Appendix D to Part 25 - —Ratings

Appendix D to Part 25—XXX

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25—Ratings

a. Ratings, in general. In assigning a rating, the appropriate Federal banking agency evaluates a bank's or savings association's performance under the applicable performance criteria in this part, pursuant to §§ 25.21 and 25.28. The agency calculates an overall performance score for each State and multistate MSA, as applicable pursuant to § 25.28(c), and for the institution. The appropriate Federal banking agency assigns a rating of “Outstanding,” “Satisfactory,” “Needs to Improve,” or “Substantial Noncompliance” for the bank's or savings association's performance in each State and multistate MSA, as applicable pursuant to § 25.28(c), and for the institution that is nearest to the overall performance score, as follows:

Performance score	Rating
8.5 or more	Outstanding.
4.5 or more but less than 8.5	Satisfactory.
1.5 or more but less than 4.5	Needs to Improve.
Less than 1.5	Substantial Noncompliance.

The appropriate Federal banking agency also considers any evidence of discriminatory or other illegal credit practices pursuant to § 25.28(d) and the bank's or savings association's past performance pursuant to § 25.28(e).

b. Large bank or savings association ratings at the State, multistate MSA, and institution levels. Subject to paragraph g of this appendix, the appropriate Federal banking agency combines a large bank's or savings association's performance scores for its State, multistate MSA, or institution-level performance under the Retail Lending Test in § 25.22, Retail Services and Products Test in § 25.23, Community Development Financing Test in § 25.24, and Community Development Services Test in § 25.25 to determine the bank's or savings association's rating in each State or multistate MSA, as applicable pursuant to § 25.28(c), and for the institution.

1. The appropriate Federal banking agency weights the performance scores as follows: Retail Lending Test (40 percent); Retail Services and Products Test (10 percent); Community Development Financing Test (40 percent); and Community Development Services Test (10 percent). The appropriate Federal banking agency multiplies each of these weights by the bank's or savings association's performance score on the respective performance test, and then adds the resulting values together to develop a State, multistate MSA, or institution-level performance score.

2. The appropriate Federal banking agency assigns a rating corresponding with the rating category that is nearest to the State, multistate MSA, or institution performance score using the table in paragraph a of this appendix.

Example D-1: A large bank received the following performance scores and conclusions in a State:

• On the Retail Lending Test, the bank received a 7.3 performance score and a corresponding conclusion of “High Satisfactory;”

• On the Retail Services and Products Test, the bank received a 6.0 performance score and a corresponding conclusion of “Low Satisfactory;”

• On the Community Development Financing Test, the bank received a 5.7 performance score and a corresponding conclusion of “Low Satisfactory;” and

• On the Community Development Services Test, the bank received a 3.0 performance score and a corresponding conclusion of “Needs to Improve.”

Calculating weights:

• For the Retail Lending Test, the weight is 40 percent (or 0.4);

• For the Retail Services and Products Test, the weight is 10 percent (or 0.1);

• For the Community Development Financing Test, the weight is 40 percent (or 0.4); and

• For the Community Development Services Test, the weight is 10 percent (or 0.1).

State Performance Score: Based on the illustration in this example D-1, the bank's State performance score is 6.1.

(0.4 weight × 7.3 performance score on the Retail Lending Test = 2.92) + (0.1 weight × 6.0 performance score on the Retail Services and Products Test = 0.6) + (0.4 weight × 5.7 performance score on the Community Development Financing Test = 2.28) + (0.1 weight × 3.0 performance score on the Community Development Services Test = 0.3).

State Rating: A State performance score of 6.1 is greater than 4.5 but less than 8.5, resulting in a rating of “Satisfactory.”

c. Intermediate bank or savings association ratings.

1. Intermediate banks or savings associations evaluated pursuant to the Retail Lending Test and the Community Development Financing Test. Subject to paragraph g of this appendix, the appropriate Federal banking agency combines an intermediate bank's or savings association's performance scores for its State, multistate MSA, or institution performance under the Retail Lending Test and the Community Development Financing Test to determine the bank's or savings association's rating in each State or multistate MSA, as applicable pursuant to § 25.28(c), and for the institution.

i. The appropriate Federal banking agency weights the performance scores as follows: Retail Lending Test (50 percent) and Community Development Financing Test (50 percent). The appropriate Federal banking agency multiplies each of these weights by the bank's or savings association's corresponding performance score on the respective performance test, and then adds the resulting values together to develop a State, multistate MSA, or institution performance score.

ii. The appropriate Federal banking agency assigns a rating corresponding with the rating category that is nearest to the State, multistate MSA, or institution performance score, using the table in paragraph a of this appendix.

iii. The appropriate Federal banking agency may adjust an intermediate bank's or savings association's institution rating where the bank or savings association has requested and received sufficient additional consideration pursuant to § 25.30(b)(2) and (3).

2. Intermediate banks or savings associations evaluated pursuant to the Retail Lending Test and the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2). The appropriate Federal banking agency combines an intermediate bank's or savings association's performance scores for its State, multistate MSA, or institution conclusions under the Retail Lending Test and the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2) to determine the bank's or savings association's rating in each State or multistate MSA, as applicable pursuant to § 25.28(c), and for the institution.

i. The appropriate Federal banking agency weights the performance scores as follows: Retail Lending Test (50 percent) and Intermediate Bank and Savings Association Community Development Test (50 percent). The appropriate Federal banking agency multiplies each of these weights by the bank's or savings association's corresponding performance score on the respective performance test, and then adds the resulting values together to develop a State, multistate MSA, or institution performance score. For purposes of this paragraph c.2.i, the performance score for the Intermediate Bank and Savings Association Community Development Test corresponds to the conclusion assigned, as follows:

Conclusion	Performance score
Outstanding	10
High Satisfactory	7
Low Satisfactory	6
Needs to Improve	3
Substantial Noncompliance	0

ii. The appropriate Federal banking agency assigns a rating corresponding with the rating category that is nearest to the State, multistate MSA, or institution performance score using the table in paragraph a of this appendix.

iii. The appropriate Federal banking agency may adjust an intermediate bank's or savings association's institution rating where the bank or savings association has requested and received sufficient additional consideration pursuant to § 25.30(b)(1) and (3).

d. Small bank or savings association ratings.

1. Ratings for small banks or savings associations that opt to be evaluated pursuant to the Retail Lending Test in § 25.22. The appropriate Federal banking agency determines a small bank's or savings association's rating for each State or multistate MSA, as applicable pursuant to § 25.28(c), and for the institution based on the performance score for its Retail Lending Test conclusions for the State, multistate MSA or institution, respectively.

i. The appropriate Federal banking agency assigns a rating corresponding with the rating category that is nearest to the State, multistate MSA, or institution performance score using the table in paragraph a of this appendix.

ii. The appropriate Federal banking agency may adjust a small bank's or savings association's institution rating where the bank or savings association has requested and received sufficient additional consideration pursuant to § 25.29(b)(2) and (3).

2. Ratings for small banks or savings associations evaluated under the Small Bank and Savings Association Lending Test pursuant to § 25.29(a)(2). The appropriate Federal banking agency assigns a rating for small banks or savings associations evaluated under the Small Bank and Savings Association Lending Test pursuant to § 25.29(a)(2) as provided in appendix E to this part.

e. Limited purpose banks or savings associations. The appropriate Federal banking agency determines a limited purpose bank's or savings association's rating for each State or multistate MSA, as applicable pursuant to § 25.28(c), and for the institution based on the performance score for its Community Development Financing Test for Limited Purpose Banks and Savings Associations conclusion for the State, multistate MSA, or the institution, respectively.

1. The appropriate Federal banking agency assigns a rating corresponding with the rating category that is nearest to the State, multistate MSA, or institution performance score, respectively, using the table in paragraph a of this appendix.

2. The appropriate Federal banking agency may adjust a limited purpose bank's or savings association's institution rating where the bank or savings association has requested and received sufficient additional consideration pursuant to § 25.26(b)(2).

f. Ratings for banks or savings associations operating under an approved strategic plan. The appropriate Federal banking agency evaluates the performance of a bank or savings association operating under an approved plan consistent with the rating methodology that is specified in the plan pursuant to § 25.27(g)(6). The appropriate Federal banking agency assigns a rating according to the category assigned under the rating methodology specified in the plan: “Outstanding,” “Satisfactory,” “Needs to Improve,” or “Substantial Noncompliance.”

g. Minimum performance test conclusion requirements.

1. Retail Lending Test minimum conclusion. An intermediate bank or savings association or a large bank or savings association must receive at least a “Low Satisfactory” Retail Lending Test conclusion at, respectively, the State, multistate MSA, or institution level to receive an overall State, multistate MSA, or institution rating of “Satisfactory” or “Outstanding.”

2. Minimum of “low satisfactory” overall conclusion for 60 percent of facility-based assessment areas and retail lending assessment areas.

i. Except as provided in § 25.51(e), a large bank or savings association with a combined total of 10 or more facility-based assessment areas and retail lending assessment areas in any State, multistate MSA, or for the institution, as applicable, may not receive a rating of “Satisfactory” or “Outstanding” in that State, multistate MSA, or for the institution unless the bank or savings association received an overall conclusion of at least “Low Satisfactory” in 60 percent or more of the total number of its facility-based assessment areas and retail lending assessment areas in that State or multistate MSA or for the institution, as applicable.

ii. Overall conclusion in facility-based assessment areas and retail lending assessment areas. For purposes of the requirement in paragraph g.2 of this appendix:

A. The appropriate Federal banking agency calculates an overall conclusion in a facility-based assessment area by combining a large bank's or savings association's performance scores for its conclusions in the facility-based assessment area pursuant to the Retail Lending Test in § 25.22, Retail Services and Products Test in § 25.23, Community Development Financing Test in § 25.24, and Community Development Services Test in § 25.25.

The appropriate Federal banking agency weights the performance scores as follows: Retail Lending Test (40 percent); Retail Services and Products Test (10 percent); Community Development Financing Test (40 percent); and Community Development Services Test (10 percent). The appropriate Federal banking agency multiplies each of these weights by the bank's or savings association's performance score on the respective performance test, and then adds the resulting values together to develop a facility-based assessment area performance score.

The appropriate Federal banking agency assigns a conclusion corresponding with the conclusion category that is nearest to the performance score, as follows:

Performance score	Conclusion
8.5 or more	Outstanding.
6.5 or more but less than 8.5	High Satisfactory.
4.5 or more but less than 6.5	Low Satisfactory.
1.5 or more but less than 4.5	Needs to Improve.
Less than 1.5	Substantial Noncompliance.

B. An overall conclusion in a retail lending assessment area is the retail lending assessment area conclusion assigned pursuant to the Retail Lending Test in § 25.22 as provided in appendix C to this part.

[89 FR 7165, Feb. 1, 2024

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