Our assessment area boundaries are based on townships. We currently have multiple townships in our AA. In all but one instance, we include all townships in each census tract (whole census tract geographies). We do have an exception in the one census tract. Is it permissible to include only one township in that particular census tract that is composed of three townships or do we have to include all three and therefore the entire census tract? The reason we haven't been including the other two townships is because a mountain seperates the two from the one we do include. Should we include these other two townships to make it a whole geography - since the statistical data will be based on the whole census tract?

You cannot break up census tracts so you would have to include all three townships.

So the permissible adjustment to geographic areas that is mentioned in the CRA Q&As does not apply to splitting up a census tract - only splitting up other areas (political subdivisions)?

Is there a downside to including the other townships to make up the whole census tract - even if we don't expect to make loans in those townships? Again, those townships that we currently exclude are isolated by mountains.

I'm meeting resistance from management because they say the examiner was okay with our AA during our last CRA exam in 2004.

You can't break up a census tract as KC has said. It is the smallest geographic unit allowed in CRA. But remember, the examiners won't be able to breakdown your lending below that level too. So if you don't lend in those other towns in the tract it won't affect your performance evaluation as long as you are generating sufficient lending in the entire tract, even if all of it is in the town inside your AA and not in the other towns.