The Community Reinvestment Act (CRA) has been a cornerstone of banking regulation since 1977, requiring financial institutions to help meet the credit needs of the communities they serve—including low- and moderate-income neighborhoods. After years of debate, the CRA is undergoing significant modernization, with regulators rolling out updates designed to better reflect today’s banking environment. 

For banks and credit unions, this modernization effort means new opportunities, new challenges, and a renewed emphasis on documenting how your institution supports its community. 

Why CRA Modernization Matters 

Banking has changed dramatically in recent decades. Branch networks have evolved, mobile and online services have expanded, and consumer expectations have shifted. The updated CRA framework seeks to: 

• Provide more clarity and consistency in examinations. 

• Better account for digital delivery of banking services. 

• Place greater emphasis on community development activities. 

• Strengthen the link between bank performance and community impact. 

Key Changes Institutions Should Expect 

1. Assessment Areas Expand Beyond Branches
   Historically, CRA assessments focused heavily on branch locations. The new rules will take into account digital channels and lending activities outside of traditional branch networks, ensuring institutions are evaluated where they do business—not just where they are physically located. 
2. New Performance Metrics
   Regulators are introducing updated metrics and benchmarks to evaluate lending, investment, and service activities. This is intended to make CRA exams more objective and transparent, but it will require institutions to carefully track and analyze their data. 
3. Greater Focus on Community Development
   Activities such as affordable housing initiatives, small business lending, and partnerships with community-based organizations will play an even more significant role in CRA evaluations. Institutions will need to document not only what they are doing, but how those efforts create measurable community impact. 
4. Tailored Rules Based on Institution Size
   CRA modernization takes a more tailored approach, recognizing that smaller institutions may not have the same resources as large regional or national banks. Still, all institutions—regardless of size—will face increased expectations for transparency and accountability. 

Best Practices to Prepare 

• Review and Update Policies – Align internal CRA policies with the updated framework and ensure staff understand the changes. 

• Strengthen Data Collection – Invest in systems that can capture lending, investment, and service data across both physical and digital channels. 

• Engage Your Community – Build strong partnerships with local organizations and regularly seek feedback to ensure your efforts align with real community needs. 

• Train Staff at All Levels – From loan officers to senior management, make sure employees understand how CRA modernization affects their role. 

• Document Everything – Clear, well-documented records are critical for demonstrating compliance and impact during CRA examinations. 

Looking Ahead 

CRA modernization reflects a new era of accountability and transparency in banking. While the changes may feel complex, they also offer financial institutions a chance to showcase their commitment to community impact in a more meaningful way. By proactively adjusting policies, strengthening data practices, and engaging with local stakeholders, banks and credit unions can turn CRA modernization into an opportunity rather than a burden. 

At Brady Martz, our professionals are here to help financial institutions navigate these changes with confidence. From compliance reviews and policy updates to staff training and data analysis, we work alongside your team to ensure you’re well-positioned for success under the modernized CRA framework. 

For banks and credit unions, developing new products and services is a vital way to stay competitive, meet customer needs, and grow. But innovation comes with risk. Regulators continue to emphasize compliance with the prohibition against Unfair, Deceptive, or Abusive Acts or Practices (UDAAP), and institutions that fail to consider UDAAP risk during product and service due diligence can find themselves facing costly enforcement actions, reputational harm, and lost customer trust. 

At Brady Martz, we help financial institutions anticipate potential pitfalls before they become problems. As you evaluate new offerings or review existing ones, here are common UDAAP traps to keep in mind. 

Understanding UDAAP 

The Consumer Financial Protection Bureau (CFPB) and other regulators continue to make UDAAP compliance a top priority. UDAAP broadly prohibits financial institutions from engaging in practices that: 

• Unfairly cause harm to consumers that they cannot reasonably avoid. 

• Deceptively mislead consumers through inaccurate, incomplete, or unclear information. 

• Abusively take unreasonable advantage of consumers’ lack of understanding, reliance on an institution, or inability to protect their interests. 

Because the definitions are intentionally broad, due diligence is essential for identifying risks in every new or existing product or service. 

Potential UDAAP Traps in 2025 

1. Complex Fee Structures
   Even when fees are disclosed, overly complicated or poorly explained fee schedules can raise concerns. Consumers should be able to clearly understand what they will be charged and when. 
2. Digital-First Products
   As mobile and online banking solutions expand, disclosures must be just as clear and accessible as they would be in-person. Confusing interfaces, hard-to-find terms, or inconsistent language across platforms can create UDAAP exposure. 
3. Targeted Marketing
   Marketing materials that overstate benefits, omit material conditions, or fail to match the actual terms of the product are high-risk. This is especially true in marketing directed at vulnerable populations, such as students, seniors, or low-income households. 
4. Third-Party Partnerships
   Fintech collaborations, loan participations, or other vendor relationships often introduce hidden UDAAP risk. Institutions remain responsible for ensuring their partners follow the same compliance standards, making vendor due diligence critical. 
5. Servicing Practices
   Products may be designed well, but how they are serviced can create UDAAP issues. Delayed postings, inadequate complaint resolution, or inconsistent customer communications can all be flagged as abusive or unfair practices. 

Best Practices for Due Diligence 

• Conduct Thorough Reviews – Evaluate products from the customer’s perspective, ensuring disclosures are clear and that pricing and terms are easy to understand. 

• Test Communications – Review marketing materials, mobile apps, and online platforms for accuracy, clarity, and consistency. 

• Strengthen Vendor Oversight – Establish clear standards and monitoring processes for third-party providers. 

• Engage Compliance Early – Bring compliance professionals into the product development process before launch, not after. 

• Train Staff Continuously – Ensure employees at all levels understand UDAAP risks and are trained to spot potential concerns. 

Why It Matters 

Regulatory expectations around UDAAP remain high in 2025, and enforcement actions show that regulators are willing to act when institutions fall short. Proactively identifying and addressing UDAAP risks through product and service due diligence is not only about compliance—it’s about protecting your institution’s reputation and maintaining customer trust. 

Looking Ahead 

As financial products become more innovative and technology-driven, UDAAP risks will continue to evolve. By embedding due diligence into every stage of product design, rollout, and servicing, banks and credit unions can avoid costly traps while ensuring they deliver value in a fair, transparent, and responsible way. 

At Brady Martz, we guide financial institutions through product and service due diligence with a focus on compliance, risk management, and long-term success. Our professionals help you identify potential UDAAP concerns early, strengthen your oversight processes, and give your institution the confidence to innovate responsibly. 

The One Big Beautiful Bill (OBBB), enacted July 4, 2025, introduces several compelling tax, regulatory, and consumer finance changes that directly impact financial institutions. Here’s what you need to know—and act on.

1. Mortgage Lending: Permanent $750,000 Cap

The bill makes permanent the $750,000 cap on home mortgage indebtedness for individuals. While not as headline-grabbing as new deductions, this stability in the mortgage interest deduction should inform lending strategies and client communication moving forward.

Suggested Actions:

• Review mortgage product offerings to ensure alignment with the permanent cap.
• Update marketing materials to highlight long-term tax stability for borrowers.
• Train lending teams on how to position this change with clients.

2. Agricultural Real Estate Lending: 25% Interest Income Exclusion

OBBB adds Section 139L to the Internal Revenue Code, enabling qualified lenders to exclude 25% of interest income earned on new loans secured by rural or agricultural real estate, originated after July 4, 2025. This exclusion can create a meaningful pricing advantage in rural and ag markets.

Suggested Actions:

• Implement tracking systems for qualified ag loans in origination software.
• Consider lowering rates up to win competitive rural/ag deals.
• Educate loan officers and relationship managers on qualification criteria.

3. Qualified Business Income (QBI) Deduction Made Permanent

The bill permanently codifies the Qualified Business Income deduction of 20% for pass-through entities, greatly benefitting business-owner clients.

Suggested Actions:

• Develop targeted campaigns for business-owner clients highlighting tax savings.
• Collaborate with tax advisors to bundle financing and advisory offerings.
• Host educational webinars or events for pass-through business owners. 

4. “Trump Accounts” (Assumed Tax-Advantaged Accounts)

If OBBB introduced new tax-advantaged savings or investment vehicles—informally referred to as ‘Trump Accounts’—these may present novel product and advisory opportunities for institutions.

Suggested Actions:

• Monitor regulatory guidance closely to define compliant offerings.
• Plan pilot programs to test consumer interest and product fit.
• Integrate these accounts into broader wealth and savings strategies.

5. Bonus Depreciation & Section 179 Enhancements

OBBB permanently reinstates 100% bonus depreciation and raises the Section 179 expensing limit to $2.5 million. These incentives boost demand for equipment financing, particularly in capex-heavy industries.

Suggested Actions:

• Target commercial clients in manufacturing, agriculture, and construction.
• Create financing packages specifically tailored to asset acquisition timing.
• Train commercial lenders on tax-advantaged financing conversations.

6. Regulatory Relief for Mid‑Sized Institutions

The bill eases call‑report cycles, stress-testing thresholds, and capital treatment of some tax-advantaged assets for banks under $20 billion in assets. Specifically: 1) Slashed CFPB Funding Cap from 12% to approximately 5-6.5% – implying a trend towards more deregulation; and 2) postponed the implementation of the Small Business Lending Data Rule (Section 1071), which required detailed collection and reporting of small business lending data, significantly reducing the compliance burden on financial institutions.

Suggested Actions:

• Reassess compliance workflows to capitalize on new efficiencies.
• Explore reinvesting freed-up resources into lending or tech upgrades.
• Review capital planning in light of simplified treatment rules.

7. Green & Community Reinvestment (CRA/ESG) Enhancements

OBBB expands CRA eligibility for energy-efficient and affordable housing in federally designated green corridors, providing enhanced CRA credit.

Suggested Actions:

• Identify local projects eligible for enhanced CRA credit.
• Partner with municipalities and developers to co-lend on green projects.
• Adjust internal tracking to capture and report qualifying activity.

8. Expanded Lending Incentives

One of the most immediate impacts of the OBBB is the consumer interest deduction on auto and home improvement loans (up to $10,000 annually), available from 2025 through 2028. This provision is designed to stimulate domestic consumption and has clear implications for bank and credit union lending programs.

Suggested Action:

• Institutions should consider how to reposition their consumer loan marketing and underwriting criteria to capture increased demand—especially for U.S.-manufactured products and housing upgrades.

Financial institutions today face an increasingly complex regulatory landscape. From evolving consumer protection laws to heightened anti-money laundering (AML) requirements and cybersecurity mandates, compliance is more demanding than ever. At the same time, institutions must maintain strong profitability to remain competitive and continue serving their customers effectively. 

Striking the right balance between profitability and compliance is critical—and challenging. Failing to meet regulatory expectations can lead to costly fines, reputational damage, and operational setbacks. Conversely, over-investing in compliance without strategic alignment can strain resources and reduce profitability. 

In this article, we explore key considerations and best practices for financial institutions aiming to navigate the intersection of regulatory compliance and financial performance in 2025. 

Understanding the Regulatory Environment 

The regulatory framework for financial institutions continues to evolve rapidly. Key drivers include: 

• Increased Regulatory Scrutiny: Agencies like the Federal Reserve, OCC, and CFPB are enhancing oversight and enforcement, with a focus on consumer protection, data security, and financial stability. 

• AML and BSA Modernization: Updates to anti-money laundering rules emphasize risk-based approaches and improved information sharing. 

• Cybersecurity and Data Privacy: Institutions must safeguard sensitive customer data against increasingly sophisticated cyber threats. 

• Sustainability and ESG Reporting: Growing expectations around environmental, social, and governance transparency are influencing regulatory priorities. 

Staying current with these shifting requirements is a major task that demands both expertise and agility. 

The Profitability Challenge 

Profitability in financial institutions depends on efficient operations, prudent risk-taking, and customer-centric growth strategies. However, compliance obligations often require significant investments in technology, personnel, and process enhancements. This can increase operational costs and affect margins—particularly for smaller institutions with limited resources. 

The challenge lies in integrating compliance into the broader business strategy rather than treating it as a standalone cost center. 

Strategies to Balance Profitability and Compliance 

1. Adopt a Risk-Based Compliance Approach
   Tailoring compliance efforts to the institution’s unique risk profile allows for more efficient allocation of resources. Focus on high-risk areas while automating or streamlining lower-risk processes. 

1. Leverage Technology and Automation
   Investing in advanced compliance technologies—such as AI-driven transaction monitoring, automated reporting tools, and centralized risk management platforms—can reduce manual workload, improve accuracy, and lower costs over time. 

1. Enhance Cross-Functional Collaboration
   Compliance should not be siloed within a single department. Integrate compliance teams with risk management, finance, and operations to foster a holistic view of risks and opportunities. 

1. Continuous Training and Culture Building
   Promote a culture of compliance throughout the organization by providing regular training and emphasizing the strategic value of compliance in protecting the institution and its customers. 

1. Regularly Review and Optimize Processes
   Periodic assessments of compliance programs help identify inefficiencies and areas for improvement. Use insights from audits, exams, and internal reviews to fine-tune procedures. 

The Role of Leadership 

Leadership commitment is essential to balance profitability and compliance. Executives and boards must set clear expectations, allocate adequate resources, and champion compliance as a strategic priority—not just a regulatory necessity. 

Looking Ahead 

As regulatory complexity grows, financial institutions that successfully balance profitability and compliance will be better positioned for sustainable growth—achieving this balance requires ongoing effort, innovation, and strategic alignment. At Brady Martz, we understand these challenges and work closely with financial institutions to navigate regulatory requirements, optimize operations, and strengthen financial performance—providing tailored guidance and solutions that support long-term success in today’s evolving regulatory landscape. 

As the financial services industry continues to evolve, mergers and acquisitions (M&A) remain a key growth strategy for banks, credit unions, and other financial institutions looking to scale operations, expand geographic reach, or stay competitive in a tightening regulatory environment. 

In 2025, the M&A landscape is being shaped by rising interest rates, shifting customer expectations, rapid digitization, and mounting pressure to achieve operational efficiency. For many institutions, strategic consolidation presents both opportunity and risk—making careful planning more important than ever. 

What’s Driving M&A Activity in 2025? 

While overall M&A activity cooled slightly in 2024, the financial sector continues to see steady consolidation, particularly among community banks and credit unions. Several factors are contributing to this continued momentum: 

• Economic Pressures
  Persistent inflation, rising interest rates, and margin compression are prompting many institutions to look for scale. Merging can help reduce overhead, increase pricing power, and strengthen financial resilience. 

• Succession Planning Challenges
  Many smaller institutions are facing leadership transitions as longtime executives retire. Without clear internal successors, merging with a like-minded institution can ensure continued service to members or customers. 

• Regulatory Burden and Compliance Costs
  Keeping up with regulatory demands—especially around cybersecurity, anti-money laundering (AML), and capital adequacy—requires significant investment. M&A can help institutions share these costs and leverage more robust compliance infrastructure. 

• Technology Transformation
  The need to invest in digital banking platforms, data analytics, and automation continues to drive strategic mergers. Institutions often seek partners with complementary capabilities or systems to accelerate digital progress. 

Key Considerations for Financial Institutions Exploring M&A 

Mergers can unlock long-term value—but only when approached strategically. Here are a few best practices for institutions considering a transaction in today’s environment: 

1. Align on Culture and Mission 

Cultural alignment remains one of the most critical (and overlooked) elements in M&A. Successful integrations often hinge on shared values, communication styles, and approaches to customer service. Institutions should evaluate cultural compatibility early in the process to avoid friction later. 

2. Conduct Robust Due Diligence 

From loan portfolio performance and asset quality to cybersecurity protocols and vendor contracts, thorough due diligence is essential. Institutions must assess both financial health and operational readiness to uncover any red flags before moving forward. 

3. Evaluate Technology and Integration Readiness 

Integrating systems and platforms is often one of the most complex—and expensive—components of a merger. Institutions should map out how core banking systems, digital platforms, and data warehouses will be combined, and identify any gaps that need to be addressed post-merger. 

4. Communicate with Stakeholders Early and Often 

Transparent communication with employees, customers, regulators, and the community is vital. A well-crafted communications plan helps manage expectations and reduce uncertainty during the transition period. 

5. Plan for Regulatory Approval and Timelines 

Regulatory review remains a key step in any M&A deal. Institutions should prepare early by anticipating potential questions from federal and state agencies and ensuring all compliance documentation is in order. 

The Road Ahead: Growth Through Smart Consolidation 

As financial institutions adapt to economic headwinds and rising customer expectations, M&A continues to offer a strategic path forward—when executed with care. Institutions that approach consolidation with a focus on long-term value, stakeholder impact, and operational alignment are best positioned to navigate the complexities of the market and emerge stronger on the other side. 

At Brady Martz, our professionals work alongside financial institutions through every phase of the M&A process—from due diligence and financial modeling to regulatory support and integration planning. We understand the unique considerations facing banks and credit unions in today’s environment, and we’re here to help you navigate growth with confidence.