§ 228.27 - Strategic plan.

§ 228.27 Strategic plan.

(a) Alternative election. Pursuant to § 228.21, the Board evaluates a bank's record of helping to meet the credit needs of its entire community under a strategic plan, if:

(1) The Board has approved the plan pursuant to this section;

(2) The plan is in effect; and

(3) The bank has been operating under an approved plan for at least one year.

(b) Data requirements. The Board's approval of a plan does not affect the bank's obligation, if any, to collect, maintain, and report data as required by § 228.42.

(c) Plans in general —

(1) Term. A plan may have a term of not more than five years.

(2) Performance tests in plan.

(i) A bank's plan must include the same performance tests that would apply in the absence of an approved plan, except as provided in paragraph (g)(1) of this section.

(ii) Consistent with paragraph (g) of this section, a bank's plan may include optional evaluation components or eligible modifications and additions to the performance tests that would apply in the absence of an approved plan.

(3) Assessment areas and other geographic areas —

(i) Multiple geographic areas. A bank may prepare a single plan or separate plans for its facility-based assessment areas, retail lending assessment areas, outside retail lending area, or other geographic areas that would be evaluated in the absence of an approved plan.

(ii) Geographic areas not included in a plan. Any facility-based assessment area, retail lending assessment area, outside retail lending area, or other geographic area that would be evaluated in the absence of an approved plan, but is not included in an approved plan, will be evaluated pursuant to the performance tests that would apply in the absence of an approved plan.

(4) Operations subsidiaries and affiliates —

(i) Operations subsidiaries. The loans, investments, services, and products of a bank's operations subsidiary must be included in the bank's plan, unless the operations subsidiary is independently subject to CRA requirements.

(ii) Affiliates —

(A) Optional inclusion of other affiliates' loans, investments, services, and products. Consistent with § 228.21(b)(3), a bank may include loans, investments, services, and products of affiliates of a bank that are not operations subsidiaries in a plan, if those loans, investments, services, and products are not included in the CRA performance evaluation of any other depository institution.

(B) Joint plans. Affiliated depository institutions supervised by the same Federal financial supervisory agency may prepare a joint plan, provided that the plan includes, for each bank, the applicable performance tests that would apply in the absence of an approved plan. The joint plan may include optional evaluation components or eligible modifications and additions to the performance tests that would apply in the absence of an approved plan.

(C) Allocation. The inclusion of an affiliate's loans, investments, services, and products in a bank's plan, or in a joint plan of affiliated depository institutions, is subject to the following:

(1) The loans, investments, services, and products may not be included in the CRA performance evaluation of another depository institution; and

(2) The allocation of loans, investments, services, and products to a bank, or among affiliated banks, must reflect a reasonable basis for the allocation and may not be for the sole or primary purpose of inappropriately enhancing any bank's CRA evaluation.

(d) Justification and appropriateness of plan election —

(1) Justification requirements. A bank's plan must provide a justification that demonstrates the need for the following aspects of a plan due to the bank's business model (e.g., its retail banking services and retail banking products):

(i) Optional evaluation components pursuant to paragraph (g)(1) of this section;

(ii) Eligible modifications or additions to the applicable performance tests pursuant to paragraph (g)(2) of this section;

(iii) Additional geographic areas pursuant to paragraph (g)(3) of this section; and

(iv) The conclusions and ratings methodology pursuant to paragraph (g)(6) of this section.

(2) Justification elements. Each justification must specify the following:

(i) Why the bank's business model is outside the scope of, or inconsistent with, one or more aspects of the performance tests that would apply in the absence of an approved plan;

(ii) Why an evaluation of the bank pursuant to any aspect of a plan in paragraph (d)(1) of this section would more meaningfully reflect a bank's record of helping to meet the credit needs of its community than if it were evaluated under the performance tests that would apply in the absence of an approved plan; and

(iii) Why the optional performance components and eligible modifications or additions meet the standards of paragraphs (g)(1) and (2) of this section, as applicable.

(e) Public participation in initial draft plan development —

(1) In general. Before submitting a draft plan to the Board for approval pursuant to paragraph (h) of this section, a bank must:

(i) Informally seek suggestions from members of the public while developing the plan;

(ii) Once the bank has developed its initial draft plan, formally solicit public comment on the initial draft plan for at least 60 days by:

(A) Submitting the initial draft plan for publication on the Board's website and by publishing the initial draft plan on the bank's website, if the bank maintains one; and

(B)

(1) Except as provided in paragraph (e)(1)(ii)(B)(2) of this section, publishing notice in at least one print newspaper of general circulation (if available, otherwise a digital publication) in each facility-based assessment area covered by the plan; and

(2) For a military bank, publishing notice in at least one print newspaper of general circulation targeted to members of the military (if available, otherwise a digital publication targeted to members of the military); and

(iii) Include in the notice required under paragraph (e)(1)(ii) of this section a means by which members of the public can electronically submit and mail comments to the bank on its initial draft plan.

(2) Availability of initial draft plan. During the period when the bank is formally soliciting public comment on its initial draft plan, the bank must make copies of the initial draft plan available for review at no cost at all offices of the bank in any facility-based assessment area covered by the plan and provide copies of the initial draft plan upon request for a reasonable fee to cover copying and mailing, if applicable.

(f) Submission of a draft plan. The bank must submit its draft plan to the Board at least 90 days prior to the proposed effective date of the plan. The bank must also submit with its draft plan:

(1) Proof of notice publication and a description of its efforts to seek input from members of the public, including individuals and organizations the bank contacted and how the bank gathered information;

(2) Any written comments or other public input received;

(3) If the bank revised the initial draft plan in response to the public input received, the initial draft plan as released for public comment with an explanation of the relevant changes; and

(4) If the bank did not revise the initial draft plan in response to suggestions or concerns from public input received, an explanation for why any suggestion or concern was not addressed in the draft plan.

(g) Plan content. In addition to meeting the requirements in paragraphs (c) and (d) of this section, the plan must meet the following requirements:

(1) Applicable performance tests and optional evaluation components. A bank must include in its plan a focus on the credit needs of its entire community, including low- and moderate-income individuals, families, or households, low- and moderate-income census tracts, and small businesses and small farms. The bank must describe how its plan is responsive to the characteristics and credit needs of its facility-based assessment areas, retail lending assessment areas, outside retail lending area, or other geographic areas served by the bank, considering public comment and the bank's capacity and constraints, product offerings, and business strategy. As applicable, a bank must specify components in its plan for helping to meet:

(i) The retail lending needs of its facility-based assessment areas, retail lending assessment areas, and outside retail lending area that are covered by the plan. A bank that originates or purchases loans in a product line evaluated pursuant to the Retail Lending Test in § 228.22 or originates or purchases loans evaluated pursuant to the Small Bank Lending Test in § 228.29(a)(2) must include the applicable test in its plan, subject to eligible modifications or additions specified in paragraph (g)(2) of this section.

(ii) The retail banking services and retail banking products needs of its facility-based assessment areas and at the institution level that are covered by the plan.

(A) A large bank that maintains delivery systems evaluated pursuant to the Retail Services and Products Test in § 228.23(b) must include this component of the test in its plan, subject to eligible modifications or additions specified in paragraph (g)(2) of this section.

(B) A large bank that does not maintain delivery systems evaluated pursuant to the Retail Services and Products Test in § 228.23(b) may include retail banking products components in § 228.23(c) and accompanying annual measurable goals in its plan.

(C) A bank other than a large bank may include components of retail banking services or retail banking products and accompanying annual measurable goals in its plan.

(iii) The community development loan and community development investment needs of its facility-based assessment areas, States, or multistate MSAs, as applicable, and the nationwide area that are covered by the plan. Subject to eligible modifications or additions as provided in paragraph (g)(2) of this section:

(A) A large bank must include the Community Development Financing Test in § 228.24 in its plan.

(B) An intermediate bank must include either the Community Development Financing Test in § 228.24 or the Intermediate Bank Community Development Test in § 228.30(a)(2) in its plan.

(C) A limited purpose bank must include the Community Development Financing Test for Limited Purpose Banks in § 228.26 in its plan.

(D) A small bank may include a community development loan or community development investment component and accompanying annual measurable goals in its plan.

(iv) The community development services needs of its facility-based assessment areas served by the bank that are covered by the plan.

(A) A large bank must include the Community Development Services Test in § 228.25 in its plan, subject to eligible modifications or additions as provided in paragraph (g)(2) of this section, for each facility-based assessment area where the bank has employees.

(B) A bank other than a large bank may include a community development services component and accompanying annual measurable goals in its plan.

(2) Eligible modifications or additions to applicable performance tests —

(i) Retail lending.

(A) For a bank that the Board would otherwise evaluate pursuant to the Small Bank Lending Test in § 228.29(a)(2):

(1) A bank may omit, as applicable, the evaluation of performance criteria related to the loan-to-deposit ratio or the percentage of loans located in the bank's facility-based assessment area(s).

(2) A bank may add annual measurable goals for any aspect of the bank's retail lending.

(B) For a bank the Board would otherwise evaluate pursuant to the Retail Lending Test in § 228.22:

(1) A bank may add additional loan products, such as non-automobile consumer loans or open-end home mortgage loans, or additional goals for major product lines, such as closed-end home mortgage loans to first-time homebuyers, with accompanying annual measurable goals.

(2) Where annual measurable goals for additional loan products or additional goals for major product lines have been added pursuant to paragraph (g)(2)(i)(B)(1) of this section, a bank may provide different weights for averaging together the performance across these loan products and may include those loan products in the numerator of the Bank Volume Metric.

(3) A bank may use alternative weights for combining the borrower and geographic distribution analyses for major product line(s) or other loan products.

(ii) Retail banking services and retail banking products.

(A) A large bank may add annual measurable goals for any component of the Retail Services and Products Test in § 228.23.

(B) A large bank may modify the Retail Services and Products Test by removing a component of the test.

(C) A large bank may assign specific weights to applicable components in paragraph (g)(2)(ii)(A) of this section in reaching a Retail Services and Products Test conclusion.

(D) A bank other than a large bank may include retail banking services or retail banking products component(s) and accompanying annual measurable goals in its plan.

(iii) Community development loans and community development investments.

(A) A bank may specify annual measurable goals for community development loans, community development investments, or both. The bank must base any annual measurable goals as a percentage or ratio of the bank's community development loans and community development investments for all or certain types of community development described in § 228.13(b) through (l), presented either on a combined or separate basis, relative to the bank's capacity and should account for community development needs and opportunities.

(B) A bank may specify using assets as an alternative denominator for a community development financing metric if it better measures a bank's capacity.

(C) A bank may specify additional benchmarks to evaluate a community development financing metric.

(D) A small bank may include community development loans, community development investments, or both, and accompanying annual measurable goals in its plan.

(iv) Community development services.

(A) A bank may specify annual measurable goals for community development services activity, by number of activity hours, number of hours per full-time equivalent employee, or some other measure.

(B) A bank other than a large bank may include a community development services component and accompanying annual measurable goals in its plan.

(v) Weights for assessing performance across geographic areas. A bank may specify alternative weights for averaging test performance across assessment areas or other geographic areas. These alternative weights must be based on the bank's capacity and community needs and opportunities in specific geographic areas.

(vi) Test weights. For ratings at the State, multistate MSA, and institution levels pursuant to § 228.28(b) and paragraph g.2 of appendix D to this part, as applicable:

(A) A bank may request an alternate weighting method for combining performance under the applicable performance tests and optional evaluation components. In specifying alternative test weights for each applicable test, a bank must emphasize retail lending, community development financing, or both. Alternative weights must be responsive to the characteristics and credit needs of a bank's assessment areas and public comments and must be based on the bank's capacity and constraints, product offerings, and business strategy.

(B) A bank that requests an alternate weighting method pursuant to paragraph (g)(2)(vi)(A) of this section must compensate for decreasing the weight under one test by committing to enhance its efforts to help meet the credit needs of its community under another performance test.

(3) Geographic coverage of plan.

(i) A bank may incorporate performance evaluation components and accompanying annual measurable goals for additional geographic areas but may not eliminate the evaluation of its performance in any geographic area that would be included in its performance evaluation in the absence of an approved plan.

(ii) If a large bank is no longer required to delineate a retail lending assessment area previously identified in the plan as a result of not meeting the required retail lending assessment area thresholds pursuant to § 228.17, the Board will not evaluate the bank for its performance in that area for the applicable years of the plan in which the area is no longer a retail lending assessment area.

(iii) A bank that includes additional performance evaluation components with accompanying annual measurable goals in its plan must specify the geographic areas where those components and goals apply.

(4) Confidential information. A bank may submit additional information to the Board on a confidential basis, but the goals stated in the plan must be sufficiently specific to enable the public and the Board to judge the merits of the plan.

(5) “Satisfactory” and “Outstanding” performance goals. A bank that includes modified or additional performance evaluation components with accompanying annual measurable goals in its plan must specify in its plan annual measurable goals that constitute “Satisfactory” performance and may specify annual measurable goals that constitute “Outstanding” performance.

(6) Conclusions and rating methodology. A bank must specify in its plan how all elements of a plan covered in paragraphs (g)(1) through (5) of this section, in conjunction with any other applicable performance tests not included in an approved strategic plan, should be considered to assign:

(i) Conclusions. Pursuant to § 228.28 and appendix C to this part, the Board assigns conclusions for each facility-based assessment area, retail lending assessment area, outside retail lending area, State, and multistate MSA, as applicable, and the institution. In assigning conclusions under a strategic plan, the Board may consider performance context information as provided in § 228.21(d).

(ii) Ratings. Pursuant to § 228.28 and paragraph f of appendix D to this part, the Board incorporates the conclusions of a bank evaluated under an approved plan into its State or multistate MSA ratings, as applicable, and its institution rating, accounting for paragraph g.2 of appendix D to this part, as applicable.

(h) Draft plan evaluation —

(1) Timing. The Board seeks to act upon a draft plan within 90 calendar days after the Board receives the complete draft plan and other materials required pursuant to paragraph (f) of this section. If the Board does not act within this time period, the Board will communicate to the bank the rationale for the delay and an expected timeframe for a decision on the draft plan.

(2) Public participation. In evaluating the draft plan, the Board considers:

(i) The public's involvement in formulating the draft plan, including specific information regarding the members of the public and organizations the bank contacted and how the bank collected information relevant to the draft plan;

(ii) Written public comments and other public input on the draft plan;

(iii) Any response by the bank to public input on the draft plan; and

(iv) Whether to solicit additional public input or require the bank to provide any additional response to public input already received.

(3) Criteria for evaluating plan for approval.

(i) The Board evaluates all plans using the following criteria:

(A) The extent to which the plan meets the standards set forth in this section; and

(B) The extent to which the plan has adequately justified the need for a plan and each aspect of the plan as required in paragraph (d) of this section.

(ii) The Board evaluates a plan under the following criteria, as applicable, considering performance context information pursuant to § 228.21(d):

(A) The extent and breadth of retail lending or retail lending-related activities to address credit needs, including the distribution of loans among census tracts of different income levels, businesses and farms of different sizes, and individuals of different income levels, pursuant to §§ 228.22, and 228.29, as applicable;

(B) The effectiveness of the bank's systems for delivering retail banking services and the availability and responsiveness of the bank's retail banking products, pursuant to § 228.23, as applicable;

(C) The extent, breadth, impact, and responsiveness of the bank's community development loans and community development investments, pursuant to §§ 228.24, 228.26, and 228.30, as applicable; and

(D) The number, hours, and types of community development services performed and the extent to which the bank's community development services are impactful and responsive, pursuant to §§ 228.25 and 228.30, as applicable.

(4) Plan decisions —

(i) Approval. The Board may approve a plan after considering the criteria in paragraph (h)(3) of this section and if it determines that the bank has provided adequate justification for the plan and each aspect of the plan as required in paragraph (d) of this section.

(ii) Denial. The Board may deny a bank's request to be evaluated under a plan for any of the following reasons:

(A) The Agency determines that the bank has not provided adequate justification for the plan and each aspect of the plan as required pursuant to paragraph (d) of this section;

(B) The Board determines that evaluation under the plan would not provide a more meaningful reflection of the bank's record of helping to meet the credit needs of the bank's community;

(C) The plan is not responsive to public comment received pursuant to paragraph (e) of this section;

(D) The Board determines that the plan otherwise fails to meet the requirements of this section; or

(E) The bank fails to provide information requested by the Board that is necessary for the Board to make an informed decision.

(5) Publication of approved plan. The Board will publish an approved plan on the Board's website.

(i) Plan amendment —

(1) Mandatory plan amendment. During the term of a plan, a bank must submit to the Board for approval an amendment to its plan if a material change in circumstances:

(i) Impedes its ability to perform at a satisfactory level under the plan, such as financial constraints caused by significant events that impact the local or national economy; or

(ii) Significantly increases its financial capacity and ability to engage in retail lending, retail banking services, retail banking products, community development loans, community development investments, or community development services referenced in an approved plan, such as a merger or consolidation.

(2) Elective plan amendment. During the term of a plan, a bank may request the Board to approve an amendment to the plan in the absence of a material change in circumstances.

(3) Requirements for plan amendments —

(i) Amendment explanation. When submitting a plan amendment for approval, a bank must explain:

(A) The material change in circumstances necessitating the amendment; or

(B) Why it is necessary and appropriate to amend its plan in the absence of a material change in circumstances.

(ii) Compliance requirement. An amendment to a plan must comply with all relevant requirements of this section, unless the Board waives a requirement as not applicable.

(j) Performance evaluation under a plan —

(1) In general. The Board evaluates a bank's performance under an approved plan based on the performance tests that would apply in the absence of an approved plan and any optional evaluation components or eligible modifications and additions to the applicable performance tests set forth in the bank's approved plan.

(2) Goal considerations. If a bank established annual measurable goals and does not meet one or more of its satisfactory goals, the Board will consider the following factors to determine the effect on a bank's CRA performance evaluation:

(i) The degree to which the goal was not met;

(ii) The importance of the unmet goals to the plan as a whole; and

(iii) Any circumstances beyond the control of the bank, such as economic conditions or other market factors or events, that have adversely impacted the bank's ability to perform.

(3) Ratings. The Board rates the performance of a bank under this section pursuant to appendix D to this part.

[Reg. BB, 89 FR 7188, Feb. 1, 2024, as amended at 89 FR 22068, Mar. 29, 2024]