§ 25.29 - Small bank and savings association performance evaluation.

§ 25.29 Small bank and savings association performance evaluation.

(a) Small bank or savings association performance evaluation —

(1) In general. The appropriate Federal banking agency evaluates a small bank's or savings association's record of helping to meet the credit needs of its entire community pursuant to the Small Bank and Savings Association Lending Test as provided in paragraph (a)(2) of this section, unless the small bank or savings association opts to be evaluated pursuant to the Retail Lending Test in § 25.22.

(2) Small Bank and Savings Association Lending Test. A small bank's or savings association's retail lending performance is evaluated pursuant to the following criteria:

(i) The bank's or savings association's loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, other retail and community development lending-related activities, such as loan originations for sale to the secondary markets, community development loans, or community development investments;

(ii) The percentage of loans and, as appropriate, other retail and community development lending-related activities located in the bank's or savings association's facility-based assessment areas;

(iii) The bank's or savings association's record of lending to and, as appropriate, engaging in other retail and community development lending-related activities for borrowers of different income levels and businesses and farms of different sizes;

(iv) The geographic distribution of the bank's or savings association's loans; and

(v) The bank's or savings association's record of taking action, if warranted, in response to written complaints about its performance in helping to meet credit needs in its facility-based assessment areas.

(b) Additional consideration —

(1) Small banks or savings associations evaluated pursuant to the Small Bank and Savings Association Lending Test. The appropriate Federal banking agency may adjust a small bank or savings association rating from “Satisfactory” to “Outstanding” at the institution level where the bank or savings association requests and receives additional consideration for the following activities, without regard to whether the activity is in one or more of the bank's or savings association's facility-based assessment areas, as applicable:

(i) Making community development investments;

(ii) Providing community development services; and

(iii) Providing branches and other services, digital delivery systems and other delivery systems, and deposit products responsive to the needs of low- and moderate-income individuals, families, or households, residents of low- and moderate-income census tracts, small businesses, and small farms.

(2) Small banks or savings associations that opt to be evaluated pursuant to the Retail Lending Test in § 25.22. The appropriate Federal banking agency may adjust a small bank or savings association rating from “Satisfactory” to “Outstanding” at the institution level where the bank or savings association requests and receives additional consideration for activities that would qualify pursuant to the Retail Services and Products Test in § 25.23, the Community Development Financing Test in § 25.24, or the Community Development Services Test in § 25.25.

(3) Additional consideration for activities with MDIs, WDIs, and LICUs, and for providing low-cost education loans. Notwithstanding paragraphs (b)(1) and (2) of this section, a small bank or savings association may request and receive additional consideration at the institution level for activities with MDIs, WDIs, and LICUs pursuant to 12 U.S.C. 2903(b) and 2907(a) and for providing low-cost education loans to low-income borrowers pursuant to 12 U.S.C. 2903(d), regardless of the small bank's or savings association's overall institution rating.

(c) Small bank or savings association performance conclusions and ratings —

(1) Conclusions. Except for a small bank or savings association that opts to be evaluated pursuant to the Retail Lending Test in § 25.22, the appropriate Federal banking agency assigns conclusions for the performance of a small bank or savings association evaluated under this section as provided in appendix E to this part. If a bank or savings association opts to be evaluated pursuant to the Retail Lending Test, the appropriate Federal banking agency assigns conclusions for the bank's or savings association's Retail Lending Test performance as provided in appendix C to this part. In assigning conclusions for a small bank or savings association, the appropriate Federal banking agency may consider performance context information as provided in § 25.21(d).

(2) Ratings. For a small bank or savings association evaluated under the Small Bank and Savings Association Lending Test, the appropriate Federal banking agency rates the bank's or savings association's performance under this section as provided in appendix E to this part. If a small bank or savings association opts to be evaluated under the Retail Lending Test in § 25.22, the appropriate Federal banking agency rates the performance of a small bank or savings association as provided in appendix D to this part.

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