Under the new rule, for large banks, Facility Based Assessment Areas (FBAAs) must consist of 1) a single MSA, one or more contiguous counties within an MSA, or one or more contiguous counties within the nonmetropolitan area of a State.

With the OMB changes to certain MSA boundaries that are effective January 1, 2024 for CRA (per the FFIEC), some counties within our AA delineation have been moved to other MSAs. The result is that in one MSA, the counties that we delineate as part of the AA within that MSA are not contiguous. Does this mean we must delineate separate assessment areas with that MSA? Example: Big City MSA consists of 6 counties. We delineate County 1, County 2, County 3 and County 6 as our assessment area (we have branches in these counties). Counties 1, 2 and 3 are contiguous. However, County 6 is not adjacent to any of those three counties (1, 2, 3). Does this mean we have to designate Counties 1, 2 and 3 as one assessment area in Big City MSA and County 6 as a separate assessment area in Big City MSA?

Thank you.

While an updated list was published by OMB in July 2023, I don't think there were any changes to the MSA composition between 2022 and 2023. There were significant changes in 2022 when the new Census 2020 tracts were implemented by the FFIEC.

Typically the FFIEC makes an announcement of the changes and cites the specific changes, but the FFIEC website doesn't say anything about specific changes implemented beginning in January 2024. So I skeptical that any changes actually happened.

We are running a cross comparison of 2022 and 2023 MSAs (based on the July 2023 OMB list) to see if we identify any changes.

There is no "Big City" MSA in the OMB list so I assume you used that as a dummy name to disguise your location. Why don't you email me the specifics of your area and I can check it out. My email is LenSuzio@GeoDataVision.com

I have a similar question on this subject:

We have an AA that is 2 contiguous counties. We have 1 branch. Each county is in a separate MSA. Under the new rule, we cannot have an FBAA that includes more than 1 MSA, so I am left with the following decision:
1) remove the county that does not contain our branch. It will likely become a component geographic area in our ORLA, or
2) separate this area into 2 FBAAs. Each FBAA would be 1 county.

Honestly both options are bad. We are dealing with large counties where we have will struggle to hit these new benchmarks (I think my option 1 would be best).

Am I on the right track with my line of thinking? These are my only options?

What is the size of your institution? If you are a Small or Intermediate Bank you may adjust the boundaries to include only the portion of county you can reasonably be expected to serve; they must be contiguous whole census tracts. (See section __16.(b)(3) in the Common Rule.)

We are an IB with two Branches. Under the existing rule, we defined our Assessment Area as our city’s geographic footprint and surrounding farmland. Our MSA covers two counties, and our city is in a corner of each county. Under the Final Rule our FBA would need to be both counties, which is too big to cover for our small footprint. Our previous AA consisted of contiguous census tracts, so I am adjusting the new FBA boundaries to the same census tracts per this provision. In other words, no change.

I’ve talked with a couple of other small banks that have done the same. The proof will be in the pudding!

We are a large bank- this is just one of our FBAAs. We have to take whole counties, but my main issue is that the 2 counties that are in this current AA are in different MSAs and that is no longer allowed for the new FBAA requirement.

I do not believe you can take the second county if it has no facility. I think option 1 is your only option.

We are in a rural area with a few population centers in MSAs. We have branches in non-MSA counties that are contiguous with the counties in the MSA, but not contiguous with any other non-MSA counties. Examiners have always included these counties in with the MSA when they do their CRA exam. However, it appears under the FBAA rules, this rural county where we have a office would have to be it's own separate AA. Is that correct? We can't have an AA that is MSA + contiguous non-MSA county, right?

I answered my own question:

“…under the final rule, a facility-based assessment may not extend beyond an MSA boundary and may not extend beyond a State boundary unless the facility-based assessment area is located within a multistate MSA.”

Inherent_ Risk- thanks for responding. I think you are correct. It is a FACILITY based AA, so that makes sense- no facility, no FBAA. I think, even with just the one branch, we would have been able to keep both counties if not for the separate MSA issue.

TMatt87- we also have that situation with an area that has contiguous counties partially in an MSA and partial in non-MSA. And yes, we are creating 1 FBAA for the counties located in the MSA and a separate FBAA for the county that is in the non-MSA (it makes it harder to show much loan activity in that single non-MSA county- especially with the new retail lending test format)

It sounds like the FBAA definition still includes the option of includes areas where you don't have a facility, but originate a substantial portion of your loans.

From page 330 of the Final Rule:

Final Rule
The agencies are adopting a modified version of proposed § __.16(b)(1). Final § __.16(b)(1) provides that, except as provided in paragraph (b)(3), a bank’s facility-based assessment areas must include each county in which a bank has a main office, a branch, or a deposit-taking remote service facility, as well as the surrounding counties in which the bank has originated a substantial portion of its loans (including home mortgage loans, multifamily loans, small business loans, small farm loans, and automobile loans).

I may have missed this in the threads above.... we have an MSA that includes three counties, but we only have branches in two of them. Do you break out the counties and make them a FBAA on their own? For example, county A is one FBAA and county B is another.

Mel in WA= I see no reason that you could not keep your 3 counties as 1 FBAA. As long as they are contiguous and in the same MSA.

Thanks. I wasn't sure if it was acceptable to leave one out of the three counties located in the same MSA, but if there's no facility in the third county, we really have no choice.

but do you generate a substantial portion of your loans in that county?

Off the top of my head, I would say no. To determine "substantial" would you take all loans within the MSA and calculate the percentage per county?

Well, with the interim final rule, it looks like we will have more time and hopefully some agency guidance on FBAA designations!

Under the current rule all banks can annex some tracts that are on the other side of a MSA in another MSA or non-MSA as long as the encroachment isn't "substantial" (which is not defined in the regulation but I would say incorporating an entire county outside the MSA would qualify as substantial.

There is one big exception to the "do not cross the line" rule which is when your AA is in a CSA. Under those circumstances you can include other counties in the same CSA as long as they are contiguous with your AA.

If the new rule survives the court challenge it forbids any large bank from having an AA that crosses a MSA boundary period, no exception for non-substantial encroachment.

Intermediate and small banks will retain the AA delineation flexibility allowed under the current rule.

As I have said for many years - AA delineation is your most important CRA decision. It affects your performance and the standards against which you will be measured. Every year you should check to see if your AA is outdated for any of various reasons, new rule or old rule!