Unlocking Insights: Analyzing the 2022 CRA Peer Data for Small Business, Small Farm and Community Development

On December 20, 2023, the three Federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibilities — the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (The Agencies) — announced the public release of the 2022 Community Reinvestment Act (CRA) peer data. This dataset includes small business, small farm, and community development lending data reported by certain commercial banks and savings associations. RiskExec has been updated with this dataset and 2022 CRA reporting is available within the Peer Analysis module and CRA module’s small business and small farm reports. CRA Officers can now assess their respective institution’s lending in light of this updated peer data.

Evaluating the 2022 Data

The 2022 CRA peer data set includes data from financial institutions comprising over 8.9 million small business loans and over 200,000 small farm loans. For 2022, a total of 711 lenders reported data about originations and purchases of small loans to businesses (loans with original amounts of $1 million or less) and small farms (loans with original amounts of $500,000 or less), representing a 3.7 percent increase from the 685 lenders reporting data for 2021. Of the 711 institutions reporting 2022 data, 80 had assets below the mandatory reporting threshold and reported either voluntarily or because they elected to be evaluated as a “large” institution during CRA examinations. Since 2020, the volume of reporting financial institutions has increased.[1] In 2022, the volume of originations and purchases was down from 2021 and was closer to 2020 levels.

The amount of money borrowed has steadily declined over the last three years from a 2020 high point, which was largely due to lending from the U.S. Small Business Administration Paycheck Protection Program (PPP). PPP lending continued into 2021, but was phased out by May of that year.

Despite the increase in reporting lenders, loan volume by count and dollar amount declined in comparison to 2021, with small farm lending volumes declining most significantly since the prior year. Small farm originations and purchases decreased by about 18 percent and the dollar amount loans decreased by three percent from 2021 to 2022. The number of small business loans originated decreased by 6 percent relative to 2021. The dollar amount of small business loans originated decreased by 25 percent. The Agencies attribute the decrease in total number of small business loans originated, and especially the total dollar amount of small business loans originated, to the phasing out of PPP loans. The distribution of loan types remained consistent in comparison to the prior year with small business loans representing 98 percent of reported lending and small farm loans representing the remaining two percent.

It is also interesting to note that the number of “small” loans is increasing in proportion to the other larger loan amounts. In 2020, 88 percent of loans were small and, by 2022, that figure had increased to 94 percent. 

*Loan Amount Key: Small: $100K or Less; Medium: $100,001K - $250K, Large: Loans Over $250K

In 2022, the reporting institutions had nearly 33 thousand community development loans totaling $152 billion. While the dollar amount of loans remained relatively stable since the prior year, the volume represents a 41 percent decline in community development loans compared to the 2021 CRA peer data. The Agencies suggest this decrease may also be attributable to the phasing out of the PPP lending. Many of the PPP loans that did not meet the size requirements of reportable small business loans met the qualifications for community development and were reported as such.

Next Steps for Institutions - Utilizing the Peer Data

• Run peer reports and CRA tables. Peer reports will be critical to understanding your institution’s standing in an assessment area among reporting peers. With an increase in reporting institutions, but a decrease in loan count and volume, there will be multiple variables impacting changes. CRA tables will provide the framework for understanding how changes in peer performance compare to your institution. Some regulatory agencies combine multiple years of data for analysis and compare the performance to the most recently released peer data. While this approach creates exam efficiencies, it can mask material changes when evaluating performance against peers. Consider running separate years of data against each respective peer year. 

• Understand impacts in low- and moderate-income (LMI) geographies. With declines in overall volume from 2022 to 2021, it will be important to evaluate the changes with your assessment areas and the relative impact in LMI geographies. At a national level in 2022, 22 percent of loans were in LMI geographies compared to 23 percent in 2021. In 2022, 23 percent of small business loans were in LMI geographies and 11 percent of small farm loans were in LMI geographies in 2022. In 2021, 23 percent of small business loans were in LMI geographies, while nine percent of small farm loans were in LMI geographies. While these changes are not necessarily material at the national level, it will be important to evaluate the impacts in your institution’s assessment areas, with particular focus on assessment areas where there are a significant number of LMI tracts. 

• Prepare performance context to explain changes in performance relative to peers. Whether changes in performance are attributable to changes in peers such as the increase in reporting institutions or in the availability of products like PPP, it will be critical to understand what has changed in your assessment areas. The interagency procedures provide an excellent framework for documenting performance context. With the issuance of the 2022 CRA peer data, now is also a good time to revisit the ways in which changes to business strategy, lending capacity, and product offerings have impacted performance. 

The Agencies’ release of the 2022 CRA peer data presents an opportunity to review historical lending needs and prepare for future exams. The Agencies’ summary and the reports within RiskExec provide critical tools for analyzing this data and utilizing it to strengthen your CRA program.  As always, the RiskExec team is here to help should you have questions or would like assistance charting a different path forward with your CRA plans and operations.

RiskExec is a reporting and analysis platform for CRA, Small Business Lending, HMDA, Fair Lending, and Fair Servicing. With RiskExec's compliance reporting and analysis platform financial institutions can automate CRA, Small Business Lending, HMDA, Fair Lending, and Fair Servicing processes and also use mapping for visualizing loan data with sophisticated geocoding and customizable layers.

Sarah Brons is Senior Vice President of CRA Products and Services at RiskExec. She has more than 20 years of experience in financial services and regulatory compliance. Sarah is an expert in community reinvestment and community development and leads CRA product development.

1. https://www.ffiec.gov/hmcrpr/cra_fs23.htm