(a) In general. A bank or savings association must delineate one or more facility-based assessment areas within which the appropriate Federal banking agency evaluates the bank's or savings association's record of helping to meet the credit needs of its entire community pursuant to the performance tests and strategic plan described in § 25.21.

(b) Geographic requirements for facility-based assessment areas. (1) Except as provided in paragraph (b)(3) of this section, a bank's or savings association's facility-based assessment areas must include each county in which a bank or savings association has a main office, a branch, or a deposit-taking remote service facility, as well as the surrounding counties in which the bank or savings association has originated or purchased a substantial portion of its loans (including home mortgage loans, multifamily loans, small business loans, small farm loans, and automobile loans).

(2) Except as provided in paragraph (b)(3) of this section, each of a bank's or savings association's facility-based assessment areas must consist of a single MSA, one or more contiguous counties within an MSA, or one or more contiguous counties within the nonmetropolitan area of a State.

(3) An intermediate bank or savings association or a small bank or savings association may adjust the boundaries of its facility-based assessment areas to include only the portion of a county that it reasonably can be expected to serve, subject to paragraph (c) of this section. A facility-based assessment area that includes a partial county must consist of contiguous whole census tracts.

(c) Other limitations on the delineation of a facility-based assessment area. Each of a bank's or savings association's facility-based assessment areas:

(1) May not reflect illegal discrimination; and

(2) May not arbitrarily exclude low- or moderate-income census tracts. In determining whether a bank or savings association has arbitrarily excluded low- or moderate-income census tracts from a facility-based assessment area, the appropriate Federal banking agency takes into account the bank's or savings association's capacity and constraints, including its size and financial condition.

(d) Military banks or savings associations. Notwithstanding the requirements of this section, a military bank or savings association whose customers are not located within a defined geographic area may delineate the entire United States and its territories as its sole facility-based assessment area.

(e) Use of facility-based assessment areas. The appropriate Federal banking agency uses the facility-based assessment areas delineated by a bank or savings association in its evaluation of the bank's or savings association's CRA performance unless the appropriate Federal banking agency determines that the facility-based assessment areas do not comply with the requirements of this section.