§ 25.21 - Evaluation of CRA performance in general.

§ 25.21 Evaluation of CRA performance in general.

(a) Application of performance tests and strategic plans —

(1) Large banks or savings associations. To evaluate the performance of a large bank or savings association, the appropriate Federal banking agency applies the Retail Lending Test in § 25.22, the Retail Services and Products Test in § 25.23, the Community Development Financing Test in § 25.24, and the Community Development Services Test in § 25.25.

(2) Intermediate banks or savings associations —

(i) In general. To evaluate the performance of an intermediate bank or savings association, the appropriate Federal banking agency applies the Retail Lending Test in § 25.22 and either the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2) or, at the bank's or savings association's option, the Community Development Financing Test in § 25.24.

(ii) Intermediate banks or savings associations evaluated under § 25.24. If an intermediate bank or savings association opts to be evaluated pursuant to the Community Development Financing Test in § 25.24, the appropriate Federal banking agency evaluates the intermediate bank or savings association for the evaluation period preceding the bank's or savings association's next CRA examination pursuant to the Community Development Financing Test in § 25.24 and continues evaluations pursuant to this performance test for subsequent evaluation periods until the bank or savings association opts out. If an intermediate bank or savings association opts out of the Community Development Financing Test in § 25.24, the appropriate Federal banking agency reverts to evaluating the bank or savings association pursuant to the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2), starting with the evaluation period preceding the bank's or savings association's next CRA examination.

(iii) Additional consideration. An intermediate bank or savings association may request additional consideration pursuant to § 25.30(b).

(3) Small banks or savings associations —

(i) In general. To evaluate the performance of a small bank or savings association, the appropriate Federal banking agency applies the Small Bank and Savings Association Lending Test in § 25.29(a)(2), unless the bank or savings association opts to be evaluated pursuant to the Retail Lending Test in § 25.22.

(ii) Small banks or savings associations evaluated under the Retail Lending Test. If a small bank or savings association opts to be evaluated pursuant to the Retail Lending Test in § 25.22, the following applies:

(A) The appropriate Federal banking agency evaluates the small bank or savings association using the same provisions used to evaluate intermediate banks or savings associations pursuant to the Retail Lending Test in § 25.22.

(B) The appropriate Federal banking agency evaluates the small bank or savings association for the evaluation period preceding the bank's or savings association's next CRA examination pursuant to the Retail Lending Test in § 25.22 and continues evaluations under this performance test for subsequent evaluation periods until the bank or savings association opts out. If a small bank or savings association opts out of the Retail Lending Test in § 25.22, the appropriate Federal banking agency reverts to evaluating the bank or savings association pursuant to the Small Bank and Savings Association Lending Test in § 25.29(a)(2), starting with the evaluation period preceding the bank's or savings association's next CRA examination.

(iii) Additional consideration. A small bank or savings association may request additional consideration pursuant to § 25.29(b).

(4) Limited purpose banks or savings associations —

(i) In general. The appropriate Federal banking agency evaluates a limited purpose bank or savings association pursuant to the Community Development Financing Test for Limited Purpose Banks and Savings Associations in § 25.26.

(ii) Additional consideration. A limited purpose bank or savings association may request additional consideration pursuant to § 25.26(b)(2).

(5) Military banks or savings associations —

(i) In general. The appropriate Federal banking agency evaluates a military bank or savings association pursuant to the applicable performance tests described in paragraph (a) of this section.

(ii) Evaluation approach for military banks or savings associations operating under § 25.16(d). If a military bank or savings association delineates the entire United States and its territories as its sole facility-based assessment area pursuant to § 25.16(d), the appropriate Federal banking agency evaluates the bank or savings association exclusively at the institution level based on its performance in its sole facility-based assessment area.

(6) Banks and savings associations operating under a strategic plan. The appropriate Federal banking agency evaluates the performance of a bank or savings association that has an approved strategic plan pursuant to § 25.27.

(b) Loans, investments, services, and products of operating subsidiaries and other affiliates —

(1) In general. In the performance evaluation of a bank or savings association, the appropriate Federal banking agency considers the loans, investments, services, and products of a bank's or savings association's operating subsidiaries and other affiliates, as applicable, as provided in paragraphs (b)(2) and (3) of this section, so long as no other depository institution claims the loan, investment, service, or product for purposes of this part or 12 CFR part 228 or 345.

(2) Loans, investments, services, and products of operating subsidiaries. The appropriate Federal banking agency considers the loans, investment, services, and products of a bank's or savings association's operating subsidiaries under this part, unless an operating subsidiary is independently subject to the CRA. The bank or savings association must collect, maintain, and report data on the loans, investments, services, and products of its operating subsidiaries as provided in § 25.42(c).

(3) Loans, investments, services, and products of other affiliates. The appropriate Federal banking agency considers the loans, investments, services, and products of affiliates of a bank or savings association that are not operating subsidiaries, at the bank's or savings association's option, subject to the following:

(i) The affiliate is not independently subject to the CRA.

(ii) The bank or savings association collects, maintains, and reports data on the loans, investments, services, or products of the affiliate as provided in § 25.42(d).

(iii) Pursuant to the Retail Lending Test in § 25.22, if a bank or savings association opts to have the appropriate Federal banking agency consider the closed-end home mortgage loans, small business loans, small farm loans, or automobile loans that are originated or purchased by one or more of the bank's or savings association's affiliates in a particular Retail Lending Test Area, the appropriate Federal banking agency will consider, subject to paragraphs (b)(3)(i) and (ii) of this section, all of the loans in that product line originated or purchased by all of the bank's or savings association's affiliates in the particular Retail Lending Test Area.

(iv) Pursuant to the Retail Lending Test in § 25.22, if a large bank or savings association opts to have the appropriate Federal banking agency consider the closed-end home mortgage loans or small business loans that are originated or purchased by any of the bank's or savings association's affiliates in any Retail Lending Test Area, the appropriate Federal banking agency will consider, subject to paragraphs (b)(3)(i) and (ii) of this section, the closed-end home mortgage loans or small business loans originated by all of the bank's or savings association's affiliates in the nationwide area when delineating retail lending assessment areas pursuant to § 25.17(c).

(v) Pursuant to the Community Development Financing Test in § 25.24, the Community Development Financing Test for Limited Purpose Banks and Savings Associations in § 25.26, the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2), or pursuant to an approved strategic plan in § 25.27, the appropriate Federal banking agency will consider, at the bank's or savings association's option, community development loans or community development investments that are originated, purchased, refinanced, or renewed by one or more of the bank's or savings association's affiliates, subject to paragraphs (b)(3)(i) and (ii) of this section.

(c) Community development lending and community development investment by a consortium or a third party. If a bank or savings association invests in or participates in a consortium that originates, purchases, refinances, or renews community development loans or community development investments, or if a bank or savings association invests in a third party that originates, purchases, refinances, or renews community development loans or community development investments, the appropriate Federal banking agency may consider, at the bank's or savings association's option, either those loans or investments, subject to the limitations in paragraphs (c)(1) through (3) of this section, or the investment in the consortium or third party.

(1) The bank or savings association must collect, maintain, and report the data pertaining to the community development loans and community development investments as provided in § 25.42(e), as applicable;

(2) If the participants or investors choose to allocate community development loans or community development investments among themselves for consideration under this section, no participant or investor may claim a loan origination, loan purchase, or investment for community development consideration if another participant or investor claims the same loan origination, loan purchase, or investment; and

(3) The bank or savings association may not claim community development loans or community development investments accounting for more than its percentage share (based on the level of its participation or investment) of the total loans or investments made by the consortium or third party.

(d) Performance context information considered. When applying performance tests and strategic plans pursuant to paragraph (a) of this section, and when determining whether to approve a strategic plan pursuant to § 25.27(h), the appropriate Federal banking agency may consider the following performance context information to the extent that it is not considered as part of the performance tests as provided in paragraph (a) of this section:

(1) Any information regarding a bank's or savings association's institutional capacity or constraints, including the size and financial condition of the bank or savings association, safety and soundness limitations, or any other bank-specific factors that significantly affect the bank's or savings association's ability to provide retail lending, retail banking services and retail banking products, community development loans, community development investments, or community development services;

(2) Any information regarding the bank's or savings association's past performance;

(3) Demographic data on income levels and income distribution, nature of housing stock, housing costs, economic climate, or other relevant data;

(4) Any information about retail banking and community development needs and opportunities provided by the bank or savings association or other relevant sources, including, but not limited to, members of the community, community organizations, State, local, and tribal governments, and economic development agencies;

(5) Data and information provided by the bank or savings association regarding the bank's or savings association's business strategy and product offerings;

(6) The bank's or savings association's public file, as provided in § 25.43, including any written comments about the bank's or savings association's CRA performance submitted to the bank or savings association or the appropriate Federal banking agency and the bank's or savings association's responses to those comments; and

(7) Any other information deemed relevant by the appropriate Federal banking agency.

(e) Conclusions and ratings —

(1) Conclusions. The appropriate Federal banking agency assigns conclusions to a large bank's or savings association's or limited purpose bank's or savings association's performance on the applicable tests described in paragraph (a) of this section pursuant to § 25.28 and appendix C to this part. The appropriate Federal banking agency assigns conclusions to a small bank's or savings association's or intermediate bank's or savings association's performance on the applicable tests described in paragraph (a) of this section pursuant to § 25.28 and appendices C and E to this part. The appropriate Federal banking agency assigns conclusions to a bank or savings association that has an approved strategic plan pursuant to § 25.28 and paragraph g of appendix C to this part.

(2) Ratings. The appropriate Federal banking agency assigns an overall CRA performance rating to a bank or savings association in each State or multistate MSA, as applicable, and for the institution pursuant to § 25.28 and appendices D and E to this part.

(f) Safe and sound operations. The CRA and this part do not require a bank or savings association to originate or purchase loans or investments or to provide services that are inconsistent with safe and sound banking practices, including underwriting standards. Banks and savings associations are permitted to develop and apply flexible underwriting standards for loans that benefit low- or moderate-income individuals, small businesses or small farms, and low- or moderate-income census tracts, only if consistent with safe and sound operations.

[89 FR 7165, Feb. 1, 2024, as amended at 89 FR 7167, Feb. 1, 2024]