What is the Community Reinvestment Act (CRA)?

The Community Reinvestment Act (CRA) is a federal law that encourages banks to meet the credit needs of all communities they serve, especially in low and moderate-income neighborhoods. Passed in 1977, it was designed to prevent discriminatory lending practices and ensure banks are helping to develop the communities where they operate. Banks receive CRA ratings based on their lending, investment, and service activities in these communities.

How could simplifying the CRA benefit banks?

Simplifying the Community Reinvestment Act could benefit banks by reducing compliance costs, paperwork, and administrative burdens. With clearer guidelines and streamlined requirements, banks could reallocate resources from regulatory compliance to actual lending and community development. This could potentially lead to increased profitability, more efficient operations, and greater lending capacity, which may ultimately benefit shareholders.

What are regional and community banks?

Regional and community banks are financial institutions that primarily serve specific geographic areas rather than operating nationwide. Community banks are typically smaller, locally owned institutions focused on providing traditional banking services to local residents and businesses. Regional banks are midsize institutions serving multiple communities across several states. Both types typically have strong ties to their communities, emphasize relationship banking, and play vital roles in local economic development.

What is dividend yield and why does it matter?

Dividend yield is the annual dividend payment divided by the current stock price, expressed as a percentage. For example, if a stock costs $100 and pays $3 in annual dividends, the dividend yield is 3%. This matters to investors because it represents a source of return independent of stock price changes. Many regional banks offer competitive dividend yields, providing investors with regular income while they hold the stock, which can be especially attractive during market downturns.

What does "Market Cap" mean?

Market capitalization (Market Cap) is the total value of a company's outstanding shares, calculated by multiplying the current stock price by the total number of shares. It helps investors understand the company's size and classification: large-cap (over $10 billion), mid-cap ($2-10 billion), or small-cap (under $2 billion). For regional banks, market cap indicates their relative size in the banking sector and can reflect their geographic reach, lending capacity, and overall market presence.

15 handpicked stocks

Community Banking Catalyst

This carefully selected group of stocks features regional and community banks positioned to benefit from the FDIC's proposed simplification of the Community Reinvestment Act. Our professional analysts identified these financial institutions as potentially gaining from reduced regulatory burdens, which could boost lending capacity and shareholder value.

Han Tan | Market Analyst

Updated 2 days ago | Published at juillet 14