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Public Welfare Investments Resource Directory

Both national banks and federal savings associations (FSAs) may make direct or indirect investments designed primarily to promote the public welfare. For purposes of this web page, investments that help to finance community development activities and provide capital for affordable housing, small business development and other community needs will be referred to as "public welfare investments investments or PWI."

This Public Welfare Investments Resource Directory provides information that would assist both national banks and FSAs to engage in these activities.

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Federal savings associations' public welfare investments are made pursuant to different statutory and regulatory authorities than available for national banks. FSAs' public welfare investments are also subject to different investment limits.1  If an investment can be made under more than one authority, then an FSA may designate under which authority the investment has been or will be made. If you need additional assistance, please call the Community Affairs Department at (202) 649-6420 or contact your District Community Affairs Officer.

In addition to their general lending and investment authorities, FSAs may use the following authorities to make public welfare investments:


Community Development-Related Equity Investments in Real Estate - Section 5(c)(3)(A) of the HOLA (12 USC ยง 1464(c)(3)(A)), 12 CFR 16030 

Under section 5(c)(3)(A) of the HOLA, an FSA may make investments in real property and obligations secured by liens on real property located in areas "receiving concentrated development assistance by a local government under title I of the Housing and Community Development Act of 1974." To be permissible for investment, the real estate must be located within a geographic area or neighborhood that receives assistance under or is covered by, for example, the U.S. Department of Housing and Urban Development's Community Development Block Grant (CDBG) program.

Under 12 CFR 160.30, which covers the general lending and investment powers of FSAs, an FSA's aggregate community development loans and equity investments may not exceed 5 percent of its total assets. Further, within that limitation, an FSA's aggregate equity investments may not exceed 2 percent of its total assets.

The standards for these investments are as follows:4

  • The investment must be located either in a CDBG entitlement community, in a non-entitlement community that has not been specifically excluded by the state in its statewide submission for CDBG funds, or in an area that participates in the Small Cities Program.5
  • The investment must be made in a residential housing project that benefits LMI people. The OCC generally considers an investment that benefits LMI people to mean that over 50 percent of the units are reserved for occupancy by LMI individuals or families.
  • The investment must be safe and sound. Whether an investment is safe and sound depends on the relevant facts and circumstances regarding the business transaction. For example, the OCC does not consider an investment that exposes an FSA to unlimited liability to be safe and sound.6
  • The FSA's investment may not exceed the institution's loan-to-one borrower limit.7
  • If the FSA does not qualify as an eligible savings association pursuant to 12 CFR 5.3(g), it must provide notice to the OCC (Community Affairs Department) at least 14 calendar days before making the investment.
  • The investment must conform to all applicable laws, including the two percent aggregate investments cap for all equity investments by the FSA under HOLA 5(c)(3)(A).

Generally, if an FSA's investment meets all of the standards listed above, the FSA would not need to provide notice to the OCC. However, the FSA should maintain records that document the investment's compliance with these standards.8

If an FSA wishes to make a community development investment that is consistent with the spirit and intent of section 5(c)(3)(A) of the HOLA, but the investment does not meet all of the standards listed above, the FSA may seek a case-by-case review by the OCC (Community Affairs Department) before making the investment.

De Minimis Investments - 12 CFR 160.36 

Under the de minimis authority, an FSA may invest, in the aggregate, up to the greater of 1 percent of capital or $250,000 in community development investments of the type permitted for a national bank under 12 CFR 24 (the OCC's regulation on national bank investments in community and economic development entities, community development projects, and other public welfare investments). Generally, public welfare investments under 12 CFR 24 are investments that primarily benefit low- and moderate-income (LMI) individuals, low- and moderate-income areas, or other areas targeted by a government entity for redevelopment. In addition, an investment that would receive consideration as a "qualified investment" under 12 CFR 25.23 (the Community Reinvestment Act regulation) would qualify as a public welfare investment.2 Examples of eligible investments include those that support affordable housing and other permitted real estate development for community development, provide equity for start-up and small business expansion, or revitalize or stabilize a government-designated area.

An FSA using the de minimis investment authority to make an investment of the type that is permitted for a national bank generally does not need to provide notice to the OCC. However, the FSA should maintain records that document the investment's permissibility consistent with the public welfare requirements of 12 CFR 24.3

Investments in Service Corporations and Service Corporation Subsidiaries for Community Development Investments - 12 CFR 5.59  

Under the authority of 12 CFR 5.59, an FSA may make investments in service corporations and service corporation subsidiaries that engage in community development activities. Specifically, pursuant to 12 CFR 5.59(f)(8), the FSA may, through one or more service corporations, make investments in community and economic development or public welfare investments that are permissible under 12 CFR 24, provided that any applicable filing requirements are satisfied.

An FSA may invest up to 3 percent of its assets in service corporations, but any amount exceeding 2 percent must serve "primarily community, inner-city, or community development purposes."

An FSA's direct investment in a service corporation is subject to geographic and ownership restrictions. If an FSA wants to make a direct community development investment in an entity under the service corporation authority of 12 CFR 5.59, the entity must be incorporated in the state of the home office of the investing institution. In addition, only federal or state-chartered savings associations with home offices in the state where the investing institution has its home office may invest in the service corporation.

Although 12 CFR 5.59 provides ownership and geographic restrictions for a first-tier service corporation, those requirements do not apply to lower-tier service corporations. Specifically, a service corporation may own a lower-tier service corporation that is chartered in another state or that has non-FSA investors, including national banks.

Under 12 USC 1828(m) and 12 CFR 5.59(h), an FSA is required to file a notice or application, as appropriate, with the OCC's Licensing Department before establishing or acquiring a new service corporation or before commencing a new activity in a service corporation or subsidiary, as defined at 12 CFR 5.59(d)(5). All filings must be made in accordance with the filing requirements outlined under 12 CFR 5.59(h). In describing the public welfare investment for purposes of notices to the OCC, an FSA should describe the purpose and types of planned community development activities in which the service corporation will engage and the geography that the service corporation will cover.9

Other FSA Legal Authorities for Community Development Finance 

The following opinions from the Office of Thrift Supervision address other community development activities that may apply to federal savings associations:

  • Letter dated November 12, 1992 (PDF) regarding the creation of a private foundation for charitable contributions by a federal savings association.
  • Letter dated March 28, 1996 (PDF) regarding the purchase of securities backed by community development loan pools by a federal savings association.

1 National banks and their subsidiaries may make direct or indirect investments designed primarily to promote the public welfare, consistent with 12 USC 24(Eleventh) and its implementing regulation, 12 CFR 24.

2 The CRA regulatory provisions applicable to national banks are codified at 12 CFR 25. The nearly identical regulatory provisions applicable to FSAs are codified at 12 CFR 195.

3 Under 12 CFR 163.170(c), an FSA is required to maintain complete and accurate records of all of its business transactions.

4 The standards for FSAs making community development investments under section 5(c)(3)(A) of the HOLA are explained in an opinion letter of the Chief Counsel of the OTS, dated May 10, 1995. This letter is still applicable to FSAs, with the following modifications based on application of law. First, at the time of the May 10, 1995 letter, the applicable statutory reference was section 5(c)(3)(B) of the HOLA. Subsequently, the statutory citation was changed to section 5(c)(3)(A) of the HOLA, Therefore, the letter now should be read to incorporate this citation change. Second, the May 10, 1995, letter included a standard that required an investing association that does not qualify for "expedited treatment" to provide notice to the appropriate OTS Regional Director before making the investment. The OCC, in 2015, integrated prior OTS regulations with OCC regulations to conform applicable rules and procedures for processing filings related to the corporate activities and transactions of national banks and FSAs. As part of this integration, the concept of "expedited treatment" was replaced by the concept of an "eligible savings association" as defined in 12 CFR 5.3(g). Under 12 CFR 5.13, an "eligible savings association" may receive expedited review of its filings. See OCC Bulletin 2015-28. Accordingly, the May 10, 1995 letter should be read to incorporate the "eligible savings association standard." Lastly, the reference to "OTS Regional Director" should be replaced with OCC Community Affairs Department.

5 The Small Cities Program refers to the state administration of CDBG funds to "nonentitlement areas," as defined in the Housing and Community Development Act of 1974. See 42 USC 5301 et seq. An FSA may invest in a limited partnership, limited liability company, or another type of community economic development entity (CEDE) that makes multiple investments in diverse locations. The OCC will not object to the FSA's investment in such a CEDE if the CEDE's investments that are outside a CDBG entitlement community, outside a non-entitlement community that has not been specifically excluded by the state in its statewide submission for CDBG funds, or outside an area that participates in the Small Cities Program, do not exceed 10 percent of all the CEDE's investments. In that situation, however, all of the investments of that CEDE must meet the other standards listed above.

6 This is consistent with the OCC's position that a national bank's public welfare investments should be structured in a manner that does not expose the bank to unlimited liability, under 12 CFR 24.4(b).

7 See 12 CFR 32.

8 Under 12 CFR 163.170(c), an FSA is required to maintain complete and accurate records of all of its business transactions.

9 Under 12 CFR 163.170(c), an FSA is required to maintain complete and accurate records of all of its business transactions.

National banks may make investments that are primarily designed to promote the public welfare under the investment authority in 12 USC 24 (Eleventh) (PDF) and the implementing regulation, 12 CFR 24. This authority allows banks to make investments if those investments primarily benefit low- and moderate-income individuals, low- and moderate-income areas, or other areas targeted by a government entity for redevelopment, or if the investments would receive consideration under 12 CFR 25.23 (the Community Reinvestment Act regulation) as a "qualified investment." Examples of public welfare investments include those supporting affordable housing and other real estate development, providing equity for start-up and small business expansion, and revitalizing or stabilizing a government-designated area.

If you need additional assistance, please call the Community Affairs Department at (202) 649-6420 or contact your District Community Affairs Officer.

Common 12 CFR 24 Questions and Answers

These questions and answers are listed here to provide guidance on national bank investments using the public welfare authority or other appropriate national bank authority.

National Bank Community Development Investment "At a Glance" Charts

The charts list national bank investments made under the 12 CFR 24 authority.

Other Resources

Community Development Investment Precedent Letters
The OCC posts its precedent setting community development investment letters in the Electronic Interpretations and Actions section of the OCC's website. These investments were made consistent with the 12 CFR 24 authority and reflect precedent setting actions that are consistent with the public welfare and other requirements of the regulation.

Quick Reference Guide to Public Welfare Investments (PDF)
The guide describes the guidelines for community development investments covered by 12 CFR 24. It gives an easy-to-follow list of requirements and examples of how banks make investments.

Regulation W Special Analysis: Impact on National Bank Community Development Corporations (CDC) (PDF)
The report provides guidance for national bank public welfare investments under 12 USC 24 (Eleventh) and 12 CFR 24 that: (1) present issues under sections 23A and 23B of the Federal Reserve Act, and (2) involve a holding company's transfer of an interest in its CDC to one or more subsidiary banks.

Public Welfare Investments Authority and Regulation

The OCC conducts best practice research and highlights examples of public welfare investments and community development best practices related to national bank and thrift investments. Those examples are described in the following Community Developments Fact Sheets, Community Developments Insights,Community Development Investments, and video.

Community Developments Fact Sheets on Public Welfare Investment and Related Investment Topics

Community Developments Insights Reports on Public Welfare Investment Topics

Community Developments Investments

Video