development Analyst

Roy C. Lopez
Community Development Officer

Jennifer Chamberlain
Communications Advisor

Areeb Siddiqui
Community Development Intern

Julie Gunter
Community Development Director

Kathy Thacker

Sharon Ford
Assistant Director of Examinations

Emily Rogers
Graphic Designer

Molly Hubbert Doyle
Community Development Specialist

Federal Reserve Bank of Dallas Community Outlook Series Issue 2


Overall, this research on the impact of the Community Reinvestment Act (CRA) in Texas
follows methods established in a report from the Federal Reserve Bank of Atlanta,
“Community Reinvestment Act: How Much Is It Worth in the Southeast?”1 To arrive at an
estimate of total annualized community development lending and investing in Texas, we made
a few assumptions:
1. We limit our analysis to large banks —those with assets of at least $1.226 billion—for a few
reasons: First, we assume that these banks do the great majority of lending and investing in low- and
moderate-income communities. This is not to say that intermediate-small (ISB) or small-bank lending/
investing does not occur or does not have an important impact in communities, but rather that the
volume is considerably less. Second, the CRA requirements for ISBs and small banks differ quite a bit
from those for large banks. Small banks are not necessarily evaluated on community development
lending specifically. ISBs do not have separate community development tests for lending, investment
and service; rather, they are grouped together for one community development activities test. For these
two reasons, it is difficult to obtain specific PE data and compare those with large bank data.

2. We use a ratio calculated from the Texas sample to estimate the total level of CRA funds in
Texas communities. This requires an assumption that the eight banks in the Texas sample are similar in
nature and representative of other large banks in terms of lending and investments.
Based on these assumptions, we calculated an estimate of the total amount of community development
money that banks provide on an annual basis. First, we determined the ratio of community development
money to total in-market deposits for the Texas sample, which came out to be .0061, or 0.61 percent.2 We
then determined that the remaining large banks in Texas hold approximately $669.3 billion in deposits
in the state. Applying that ratio, we calculated that these remaining large banks would lend and invest
$4.083 billion community development dollars annually in Texas. Adding this to the $1.793 billion from
the Texas sample, we arrived at the total reported in this report, $5.88 billion.

“Community Reinvestment Act: How Much Is It Worth in the Southeast?” by Will Lambe and Jessica Farr, Federal Reserve Bank of Atlanta, September/
October 2015,

This is based on the author’s estimates and should not be considered an industry standard.


Federal Reserve Bank of Dallas Community Outlook Series Issue 2