[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24323]
[[Page Unknown]]
[Federal Register: October 7, 1994]
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Part II
Department of the Treasury
Office of the Comptroller
12 CFR Part 25
Federal Reserve System
12 CFR Part 228
Federal Deposit Insurance Corporation
12 CFR Part 345
Department of the Treasury
Office of Thrift Supervision
12 CFR Part 563e
Community Reinvestment Act Regulations; Proposed Rule
Federal Reserve System
12 CFR Part 203
Home Mortgage Disclosure; Proposed Rule
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 25
[Docket No. 94-15]
RIN 1557-AB32
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R-0822]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 345
RIN 3064-AB27
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563e
[Docket No. 94-213]
RIN 1550-AA69
Community Reinvestment Act Regulations
AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS).
ACTION: Joint notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Office of Thrift Supervision, (collectively, the
Federal financial supervisory agencies or agencies) propose to revise
their regulations concerning the Community Reinvestment Act (CRA). The
agencies published a joint notice of proposed rulemaking on this issue
on December 21, 1993 (December proposal). The revised proposal
published today reflects comments received on the December proposal and
the agencies' further internal considerations.
The purpose of the CRA regulations is to implement the continuing
and affirmative obligation of regulated financial institutions to help
meet the credit needs of their communities, including low- and
moderate-income neighborhoods, consistent with safe and sound
operations and to provide guidance on how the agencies assess the
performance of institutions in meeting that obligation.
The revised proposal would provide guidance to financial
institutions on the nature and extent of their CRA obligation and the
methods by which the obligation will be assessed and enforced. The
proposed procedures seek to emphasize performance rather than process,
promote consistency in assessments, permit more effective enforcement
against institutions with poor performance, and reduce unnecessary
compliance burden while stimulating improved performance. As compared
to the December proposal, the revised proposal broadens the examination
of performance, more explicitly considers community development
activities, and makes other modifications and clarifications.
DATES: Comments must be received by November 21, 1994.
ADDRESSES:
OCC: Comments should be directed to: Communications Division, Office of
the Comptroller of the Currency, 250 E Street, SW., Washington, DC
20219, Attention: Docket No. 94-15. Comments will be available for
public inspection and photocopying at the same location.
BOARD: Comments should be directed to: William W. Wiles, Secretary,
Board of Governors of the Federal Reserve System, Docket No. R-0822,
20th Street and Constitution Avenue, NW., Washington, DC 20551.
Comments addressed to Mr. Wiles may also be delivered to Room B-2222 of
the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the
guard station in the Eccles Building courtyard on 20th Street, NW.
(between Constitution Avenue and C Street) at any time. Comments may be
inspected in Room MP-500 of the Martin Building between 9 a.m. and 5
p.m. weekdays, except as provided in 12 CFR 261.8 of the Board's rules
regarding the availability of information.
FDIC: Comments should be directed to: Robert E. Feldman, Acting
Executive Secretary, FDIC, 550 17th Street, NW., Washington, DC 20429.
They may be hand delivered to Room 402, 1776 F Street, NW., Washington,
DC between 8:30 a.m. and 4:30 p.m. on business days. They may be sent
by facsimile transmission to (202) 898-3838. Comments will be available
for public inspection at the FDIC Reading Room #7118 at 550 17th
Street, NW., Washington, DC between 9 a.m. and 4:30 p.m. on business
days.
OTS: Comments should be directed to: Director, Information Services
Division, Public Affairs, Office of Thrift Supervision, 1700 G Street,
NW., Washington, DC 20552, Attention: Docket No. 94-213. These
submissions may be hand delivered to 1700 G Street, NW. from 9 a.m. to
5 p.m. on business days; they may be sent by facsimile transmission to
FAX number (202) 906-7755. Submissions must be received by 5 p.m. on
the day they are due in order to be considered by the OTS. Comments
will be available for public inspection at 1700 G Street, NW., from 1
p.m. until 4 p.m. on business days. Visitors will be escorted to and
from the Public Reading Room at established intervals.
FOR FURTHER INFORMATION CONTACT:
OCC: Stephen M. Cross, Deputy Comptroller for Compliance, (202) 874-
5216; and Matthew Roberts, Director, Community and Consumer Law
Division, (202) 874-5200.
BOARD: Glenn E. Loney, Associate Director, Division of Consumer and
Community Affairs, (202) 452-3585; Scott G. Alvarez, Associate General
Counsel, Legal Division, (202) 452-3583; Robert deV. Frierson,
Assistant General Counsel, Legal Division, (202) 452-3711; and Leonard
N. Chanin, Managing Counsel, Division of Consumer and Community
Affairs, (202) 452-3667.
FDIC: Ken A. Quincy, Acting Assistant Director, Division of Compliance
and Consumer Affairs, (202) 898-6753; Bobbie Jean Norris, Chief, Fair
Lending Section, Division of Compliance and Consumer Affairs, (202)
898-6760; Robert Mooney, Fair Lending Specialist, Division of
Compliance and Consumer Affairs, (202) 898-3540; Ann Hume Loikow,
Counsel, Regulation and Legislation Section, Legal Division, (202) 898-
3796; and Sandy Comenetz, Counsel, Regulation and Legislation Section,
Legal Division, (202) 898-3582.
OTS: Timothy R. Burniston, Deputy Assistant Director for Policy, (202)
906-5629; Theresa A. Stark, Program Analyst, Specialized Programs,
(202) 906-7054; and Lewis A. Segall, Senior Attorney, Regulations and
Legislation Division, Chief Counsel's Office, (202) 906-6648.
SUPPLEMENTARY INFORMATION:
Introduction
The Federal financial supervisory agencies are jointly proposing to
revise their regulations implementing the CRA (12 U.S.C. 2901 et seq.).
The proposed regulations would replace the existing regulations in
their entirety.
The CRA is designed to promote affirmative and ongoing efforts by
regulated financial institutions to help meet the credit needs of their
entire communities, including low- and moderate-income neighborhoods,
consistent with safe and sound operations. Despite the CRA's notable
successes, bank and thrift industry, community, consumer and other
groups maintain that its full potential has not been realized, in large
part, because compliance efforts have focused on process rather than
performance.
In accordance with a request by the President, the Federal
financial supervisory agencies have undertaken a comprehensive effort
to reform their evaluation standards and examination procedures. The
proposed regulations would implement one part of this reform effort by
substituting a new system that would rate institutions based on their
actual performance in helping to meet community credit needs.
In addition to this rulemaking, the agencies will work together to
improve examiner training and to increase interagency coordination
regarding application of standards, performance of examinations,
assignment of ratings, and use of enforcement procedures. These efforts
should produce a CRA assessment process that is less burdensome for
many institutions yet yields better results for the local communities
the law is intended to benefit.
Background
In 1977, the Congress enacted the CRA to encourage banks and
thrifts to help meet the credit needs of low- and moderate-income
communities, consistent with safe and sound lending practices. In the
CRA, the Congress found that regulated financial institutions are
required to demonstrate that their deposit facilities serve the
convenience and needs of the communities in which they are chartered to
do business, and that the convenience and needs of communities include
the need for credit as well as deposit services. The CRA has come to
play an increasingly important role in improving access to credit among
under-served communities--both rural and urban--across the country.
Under the impetus of the CRA, many banks and thrifts opened new
branches, provided expanded services, and made substantial commitments
to increase lending to all segments of society.
Despite these successes, the CRA examination and enforcement system
has been criticized. Financial institutions have complained that policy
guidance from the supervisory agencies on the CRA is unclear and that
examination standards are applied inconsistently. Financial
institutions have also complained that the CRA examination process
encourages them to generate excessive paperwork at the expense of
providing loans, services, and investments.
Community, consumer, and other groups have agreed with the industry
that there are inconsistencies in CRA evaluations and current
examinations overemphasize process and underemphasize performance.
Community and consumer groups also have criticized the regulatory
agencies for failing to aggressively penalize banks and thrifts for
poor performance.
Believing that the CRA examination and enforcement process can be
improved, the President requested in July 1993 that the Federal
financial supervisory agencies reform the CRA examination and
enforcement system. The President asked the agencies to consult with
the banking and thrift industries, Congressional leaders, and leaders
of community-based organizations across the country to develop new CRA
regulations and examination procedures that ``replace paperwork and
uncertainty with greater performance, clarity, and objectivity.''
Specifically, the President asked the agencies to refocus the CRA
examination system on more objective, performance-based assessment
standards that minimize compliance burden while stimulating improved
performance. He also asked the agencies to develop a well-trained corps
of examiners who would specialize in CRA examinations. In undertaking
this effort, the President requested that the agencies promote
consistency and even-handedness, improve CRA performance evaluations,
and institute more effective sanctions against institutions with
consistently poor performance.
To implement the President's initiative, the four agencies held a
series of seven public hearings across the country in 1993. At those
hearings, the agencies heard from over 250 witnesses. Nearly 50 others
submitted written statements. The preamble to the December proposal
reviewed the results of those hearings.
The December Proposal
The December proposal (58 FR 67466) would have eliminated the
twelve assessment factors in the present CRA regulation and substituted
a performance-based evaluation system. Under the December proposal, a
financial institution would not have been assessed on its efforts to
meet community credit needs, nor on its methods for determining the
credit needs of its community. Rather, the agencies would have
evaluated institutions based on their actual lending, service, and
investment performance.
Generally, independent institutions with at least $250 million in
assets and affiliates of holding companies with at least $250 million
in bank and thrift assets would have been evaluated based on some
combination of lending, service, and investment tests. Institutions
would have had to report to the agencies and make available to the
public data on the geographic distribution of their loan applications,
denials, originations and purchases. Small banks and thrifts could have
elected to be evaluated under a streamlined method that would not have
required them to report this data. Every institution would have had the
option to have its performance evaluated based on a pre-approved
strategic plan that had been subjected to review and comment by
community-based organizations and the rest of the public. However, the
strategic plan option would not have relieved an institution of its
data reporting obligations.
There would have been five ratings--``outstanding,'' ``high
satisfactory,'' ``low satisfactory,'' ``needs to improve,'' and
``substantial noncompliance''--under each of the lending, investment,
and service tests so as to measure with more refinement the variations
in performance among institutions. The agencies proposed to have only
four overall ratings, however, as required by statute--``outstanding,''
``satisfactory,'' ``needs to improve,'' and ``substantial
noncompliance.''
The December proposal was originally published with a 60-day
comment period. This period was extended for 30 additional days in view
of the magnitude of the proposed changes, the complexity of the issues,
the level of interest in the subject, and delays resulting from the
holiday season (59 FR 5138). After considering the thousands of
comments received, the agencies produced the revised regulations
proposed today, which respond to suggestions in the comments while
preserving the December proposal's goal of emphasizing performance over
process.
Overview of Comments on the December Proposal
Collectively, the agencies received over 6700 comment letters on
the December proposal. The agencies received comment letters from
representatives of banks and thrifts, consumer and community groups,
Congress, state and local governments, and others as shown in the
following table:
Table of Comments Received
----------------------------------------------------------------------------------------------------------------
Letters from
banks, thrifts Letters from Letters from Letters
Agency and their consumer and government from Total
trade community entities others
associations groups
----------------------------------------------------------------------------------------------------------------
OCC....................................... 1329 253 78 153 1813
Board..................................... 1236 209 54 181 1680
FDIC...................................... 2002 219 71 82 2374
OTS....................................... 486 240 62 55 843
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The agencies reviewed and considered all of the above-described
comments concerning the December proposal. Comments are discussed in
greater detail in the section-by-section analysis of the revised
proposal. As a general matter, the vast majority of commenters
expressed support for the agencies' goal of developing more objective,
performance-based assessment standards that minimize burden while
stimulating improved performance. Many commenters believed that, under
the existing CRA regulations, the agencies focus too closely on
documentation of CRA performance and too little on actual performance.
These commenters felt the present documentation requirements are overly
burdensome. Many commenters also supported the agencies' goal of
ensuring consistency and evenhandedness among the agencies in CRA
evaluations. Commenters supported enhanced CRA examiner training to
increase consistency. While most commenters generally supported the
agencies' goals in amending their CRA regulations, many expressed
concern over some aspects of the December proposal.
The Revised Proposal
In General
The revised proposal retains, to a significant extent, the
principles and structure underlying the December proposal but makes
significant changes to the details in order to respond to many of the
concerns raised in the comments. Like the December proposal, the
revised proposal would eliminate the existing regulation's twelve
assessment factors and substitute a performance-based evaluation
system.
In order to take into account community characteristics and needs,
the revised proposal would make explicit the assessment context against
which the tests and standards set out in the proposed regulation would
be applied. This assessment context would include consideration of: (1)
Demographic data about the community; (2) information about community
characteristics and needs; (3) information about the institution's
capacity and constraints; (4) information about the institution's
product offerings and business strategy; (5) data on the prior
performance of the institution; and (6) data on the performance of
similarly-situated lenders. The agencies, rather than the institution,
would develop the assessment context for each institution. The agencies
will neither require nor request an institution to provide data for
this assessment context, although any data offered by an institution
would be considered.
As in the December proposal, the agencies would give particular
attention to the institution's record of helping to meet credit needs
in low- and moderate-income geographies. However, the revised proposal
would further emphasize the institution's performance with respect to
low- and moderate- income individuals, and other individuals and areas
where appropriate, given community characteristics and needs. The
agencies also have modified the definitions of low- and moderate-income
geographies in response to concerns that the definitions in the
December proposal were too low for high cost areas. Under the revised
proposal, the qualifying income levels would be adjusted to reflect
prevailing housing construction costs or significant anomalies in
family income levels. The agencies would make available annually a list
of qualifying income levels by geographic area.
The lending, service and investment tests would continue to
constitute the primary method by which the agencies would assess the
CRA performance of independent retail institutions with at least $250
million in assets and affiliates of holding companies with at least
$250 million in bank and thrift assets. However, the revised proposal
changes how an institution's ratings on the three tests would be
combined to produce the institution's overall composite rating. The
revised proposal would give primacy to lending performance by requiring
an institution to receive a ``satisfactory'' or better rating on the
lending test in order to receive a ``satisfactory'', or better, overall
rating. At the same time, the rating system would increase the
importance of the service and investment tests, because the effect of
those tests on the overall rating would no longer be limited to
situations in which an institution had extraordinarily strong or weak
performance on one of the tests.
The agencies also have made modifications to the details of the
lending, service and investment tests in order to broaden their scope.
Rather than rely presumptively on a few quantitative measures that
could then be adjusted or rebutted by other considerations, the tests
would be based from the outset on a broader range of quantitative and
qualitative criteria that would include both those criteria that formed
the basis for the presumptive ratings in the December proposal and
those additional considerations contained in the adjustment and
rebuttal sections of the December proposal. The revised proposal
therefore would not use rebuttable presumptions and adjustments.
These revisions to the lending, investment and service tests would
increase, rather than reduce, the number of judgments that examiners
would be required to make in the examination process. The agencies
believe that a CRA evaluation system eliminating all examiner judgment
would not be desirable, even if it were achievable. Preservation of
examiner judgment to take into account the characteristics and needs of
an institution's community and the capacity and constraints of the
institution is critical.
At the same time, the agencies believe that consistency in
evaluations, reduction in compliance burden, and focus on performance
are fully consistent with the necessary degree of examiner judgment.
The agencies believe that the revised proposal, which entails a series
of examiner decisions in reliance on detailed data concerning an
institution's actual lending, service and investment performance, would
provide the proper balance between objective analysis and subjective
judgment. In order to minimize unnecessary subjectivity, the agencies
have attempted to provide more guidance in the revised proposal as to
the standards that examiners would apply to make the required
judgments.
In addition to identifying the data that would form the basis for
their performance analysis, the information that would provide the
background assessment context, and the criteria that would guide the
assessments, the agencies have proposed detailed performance rating
profiles for each rating level of the lending, service, and investment
tests. An institution's performance need not fit every performance
aspect of the typical profile in order to receive a certain rating.
Exceptionally strong performance on some aspects can compensate for
weak performance on others. However, the institution would receive a
rating which is generally consistent with the institution's overall
performance on the various aspects of the profile.
The December proposal based its presumptive ratings on comparative
terms, for example whether an institution's qualified investments were
significant as compared to its capital, or whether an insignificant
percentage of an institution's branches were located in or readily
accessible to low- and moderate-income geographies in the institution's
service area. While many comments stated that these terms should be
further defined, few commenters, despite a specific request in the
December proposal, actually suggested what these definitions should be.
The ratings profiles in the current proposal continue to use
comparative terms, such as excellent, significant, and poor, without
further specification. Many comments agreed that the mechanical
application of numerical ratios would not foster fair and appropriate
CRA assessments. The agencies continue to believe, given the wide
diversity of institutions and communities, that it is inadvisable to
provide such specific numerical ranges or ratios. The agencies expect
the current proposal to increase the consistency and clarity of the
examination process. By identifying a set of performance-based
assessment criteria, and expanding the objective performance data
available to examinations, institutions and the public will be better
able to evaluate the basis on which examiner judgments are made. In
addition, by providing more detailed profiles that involve several
criteria, assessment under the current proposal will not turn on the
evaluation of a single factor.
The revised proposal also modifies the lending and service tests
for retail institutions to emphasize the importance of community
development activities in the assessments of performance under those
tests. In addition, the revised proposal replaces the investment test
with a community development test for wholesale or limited purpose
institutions. The proposal incorporates into this community development
test both community development lending and community development
services in addition to qualified investments. Therefore, under the
revised proposal, wholesale or limited purpose institutions would be
subject only to the community development test.
The revised proposal would reduce data reporting burdens by
streamlining reporting requirements to coincide more closely with
existing requirements and eliminating unnecessary reporting. The one
significant new data reporting requirement would be that small business
and small farm loan data reported to the agencies would include
information on the race and gender of small business and farm borrowers
to respond to concerns that the December proposal did not give enough
weight to the fair lending aspect of an institution's CRA performance.
This concern is also reflected in the revision of the provisions
regarding consideration of illegal discrimination to conform them more
closely to existing regulatory language.
Smaller banks and thrifts would continue to be evaluated under a
streamlined assessment method that would not require reporting of
additional lending data. However, the streamlined method would be the
presumptive method for evaluating small institutions and would be
applied to every qualifying institution unless the institution
affirmatively requests an alternative assessment method. The agencies
have also altered the description of the streamlined assessment method
in order to make clear that this assessment is not intended to operate
as an exemption from the CRA rules.
The streamlined assessment method would continue to focus on the
institution's loan-to-deposit ratio, degree of local lending, record of
lending to borrowers and geographies of different income levels, and
record of responding to complaints. The institution's fair lending
record would still be taken into account in assigning a final rating.
In response to comments, the agencies have eliminated the provision in
the December proposal that made a loan-to-deposit ratio of 60% or more
presumptively satisfactory. The revised proposal would consider an
institution's size, financial condition, and credit needs of its
service area in evaluating whether its loan-to-deposit ratio is
reasonable. The evaluation would further consider, as appropriate,
other lending-related activities, such as originations for sale on the
secondary market and community development lending and investment.
Every institution would continue to have the option to be evaluated
pursuant to a pre-approved strategic plan. The strategic plan option
would not relieve an institution from any reporting obligations that it
otherwise would have. The revised proposal clarifies, however, that
small institutions would not subject themselves to any data reporting
responsibilities by electing the strategic plan option. The agencies
also have provided more detail as to how the proposed strategic plan
option would operate in practice.
The revised proposal has eliminated provisions that some comments
interpreted as ``safe harbors'' from examination or enforcement action.
The revised proposal would not make substantive modifications to the
December provisions governing what types of institutions are subject to
the proposed regulations, although the agencies have clarified that
bankers banks would not be covered. The revised proposal continues to
provide that uninsured branches of foreign banks would not be covered
by the proposed regulations. However, the agencies are aware that the
Interstate Banking Efficiency Act would address the CRA coverage of
certain uninsured branches of foreign banks. Should this Act be signed
into law, the agencies would modify the revised proposal to reflect the
new legal requirements.
The December proposal would have made an institution with an
assigned rating of ``substantial noncompliance'' subject to an
enforcement action under 12 U.S.C. 1818. A number of commenters
questioned the legal authority of the agencies under the CRA to use
assigned ratings as the basis for an enforcement action. Other
commenters endorsed taking enforcement action against institutions with
poor CRA ratings.
The revised proposal includes the enforcement provisions from the
December proposal while the agencies continue to analyze the issues
raised by the comments. The agencies invite further comment on these
issues before issuing a final rule.
The Lending Test
The lending test in the December proposal would have evaluated--on
the basis of its performance in relation to other lenders subject to
CRA and on an independent basis--the extent to which a retail
institution was making loans in the low- and moderate-income portions
of its service area. The test would have evaluated an institution's
lending performance relative to other lenders by comparing the
institution's market share of housing, small business, small farm, and
consumer loans in the low- and moderate-income geographies of its
service area with its share of such loans in the other parts of its
service area. The test would have evaluated performance on an
independent basis by examining the ratio of reported loans made (both
number and amount) by the institution in the low- and moderate-income
geographies of its service area to the reported loans made throughout
its entire service area and the geographic distribution of its reported
loans across the low- and moderate-income geographies of its service
area.
At the election of the institution, the agencies would have
considered indirect loans under the lending test. Indirect loans were
defined to include loans made by third parties, such as lending
consortia, subsidiaries of the institution, non-chartered affiliates
funded by the institution, and other lenders that lent to low- and
moderate-income individuals or geographies and in which the institution
had made lawful investments. The agencies would have attributed
indirect loans to an institution in proportion to the size of the
institution's investment in or funding of the third party lender or
participation in the third party's loans, provided the institution
reported the indirect loans.
The December proposal would have made a distinction between the
ability of an institution to claim credit under the lending test for
indirect loans by its subsidiaries and funded non-chartered affiliates
and its ability to claim credit for indirect loans made by other
lenders. An institution would have been able to claim credit for
lending by its subsidiaries or non-chartered affiliates if the
institution either invested in the entity or made a loan to it. For
third party lenders, however, the institution would have been required
to make an investment in the entity (as opposed to making a loan to the
entity) in order to claim credit under the lending test for the third
party loans. The purpose of this distinction was to recognize the
unique relationship between an institution and its subsidiaries and
affiliates, and to give institutions and their parent corporations
greater flexibility to structure their lending as they saw fit.
While the foregoing factors would have served as the basis for a
rating under the lending test, the December proposal would have allowed
the agencies to adjust an institution's assessment upward, and, in
exceptional cases, downward. Upward adjustment might have been
warranted if the institution made, for example, a substantial amount of
loans requiring innovative underwriting or loans for which there was
special need, such as loans for multifamily housing construction and
rehabilitation, loans for start-up or very small businesses, loans to
community development organizations or facilities, or loans to very
low-income individuals and geographies. An institution's assessment
also could have been increased if it operated a ``second look'' program
to reevaluate loan applications that, based on an initial review, the
institution had planned to deny. On the other hand, a downward
adjustment could have been warranted if, for example, the quantitative
measures inaccurately portrayed the institution's actual lending to
low- or moderate-income geographies or individuals.
Commenters from both the banking industry and the public believed
the lending test contained in the December proposal was too narrow in
its focus. In particular, some believed the test gave insufficient
emphasis to community development lending and innovative underwriting.
Other commenters noted that the proposed lending test placed undue
emphasis on the location of the borrower rather than on the borrower's
individual characteristics (e.g., income). Some commenters believed the
December proposal would have given institutions a greater incentive to
make loans to high-income borrowers located in low-income geographies
than to make loans to low-income borrowers located in high-income
geographies.
In response to commenters who believed the December proposal
underemphasized the importance of community development lending, the
revised proposal would treat such lending as a principal component of
an institution's lending performance, not merely an adjustment factor.
The revised proposal also defines community development loans. Such
loans are loans (including lines of credit, commitments and letters of
credit) that address affordable housing or other community economic
development needs not being met by the private market, provided such
loans (1) Principally benefit low- or moderate-income individuals,
businesses or small farms with annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; (2) have not been reported or
collected by the bank or one of its affiliates as home mortgage loans,
small business loans, small farm loans, or consumer loans for CRA
purposes, unless the loans are for multifamily dwellings (as defined in
the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et seq.)
regulations); and (3) except in the case of a wholesale or limited
purpose bank, benefit the bank's service area(s) or a broader statewide
or regional area that includes the bank's service area(s). This
definition clarifies that community development loans deserving of
favorable consideration are those that fill a void left by the ordinary
operation of the private market. In addition, it is designed to prevent
double-counting of all loans except for multifamily housing loans,
which the agencies believe should be considered both in the
distribution analyses of an institution's home mortgage lending and for
evaluation of its community development lending in order to properly
evaluate the value of the loans for CRA purposes. Finally, the
definition also provides that an institution will get favorable
consideration for a community development loan if it is in the
institution's service area or is in a broader region that includes the
institution's service area. This broader geographic scope would
recognize the nature of some lending programs and consortia that
produce these loans. An institution would be evaluated based on the
number, amount, complexity, and innovativeness of its community
development loans.\1\
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\1\Examples of community development loans identified by the
agencies include, but are not limited to, loans to: borrowers in
support of affordable housing rehabilitation and contruction,
including construction and permanent financing of multifamily rental
property serving low- and moderate-income persons; not-for-profit
organizations serving primarily low- and moderate-income housing or
other community economic development needs; borrowers in support of
community facilities in low- and moderate-income areas or that
primarily benefit low- and moderate-income individuals; and
financial intermediaries including, but not limited to, Community
Development Financial Institutions (CDFIs), Community Development
Corporations (CDCs), minority- and women-owned financial
institutions, and low-income or community development credit unions
that primarily lend or facilitate lending in low- and moderate-
income areas or to low- and moderate-income individuals in order to
promote affordable housing and/or community economic development.
---------------------------------------------------------------------------
The agencies also have revised the lending test in response to
comments that the December proposal placed undue emphasis on the
geography of the borrower rather than on the borrower's individual
characteristics. Under the revised proposal, while the agencies would
continue to place a heavy emphasis on the geographic distribution of an
institution's lending, they also would consider favorably loans made to
low- and moderate-income individuals regardless of where the borrowers
reside. The agencies would evaluate the number and amount of home
mortgage loans to low-, moderate-, middle-, and upper-income
individuals; the number and amount of loans to small business and small
farms with annual revenues less than or equal to $1 million; the number
and amount of loans to small businesses and small farms by size of
loan; and, at the institution's option, the number and amount of
consumer loans to low-, moderate-, middle-, and upper-income
individuals. The revised proposal provides that distribution of
borrower characteristics would be examined with particular reference to
the institution's service area, but need not be limited to the
institution's service area. Institutions would receive favorable
consideration for lending to low- and moderate-income individuals and
small businesses and farms outside of their service area, so long as
they have not neglected these borrowers inside their service area. The
agencies have also created an assessment criterion regarding an
institution's use of innovative and flexible lending practices to
recognize those programs and products that might have been cause for
upward adjustments in the December proposal.
The agencies received numerous comments on the market share
component of the lending test. Many banks and thrifts felt the market
share test was misleading in that, among other things, it overlooked
loans by institutions that do not have any reporting obligations under
HMDA or CRA. Further, institutions could have had service areas that
overlapped partially, but not completely, in ways that would distort
the measurement of their lending performance under the test. Many also
were concerned that if one bank increased its market share, another
necessarily would lose market share; hence, the commenters suggested
that the market share test could promote a price war among institutions
trying to make loans in low- and moderate-income areas, potentially
leading to unsafe and unsound banking practices. Banks and thrifts
frequently stated that the lending test in the December proposal was a
form of credit allocation. On the other hand, many community groups and
government officials liked the market share test because it provided an
objective and quantitative standard for measuring an institution's CRA
performance. At the same time, a number of community groups expressed
concern that the formula did not take into account qualitative
differences among loans.
In light of these comments, the lending test has been modified. The
lending test would continue to give significant weight to the
geographic distribution of an institution's lending; and, as part of
the assessment context, examiners would consider, among other
considerations described earlier in this preamble, the performance of
other similarly-situated lenders where appropriate. In this regard,
examiners would use market share and other analyses to assist in
evaluating the geographic distribution of an institution's lending
where such analyses would provide accurate insight. However, the
proposed regulation does not require examiners to use any single type
of analysis, and would not link a particular market share ratio, or any
ratio, with a particular lending test rating.
In considering the geographic distribution of an institution's
loans, the agencies, under the revised proposal, would evaluate the
number and amount of an institution's loans in the low-, moderate-,
middle-, and upper-income geographies of the institution's service
area. They also would assess the dispersion of the institution's
lending throughout its service area. In response to concerns expressed
by some commenters that an institution might limit the size of its
service area to obtain a better performance rating, the revised
proposal would penalize an institution if too little of its lending
were made inside its service area.
While agreeing with the concept of including affiliate and third-
party lending at the institution's option, many industry commenters
criticized the December proposal--which would not have considered
lending by chartered or non-funded affiliates--as unduly restrictive
and inconsistent with the corporate funding practices of certain
institutions. Also, some community and consumer groups expressed
concern that institutions could use third-party lending to avoid their
direct lending obligations and, in effect, ``buy out'' of their CRA
obligations.
Like the December proposal, the revised proposal would allow
institutions, at their option, to include affiliate and third-party
lending in their lending record but would make certain changes to the
December proposal in this regard. First, the revised proposal would
consider indirect lending by any of an institution's affiliates--
regardless of whether the affiliate is chartered or how it is funded.
The revised proposal would not impose restrictions on the corporate
structures of institutions and their affiliates.
Second, the rules regarding the allocation of loans among
affiliates have been simplified. The revised proposal would also
include several new provisions designed to prevent an institution from
selectively including (or excluding) its affiliate lending. Under the
revised proposal, the agencies would evaluate an institution's
affiliate lending when assessing the institution's overall lending
performance, provided the institution (or its affiliate) chooses to
collect and report the data pertaining to such lending. If an
institution chooses to report some of its affiliate loans in a service
area for a particular lending category, such as home mortgages, or
small business loans, it would be required to report all of its
affiliate loans of that category for that specific service area. An
agency would be able to consider the lending of an institution's
affiliate, notwithstanding whether the institution wants the agency to
consider its affiliate lending, if the agency were to determine that
such lending is integral to the institution's business. An affiliate's
lending would be integral to an institution's business if the
institution's operations closely involve or support the marketing,
management, or other operation of the affiliate's lending. Lending
would not be considered integral to an institution's business merely
because the institution had a financial interest in the affiliate.
Third, the revised proposal would no longer allow an institution to
include third party loans with its direct and affiliate loans for
purposes of assessing the geographic distribution of the institution's
lending or the distribution of its lending across borrower
characteristics. Under the revised proposal, third party loans could be
attributed to an institution only if they meet the definition of
community development loans. This change responds to comments from
community and consumer groups who expressed concern that institutions
could use third-party lending to avoid their direct lending obligations
and, in effect, ``buy out'' of their CRA obligations. The revised
proposal also would operate to relieve third party lenders of the
burden of reporting the geographic location of their loans that could
have been placed on them by the December proposal.
The Investment Test
In the December proposal, retail institutions as well as wholesale
or limited purpose institutions would have been evaluated under the
investment test based on the amount of assets they had devoted to
``qualified investments'' in comparison to their risk-based capital.
The focus of the investment test would have been on the ultimate impact
of an institution's investment rather than the investment per se.
Therefore, qualified investments would not have been credited under the
test unless they had a demonstrable impact, e.g., in providing loans or
community development projects that benefit low- and moderate-income
individuals and geographies.
Qualified investments would have included lawful investments that
benefit low- and moderate-income geographies or individuals in an
institution's service area. Examples of such investments would have
included those: (1) in support of local affordable housing and
community, economic, or small business development; (2) in community
development financial institutions, community development corporations,
community development projects, small business investment companies
(including specialized small business investment companies), and
minority- and women-owned financial institutions and other community
development financial intermediaries; (3) in consortia or other
entities serving low- and moderate-income individuals and areas; and
(4) in state and local government agency housing bonds or state and
local government revenue bonds specifically aimed at helping low- and
moderate-income areas and individuals. Eligible grants and the donation
or sale on favorable terms of branches to minority- or women-owned
financial institutions also would have counted as qualifying
investments.
The agencies could have adjusted an institution's rating upward
under the investment test to take into account whether the
institution's investments were particularly innovative or met a special
need or whether the institution's activities in connection with the
investments were particularly complex or intensive. The agencies also
would have been able to adjust an institution's rating upward if the
institution had made a large amount of investments that would have been
qualified investments except that they failed to benefit the
institution's service area. Downward adjustments would have been
justified only in exceptional cases.
Commenters criticized several aspects of the proposal. Most
notably, many banking industry commenters expressed dissatisfaction
with the test's focus on the amount of qualified investments relative
to an institution's risk-based capital. They felt reliance on any such
investment-to-capital ratio would unfairly penalize well-capitalized
institutions. Community groups commented on various aspects of how the
term ``qualified investments'' was defined and the banking industry
criticized the restriction that qualified investments must benefit the
institution's service area.
The investment test in the revised proposal has been modified to
address the principal concerns raised in the comments. The reliance on
the ratio of qualified investments to risk-based capital has been
eliminated. Rather, under the revised proposal, the agencies would
focus on the dollar amount of the institution's qualified investments
(independent of the institution's capital), the innovativeness and
complexity of the qualified investments and their connection to credit
needs, and the institution's responsiveness to credit and community
economic development needs.
Further, the revised proposal clarifies the definition of
``qualified investments.''\2\ Qualified investments are lawful
investments, deposits, membership shares in a credit union, and grants
that primarily benefit low- or moderate-income individuals or
businesses or farms with under $1 million in annual revenues or that
qualify as small businesses under SBA regulations; and that address
affordable housing (including multifamily rental housing) or other
community economic development needs that are not being met in the
normal course of business by the private market. The agencies intend
the limitation regarding needs not being met by the private market to
exclude untargeted municipal bonds and standard mortgage-backed
securities. The revised proposal also would clarify that grants,
membership shares in a credit union, and other non-loan financial
support can qualify as qualified investments. Under the definition, a
qualified investment would not otherwise be disqualified because an
institution receives favorable treatment (for example as a tax
deduction or credit) for them under the Internal Revenue Code. In
addition, under the revised proposal, qualified investments no longer
would need to benefit an institution's service area, provided the
investments benefit a broader statewide or regional geographic area
that includes the institution's service area. This change would conform
with the broader geographic scope permitted for community development
loans discussed previously.
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\2\Examples of qualified investments identified by the agencies
include, but are not limited to, investments and grants: in or to
financial intermediaries (including, but not limited to CDFIs, CDCs,
minority- and women-owned financial institutions, and low-income or
community development credit unions) that primarily lend or
facilitate lending in low- and moderate-income areas or to low- and
moderate-income individuals in order to promote affordable housing
and/or community economic development; in support of organizations
engaged in affordable housing rehabilitation and construction,
including multifamily rental housing; in support of organizations
promoting small businesses, including Small Business Investment
Companies (SBICs), and specialized SBICs; in and to not-for-profit
organizations serving low- and moderate-income housing needs and/or
other community economic development needs; to support or develop
facilities that promote community economic development in low- and
moderate-income areas or for low- and moderate-income individuals,
such as day care facilities, in projects eligible for low-income
housing tax credits; in state and municipal obligations that
specifically support affordable housing or other community economic
development to benefit low- and moderate-income individuals or
areas; to not-for-profit organizations serving low- and moderate-
income housing and/or other community economic development needs,
such as home-ownership counseling, home maintenance counseling,
credit counseling, and other financial services education; and in or
to organizations supporting activities essential to the capacity of
low- and moderate-income individuals or geographies to utilize
credit or to sustain economic development.
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The revised proposal deletes the definition of small business from
the December proposal that some commenters criticized as too
complicated. Instead, the qualified investment and community
development loan definitions refer to investments and loans that
benefit businesses with annual revenues under $1 million or that would
qualify as small businesses under a Small Business Administration
program. The $1 million figure was chosen because it is used in
Regulation B to differentiate among borrowers for requirements
concerning adverse action notices and application retention. The new
proposed definitions also maintain a treatment of small business that
conforms to the SBA definitions, as required by law for federal
agencies.
As described more fully later in this preamble, under the revised
proposal, wholesale or limited purpose banks would be subject to
evaluation under the new community development test rather than under
the investment test.
The Service Test
The December proposal would have evaluated an institution's CRA
service performance primarily on the basis of the percentage of its
branches located in or readily accessible to low- and moderate-income
geographies. The percentage of branches that an institution would have
been expected to have in or readily accessible to low-and moderate-
income geographies in each service area would have depended, in part,
on the number of such geographies in the service area. Under the
December proposal, institutions would not have been required to expand
the size of their branching network or to operate branches at a loss.
The agencies would have been able to adjust an institution's
service record upward or downward to reflect more accurately its branch
service to lowor moderate-income geographies or individuals, but
downward adjustments would have been made only in exceptional cases. In
determining the appropriateness and degree of any adjustment, the
agencies would have considered: (1) the institution's record of opening
and closing branches; (2) whether branches--wherever located--were
actually serving low- and moderate-income individuals; (3) any
significant differences in the quality, quantity or types of services
offered to low- or moderate-income individuals or geographies; and (4)
similar factors. The agencies also could have adjusted an institution's
rating upward to reflect a strong record of providing or supporting
other services that promote credit availability for low- and moderate-
income individuals or geographies. Particular weight would have been
given to credit and home-ownership counseling, small and minority-owned
business counseling, low-cost check-cashing, and low-cost deposit
services.
The service test contained in the revised proposal would change the
service test contained in the December proposal in response to comments
received by the agencies. In crafting the December proposal, the
agencies were guided by a belief that ready access to branches is a
critical factor in the availability of credit and deposit services in a
community. However, many banking industry representatives commented
that the service test placed too much emphasis on ``brick and mortar''
branches (i.e., permanent staffed banking facilities). The commenters
noted that although branches are still valuable, present technology has
made the need for branches less imperative to the provision of banking
services. On the other hand, many consumer groups stressed that,
despite changes in technology, brick and mortar branches continue to
have symbolic and practical relevance to credit availability. A number
of commenters emphasized, however, that evaluations based on the mere
presence of brick and mortar facilities is not sufficient. Rather, the
agencies must consider the actual services that are provided.
In light of these comments, the agencies have decided to modify the
service test so that ``brick and mortar'' branches no longer would
serve as the overwhelming factor in assessing an institution's service
performance, although they still would receive prominent consideration.
Under the revised proposal, equal weight would be given to the actual
services provided to low- and moderate-income geographies.
Under the revised proposal, the agencies would evaluate an
institution's systems for delivering retail banking services (where the
term ``systems'' includes, among other things, branches, automated
teller machines (ATMs), loan production offices, banking by telephone
or computer, mobile branches, and bank-at-work or by-mail programs) by:
(1) assessing the distribution of the institution's branches and ATMs
among low-, moderate-, middle-, and upper-income geographies; (2)
reviewing the institution's record of opening and closing branches and
ATMs; (3) assessing the range of services provided in low-, moderate-,
middle-, and upper-income geographies; and (4) evaluating the
availability of alternative systems for delivering retail banking
services.
In addition, the agencies would evaluate the extent to which an
institution provides community development services and the
innovativeness and responsiveness of such services, given the needs of
the institution's community and the capacity and constraints of the
institution. The revised proposal defines community development
services as services that primarily benefit low- and moderate-income
individuals, businesses or farms with annual revenues less than or
equal to $1 million, or businesses or farms that qualify as small
businesses under a Small Business Administration program and that
address affordable housing (including multifamily rental housing) or
other community economic development needs that are not being met by
the private market.\3\
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\3\Examples of community development services would include,
among other things: providing technical expertise for not-for-profit
organizations serving low- and moderate-income housing needs and/or
economic growth and development, lending executives to organizations
facilitating affordable housing construction and rehabilitation and/
or development of affordable housing; providing credit counseling,
home buyers counseling, home maintenance counseling, and/or
financial planning to promote community economic development and
affordable housing, school savings programs, and other financial
services education; and offering lifeline deposit services, low-cost
or free government check cashing, or participating in an electronic
benefit transfer network.
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The Community Development Test for Wholesale or Limited Purpose
Institutions
Under the December proposal, wholesale or limited purpose
institutions were defined as insured depository institutions that are
in the business of extending credit to the public but do not make a
significant amount of reportable loans (i.e., home mortgage, consumer,
small farm and small business loans). These would have included
institutions that make primarily large commercial loans, as well as
credit card banks, and similar institutions. The December proposal
would have required an evaluation of the CRA performance of these
institutions primarily under the proposed investment test.
Performance under that test would have been measured based on the
amount of an institution's assets devoted to qualified investments as
compared to its risk-based capital. Qualified investments would have
consisted of lawful investments that benefited low- and moderate-income
geographies or individuals in an institution's service area, including
investments that supported local affordable housing and community,
economic, or small business development. Eligible grants and loans that
would have constituted a qualified investment also would have been
included within the investment test. In assigning the overall rating
for wholesale or limited purpose institutions, the institution's
investment test rating could have been increased one level for
outstanding performance and decreased one level for a ``substantial
noncompliance'' rating on the service test.
In light of the comments received, the revised proposal would
replace the investment test with the community development test as the
primary test for wholesale or limited purpose institutions. A number of
commenters considered the investment test too narrowly focused to use
as a tool for assessing the CRA performance of wholesale or limited
purpose institutions and suggested replacing the test with a test that
focused on community development activities more generally.
The community development test in the revised proposal would focus
on a wholesale or limited purpose institution's record in helping to
meet the credit needs of its service area through qualified
investments, community development lending, and community development
services. In general, these community development-related activities
would be similar to the community development aspects of the lending
and service tests, and would adopt the definition of qualified
investments used in the investment test in the revised proposal. The
community development test also would consider small business and small
farm loans as well as loans to low- and moderate-income individuals and
geographies as community development loans, whether or not reported or
collected under the data collection requirements of the revised
proposal.
Several commenters believed the December proposal's definitions of
wholesale or limited purpose institutions did not clearly distinguish
between these types of institutions and retail institutions. Some
commenters also suggested that these institutions be permitted to
conduct a certain amount of incidental retail lending without losing
their wholesale or limited purpose institution status. Several comments
suggested that an institution should have the opportunity to confirm
its status as a wholesale or limited purpose institution with the
agencies in advance of being examined.
In response to these comments, the revised proposal would clarify
which institutions would be considered wholesale or limited purpose
institutions for purposes of CRA. The definition for institutions
eligible for wholesale or limited purpose designation would be as
follows: (1) wholesale institutions are institutions that are not in
the business of extending home mortgage, small business, small farm, or
consumer loans to retail customers; and (2) limited purpose
institutions are institutions that offer only a narrow product line
(such as credit cards or automobile loans) to a national or regional
market. An institution would not be considered in the business of
extending loans to retail customers if it does not hold itself out to
the retail public as providing such loans and the institution's
revenues from extending such loans are insignificant when compared to
its overall lending operations. An institution could conduct some
incidental retail lending if the retail activity would not cause the
institution to exceed these limitations. However, a so-called ``niche
institution'' (an institution that is in the business of lending to the
public but which specializes in certain types of retail loans or
extending credit to a class of borrowers with, for example, certain
financial or professional characteristics) would not generally qualify
as a wholesale or limited purpose institution.
The revised proposal also would require an institution that elects
to be evaluated as a wholesale or limited purpose institution to file a
written request with the appropriate agency and receive confirmation of
its status before the commencement of the examination. The agencies
will issue guidelines regarding how long in advance of a scheduled
examination an institution must file its request, and under what
circumstances an institution will have to reapply to retain wholesale
or limited purpose status. An institution whose request for wholesale
or limited purpose status has been denied by the appropriate agency
would be evaluated under the tests applicable to retail institutions,
small institutions, or an institution with approved strategic plans, as
appropriate.
The OTS did not include provisions for wholesale or limited purpose
thrifts in its version of the December proposal. In response to
comments, the OTS's revised proposal includes provisions that would
allow thrifts the opportunity to request designation as a wholesale or
limited purpose institution.
Small Institution Assessment Option
The December proposal would have offered small banks and thrifts
the option of choosing to be evaluated under a streamlined assessment
method. The regulations would not have imposed upon small institutions
the data collection requirements imposed on other institutions. The
agencies stressed in the preamble to the December proposal that,
notwithstanding the different assessment methods, examinations of small
banks and thrifts would have been meaningful examinations and would not
have been implemented as de facto exemptions.
Small banks and thrifts were defined in the December proposal as
independent institutions with assets of less than $250 million or
members of holding companies the total banking and thrift assets of
which are less than $250 million. A small institution's CRA rating
under the December proposal would have been based primarily on its
lending record. An institution would have been presumed to receive a
``satisfactory'' rating if it had a reasonable loan-to-deposit ratio,
made the majority of its loans locally, had a good loan mix (i.e., made
a variety of loans to the extent permitted by law and regulation and
lent across economic levels), had no legitimate, bona-fide complaints
from community members, had not committed an isolated act of illegal
discrimination of which it had knowledge that it had not corrected
fully or was not in the process of correcting fully, and had not
engaged in a pattern or practice of illegal discrimination that it had
not corrected fully. If an institution was required to report loans
under the HMDA, the institution also would have been required to have a
reasonable geographic distribution of reported loans.
A small institution that met each of the standards for a
``satisfactory'' rating and exceeded some or all of those standards
could have received an overall rating of ``outstanding'' depending on
the degree to which it exceeded the criteria for a ``satisfactory''
rating and, at its option, its record of making qualified investments
and its record of providing services. If a small institution failed to
meet or exceed all of the standards for a ``satisfactory'' rating, the
relevant agency would have conducted a more extensive examination of
the institution, including, at the option of the institution, an
examination of its investment and service performance. Also, if a small
institution operated in more than one service area, the relevant agency
would have evaluated the institution's performance in all of those
service areas.
Many community and consumer group commenters asked the agencies to
eliminate the small institution assessment method because they believed
that it would operate as an exemption for qualifying institutions.
However, many banks and thrifts, as well as the weight of Congressional
comments, supported the streamlined approach. The agencies have
retained the streamlined assessment method as modified in the revised
proposal. The agencies also have retained the December proposal's
exemption of small institutions from the new data collection and
reporting requirements for small business, small farm and community
development loans, although the agencies have clarified that small
institutions would not be subjected to those requirements because they
request to be evaluated under the strategic plan assessment option.
The agencies reiterate, however, that they do not intend by the
proposal to exempt small institutions from the CRA or subject them to a
less demanding standard of performance. The revised proposal has been
redrafted so that the format of the small institution approach is more
straightforward. The revised proposal first states the criteria that
the agencies would use to assess the performance of a small
institution, and then describes the performance levels that correspond
to satisfactory performance. As under the tests for large retail
institutions, the agencies have eliminated the structure of rebuttable
presumptions and have proposed a rating profile. A small institution's
performance need not fit every aspect of the rating profile describing
``satisfactory'' performance for it to receive that rating.
Exceptionally strong performance on some aspects can compensate for
weak performance on others provided the institution's overall
performance is consistent with the rating profile. Small institutions
that do not meet the standards for a ``satisfactory'' record would be
given the appropriate rating without the necessity of a ``closer
review.''
Some commenters expressed concern that under the December proposal
an institution would be required to affirmatively elect to be examined
under the streamlined assessment method and suggested that the
streamlined method be the default examination procedure unless a
qualifying institution elects another assessment method. The agencies
agree and have drafted the revised proposal accordingly.
Commenters representing holding companies and small institutions
that are affiliates of holding companies with total banking and thrift
assets over $250 million urged that the $250 million asset limit take
into consideration only the assets of the subject bank or thrift and
not the aggregate amount of bank and thrift assets held by the holding
company or, alternatively, that the asset limit be raised. Many
community and governmental groups, on the other hand, believed that the
asset limit should be lowered. After considering all of the comments,
the agencies have decided to retain the definition of small institution
set forth in the December proposal. No compelling evidence was
presented to support a change of the asset limit. Further, the revised
proposal reflects the notion that the CRA performance of a small
independent institution or small affiliate institution of a small
holding company should be measured against different standards than a
small institution affiliate of a larger holding company. The
consideration of assessment context added in the revised proposal will
permit the agencies to make this differentiation. The larger holding
company could be expected to provide support and assistance to a degree
not available to a small independent institution or to an affiliate
institution of a small holding company.
Many commenters from small institutions criticized the presumption
in the December proposal that a 60% loan-to-deposit ratio was
reasonable. These commenters pointed out that economic conditions,
institutional capacity and other constraints may result in loan-to-
deposit ratios significantly below this figure. Although the agencies
did not intend the December proposal to suggest that a loan-to-deposit
ratio below 60% would have been presumed less than reasonable, the
agencies have eliminated the use of any fixed percentage. Instead, the
revised proposal would require that an institution's loan to deposit
ratio, adjusted for seasonal variation and, as appropriate, other
lending related activities, must be reasonable given the institution's
size, financial condition, and the credit needs of its service area.
The adjustment for lending related activities, such as secondary market
sales and community development lending and investment, is new in the
revised proposal. This provision responds to concerns that institutions
that package and sell their loans would be disadvantaged, compared to
portfolio lenders, by a strict loan-to-deposit ratio test. The proposed
adjustment also addresses concerns raised by commenters that the small
institution assessment method in the December proposal would have
ignored the community development lending performance of small
institutions.
Many industry commenters also criticized the requirement in the
December proposal that, to be presumed to be performing satisfactorily,
an institution would have needed a good loan mix, which would have
included offering, to the extent permitted by law, a variety of loans
to customers across economic levels. These commenters were concerned
that an institution would have been required to offer all permissible
loan products to all customers. The agencies agree that the focus on
the types of products offered was inconsistent with the tenor of the
proposed regulation as a whole and have altered the criterion in the
revised proposal to eliminate any requirement concerning the types of
products that an institution offers. The revised proposal would retain
the aspect of the criterion focussing on lending to customers across
economic levels.
In a related change, the revised proposal would broaden the
criterion in the December proposal concerning the distribution of loans
by institutions required to report loan data under HMDA. The revised
proposal would explicitly provide that the agencies would consider the
geographic distribution of loans of all small institutions, not just
these subject to HMDA. The agencies believe this consideration was
implicit in the December proposal, which required lending across
economic levels. In any event, the agencies do not intend this change
to result in any increased documentation burden on small institutions.
The geographic analysis would be performed by the agencies' examiners
and would not be required of the institutions.
The agencies also received comments questioning the meaning of the
criterion in the December proposal focussing on the complaint record of
small institutions. Because of concerns by commenters that a
``legitimate, bona- fide complaint'' was not adequately defined, the
agencies have now proposed a criterion that would focus on the
institution's record of taking appropriate action, as warranted, in
response to written complaints about its CRA performance.
Many commenters expressed concern that the December proposal was
unclear regarding the circumstances under which a small institution
could have earned an ``outstanding'' or less than ``satisfactory''
rating. The changes in the revised proposal clarify and conform the
treatment of small banks to the requirement proposed for large retail
institutions--that lending performance must be ``satisfactory'' for an
institution to receive an overall satisfactory rating. Under the
revised proposal, the agencies would consider a small institution's
investment and service performance in order to determine whether it is
eligible for an ``outstanding'' rating. Strong investment or service
performance could help boost a small institution's rating to the
``outstanding'' level. Poor investment or service performance would not
lower a small institution's rating below ``satisfactory'' but could
prevent the institution from receiving an ``outstanding'' rating. The
agencies would not consider investment and service performance to
offset less than ``satisfactory'' performance by a small institution on
the basic assessment criteria.
The revised proposal also reflects minor changes to clarify the
treatment of small institutions. The agencies have eliminated the
criterion in the December proposal relating to discrimination because
the issue is addressed in the section on the assignment of overall
ratings. In addition, consistent with the changes in the proposal for
large institutions, the discussion of the examination procedures for
small institutions with multiple service areas has been eliminated.
Strategic Plan Assessment
The December proposal would have provided that, as an alternative
to being rated under the lending, service, and investment tests, or the
small institution assessment standards, an institution could submit to
its supervisory agency for approval a strategic plan detailing how the
institution proposed to meet its CRA obligation. The December proposal
would have required that the plan be submitted three months in advance
of its effective date, and that the institution solicit public comment
on the plan at the time the plan is submitted to the agency. No plan
would have been approved unless it provided measurable goals for
proposed performance and those goals constituted at least satisfactory
performance under the standards of the regulation. No plan could have
had a term beyond two years, and the institution could have petitioned
the agency to amend the plan on the grounds that a material change of
circumstances made the plan no longer appropriate. The agency would
have assessed the CRA performance of the institution under the plan. If
the institution failed to meet or exceed the preponderance of its
goals, its performance would have been evaluated against the lending,
service and investment tests or the small institution assessment
method, as applicable. The preamble to the December proposal stated
that an institution operating under an approved strategic plan would
not be relieved of its obligation to report data under the regulation.
The concerns regarding the strategic plan option most consistently
raised by the comments were the December proposal's lack of details
concerning important aspects of how the plan option would operate and
the nature of public input into the process. The revised proposal would
provide substantially more detail about the operation of the plan
option than the December proposal, and would modify the December
proposal in other respects as well. In the revised proposal, the
agencies have attempted to provide a real alternative to the standard
lending, investment, and service tests through the strategic plan
option, while assuring that those operating under a plan are subject to
a CRA assessment that is no less stringent and performance-based than
the proposed standard tests.
The revised proposal would substantially revise the provisions in
the December proposal regarding public participation in the plan
process. An institution would be required to informally seek
suggestions from the public while developing the plan. Once the
institution had developed the plan, the institution would be required
to formally solicit public comment on the plan for at least 30 days.
The agencies have decided not to extend the minimum comment period to
avoid unduly lengthening the plan process. After the comment period,
the institution would submit the plan to its regulator, along with any
comments received, and, if the plan was revised in light of the
comments received, the plan in the form released for public comment.
Under the revised proposal, a submitted plan would be approved if the
agency fails to act on the plan within 60 days after submission, unless
the agency extended the review period for good cause. Until a plan was
approved, an institution would be subject to the standard performance
tests.
These changes would increase the opportunity for productive
community input in the plan process. By requiring an institution to
seek informal suggestions in formulating a plan, and then to solicit
formal comment before submitting a plan to the agency, this process
will encourage consultation between an institution and its community,
including local government, community leaders, and the public. There
would not be a further comment period after the institution submits its
proposed plan to the agency because such a comment period could
undermine the direct communication and consultation between an
institution and its community that is most beneficial to the process.
The revised proposal would provide that, in evaluating a plan, the
agency would consider the public's involvement in formulating the plan
and any response by the institution to public comment on the plan.
Several comments appeared to misunderstand why the strategic plan
would provide for input from the public. The plan option would provide
institutions an opportunity to tailor their CRA objectives to the needs
of their community and their capacity and expertise. Few comments
suggested that an institution would be able to determine the needs of
its community without consulting in some fashion with those in the
community. Several industry comments were concerned that under the
strategic plan option, community organizations would play an
inappropriate role in an institution's operations. However, the purpose
of the consultation would be for the institution to develop information
about the needs of its community and how they might be met so that it
can make better judgments when formulating its plan objectives. The
decision regarding how the institution is to meet those needs would
remain with the institution. In reviewing the public participation, the
agencies would not consider whether community organizations unanimously
supported the plan, but whether the institution made an appropriate
investigation to determine the needs of its community, and whether,
considering the information about community credit needs that the
institution received in the comments, the plan goals are appropriate.
The agencies would evaluate strategic plans and their proposed
measurable goals in the assessment context against which the tests and
standards of the proposed regulation would be applied.
The revised proposal also would provide significantly more guidance
regarding the standards for approval of a plan. Commenters on the
December proposal were divided over the standards for approval. Some
commenters thought the regulation should state that the standards for
approval of a plan are the same as the standards on the lending,
service, and investment tests, or that the plan should require no less
lending than the lending test. In contrast, some industry commenters
thought that the plan would not provide a real alternative unless it
permitted an institution to depart from the standard tests in
responding to local needs. Under the revised proposal, a plan would
have to specify measurable goals for helping to meet the credit needs
of the institution's service area, particularly the needs of low- and
moderate-income geographies and low- and moderate-income individuals.
These goals would have to reflect the institution's capacity and
constraints, product offerings, and business strategy.
The revised proposal would require that the plan specify measurable
goals in lending, investment, and the provision of services, as
appropriate to the circumstances. The proposal would specify the broad
criteria in lending, investment, and services that should be the
framework for the plan goals. At the same time, however, the proposal
would make clear that an institution has great flexibility to fashion
its program within those parameters. An institution would not be
required to set levels of performance in all three categories. In order
to maintain the focus on lending for retail institutions operating
under a plan, a retail institution's goals would have to emphasize
lending and lending-related activities, unless a different emphasis
were appropriate given the credit needs of the service area, public
comment, and the institution's capacity and constraints.
The agencies intend through these provisions to provide guidance to
the industry and the community regarding the standards for plan
approval, while preserving substantial flexibility for institutions to
tailor their CRA programs. The purpose of the plan is not to provide
institutions operating under a plan with a different or lesser
obligation to help meet the needs of their community; it is to provide
more certainty and flexibility for those institutions that wish to meet
their obligation in a fashion that they believe may not be
appropriately assessed by the standard performance tests.
The revised proposal would require that each plan specify
measurable goals, the satisfaction of which, the institution believes,
would warrant a ``satisfactory'' rating. An institution also would have
the option of identifying a separate set of goals that, if met, would
warrant an ``outstanding'' rating. An institution would not be
considered for a rating of outstanding unless its plan contained
outstanding goals that had been approved by the relevant agency.
The revised proposal also would clarify how performance would be
assessed under the plan. The agencies believe that the standard of
performance in the December proposal should be strengthened, and the
revised proposal would require an institution to substantially achieve
its plan goals to receive that rating. This would apply to the
satisfactory rating and, if the plan contained such approved goals, to
the outstanding rating.
Some commenters believed that the possibility of being considered
under the standard tests, as contemplated by the December proposal,
made the plan a less attractive alternative to the standard tests. The
revised proposal would, unless the institution chose otherwise, rate an
institution's performance under an approved plan solely in relation to
its plan goals. An institution would have the option, however, to elect
in its plan to be subject to the standard tests should its performance
under the plan goals be less than satisfactory. The agencies intend
that an institution operating under an approved plan would, during the
period of the plan, never be subject to assessment under the standard
tests, unless the institution so chose.
In response to industry comments that said the two year plan term
in the December proposal was too short to warrant the expense of
preparing a plan and to permit institutions to initiate activities with
a longer view, the agencies have lengthened the possible plan term to 5
years, but would require the plan to have annual interim measurable
goals. The agencies agree that it is beneficial to provide institutions
the opportunity for long-range planning, and the interim goals should
enable effective examinations during the plan period. The proposal also
would permit an institution to develop a single plan for one or more or
all of its service areas and allow affiliated institutions to prepare
joint plans.
A number of industry commenters indicated that the possibility of
public disclosure of confidential information presented a major
disincentive to their use of the strategic plan alternative. The
revised proposal would allow institutions to submit additional
information to the relevant agency on a confidential basis. However,
the publicly available information would have to be sufficiently
specific to enable the public and the agency to judge fairly the merits
of the plan's goals.
The revised proposal also would provide more detail regarding plan
amendment. An institution would be able to petition for an amendment on
the grounds that a material change in circumstances had made the plan
no longer appropriate. In order to preserve the integrity of the public
participation in the plan process, any proposed amendment would have to
go through the public consultation and comment process described
earlier in this preamble.
Despite industry comments to the contrary, the revised proposal
continues to provide that approval of a plan would not affect an
institution's data collection responsibilities. The data are useful to
the agencies in assessing overall lending in communities, and would
also be of value to the public. Since the institution's plan would be
in its public file, the public would have the appropriate context in
which to evaluate the lending data.
The revised proposal also clarifies that evidence of discrimination
would affect an institution's rating based on plan performance in the
same manner as such evidence would affect an institution's rating
calculated pursuant to the standard tests.
Assigned Ratings
Under the December proposal, institutions would have been assigned
one of four overall, or composite, ratings, as required by the statute:
``outstanding'', ``satisfactory'', ``needs to improve'', and
``substantial noncompliance''. In the December proposal, ratings on the
lending, investment, and service test were combined into a composite
rating. For a retail institution, the institution's rating under the
lending test would have served as the base rating. This base rating
would then have been increased by two levels in the case of outstanding
investment performance or by one level in the case of high satisfactory
investment performance. For a wholesale or limited-purpose institution,
the institution's rating under the investment test would have served as
the basis for the overall rating. For any institution, the rating would
have been increased by one level in the case of an ``outstanding''
rating for service and decreased by one level in the case of a
``substantial non-compliance'' rating for service.
Because the lending, service and investment tests had five rating
levels rather than four, the rating would then have been converted to
the statutorily-required four level rating system, with ``high
satisfactory'' and ``low satisfactory'' both scored as
``satisfactory''. An institution that would otherwise have received a
``needs to improve'' rating would have been rated in ``substantial
noncompliance'' if the institution received no better than a ``needs to
improve'' rating on each of its two previous examinations. Finally, the
rating would have been adjusted to take into account any illegal
lending discrimination by the institution to arrive at a final
composite rating.
Many commenters, particularly community and consumer groups, were
concerned that the rating system proposed in December permitted a
retail institution with poor lending performance to achieve a
satisfactory or outstanding overall rating through outstanding
performance on the investment and service tests. These commenters asked
that no retail institution be permitted to achieve a satisfactory
overall rating unless it received a satisfactory rating on the lending
test. The revised proposal would ensure that lending performance
receives sufficient weight by weighing a retail institution's rating on
the lending test so as to count for at least 50 percent of its overall
rating. Furthermore, a retail institution would be required to achieve
a rating of satisfactory on the lending test in order to receive an
overall rating of satisfactory.
Some commenters were concerned that investment and service
performance only affected an institution's overall rating at the
margins--if investment or service performance was extraordinarily
strong or weak. The revised proposal would allow investment and service
performance to boost an institution's rating provided the institution
had achieved a rating of satisfactory on the lending test. Poor
performance on either the investment or service test could negatively
affect an institution's overall performance.
These principles would be implemented through the process described
in paragraph (b) of Appendix A for assigning a rating for retail
institutions assessed under the lending, service and investment tests.
Points would be assigned to an institution's performance on each of the
underlying tests. The total number of points would determine the
composite rating, unless the total exceeds twice the number of points
attributable to the institution's performance under the lending test.
In that case, the composite rating would be determined using twice the
number of points attributable to the institution's lending performance
to ensure that lending performance accounts for at least 50 percent of
the overall rating.
Small institutions, wholesale or limited purpose institutions, or
institutions with an approved strategic plan would be rated as
described in paragraphs (c) through (e) of Appendix A.
As in the December proposal, the revised proposal would require the
agencies to adjust ratings for all institutions, regardless of the
method of CRA evaluation, to take evidence of discrimination or other
illegal credit practices into consideration. In addition, the revised
proposal, as in December's proposal, provides that an institution that
otherwise would receive a needs to improve rating would be rated in
substantial noncompliance if it received no better than a needs to
improve rating on each of its two previous examinations.
Lending Discrimination
Under the December proposal, an institution would presumptively
have received a final CRA rating of less than satisfactory if the
institution (1) committed an isolated act of illegal discrimination of
which it had knowledge that it had not corrected fully or was not in
the process of correcting fully or (2) engaged in a pattern or practice
of illegal discrimination that it had not corrected fully. The
presumption could have been rebutted in the case of technical or de
minimis violations, for example, if an institution violated the Equal
Credit Opportunity Act by offering a preferential credit program for
individuals over age 55 (rather than limiting the program to
individuals over age 62 as the law requires).
Many community and consumer groups criticized this proposal as a
retreat from current practice. They pointed out that the existing
regulation provides that the agencies will consider any evidence of
discriminatory or other illegal credit practices. Although the agencies
did not intend in the December proposal to reduce the weight given
evidence of illegal discrimination in the CRA evaluation process, they
believe that the commenters' concerns should be addressed. The revised
proposal conforms with the language of the existing regulation. Also,
the discrimination provisions in the revised proposal would avoid the
use of a rebuttable presumption consistent with the elimination of
presumptions throughout the proposal.
Under the revised proposal, any evidence of discriminatory or other
illegal credit practices would adversely affect the agencies'
evaluation of an institution's CRA rating. In determining the effect on
an institution's rating, the agencies would consider the nature and
extent of the evidence, the policies and procedures that the
institution has in place to prevent discriminatory or other illegal
credit practices, any corrective action that the institution has taken
or has committed to take, particularly voluntary corrective action
resulting from self-assessment, and other relevant information, such as
the institution's past fair lending performance.
There was also some confusion regarding whether the December
proposal intended that illegal discrimination would have the same
effect for all institutions regardless of the assessment method that
they chose. The revised proposal makes clear that evidence of
discrimination would be considered in assigning a rating to all banks
and thrifts, regardless of whether they were evaluated under the
lending, service, and investment tests, the community development test
for wholesale or limited purpose banks, the small institution
assessment method, or the strategic plan option.
Multiple Service Areas
The preamble to the December proposal stated that an institution's
CRA rating should reflect its performance in all the local communities
in which it does business. However, the proposed regulatory language
provided that the agencies would conduct full lending, service, and
investment tests (or the other appropriate assessments) in a sample of
the service areas in which the institution operated. The agencies would
then assign separate composite ratings for each area. The institution's
overall rating would reflect the performance of the institution in all
service areas studied.
Some commenters urged the agencies to conduct assessments in every
one of an institution's service areas, because every institution has an
obligation to help meet the credit needs of all of its service areas.
These commenters and others also expressed concern that the regulation
did not provide clear rules as to how performance in each of the
service areas assessed would be combined to arrive at an overall rating
for the institution.
An institution is obligated to help meet the credit needs of its
entire community, including all of the institution's service areas.
However, ensuring that institutions fulfill this responsibility does
not necessarily require that an institution's performance in each of
its service areas must be examined. Questions of how many service areas
should be examined during an examination and how performance in
different service areas should be weighed are more appropriately
handled through examination procedures than through regulatory
language. The agencies have therefore omitted from the revised proposal
all discussion of examination treatment of multiple service areas.
The agencies note that the Interstate Banking Efficiency Act would
establish requirements for the examination of multi-state and other
institutions. This proposal and examination procedures will be modified
as necessary to comply with that Act if it becomes law.
Effect of Ratings on Applications
The CRA requires the agencies to consider an institution's CRA
performance record when considering an application by the institution
to establish a deposit facility (e.g., branch). The December proposal
specified how CRA ratings would be considered in applications. For
example, an application from an institution with a ``substantial
noncompliance'' CRA rating would have generally been denied, whereas an
application from an institution with an ``outstanding'' rating would
have been given extra weight. A ``satisfactory'' rating generally would
have been consistent with approval of an application and a ``needs to
improve'' rating, absent other evidence, generally would have resulted
in a denial or conditional approval of an application. The agencies
emphasized, however, that the CRA examination rating is not conclusive
and recognized that other information related to CRA performance and
the convenience and needs of communities, including information
collected through public comment and reports, is also relevant and
would be considered.
Although not intended as such, a number of the commenters believed
these provisions would have provided institutions with a ``safe
harbor'' from challenges to their performance record in the
applications process if they achieved an ``outstanding'' CRA
examination rating. Those commenters were concerned that they could be
prevented from effectively commenting on the CRA performance aspects
relevant to applications and urged that those provisions be dropped.
The discussion of the effect of particular ratings on applications
in the December proposal was not intended to alter the agencies' policy
of considering examination ratings and public comment during the
applications process and has been deleted. As stated in the December
proposal, the agencies have consistently recognized that materials
relating to CRA performance received during the applications process
from public comments and other sources, can and do provide relevant and
valuable information. The revised proposal explicitly states that
interested parties would have the opportunity to comment on
applications and that the agencies would take their views into account
in considering the CRA performance of an institution in the
applications process. The agencies continue to believe, as provided in
the Interagency Policy Statement Regarding the Community Reinvestment
Act, that information from an examination is a particularly important
consideration in the applications process because it represents the on-
site evaluation of an institution's CRA performance by its primary
federal regulator. The revised proposal also would specify that an
institution's record of CRA performance would be considered in an
institution's expansion proposals (as defined in the CRA) and may be
the basis for approving, denying, or conditioning approval of an
application.
Definition of Service Area
The December proposal would have replaced the concept of
``delineated community'' in the existing regulation with the concept of
service area. The December proposal would have defined service area as
the area around each institution's office or group of offices where the
preponderance of direct reportable loans made through those offices are
located. A service area would have been presumed acceptable if it was
broad enough to include low- and moderate-income geographies and did
not arbitrarily exclude such geographies. An institution had the
opportunity to show there were no low- and moderate-income geographies
within a reasonable distance given its size and financial condition,
and the supervisory agency could reject an otherwise acceptable service
area if the service area did not account for the true effective lending
territory of the institution or if it reflected past redlining or
illegal discrimination. The proposal would have required an institution
to delineate multiple service areas if the geographies it served
extended substantially across state boundaries or the boundaries of a
Metropolitan Statistical Area (MSA). An institution serving military
customers would have been permitted to delineate a ``military
community'' consisting of those customers. Each institution would also
have been required to compile and maintain a list of all the
geographies within its service area or areas and a map of each service
area. The December proposal would not have required wholesale or
limited purpose institutions to delineate a service area, but would
have treated all low- and moderate-income geographies in the country as
the service area for wholesale or limited purpose institutions.
As a result of numerous comments received on this issue, the
revised proposal makes several changes to the definition. Several
commenters suggested that the proposed regulation adopt concepts from
the existing regulation, including the equidistance provision that
requires an institution to include those areas around its offices where
it makes a substantial portion of its loans and all other areas
equidistant from its offices as those areas. The revised proposal would
adopt the equidistance principle from the current regulation in
slightly modified form. The equidistance requirement is an effective
tool to assure that the delineation of a service area is consistent
with the purposes of the statute and that institutions do not draw
their service areas too narrowly. This modification clarifies the
service area requirement and builds on concepts with which the industry
and community already have experience. This change does not
significantly modify the substance of the December proposal, since the
December proposal preamble stated that a service area conforming to the
equidistance concept would generally have been acceptable.
The revised proposal also incorporates the concept of ``local
area'' from the current regulation. This responds to comments
expressing concern that loans made a substantial distance from a branch
might inappropriately expand the scope of a service area.
The revised proposal would delete the requirement that a service
area be broad enough to include low- and moderate-income areas. The
necessity for this requirement was unclear, given the provision
preventing institutions from arbitrarily excluding low- and moderate-
income geographies. The proposal would clarify that the requirement
that low- or moderate-income geographies not be arbitrarily excluded
would take into account the institution's size, financial condition,
and the extent of its branching network. An institution's performance
evaluation would include an account of how many low- and moderate-
income geographies are included in the institution's service area(s).
The revised proposal would clarify that an institution's service
area is derived from its direct lending in relation to its branches and
proprietary deposit-taking ATMs, rather than its other non-deposit-
taking offices. This appropriately links an institution's CRA
obligations to where it takes deposits, while enabling the agencies to
review whether the institution is serving the needs of its entire
community in the manner in which it extends credit.
Industry commenters were particularly concerned that the December
proposal meant that lending conducted by non-branch offices, such as
loan production offices, would expand an institution's service area.
The revised proposal would not require an institution to include
geographies where an institution has made loans through a loan
production office, unless those geographies are in the local area
around a deposit-taking branch or ATM. However, an institution would be
free to include such geographies if it wishes, and the regulation would
provide some incentive to do so. Under the revised proposal, if an
agency determined that lending by an institution's affiliate(s) was
integral to the business of the institution, then it would include the
lending by that affiliate in its assessment of the institution's
lending performance, even if the institution had not requested the
agency to do so. In addition, by limiting the size of its service area,
an institution would increase the likelihood that it would perform
poorly on the criterion of the lending test that considers the
proportion of the institution's total lending in its service area(s).
Rather than requiring the service area to include those geographies
accounting for a ``preponderance'' of the institution's loans, as in
the December proposal, or the areas accounting for a ``substantial
portion'' of the institution's loans, as in the existing regulation,
the revised proposal would require the service area to include those
geographies in which the institution has made ``a significant number
and amount of loans.'' The agencies intend the meaning of
``significant'' to be broad, and to include all geographies around its
branches and proprietary deposit-taking ATMs where an institution has
made more than a handful of loans. Because of this change in the
proposal, the criterion in the small institution assessment method that
requires a majority of an institution's loans to be in its service
area(s) for a satisfactory rating would not be redundant as it might
have been in the December proposal.
Under the revised proposal, as in the December proposal, the
agencies would consider whether the delineation reflects illegal
discrimination, and thus would, as some commenters suggested, consider
the racial composition of geographies in reviewing an institution's
delineation. The agencies have eliminated the term ``redlining''
because the agencies believe that term is included in the term
``illegal discrimination.'' In this regard, illegal discrimination
includes the practice of refusing to lend to an area or neighborhood on
the basis of race or other prohibited bases.
Some commenters thought that the agencies should require
institutions to justify the methodology for delineations, and that the
regulation expressly provide for community input into the delineation.
Under the revised proposal, examiners would review whether the service
area meets the requirements of the regulation, but the agencies would
not prescribe or review the method by which an institution defines its
service area. Rather than having the agencies determine whether a
delineation is ``reasonable,'' it is simpler and more effective in
meeting the purposes of the statute to focus on the lending patterns of
the institution, whether low- and moderate income areas are excluded,
and whether the service area reflects illegal discrimination.
Furthermore, the revised proposal would not expressly provide for
community input into the delineation. As part of the assessment
context, agency staff would review comments from the community with
regard to the performance of an institution, including its delineation
of its service area(s).
The revised proposal would retain the requirement from the December
proposal that institutions delineate multiple service areas, with
clarifying modifications. The revised proposal would not require
institutions to delineate an MSA or other political boundary. The
requirements that would govern under the revised proposal should
prevent institutions from inappropriately limiting their service
area(s) in order to exclude certain geographies.
Some commenters suggested requiring the service area to include
full census tracts and block numbering areas to facilitate data
collection and reporting. The agencies agree, and the revised proposal
would contain such a requirement.
While comments generally supported the separate treatment of
wholesale or limited purpose institutions, many commenters questioned
whether wholesale or limited purpose institutions should have
nationwide service areas and suggested that more consideration should
be given to qualified investments in the institution's local area. Some
commenters claimed that permitting wholesale banks to define a
``national community'' violated the ``local community'' orientation of
the statute. The revised proposal would eliminate a mandatory
nationwide service area for wholesale or limited purpose institutions.
Such institutions have chosen to locate in particular communities, and
it is appropriate that their CRA performance reflect their location.
The revised proposal would therefore require that a wholesale or
limited purpose institution designate as its service area the area or
areas around its offices, or a broader statewide or regional area that
includes such areas. The institution would have a broad scope in
preparing this designation, so long as the area meets the purposes of
the CRA and does not arbitrarily exclude low and moderate income
geographies. Performance under the community development test would
focus on qualified investments, community development loans outstanding
and community development services that benefit the areas within the
institution's service area. Qualifying activities that benefit areas
outside the institution's service area would be considered up to an
amount equal to the amount of qualifying activities within the
institution's service area. However, if the institution could
demonstrate only a limited need or opportunity to provide qualifying
activities within its service area, the appropriate agency could modify
or eliminate this limitation.
Data Collection and Reporting
The December proposal would have required institutions that were
not eligible for the small institution streamlined assessment method to
collect and report to the agencies data showing the geographic
distribution of written applications, application denials, originations
and purchases for home mortgage, small business and small farm, and
consumer loans. Home mortgage loans would have included all mortgage
loans reportable under HMDA and its implementing regulations. The
proposal would have required institutions to report separately
information covering loans for home purchase, home improvement,
multifamily dwellings, and refinancings. Small business loans would
have included all loans to private, for-profit organizations that in
the fiscal year preceding the making of the loan had gross receipts of
less than $10 million (for a firm providing services), or up to 500
employees (for a manufacturing firm). As proposed, institutions would
have had to separate such loans into in four categories based on the
sales volume of the business. Small farm loans would have been defined
to include all loans to private organizations engaged in farming
operations with gross receipts of less than $500,000 in the fiscal year
preceding the making of the loan. Consumer loans would have been
defined to include all closed-end loans, secured and unsecured,
extended to a natural person primarily for personal, family, or
household purposes, except for credit card loans and motorized vehicle
loans and those loans included in the definition of home mortgage
loans.
The December proposal would also have required institutions to
report data in summary form by geography for each of the three major
loan categories--mortgages, small businesses and small farms, and
consumer--by January 31 of each calendar year. The data would have
covered the related lending activity that took place in the preceding
calendar year.
Some commenters raised general concerns regarding the data
collection requirements in the December proposal. As discussed later in
this preamble, the agencies have streamlined requirements to reduce
burden. In addition, the agencies plan to make software available to
institutions to facilitate compliance with the proposed requirements.
The agencies have proposed the data collection and reporting
requirements in this revised proposal as a means for permitting the
agencies to fulfill their responsibilities under the CRA of assessing
each institution's record of helping to meet the credit needs of the
community. This proposal has also been made to permit the agencies to
discuss the facts supporting the agencies' conclusions regarding the
institution's record of lending.
The comments on the proposed data collection raised five principal
concerns, all of which have been addressed in the revised proposal.
First, many commenters indicated that the proposed rules would be
overly burdensome and, in the case of home mortgage loans, would have
required duplicative tracking of data. Under the revised proposal, the
agencies would base their analysis of mortgage lending on the data
already reported pursuant to HMDA. To acquire more geographic detail on
home mortgage lending, the agencies propose to amend the HMDA
regulation to require that institutions other than small banks and
thrifts report the geography of applications, approvals, and denials
for loans secured by properties outside the institution's MSA, data
that is already reported on a voluntary basis.
Second, some commenters questioned whether the need for consumer
loan data justified the burden of mandatory reporting. However, many of
the same commenters suggested that if consumer loan data were to be
required, the data should include all consumer loans, including credit
card loans and motor vehicle loans, which were not included in the
collection and reporting requirements of the December proposal. Some
institutions indicated that consumer lending was an important aspect of
their CRA performance that should be considered by the agencies. The
revised proposal would offer institutions the option of collecting data
on the amount outstanding, the location of the borrower, and the income
of the borrower for each open-end and closed-end consumer loan
outstanding as of the end of the calendar year. Such data is typically
required by all institutions as an integral part of their loan
underwriting procedures. If an institution selected this option, the
foregoing data would be reviewed during the institution's CRA
examination but would not be reported to the agencies.
Third, many lenders criticized the December proposal's inclusion of
information on small business applications and application denials.
Those commenters indicated that reporting should be limited to loan
outstandings or loan originations. The revised proposal would simplify
the definition of small business and small farm loans, by adopting the
definition of those terms now used by institutions for purposes of
completing, in the case of banks, their Reports of Condition and Income
(Call Reports), and in the case of thrifts, the Thrift Financial Report
(TFR). Under the revised proposal, institutions would collect and
report data on a loan-by-loan basis for all loans included in the
aggregate small business and small farm loan figures on the
institution's Call Report or TFR, which includes business loans with
original amounts under $1 million and farm loans with original amounts
under $500,000. These data would include the outstanding balance as of
December 31 of each year, the location of the business or farm or the
location where the loan proceeds would be applied (as indicated by the
borrower), an indication of whether the borrower has annual revenues of
less than or equal to $1 million, and an indication of whether the
borrower (if not publicly traded) is more than 50 percent owned by one
or more minority individuals or by one or more women. The loan register
information would be required to be submitted at the same time and in
accordance with the provisions for submitting HMDA data as provided in
12 CFR Part 203 (Regulation C). In addition, the revised proposal would
change the date on which Call Report or TFR data on small business and
small farms loans would be required to be submitted from June 30 to
December 31 of each year to coincide with the calendar year reporting
requirements of HMDA.
Fourth, many commenters criticized the failure of the December
proposal to require the collection of data on the race and gender of
borrowers except to the extent such data was required by current law.
These commenters were particularly interested in the reporting of race
and gender data for small business loans in order to support the fair
lending component of the CRA assessment. In response to these comments,
the revised proposal would require institutions to collect certain race
and gender data in connection with their small business and small farm
lending. Each institution would be required to request, either in
connection with a written application or, if the institution did not
use written applications, at an appropriate point in the lending
process, that an applicant or borrower indicate the percentage of the
business or farm owned by men and by women as well as the percentages
owned by members of different racial and ethnic categories. If the
institution neither takes a written application nor originates the
loan, the institution would not be required to request the information.
To protect the privacy of individual borrowers, this detailed
information would not be included on loan registers, which, as noted
earlier in this preamble, would only indicate whether an individual
loan was to a business or farm that was more than 50 percent women-
owned or more than 50 percent minority-owned. The institution would
also retain but not report or disclose the information on applicants
who did not receive a loan. To further safeguard privacy, the loan
registers would not be disclosed to the public but the institutions
would include aggregate information about the loans in their public CRA
files.
Finally, some commenters were concerned that because community
development loans were not required to be reported, examiners would not
give them sufficient weight in evaluating an institution's lending
performance. The revised proposal would require institutions to report
on their Call Reports and TFRs the aggregate number and dollar amount
of community development loans outstanding as of December 31 of each
year.
Public File and Disclosure
The December proposal would have required institutions to make
available for public inspection: (1) a file containing all the signed,
written comments that it had received from the public for the past two
years; (2) its performance data for that period; (3) maps of its
service areas (with lists of the census tracts or block numbering areas
that make up each service area); and (4) a copy of the public section
of its most recent CRA Performance Evaluation. If an institution
elected to be assessed under the strategic plan option, it would have
been required to include a copy of its plan in the public file. The
December proposal would have required the institution to maintain the
public file at its main office and to make available copies of the file
at cost to members of the public. Materials relating to a given service
area would have been maintained at each branch in that service area,
and every institution would have been required to post in the public
lobby of each branch a notice of its CRA obligation and the public's
opportunity to comment on and review data concerning that performance.
Commenters generally favored the public disclosure of an
institution's CRA-related activities, and the revised proposal retains
all the relevant public disclosure provisions of the December proposal.
The revised proposal modifies the required contents of the public file
to reflect proposed changes in the various assessment tests and the
proposed data collection requirements for small business and small farm
loans. For example, consistent with the proposed service test, the
revised proposal would require an institution to maintain a list of its
branches and ATMs along with their locations and the services generally
available at such facilities.
To protect the privacy of borrowers and the competitive information
of institutions, the revised proposal would not require an institution
to include the small business or small farm loan registers containing
information on individual applicants in its public file. Instead, the
revised proposal would require the public disclosure of aggregated
information on small business and small farm loans for the past two
calendar years by every institution (other than a small institution).
Loan registers would be available to agency examiners to confirm the
accuracy of the aggregated data but the agencies do not intend to make
unaggregated information publicly available.
Under the revised proposal, the following aggregated loan data for
small business and small farm loans would be placed in the public file:
(1) the number and amount of loans in low-,
moderate-, middle-, and upper-income geographies; (2) a list of the
geographies in which an institution made at least one loan; (3) the
number and amount of loans inside and outside the institution's service
area; (4) the number and amount of loans to minority- and women-owned
businesses; and (5) the number and amount of loans to businesses and
farms with annual revenues equal to or less than $1 million.
Institutions would also be required to disclose the number and amount
of community development loans outstanding. Institutions may elect to
disclose publicly the number and amount of consumer loans to
individuals and geographies by various income levels, and the number
and amount of these loans made within and outside its service area(s).
However, to protect the privacy interests of borrowers, an institution
may not place in its public file any loan information described above
for a particular year if special circumstances, such as a small number
of loans or a limited number of geographies in the designated
categories, could reasonably be expected to disclose the borrower's
identity.
A small institution would be required to include its loan-to-
deposit ratio computed at the end of the most recent calendar year. The
institution could include other data on its loan-to-deposit ratio if it
believed the data would give a more accurate picture of its lending and
lending-related activities. If a small institution elects to be rated
under the lending, investment, and service tests applicable to larger
institutions, it would be required to include in its public file all of
the lending information described earlier in this preamble. An
institution electing to be assessed under an approved plan would
continue to provide a copy of its plan in the public file but would not
have to disclose information submitted to the agencies on a
confidential basis.
In response to comments, the agencies have modified the provisions
regarding the location of the public file. The complete public file
would be required to be maintained at the institution's main office. In
addition, at least one branch in each service area would be required to
have copies of the bank's HMDA Disclosure Statements and all materials
in the public file relating to the service area in which the branch is
located. If a member of the public requested to review a bank's public
file at a branch that did not have a copy, the bank would have to make
a complete copy of the file for that service area available for review
at the branch within 5 business days at no cost.
Public Notice
The December proposal would have required that institutions provide
the Community Reinvestment Act Notice ``in the public lobby of its head
office and each branch,'' and it would have set forth the Notice. The
revised proposal makes minor changes to the Notice requirements. The
term ``head office'' is changed to ``main office'' for clarity. Within
the Notice, the statement of what is included in the CRA performance
file would be expanded to describe more accurately the contents of the
file. In addition, the revised proposal would require that the file
include a map identifying the institution's service area, a list of its
branches and ATMs in its service area, and a list of services the
institution provides at each of the foregoing locations.
Publication of Examination Schedule
The December proposal would have required that each agency publish
a list of the banks scheduled for CRA exams in each calendar quarter at
least 30 days before the beginning of the quarter, and permitted
members of the public to submit comments about a bank's CRA
performance. The revised proposal would leave intact the provision
concerning timing of publication, but delete as redundant the provision
concerning public comment.
Transition
The December proposal would have established a transition period
from July 1, 1994, to April 1, 1996. Institutions subject to data
collection and reporting requirements would have been required to begin
collecting home mortgage, small business, and consumer loan data on
July 1, 1994. The data would have been reported to the agencies no
later than January 31, 1995, and annually thereafter. Evaluations under
the proposed standards would have begun April 1, 1995. However, any
institution could have elected to be evaluated under the existing
twelve assessment factors rather than the proposed standards until July
1, 1995, and any institution showing cause could have requested
evaluation under the existing standards up to April 1, 1996. The
agencies would have accepted strategic plans for approval at any time
after the publication of the final rule.
The December proposal, in addition, would have insulated some
institutions from supervisory sanctions until they had been subject to
at least two examinations under the proposed standards. Specifically,
the agencies would not have disapproved corporate applications or taken
any enforcement action against an institution whose initial CRA rating
under the proposed standards dropped by more than one level, if the
agencies determined that the drop in ratings occurred despite a good
faith effort to achieve at least a satisfactory level of performance.
Many of the commenters criticized the transition period in the
December proposal for being too short. Those commenters were
particularly critical of the proposal to begin collection of data on
July 1, 1994. Several commenters suggested that the proposed data
collection be delayed as much as 12 months after the publication of a
final rule. Some also criticized the proposal to begin conducting
examinations in 1995 using a partial year's data from the second half
of 1994.
Other commenters criticized the proposal to insulate certain
institutions from supervisory actions until they had gained more
experience with the proposed standards. Those commenters were generally
concerned that the proposal would have protected institutions whose
performance ratings would have suffered as a result of more objective,
performance-based assessments.
In developing the revised proposal, the agencies sought to address
these concerns in two principal ways. First, despite substantial
simplification in data collection compared to the December proposal,
the revised proposal would provide institutions additional time before
the data collection would begin. Under the revised proposal, collection
of new data elements would not be required until July 1, 1995.
Second, compared to the December proposal, the revised proposal
eliminates the grace period and instead would provide institutions with
additional time before assessments under the proposed standards would
become mandatory.
The revised proposal would also provide institutions with
assessment options prior to full implementation of the rule. Even
though assessments under the proposed standards would not be mandatory
until July 1, 1996, small institutions would have the opportunity to be
examined, at their option, under the small bank assessment method
anytime after July 1, 1995. Anytime on or after July 1, 1995, an
institution could also elect to submit for approval a strategic plan to
achieve satisfactory or better CRA performance. Examinations under
approved strategic plans could begin July 1, 1996.
Under the proposed transition schedule, the current regulation
would be repealed in its entirety on July 1, 1996.
Review
The agencies recognize that the revised proposal, like the December
proposal, represents a significant change in existing practices and
that cautious administration is therefore required. Consultation by
financial institutions with the agencies on compliance with the new
standards and procedures will be encouraged, as will liberal use of
agency appeals processes. The supervisory agencies will engage in an
internal review of the effectiveness of the new regulations. The
agencies contemplate reconsideration of the regulations to improve
their effectiveness within the next several years. The agencies intend
for the proposed regulations to require demonstrated performance but to
impose as little unnecessary compliance burden as possible, and the
agencies will review the regulations to determine whether they are
advancing these goals.
Other Efforts
In addition to this rulemaking, the agencies will work together to
improve examiner training and to increase interagency coordination
regarding application of standards, performance of examinations,
assignment of ratings, and use of enforcement tools. The agencies will
work together to make examinations as short in duration as possible, to
minimize unnecessary compliance burden, and to ensure consistency and
reliability in the rating process.
Benefit and Burden of Administrative Compliance Requirements
With respect to the reporting, disclosure, and other administrative
compliance requirements in the proposal, the agencies invite comment on
(1) any administrative burdens that these requirements in the revised
proposal would place on depository institutions, including small
depository institutions and customers of depository institutions; and
(2) the benefits of these requirements in the revised proposal for
depository institutions, their customers, and their communities.
Paperwork Reduction Act
OCC: The collections of information contained in this notice of
proposed rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1980 (44 U.S.C. 3502(h)). Comments on the collections of information
should be sent to the Comptroller of the Currency, Legislative,
Regulatory, and International Activities, Attention: 1557-0160, 250 E.
Street, SW., Washington, DC 20219, with a copy to the Office of
Management and Budget, Paperwork Reduction Project (1557-0160),
Washington, DC 20503.
The collections of information in this proposed regulation are in
12 CFR 25.25, 25.27, 25.29, 25.42 and 25.43. This information is
required to evidence national bank efforts in satisfying their
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas.
This information will be used to assess national bank performance
in satisfying the credit needs of their communities and in evaluating
certain corporate applications. The likely respondents/recordkeepers
are for profit institutions, including small businesses.
The estimated annual burden per respondent/recordkeeper varies from
three to 200 hours, depending on individual circumstances, with an
estimated average of 37 hours. There will be an estimated 857
respondents averaging 132 hours and 2,460 recordkeepers averaging 3.4
hours.
Board: In accordance with section 3507 of the Paperwork Reduction
Act of 1980 (44 U.S.C 3504(h)), the proposed information collection
will be reviewed by the Board under the authority delegated to the
Board by the Office of Management and Budget after consideration of the
comments received during the public comment period. Comments on the
collections of information should be sent to William W. Wiles,
Secretary of the Board, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, NW., Washington, DC 20551.
The collections of information in this proposed regulation are in
12 CFR 228.25, 228.27, 228.42, 228.43 and 228.44. This information is
required to evidence the efforts of banks in satisfying their
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas. This
information will be used to assess bank performance in satisfying the
credit needs of their communities and in evaluating certain
applications.
The estimated annual burden per respondent/recordkeeper varies from
eight to 280 hours, depending on individual circumstances, with an
estimated average of 36 hours. There will be an estimated 297
respondents, averaging 133 hours, and 972 recordkeepers, averaging five
hours.
FDIC: The collections of information contained in this notice of
proposed rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1980 (44 U.S.C. 3502(h)). Comments on the collections of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (3604-0092), Washington, DC 20503, with copies of
such comments to be sent to Steven F. Hanft, Office of the Executive
Secretary, room F-453, Federal Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
The collection of information requirements in this proposed
regulation are found in 12 CFR 345.25, 345.27, 345.29, 345.42 and
345.43. This information is required to evidence efforts of financial
institutions in satisfying their continuing and affirmative obligation
to help meet the credit needs of their communities, including low- and
moderate-income areas. It will be used to assess an institution's
performance in satisfying the credit needs of its communities and in
evaluating certain corporate applications.
The likely respondents/recordkeepers are for-profit financial
institutions, including small businesses.
The estimated annual burden per respondent/recordkeeper varies from
two to 250 hours, depending on individual circumstances, with an
estimated average of 17 hours. There will be an estimated 730
respondents averaging 136 hours and 7,128 recordkeepers averaging three
hours.
OTS: The collections of information contained in this notice of
proposed rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1980 (44 U.S.C. 3502(h)). Comments on the collections of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (1550-0012), Washington, DC 20503, with copies to the
Office of Thrift Supervision, 1700 G. Street, NW., Washington, DC
20552.
The collections of information in this proposed regulation are in
12 CFR 563e.25, 563e.27, 563e.29, 563e.42 and 563e.43. This information
is required to evidence savings association efforts in satisfying their
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas.
This information will be used to assess savings association
performance in satisfying the credit needs of their communities and in
evaluating certain corporate applications.
The likely respondents/recordkeepers are for-profit savings
associations, including small businesses.
The estimated annual burden per respondent/recordkeeper varies from
two to 300 hours, depending on individual circumstances, with an
estimated average of 38 hours. There will be an estimated 450
respondents averaging 136.3 hours and 1,600 recordkeepers averaging
four hours.
Regulatory Flexibility Act
OCC: It is hereby certified that this proposed rule, if adopted as
a final rule, will not have a significant economic impact on a
substantial number of small banks. Accordingly, a regulatory
flexibility analysis is not required. This proposal would enable most
small banks to avoid the data collection requirements in 12 CFR Part 25
and will encourage greater small business lending by banks of all
sizes.
Board: For all the reasons discussed in the joint preamble, it is
hereby certified that this proposed rule, if adopted as a final rule,
will not have a significant economic impact on a substantial number of
small banks. This proposal would enable most small banks to avoid the
data collection requirements in 12 CFR Part 228 and will encourage
greater small business lending by financial institutions of all sizes.
Accordingly, a regulatory flexibility analysis is not required. The
Board invites comment on this matter.
FDIC: It is hereby certified that this proposed rule, if adopted as
a final rule, will not have a significant economic impact on a
substantial number of small banks. This proposal would enable most
small banks to avoid the data collection requirements in 12 CFR Part
345 and will encourage greater small business lending by financial
institutions of all sizes. Accordingly, a regulatory flexibility
analysis is not required.
OTS: It is hereby certified that this proposed rule, if adopted as
a final rule, will not have a significant economic impact on a
substantial number of small savings associations. This proposal
provides an alternative means of evaluating a small savings
association's CRA requirements that would enable most such savings
associations to avoid the data collection requirements in 12 CFR Part
563e and will encourage greater small business lending by savings
associations of all sizes.
Executive Order 12866
OCC: It has been determined that this document is a significant
regulatory action. The proposal would clarify existing requirements and
would exempt small banks from many of the requirements in 12 CFR Part
25. Further, the proposal will encourage greater small business lending
by banks of all sizes.
OTS: It has been determined that this document is a significant
regulatory action. The proposal sets forth a more focused and
streamlined method of evaluating savings associations' compliance with
existing statutory requirements; moreover it would exempt small savings
associations from many of the requirements in 12 CFR Part 563e.
Further, the proposal will encourage greater small business lending by
savings associations of all sizes.
List of Subjects
12 CFR Part 25
Community development, Credit, Investments, National banks,
Reporting and recordkeeping requirements.
12 CFR Part 228
Banks, Banking, Community development, Credit, Federal Reserve
System, Investments, Reporting and recordkeeping requirements.
12 CFR Part 345
Banks, Banking, Community development, Credit, Investments,
Reporting and recordkeeping requirements.
12 CFR Part 563e
Community development, Credit, Investments, Reporting and
recordkeeping requirements, Savings associations.
Authority and Issuance
OFFICE OF THE COMPTROLLER OF THE CURRENCY
12 CFR CHAPTER I
For the reasons outlined in the joint preamble, the Office of the
Comptroller of the Currency proposes to amend 12 CFR chapter I as set
forth below:
PART 25--COMMUNITY REINVESTMENT ACT REGULATIONS
1. The authority citation for part 25 is revised to read as
follows:
Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215,
215a, 481, 1814, 1816, 1818, 1828(c), and 2901 through 2907.
Sec. 25.101 [Redesignated as Sec. 25.9]
2. Existing Sec. 25.101 is redesignated as Sec. 25.9 and
transferred with its undesignated center heading immediately following
Sec. 25.8.
3. Part 25 is amended by adding Subparts A through E and Appendices
A through C following Sec. 25.9 to read as follows:
Subpart A--General
Sec.
25.11 Authority, community reinvestment obligation, purposes and
scope.
25.12 Definitions.
Subpart B--Standards for Assessing Performance
25.21 Assessment tests and ratings, in general.
25.22 Lending test.
25.23 Investment test.
25.24 Service test.
25.25 Community development test for wholesale or limited purpose
banks.
25.26 Small bank assessment standards.
25.27 Strategic plan assessment.
25.28 Assigned ratings.
25.29 Effect of ratings on applications.
Subpart C--Records, Reporting and Disclosure Requirements
25.41 Service area delineation.
25.42 Data collection and reporting.
25.43 Public file and disclosure by banks.
25.44 Public notice by banks.
25.45 Publication of planned examination schedule.
Subpart D--Transition Rules
25.51 Transition rules.
Subpart E--Interpretations
25.101 Applicability of the Community Reinvestment Act to certain
special purpose banks.
Appendix A to Part 25--Ratings
Appendix B to Part 25--CRA Notice
Appendix C to Part 25--CRA Loan Data Format
Subpart A--General
Sec. 25.11 Authority, community reinvestment obligation, purposes and
scope.
(a) Authority and OMB control number--(1) Authority. The authority
for this part is 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 215a,
481, 1814, 1816, 1818, 1828(c), and 2901 through 2907.
(2) OMB control number. The information collection requirements
contained in this part have been assigned OMB control number 1557-0160.
(b) Community reinvestment obligation. National banks have a
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas, consistent
with safe and sound operations.
(c) Purposes. The purposes of this part are to implement the
community reinvestment obligation of national banks; to explain how the
Office of the Comptroller of the Currency (OCC) assesses the
performance of national banks in satisfying the community reinvestment
obligation; and to describe how that performance is taken into account
in certain applications.
(d) Scope--(1) General. This part applies to all national banks
that are in the business of extending credit to the public, including
wholesale or limited purpose banks, as defined in Sec. 25.12 of this
part.
(2) Certain special purpose banks. This part does not apply to a
bankers bank that engages exclusively in providing services for other
depository institutions and for their officers, directors and
employees, or to other special purpose banks described in Sec. 25.101
of this part.
(3) Federal branches and agencies. This part applies to insured
Federal branches. References in this part to ``main office'' mean, in
the case of insured Federal branches of foreign banks, the principal
branch within the United States. The ``service area'' of an insured
Federal branch refers to the community or communities located within
the United States served by the branch as described in Sec. 25.41 of
this part. The term ``branches'' refers to insured branches located
within the United States. As provided in Sec. 28.102 of this chapter,
this part does not apply to Federal agencies, limited Federal branches,
and uninsured Federal branches.
Sec. 25.12 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate means any company that controls, is controlled by, or
is under common control with another company. For purposes of this
part, the term ``control'' has the meaning given to that term in 12
U.S.C. 1841(a)(2), and a company is under common control with another
company if both companies are directly or indirectly controlled by the
same company.
(b) Area median income means the median family income for the MSA
in which a person or geography is located or, in the case of a person
or geography located outside an MSA, the higher of the county median
family income or the statewide nonmetropolitan median family income.
(c) Automated teller machine (ATM) means an automated, unstaffed
banking facility with a fixed site owned or operated by or operated
exclusively for the bank at which deposits are received, cash
dispersed, or money lent.
(d) Bank means a national bank.
(e) Branch means a staffed banking facility (shared or unshared)
licensed as a branch with a fixed site at which deposits are received,
checks paid, or money lent, including a mini-branch in a grocery store
or a branch operated in conjunction with any other local business or
nonprofit organization.
(f) Community development loan means a loan (including a line of
credit, commitment, or letter of credit) that addresses affordable
housing (including multifamily rental housing) or other community
economic development needs not being met by the private market;
provided the loan:
(1) Primarily benefits low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program;
(2) Has not been reported or collected by the bank or one of its
affiliates as a home mortgage loan, small business loan, small farm
loan, or a consumer loan pursuant to Sec. 25.42 of this part, unless it
is a multifamily dwelling loan (as described in Appendix A to 12 CFR
Part 203); and
(3) Except in the case of a wholesale or limited purpose bank,
benefits the bank's service area(s) or a broader statewide or regional
area that includes the bank's service area(s).
(g) Consumer loan means a loan extended to one or more individuals
for household, family, or other personal expenditures; provided the
loan is not secured by real estate and is not used for the purpose of
purchasing or carrying securities.
(h) Geography means a census tract delineated by the United States
Bureau of the Census in the most recent decennial census, or a block
numbering area delineating a small statistical subdivision where a
census tract has not been established.
(i) HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et
seq.).
(j) Home mortgage loan means a mortgage loan as defined in section
303(1) of HMDA (12 U.S.C. 2802(1)) and implementing regulations.
(k) Income level--(1) Low-income means, in the case of a person, an
individual income, or in the case of a geography, a median family
income, that is less than 50 percent of the adjusted area median
income, with adjustments to take into account family size and the
prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(2) Moderate-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 50 percent and less than 80 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(3) Middle-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 80 percent and less than 120 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(4) Upper-income means, in the case of a person, an individual
income or, in the case of a geography, a median family income, that is
120 percent or more of the adjusted area median income, with
adjustments to take into account family size and the prevailing levels
of residential housing construction costs or unusually high or low
family incomes.
(l) Limited purpose bank means a bank that offers only a narrow
product line (such as credit cards or automobile loans) to a national
or regional market and has, pursuant to a written request, been
designated by the OCC as a limited purpose bank, as provided in
Sec. 25.25 of this part.
(m) Loan location. A loan is located in a geography as follows:
(1) A consumer loan is located where the borrower resides;
(2) A home mortgage loan is located where the property to which the
loan relates is located;
(3) A small business or small farm loan is located where the main
business facility or farm is located or where the loan proceeds
otherwise will be applied, as indicated by the borrower.
(n) Loan production office means a staffed banking facility that is
accessible to the public, and provides lending-related services such as
loan information and applications, but is not a branch.
(o) MSA means metropolitan statistical area or primary metropolitan
statistical area as defined by the Director of the Office of Management
and Budget.
(p) Minority means an individual who is an American Indian or
Alaskan Native, an Asian or Pacific Islander, a Black, or of Hispanic
origin as provided in the Office of Management and Budget's Statistical
Policy Directive No. 15, Race and Ethnic Standards for Federal
Statistics and Administrative Reporting.
(q) Minority-owned business means a business, including a farm,
that is more than 50 percent owned by one or more minority individuals,
and that has not issued any securities registered under Section 12(g)
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has
100 or fewer shareholders.
(r) Service area means a geographical area delineated in accordance
with Sec. 25.41 of this part.
(s) Small bank means a bank with total assets of less than $250
million that is:
(1) Independent; or
(2) An affiliate of a holding company with total banking and thrift
assets of less than $250 million.
(t) Small business loan means a loan with an original amount of $1
million or less that is either a commercial or industrial loan or a
loan secured by nonfarm, nonresidential property.
(u) Small farm loan means a loan with an original amount of
$500,000 or less that is a loan secured by farmland (including a loan
to finance a farm residence or other improvements), a loan to finance
agricultural production, or any other loan to a farmer.
(v) Women-owned business means a business, including a farm, that
is more than 50 percent owned by one or more women, and that has not
issued any securities registered under Section 12(g) of the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has 100 or fewer
shareholders.
(w) Wholesale bank means a bank that is not in the business of
extending home mortgage, small business, small farm, or consumer loans
to retail customers, and has, pursuant to a written request, been
designated by the OCC as a wholesale bank, as provided in Sec. 25.25 of
this part.
Subpart B--Standards for Assessing Performance
Sec. 25.21 Assessment tests and ratings, in general.
(a) Assessment tests and standards. In connection with an
examination of a bank, the OCC shall assess the Community Reinvestment
Act (CRA) performance of the bank as follows:
(1) Lending, investment, and service tests. The OCC shall apply
these three tests, as described in Secs. 25.22 through 25.24 of this
part, in evaluating the performance of banks, except as provided in
paragraphs (a)(2), (3) and (4) of this section.
(2) Community development test for wholesale or limited purpose
banks. In evaluating the performance of wholesale or limited purpose
banks (as defined in Sec. 25.12 of this part), the OCC shall apply the
community development test, as provided in Sec. 25.25 of this part,
except as provided in paragraph (a)(4) of this section.
(3) Assessment standards for small banks. In evaluating the
performance of small banks (as defined in Sec. 25.12 of this part), the
OCC shall apply the assessment standards for small banks as provided in
Sec. 25.26 of this part. However, a small bank may elect instead to be
assessed as provided in paragraphs (a)(2) and (4) of this section, or
it may elect to be evaluated under paragraph (a)(1) of this section if
it has collected and reported the data required for other banks under
Sec. 25.42(a)(1) of this part.
(4) Strategic plan. Any bank may elect not to be assessed by any
tests described in paragraphs (a)(1), (2) and (3) of this section by
submitting to the OCC and receiving approval of a strategic plan as
described in Sec. 25.27 of this part.
(b) Assessment context. The OCC shall apply the tests and standards
in paragraph (a) of this section in the context of the following
information:
(1) Demographic data on median income levels, distribution of
household income, nature of housing stock, housing costs, and other
relevant data pertaining to a bank's service area(s);
(2) Examiner-developed information regarding the credit needs of
the bank's service area(s) obtained from community-based organizations,
state and local governments, economic development agencies, and from
any information the bank may choose to provide;
(3) The bank's product offerings and business strategy as
determined from data provided by the bank;
(4) Institutional capacity and constraints, including the size and
financial condition of the institution, the economic climate (national,
regional and local), safety and soundness limitations, and any other
factors that significantly affect the bank's ability to lend to the
different parts of its service area(s);
(5) The bank's past performance and the performance of similarly-
situated lenders;
(6) The bank's public file, as described in Sec. 25.43 of this
part, and any signed, written comments about the bank's CRA performance
submitted to the bank or the OCC; and
(7) Any other information deemed relevant by the OCC.
(c) Assigned ratings. The OCC shall assign to each bank one of the
following four ratings as set out in Sec. 25.28 of this part and
Appendix A of this part: ``outstanding''; ``satisfactory''; ``needs to
improve''; or ``substantial noncompliance'' based on:
(1) The results of the applicable assessment test(s) or standards
or performance under an approved strategic plan; and
(2) Any evidence of discriminatory or other illegal credit
practices.
(d) Safe and sound operations. This part and the CRA do not require
any bank to make loans or investments, or to provide services that are
inconsistent with safe and sound operations. Banks are permitted and
encouraged to develop and apply flexible underwriting standards,
consistent with safe and sound operations, for loans that benefit low-
or moderate-income geographies or individuals.
(e) Compliance with community reinvestment obligation. The assigned
ratings reflect the extent of compliance or noncompliance with the
community reinvestment obligation described in Sec. 25.11(b) of this
part. A bank that receives an assigned rating of ``substantial
noncompliance'' shall be subject to enforcement actions pursuant to 12
U.S.C. 1818.
Sec. 25.22 Lending test.
(a) Scope of test. (1) The lending test evaluates a bank's
performance in helping to meet the credit needs of its service area(s)
through its lending activities, as measured by home mortgage
originations and purchases, small business and small farm loans
outstanding, and community development loans outstanding. At the bank's
option, the lending test will also evaluate the bank's consumer loans
outstanding and any other loan distribution data the bank may choose to
provide, such as data on extensions of lines of credit, commitments,
and letters of credit.
(2) When evaluating a bank's overall lending performance, the OCC
shall weigh its assessments of the bank's home mortgage lending, small
business and small farm lending, and (at the bank's option) consumer
lending to reflect the relative importance of each category of lending
to the bank's overall business.
(3) The OCC shall weigh the bank's community development lending
according to the characteristics and needs of the bank's service
area(s), the capacity and constraints of the bank, and the
opportunities available to the bank for this lending.
(b) Assessment criteria. The OCC shall evaluate a bank's lending
performance pursuant to the following criteria:
(1) Geographic distribution. The geographic distribution of the
bank's lending (based on the location of the loan as provided in
Sec. 25.12 of this part), including:
(i) The proportion of total lending in the bank's service area(s);
(ii) The dispersion of lending throughout the bank's service
area(s); and
(iii) The number and amount of loans in low-, moderate-, middle-,
and upper-income geographies in the bank's service area(s);
(2) Borrower characteristics. The distribution, particularly in the
bank's service area, of the bank's lending (based on borrower
characteristics), including:
(i) The number and amount of home mortgage loans to low-, moderate-
, middle-, and upper-income individuals;
(ii) The number and amount of small business and small farm loans
to businesses and farms with gross annual revenues less than or equal
to $1 million;
(iii) The number and amount of small business and small farm loans
by size of loan; and
(iv) At the bank's option, the number and amount of consumer loans
to
low-, moderate-, middle-, and upper-income individuals;
(3) Community development lending. The bank's community development
lending, including the number and amount of community development loans
outstanding, their complexity and innovativeness, and the number and
amount of lines of credit, commitments, and letters of credit for
community development purposes; and
(4) Innovative or flexible lending practices. The bank's use of
innovative or flexible lending practices to address the credit needs of
low- or moderate- income individuals or geographies.
(c) Affiliate lending. (1) The OCC shall, if the bank elects,
consider in its assessment of a bank's lending performance under this
section lending by an affiliate of the bank, if the bank, or its
affiliate, reports or collects the lending data pursuant to Sec. 25.42
of this part.
(2) The OCC may consider in its assessment lending by a bank's
affiliate even if the bank has chosen not to have the affiliate's
lending considered if the OCC determines that this lending is integral
to the business of the bank.
(3) Consideration of affiliate lending shall be subject to the
following constraints:
(i) No affiliate may claim the same loan as another institution;
and
(ii) If the OCC considers loans within a particular lending
category (e.g., home mortgage, small business, small farm, consumer or
community development lending) made by one or more of the bank's
affiliates in a particular service area, the OCC shall consider all the
loans within that lending category made by all of the bank's affiliates
in that particular service area.
(d) Consortia and third-party lending. Community development loans
made through consortia in which the bank participates or through third
parties in which the bank has invested:
(1) Shall be considered under the lending test, if the bank elects,
provided the data pertaining to these loans are reported by the bank
under the applicable provisions of Sec. 25.42 of this part; and
(2) May be allocated among participants or investors as they choose
for purposes of the lending test, provided that no participant or
investor claims the same loan or part of a loan as another participant
or investor, or claims in the aggregate greater than its percentage
share (based on the level of its participation or investment) of the
total loans made by the consortium or third party.
(e) Lending performance rating. The OCC shall rate a bank's lending
performance as provided in Appendix A of this part.
Sec. 25.23 Investment test.
(a) Scope of test. The investment test evaluates the degree to
which a bank is helping to meet the credit needs of its service area(s)
through qualified investments. To be considered under this test, the
qualified investments of a bank must benefit its service area(s) or a
broader statewide or regional geographic area that includes the bank's
service area(s).
(b) Qualified investments. (1) Qualified investments are lawful
investments, deposits, membership shares in a credit union, or grants
that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) Donating, selling on favorable terms, or making available on a
rent-free basis any branch of the bank that is located in any
predominantly minority neighborhood to any minority depository
institution or women's depository institution (as defined in 12 U.S.C.
2907(b)) shall be considered under the investment test.
(3) Activities considered under the lending or service tests may
not be considered under the investment test.
(4) At a bank's option, the OCC shall consider in its assessment of
a bank's investment performance a qualified investment made by an
affiliate of the bank, provided that the qualified investment is not
claimed by any other institution.
(c) Assessment criteria. The OCC shall evaluate the investment
performance of a bank pursuant to the following criteria:
(1) The dollar amount of qualified investments that directly
address credit needs;
(2) The use of innovative or complex qualified investments to
support community development initiatives; and
(3) The degree of responsiveness to credit and community economic
development needs.
(d) Investment performance rating. The OCC shall rate a bank's
investment performance as provided in Appendix A of this part.
Sec. 25.24 Service test.
(a) Scope of test. The service test evaluates a bank's record of
helping to meet the credit needs of the bank's service area(s) by
analyzing both the availability and responsiveness of a bank's systems
for delivering retail banking services and the extent and
innovativeness of its community development services.
(b) Assessment criteria--retail banking services. The OCC shall
evaluate the availability and responsiveness of a bank's systems for
delivering retail banking services, pursuant to the following criteria:
(1) The current distribution of the bank's branches and ATMs among
low-, moderate-, middle-, and upper-income geographies;
(2) In the context of its current distribution of the bank's
branches and ATMs, the bank's record of opening and closing branches
and ATMs, particularly branches and ATMs located in low- or moderate-
income geographies or primarily serving low- or moderate-income
individuals;
(3) The availability of alternative systems for delivering retail
banking services (e.g., banking by telephone or computer, mobile
branches and ATMs, ATMs not owned or operated by or operated
exclusively for the bank, loan production offices, and bank-at-work or
by-mail programs) in low- and moderate-income geographies and to low-
and moderate-income individuals; and
(4) The range of services provided in low-, moderate-, middle-, and
upper- income geographies and the degree to which the services are
tailored to meet the needs of those geographies.
(c) Assessment criteria--community development services. (1)
Community development services are services that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) The OCC shall evaluate community development services pursuant
to the following criteria:
(i) The extent to which the bank provides community development
services; and
(ii) The innovativeness and responsiveness of community development
services.
(3) When evaluating a bank's overall service performance, the OCC
shall weigh the bank's community development services according to the
characteristics and needs of the bank's service area(s), the capacity
and constraints of the bank, and the opportunities available to the
bank to provide community development services.
(4) At a bank's option, the OCC shall consider in its assessment of
a bank's service performance a community development service provided
by an affiliate of the bank, provided that the community development
service is not claimed by any other institution.
(d) Service performance rating. The OCC shall rate a bank's service
performance as provided in Appendix A of this part.
Sec. 25.25 Community development test for wholesale or limited-purpose
banks.
(a) Scope of test. (1) The OCC shall assess the degree to which a
wholesale or limited purpose bank (as defined in Sec. 25.12 of this
part) is helping to meet the credit needs of its service area(s) under
the community development test only if the bank's written request to be
designated as a wholesale or limited purpose bank has been approved by
the OCC before the commencement of its CRA examination, and the
designation has not been revoked either at the request of the bank or
at the OCC's own initiative.
(2) The community development test evaluates the record of a
wholesale or limited purpose bank in helping to meet the credit needs
of its service area(s) through qualified investments, community
development lending, or community development services.
(3) For purposes of the community development test only, community
development loans include small business and small farm loans and loans
to low- and moderate-income individuals and geographies, whether or not
reported or collected by the bank or one of its affiliates as home
mortgage loans, small business loans, small farm loans, or consumer
loans, pursuant to Sec. 25.42 of this part.
(b) Assessment criteria. The OCC shall evaluate the community
development performance of a wholesale or limited purpose bank pursuant
to the following criteria:
(1) The number and amount of community development loans
outstanding, qualified investments (as defined in Sec. 25.23 of this
part), or community development services (as defined in Sec. 25.24 of
this part);
(2) The use of innovative or complex qualified investments,
community development loans outstanding, or community development
services and their connection to credit needs; and
(3) The degree of responsiveness to credit and community economic
development needs.
(c) Indirect activities. The OCC shall, if the wholesale or limited
purpose bank elects, consider in its community development performance
assessment:
(1) Qualified investments or community development services
provided by an affiliate of the bank, provided the investment or
services are not claimed by any other institution; and
(2) Community development lending by affiliates, consortia and
third parties, subject to the requirements and limitations in
Sec. 25.22(c)(3) and (d) of this part.
(d) Benefit to service area(s)--(1) Benefit inside service area(s).
For purposes of assessing a wholesale or limited purpose bank's
community development performance under this section, the OCC shall
consider all qualified investments, community development loans
outstanding, and community development services that benefit areas
within the bank's service area(s).
(2) Benefit outside service area(s). The OCC shall consider the
qualified investments, community development loans outstanding, and
community development services provided by a wholesale or limited
purpose bank that benefit areas outside the bank's service area(s) only
up to an amount equivalent to the amount of investments, loans, and
services considered under paragraph (d)(1) of this section. If a bank
demonstrates a limited need or opportunity for these investments,
lending, and services, in its service area(s), the OCC may exempt the
bank from all or part of this limitation.
(e) Community development performance rating. The OCC shall rate a
bank's community development performance as provided in Appendix A of
this part.
Sec. 25.26 Small bank assessment standards.
(a) Scope of assessment. The OCC shall assess the degree to which a
small bank is helping to meet the credit needs of its service area(s)
under the assessment standards described in this section.
(b) Assessment criteria. The OCC shall evaluate a small bank's CRA
performance pursuant to the following criteria:
(1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets or community
development lending or investment;
(2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's service area(s);
(3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
(4) The geographic distribution of the bank's loans given its
service area(s); and
(5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in meeting the credit needs
of its service area(s).
(c) Small bank performance rating. The OCC shall rate a small
bank's performance as provided in Appendix A of this part.
25.27 Strategic plan assessment.
(a) Alternative election. A bank may request to be rated under a
strategic plan rather than under the lending, service, and investment
tests (Secs. 25.22 through 25.24 of this part), the community
development test (Sec. 25.25 of this part), or the small bank
assessment standards (Sec. 25.26 of this part), by submitting to the
OCC a strategic plan as provided for in this section. A bank's request
to be rated under a strategic plan is not approved until the OCC
approves the plan. The OCC's approval of a strategic plan does not
affect the bank's obligation, if any, to report data as required by
Sec. 25.42 of this part.
(b) Strategic plans in general. (1) A plan may have a term of no
more than five years, and any multi-year plan shall include annual
interim measurable goals according to which the OCC shall evaluate the
bank's performance.
(2) A bank with more than one service area may prepare a single
plan for all of its service areas or a plan for one or more but not all
of its service areas.
(3) Affiliated institutions may prepare joint plans if the plans
provide measurable goals for each institution.
(c) Public participation in strategic plan development. Before
submitting a plan to the OCC for approval, the bank shall:
(1) Informally seek suggestions from the public in its service
area(s) while developing the plan;
(2) Once the bank has developed a plan, formally solicit public
comment on the plan for at least 30 days by publishing notice in a
newspaper of general circulation in each of its service areas; and
(3) During the period of formal public comment, make copies of the
plan available for review at all offices of the bank in any service
area covered by the plan.
(d) Submission of plan. The bank shall submit its plan to the OCC
at least three months prior to the proposed effective date of the plan.
The bank shall also submit with its plan any public comments received,
and, if the plan was revised in light of the comments received, the
initial plan as released for public comment.
(e) Plan content--(1)Measurable goals. (i) A bank shall specify in
its plan measurable goals for helping to meet the credit needs of each
of its service area(s) covered by the plan, particularly the needs of
low- and moderate-income geographies and low- and moderate-income
individuals, through lending, investment, and the provision of
services, as appropriate.
(ii) A bank shall address all three performance categories and,
unless the bank has been designated as a wholesale or limited purpose
bank, shall emphasize lending and lending-related activities.
Nevertheless, a different emphasis, including a focus on one or more
performance categories, may be appropriate if responsive to the
characteristics and credit needs of its service area, considering
public comment and the bank's capacity and constraints, product
offerings, and business strategy.
(2) Confidential information. The bank may submit additional
information to the OCC on a confidential basis, but the goals stated in
the plan shall be sufficiently specific to enable the public and the
OCC to judge fairly the merits of the plan.
(3) Satisfactory and outstanding goals. A bank shall specify in its
plan measurable goals that constitute ``satisfactory'' performance. A
plan may specify measurable goals that constitute ``outstanding''
performance. In order to be considered for an ``outstanding''
performance rating, the bank shall submit both ``satisfactory'' and
``outstanding'' performance goals.
(f) Plan approval--(1)Timing. The OCC shall act upon a plan within
60 days after the complete plan and required accompanying material are
submitted. If the OCC fails to act within this time period, the plan
shall be deemed approved unless the OCC extends the review period for
good cause.
(2) Public participation. In evaluating the plan's goals, the OCC
shall consider the public's involvement in formulating the plan, public
comment on the plan, and any response by the bank to public comment on
the plan.
(3) Criteria for evaluating plan. The OCC shall evaluate a plan's
measurable goals using the following criteria, as appropriate:
(i) The extent and breadth of lending or lending-related
activities, including, as appropriate, the distribution of loans among
different geographies, businesses and farms of different sizes, and
individuals of different income levels, the extent of community
development lending, and the use of innovative or flexible lending
practices to address credit needs;
(ii) The amount and innovativeness, complexity, and responsiveness
of the bank's qualified investments, as defined in Sec. 25.23 of this
part; and
(iii) The extent and availability of the bank's services,
including, as appropriate, the accessibility of retail delivery systems
and the extent and innovativeness of community development services, as
defined in Sec. 25.24 of this part.
(g) Plan amendment. During the term of a plan, the bank may
petition the OCC to approve an amendment to the plan on grounds that a
material change in circumstances has made the plan no longer
appropriate. Any amendment proposed shall be developed in accordance
with the public participation requirements of paragraph (c) of this
section.
(h) Strategic plan assessment. The OCC shall approve the goals and
assess performance under a strategic plan as provided for in Appendix A
of this part.
Sec. 25.28 Assigned ratings.
(a) Ratings in general. Subject to paragraphs (b), (c), and (d) of
this section, the OCC shall assign to a bank a rating of
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or
``substantial noncompliance'' based on the bank's performance under the
lending, investment and service tests, the community development test,
the small bank assessment standards, or an approved strategic plan, as
applicable.
(b) Lending, investment, and service tests. The OCC shall assign a
rating for a bank assessed under the lending, investment, and service
tests in accordance with the procedures provided in Appendix A of this
part and the following principles:
(1) A bank's rating on the lending test shall be weighed so as to
count for at least 50 percent of its assigned rating;
(2) A bank that receives an ``outstanding'' rating on the lending
test shall receive an assigned rating of at least ``satisfactory'';
(3) A bank that receives an ``outstanding'' rating on the lending
test and an ``outstanding'' rating on either the service test or the
investment test shall receive an assigned rating of ``outstanding'';
(4) A bank that receives an ``outstanding'' rating on both the
service test and the investment test and a rating of at least ``high
satisfactory'' on the lending test shall receive an assigned rating of
``outstanding''; and
(5) No bank may receive an assigned rating of ``satisfactory''
unless it receives a rating of at least ``low satisfactory'' on the
lending test.
(c) Effect of evidence of discriminatory or other illegal credit
practices. Evidence of discriminatory or other illegal credit practices
shall adversely affect the OCC's evaluation of a bank's performance. In
determining the effect on the bank's assigned rating, the OCC shall
consider the nature and extent of the evidence, the policies and
procedures that the bank has in place to prevent discriminatory or
other illegal credit practices, any corrective action that the bank has
taken or has committed to take, particularly voluntary corrective
action resulting from self-assessment, and other relevant information,
such as the bank's past fair lending performance.
(d) Effect of successive ``needs to improve'' ratings. A bank that
would otherwise receive an assigned rating of ``needs to improve''
shall receive an assigned rating of ``substantial noncompliance'' if
the bank received no better than a ``needs to improve'' rating on each
of its two previous examinations.
Sec. 25.29 Effect of ratings on applications.
(a) CRA performance. Among other factors, the OCC shall take into
account the record of performance under the CRA of each applicant bank
in considering any application:
(1) By a bank for the establishment of a domestic branch or other
facility that would be authorized to take deposits;
(2) By a bank for the relocation of the main office, a branch
office or ATM;
(3) For the merger or consolidation with or the acquisition of
assets or assumption of liabilities of a federally insured depository
institution; and
(4) For the conversion of a federally insured depository
institution to a national bank charter.
(b) Charter application. An applicant (other than a federally
insured depository institution) for a national bank charter shall
submit a description of how it will meet its CRA objectives when the
application is made. In considering the application, the OCC shall take
the description into account and may deny or condition approval on that
basis.
(c) Interested parties. In considering CRA performance in an
application described in paragraph (a) of this section, the OCC shall
take into account any views expressed by interested parties which are
submitted in accordance with the OCC's procedures set forth in part 5
of this chapter.
(d) Denial or conditional approval of application. A bank's record
of performance may be the basis for denying or conditioning approval of
an application described in paragraph (a) of this section.
Subpart C--Records, Reporting and Disclosure Requirements
Sec. 25.41 Service area delineation.
(a) In general. Subject to paragraphs (b) and (c) of this section,
each bank may delineate its service area(s) using any method it chooses
provided that the service area(s):
(1) Do(es) not reflect illegal discrimination;
(2) Do(es) not arbitrarily exclude low- and moderate-income
geographies, taking into account the bank's size and financial
condition and the extent of its branching network, as appropriate; and
(3) Consist(s) only of whole census tracts or block numbering
areas.
(b) Banks that are not wholesale or limited purpose banks. The
service area(s) for a bank that is not a wholesale or limited purpose
bank (as defined in Sec. 25.12 of this part):
(1) Shall include those geographies in the local areas around a
bank's branches and deposit-taking ATMs in which the bank has
originated or had outstanding, during the previous calendar year, a
significant number and amount of home mortgage, small business and
small farm, and (if the bank chooses to have them considered in its CRA
evaluation) consumer loans and any other geographies equidistant from
its branches and deposit-taking ATMs, taking into account political
boundaries or significant geographic barriers; and
(2) Shall not extend substantially across MSA boundaries or state
boundaries unless the service area is located in a multistate MSA. If
the bank serves areas that extend substantially across state boundaries
or extend substantially across boundaries of an MSA, the bank shall
delineate separate service areas for the areas in each state and for
the areas inside and outside the MSA.
(c) Wholesale or limited purpose banks. The service area for a
wholesale or limited purpose bank (as defined in Sec. 25.12 of this
part) shall be delineated as an area or areas around its offices
(including its main office and branches) or a broader statewide or
regional area that includes the area or areas.
(d) Banks serving military personnel. Notwithstanding paragraphs
(a), (b), and (c) of this section, a bank whose business predominantly
consists of serving the needs of military personnel or their dependents
who are not located within a defined geographic area may delineate its
entire deposit customer base as its service area.
(e) Maintaining list and map. Each bank shall compile and maintain
a list of all the geographies within its service area or areas and a
map of each service area showing the geographies contained therein.
Sec. 25.42 Data collection and reporting.
(a) Mandatory data collection and reporting-- (1) Loan data. Each
bank, except small banks, shall collect and report to the OCC the
following data pertaining to its home mortgage, small business, small
farm, and community development loans:
(i) Home mortgage loans. If the bank is subject to reporting under
HMDA, the location of each home mortgage loan located outside the MSAs
in which the bank has a home or branch office (or outside any MSA) in
accordance with Regulation C, Home Mortgage Disclosure (12 CFR Part
203);
(ii) Small business and small farm loan data. All small business
and small farm loan data required to be collected and reported on the
OCC's Small Business and Small Farm Loan Register (CC-________-
________), set forth in appendix C of this part, in accordance with the
instructions in appendix C of this part; and
(iii) Community development loan data. All community development
loan data required to be collected and reported on the OCC's Community
Development Report Form (CC-________-________), set forth in appendix C
of this part, in accordance with the instructions in appendix C of this
part.
(2) Service area data. Each bank shall collect and report to the
OCC by April 1 of each year a list of the areas the bank considers to
be its service area(s), a list of the geographies it considers to be
within its service area(s), and a map of each service area showing the
geographies contained therein.
(b) Optional data collection. (1) If a bank elects to have its
consumer lending considered under the lending test (as described in
Sec. 25.22 of this part), the bank shall collect the consumer loan data
requested on the OCC's Consumer Loan Register (CC-________-________),
set forth in appendix C of this part, in accordance with the
instructions in appendix C of this part.
(2) At its option, a bank may:
(i) Provide information concerning outstanding small business,
small farm, or consumer loans throughout the year to account for
seasonal variations in lending for use in the evaluation of the bank
under the lending test described in Sec. 25.22 of this part; and
(ii) Provide any other information concerning its lending
performance, including additional loan distribution data.
(c) Data on affiliate lending. A bank that wishes to have the OCC
consider lending by its affiliates for purposes of the lending test
shall be prepared to identify the particular home mortgage loans
reported under HMDA which it wishes the OCC to consider, and shall
collect or report, pursuant to the provisions of paragraphs (a) and (b)
of this section, the requisite data concerning the small business,
small farm, or consumer loans made by its affiliates that it wishes OCC
to consider.
(d) Data on consortia and third-party lending. A bank that wishes
to have the OCC consider community development lending through
consortia in which the bank participates or through third parties in
which the bank has invested shall report, pursuant to paragraph
(a)(1)(iii) of this section, the requisite data concerning the
community development loans made through consortia and third parties
that it wishes the OCC to consider.
Sec. 25.43 Public file and disclosure by banks.
(a) Public availability. Each bank shall maintain a file that is
readily available for public inspection containing the information
required by this section.
(b) Current information. Each bank shall include in its public file
the following information:
(1) All signed, written comments received from the public for the
current year and each of the prior two calendar years that specifically
relate to the bank's performance in helping to meet the credit needs of
its community or communities, and any response to the comments by the
bank;
(2) A copy of the public section of the bank's most recent CRA
Performance Evaluation prepared by the OCC. The bank shall place this
copy in the public file within 30 business days after its receipt from
the OCC;
(3) A list of the areas the bank considers to be its service
area(s), a list of the geographies it considers to be within its
service area(s), and a map of each service area showing the geographies
contained therein;
(4) A list of the bank's branches and ATMs, their street addresses,
and geographies;
(5) A list of branches and ATMs opened or closed by the bank during
the current and each of the prior two calendar years, their street
addresses, and geographies; and
(6) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the bank's branches and ATMs and descriptions of material deviations in
the availability or cost of services at particular branches and ATMs,
if any. At its option, a bank may include information regarding the
availability of alternative systems for delivering retail banking
services (e.g., banking by telephone or computer, mobile branches and
ATMs, ATMs not owned or operated by or operated exclusively for the
bank, loan production offices, and bank-at-work or by-mail programs).
(c) Information for prior years. Each bank that is not a small bank
shall include in its public file the following information for each of
the prior two calendar years derived from the data collected or
reported pursuant to Sec. 25.42 of this part:
(1) The number and amount of small business loans and small farm
loans located in low-, moderate-, middle-, and upper-income
geographies;
(2) A list of the geographies where the bank had outstanding at
least one small business loan or small farm loan;
(3) The number and amount of small business and small farm loans
located inside the bank's service area(s) and outside the bank's
service area(s);
(4) The number and amount of small business and small farm loans to
minority-owned businesses;
(5) The number and amount of small business and small farm loans to
women-owned businesses;
(6) The number and amount of small business and small farm loans to
businesses and farms with gross annual revenues less than or equal to
$1 million;
(7) The number and amount of community development loans
outstanding; and
(8) If the bank has elected to have its consumer loans considered
under the lending test (as described in Sec. 25.22 of this part), the
number and amount of consumer loans to low-, moderate-, middle-, and
upper-income individuals, the number and amount of consumer loans
located in low-, moderate-, middle-, and upper-income geographies, and
the number and amount of consumer loans located inside the bank's
service area(s) and outside the bank's service area(s).
(d) Exception. A bank shall not place in its public file any
information required under paragraph (c) of this section for a
particular year if, given special circumstances such as a small number
of loans made within a small number of designated income geographies or
to a small number of designated borrowers, the information could
reasonably be expected to disclose the identity of the borrower.
(e) HMDA statement. Each bank required to report home mortgage loan
data pursuant to the HMDA shall include in its public file a copy of
its HMDA Disclosure Statement provided by the Federal Financial
Institutions Examination Council for each of the prior two calendar
years. The statement shall be placed in the main office public file
within three business days and in the branch office public files within
10 business days of the bank's receipt of the statement.
(f) Small bank file. (1) A small bank shall include in its public
file the bank's loan-to-deposit ratio computed at the end of the most
recent calendar year. A bank may include additional data on its loan-
to-deposit ratio at its option.
(2) A small bank that elects to be evaluated under the lending,
investment and service tests (as described in Secs. 25.22 through 25.24
of this part) shall include in its public file the information
specified in paragraph (c) of this section.
(g) Strategic plan. Each bank that has been approved to be assessed
under a strategic plan as described in Sec. 25.27 of this part shall
include in its public file a copy of that plan. Information submitted
to the OCC on a confidential basis in conjunction with the plan does
not have to be included in the public file.
(h) Less than satisfactory rating. Each bank that received a less
than satisfactory rating during its most recent examination shall
include in its public file a description of its current efforts to
improve its performance in helping to meet the credit needs of its
entire community. This description shall be updated quarterly.
(i) Location of public file. Each bank shall maintain its public
file as follows:
(1) The main office shall have a copy of the complete public file;
(2) At least one branch in each service area shall have a copy of
the bank's HMDA Disclosure Statements and all materials in the public
file relating to the service area in which the branch is located; and
(3) If a member of the public requests to review a bank's public
file at a branch that does not have a copy, the bank shall make a
complete copy of the file for that service area available for review at
the branch within 5 business days at no cost.
(j) Copies. Each bank shall provide copies of the information in
its public file to members of the public upon request. A bank may
charge a reasonable fee not to exceed the cost of reproduction and
mailing (if applicable).
Sec. 25.44 Public notice by banks.
(a) CRA notice for banks. Each bank shall provide in the public
lobby of its main office and each of its branches the public notice set
forth in Appendix B of this part. Bracketed material shall be used only
by banks having more than one service area.
(b) Additional notice for affiliate banks. The last two sentences
shall be included only if the bank is an affiliate of a holding company
and the last sentence only if the company is not prevented by statute
from acquiring additional banks.
Sec. 25.45 Publication of planned examination schedule.
The OCC shall publish at least 30 days in advance of the beginning
of each calendar quarter a list of the banks that are scheduled for CRA
examinations in that quarter.
Subpart D--Transition Rules
Sec. 25.51 Transition rules.
(a) Effective date. Sections of this part 25 become effective over
a period of time in accordance with the schedule set forth in paragraph
(c) of this section. The provisions of part 25 become fully effective
on July 1, 1996.
(b) Data collection and reporting; strategic plan; small bank
assessment standards; and performance tests--(1) Data collection and
reporting. On July 1, 1995, the data collection and reporting
requirements set forth in Sec. 25.42 of this part become effective.
(2) Strategic plan. Beginning July 1, 1995, a bank that elects to
be evaluated under an approved strategic plan pursuant to Sec. 25.27 of
this part may submit its strategic plan to the OCC for approval.
(3) Small bank assessment standards. Beginning July 1, 1995, a bank
that qualifies as a small bank pursuant to Sec. 25.12 of this part may
elect to be evaluated under the small bank assessment standards set
forth in Sec. 25.26 of this part. Beginning July 1, 1996, the OCC shall
evaluate each small bank under the small bank assessment standards,
unless the bank elects to be evaluated pursuant to the performance
tests set forth in Secs. 25.22 through 25.25 of this part or under an
approved strategic plan.
(4) Performance tests. On July 1, 1996, the lending, investment,
service, and community development tests set forth in Secs. 25.22
through 25.25 of this part become effective. Thereafter, the OCC shall
evaluate all banks pursuant to these test(s), except small banks
evaluated under the small bank assessment standards and banks that
elect to be evaluated under an approved strategic plan.
(c) Schedule. On January 1, 1995, Secs. 25.11, 25.12, 25.29, 25.51,
and 25.101 become effective, and Secs. 25.1, 25.2, 25.8, and 25.9 will
expire. On July 1, 1995, Secs. 25.26, 25.27, 25.42 and 25.45 become
effective, and Secs. 25.28 and 25.41 become effective for banks that
are evaluated under Secs. 25.26 or 25.27. On July 1, 1996, Secs. 25.21
through 25.25, 25.28, 25.41, 25.43, and 25.44 become effective, and
Secs. 25.3 through 25.7 will expire.
Subpart E--Interpretations
Sec. 25.101 Applicability of the Community Reinvestment Act to certain
special purpose banks.
In response to its July 1978 proposed regulation, 12 CFR Part 25,
to implement the CRA, the OCC received several inquiries from
institutions that, although they are chartered as national banks, do
not perform commercial or retail banking services. These institutions
serve solely as correspondent banks, or as trust companies, or as
clearing agents, and they do not extend credit to the public for their
own account. The OCC concludes that the CRA is not intended to cover
these institutions. It is the purpose of the CRA to require the OCC to
encourage banks to meet the credit needs of their local communities. To
this end, the OCC must assess banks' records of performance and take
those records into account in acting on certain applications affecting
the banks. The OCC believes that these provisions were intended to
cover all banks that are in the business of extending credit to the
public, including both wholesale and retail banks. The lending
activities of these banks affect the economic health of the communities
in which they are chartered. However, the OCC believes it would be
pointless to encourage or to assess the credit granting record of
institutions that are not organized to grant credit to the public in
the ordinary course of business, other than as an incident to their
specialized operations. Accordingly, the term national bank as used in
this part does not include banks that engage solely in correspondent
banking business, trust company business, or acting as a clearing
agent.
Appendix A to Part 25--Ratings
(a) Ratings in general. (1) In assigning a rating, the OCC shall
evaluate a bank's performance under the applicable assessment
criteria in this part, subject to Sec. 25.28 of this part, which
provides for adjustments on the basis of evidence of discriminatory
or other illegal credit practices and prior ``needs to improve''
ratings.
(2) A bank's performance need not fit each aspect of a
particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The bank's overall
performance, however, should generally be consistent with the
appropriate profile stated below.
(b) Banks that are not wholesale or limited purpose banks or
small banks.
(1) Lending performance rating. The OCC shall assign each bank's
lending performance one of the five ratings described below.
(i) Outstanding. The OCC shall rate a bank's lending performance
``outstanding'' if, in general, it demonstrates:
(A) Excellent responsiveness to credit needs in its service
area(s);
(B) A substantial majority of its loans are made in its service
area(s);
(C) An excellent geographic distribution of loans throughout its
service area(s);
(D) An excellent distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An excellent record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Extensive use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It is a leader in making community development loans.
(ii) High satisfactory. The OCC shall rate a bank's lending
performance ``high satisfactory'' if, in general, it demonstrates:
(A) Good responsiveness to credit needs in its service area(s);
(B) A high percentage of its loans are made in its service
area(s);
(C) A good geographic distribution of loans throughout its
service area(s);
(D) A good distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A good record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Use of innovative or flexible lending practices to address
the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a relatively high level of community development
loans.
(iii) Low satisfactory. The OCC shall rate a bank's lending
performance ``low satisfactory'' if, in general, it demonstrates:
(A) Adequate responsiveness to credit needs in its service
area(s);
(B) An adequate percentage of its loans are made in its service
area(s);
(C) An adequate geographic distribution of loans throughout its
service area(s);
(D) An adequate distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An adequate record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Limited use of innovative or flexible lending practices) to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made an adequate level of community development
loans.
(iv) Needs to improve. The OCC shall rate a bank's lending
performance ``needs to improve'' if, in general, it demonstrates:
(A) Poor responsiveness to credit needs in its service area(s);
(B) A small percentage of its loans are made in its service
area(s);
(C) A poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A poor distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Little use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a limited number of community development loans.
(v) Substantial noncompliance. The OCC shall rate a bank's
lending performance as being in ``substantial noncompliance'' if, in
general, it demonstrates:
(A) A very poor responsiveness to credit needs in its service
area(s);
(B) A very small percentage of its loans are made in its service
area(s);
(C) A very poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A very poor distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) A very poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) No use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made few, if any, community development loans.
(2) Investment performance rating. The OCC shall assign each
bank's investment performance one of the five ratings described
below.
(i) Outstanding. The OCC shall rate a bank's investment
performance ``outstanding'' if, in general, it demonstrates:
(A) An excellent level of qualified investments, often in a
leadership position, particularly those that directly address credit
needs;
(B) Extensive use of innovative or complex qualified investments
to support community development initiatives; and
(C) Excellent responsiveness to credit and community economic
development needs.
(ii) High satisfactory. The OCC shall rate a bank's investment
performance ``high satisfactory'' if, in general, it demonstrates:
(A) A significant level of qualified investments, occasionally
in a leadership position, particularly those that directly address
credit needs;
(B) Significant use of innovative or complex qualified
investments to support community development initiatives; and
(C) Good responsiveness to credit and community economic
development needs.
(iii) Low satisfactory. The OCC shall rate a bank's investment
performance ``low satisfactory'' if, in general, it demonstrates:
(A) An adequate level of qualified investments, although rarely
in a leadership position, particularly those that directly address
credit needs;
(B) Occasional use of innovative or complex qualified
investments to support community development initiatives; and
(C) Adequate responsiveness to credit and community economic
development needs.
(iv) Needs to improve. The OCC shall rate a bank's investment
performance ``needs to improve'' if, in general, it demonstrates:
(A) A poor level of qualified investments, particularly those
that directly address credit needs;
(B) Rare use of innovative or complex qualified investments to
support community development initiatives; and
(C) Poor responsiveness to credit and community economic
development needs.
(v) Substantial noncompliance. The OCC shall rate a bank's
investment performance as being in ``substantial noncompliance'' if,
in general, it demonstrates:
(A) Few, if any, qualified investments, particularly those that
directly address credit needs;
(B) No use of innovative or complex qualified investments to
support community development initiatives; and
(C) Very poor responsiveness to credit and community economic
development needs.
(3) Service performance rating. The OCC shall assign each bank's
service performance one of the five ratings described below.
(i) Outstanding. The OCC shall rate a bank's service performance
``outstanding'' if, in general, the bank demonstrates:
(A) Its service delivery systems are readily accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has improved the accessibility
of its delivery systems, particularly in low- or moderate-income
geographies or to low- or moderate-income individuals;
(C) Services (including, where appropriate, business hours) are
tailored to the convenience and needs of its service area(s),
particularly low- or moderate- income geographies or low- or
moderate-income individuals; and
(D) It is a leader in providing community development services.
(ii) High satisfactory. The OCC shall rate a bank's service
performance ``high satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to essentially
all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has not adversely affected the
accessibility of its delivery systems, particularly in low- and
moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences certain portions of its
service area(s), particularly low- and moderate-income geographies
and low- and moderate-income individuals; and
(D) It provides a relatively high level of community development
services.
(iii) Low satisfactory. The OCC shall rate a bank's service
performance ``low satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are reasonably accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has generally not adversely
affected the accessibility of its delivery systems, particularly in
low- and moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences portions of its service
area(s), particularly low- and moderate-income geographies and low-
and moderate-income individuals; and
(D) It provides an adequate level of community development
services.
(iv) Needs to improve. The OCC shall rate a bank's service
performance ``needs to improve'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to limited
portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has adversely affected the
accessibility of its delivery systems, particularly in low- or
moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that inconveniences certain portions of its service
area(s), particularly low- or moderate-income geographies or low- or
moderate-income individuals; and
(D) It provides a limited level of community development
services.
(v) Substantial noncompliance. The OCC shall rate a bank's
service performance as being in ``substantial noncompliance'' if, in
general, the bank demonstrates:
(A) Its service delivery systems are inaccessible to significant
portions of its service area(s), particularly low- and moderate-
income geographies or low- and moderate-income individuals;
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has significantly adversely
affected the accessibility of its delivery systems, particularly in
low- or moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours)
vary in a way that significantly inconveniences many portions of its
service area(s), particularly low- or moderate-income geographies or
low- or moderate-income individuals; and
(D) It provides few, if any, community development services.
(4) Assigned rating. The OCC shall use the following procedures
for assigning a rating:
(i) Assign points corresponding to the bank's performance on
each of the component tests as follows:
----------------------------------------------------------------------------------------------------------------
Component test ratings Lending Service Investment
----------------------------------------------------------------------------------------------------------------
Outstanding................................... 12 points........... 6 points............ 6 points.
High Satisfactory............................. 9 points............ 4 points............ 4 points.
Low Satisfactory.............................. 6 points............ 3 points............ 3 points.
Needs to Improve.............................. 3 points............ 1 points............ 1 points.
Substantial Noncompliance..................... 0 points............ 0 points............ 0 points.
----------------------------------------------------------------------------------------------------------------
(ii) Total the points for the three tests, and use that total to
determine the composite rating according to the chart below.
However, if the total exceeds twice the number of points
attributable to the bank's lending test performance (as provided in
paragraph (b)(4)(i) of this appendix), determine the composite
rating using twice the number of points attributable to the bank's
lending test performance.
------------------------------------------------------------------------
Points Composite rating
------------------------------------------------------------------------
18 or over......................... Outstanding.
9 through 17....................... Satisfactory.
5 through 8........................ Needs to Improve.
0 through 4........................ Substantial Noncompliance.
------------------------------------------------------------------------
(c) Community development test for wholesale or limited purpose
banks. The OCC shall assign each wholesale or limited purpose bank's
community development performance one of the four ratings described
below.
(1) Outstanding. The OCC shall rate a wholesale or limited
purpose bank's community development performance ``outstanding'' if,
in general, it demonstrates:
(i) A high level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Extensive use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Excellent responsiveness to credit and community economic
development needs in its service area(s).
(2) Satisfactory. The OCC shall rate a wholesale or limited
purpose bank's community development performance ``satisfactory''
if, in general, it demonstrates:
(i) An adequate level of qualified investments, community
development loans outstanding, or community development services,
particularly those that directly address credit needs;
(ii) Occasional use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Adequate responsiveness to credit and community economic
development needs in its service area(s).
(3) Needs to improve. The OCC shall rate a wholesale or limited
purpose bank's community development performance as ``needs to
improve'' if, in general, it demonstrates:
(i) A poor level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Rare use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Poor responsiveness to credit and community economic
development needs in its service area(s).
(4) Substantial noncompliance. The OCC shall rate a wholesale or
limited purpose bank's community development performance in
``substantial noncompliance'' if, in general, it demonstrates:
(i) Few, if any, qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) No use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Very poor responsiveness to credit and community economic
development needs in its service area(s).
(d) Assessment standards for small banks. The OCC shall rate
each small bank's performance as described below.
(1) Eligibility for a satisfactory rating. The OCC shall rate a
bank's performance ``satisfactory'' if, in general, the bank
demonstrates:
(i) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its service area(s), and taking into account, as
appropriate, lending-related activities such as loan originations
for sale to the secondary markets and community development lending
and investment;
(ii) A majority of its loans and, as appropriate, other lending-
related activities are in its service area(s);
(iii) A distribution of loans to and, as appropriate, other
lending related-activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's service area(s);
(iv) A record of taking appropriate action, as warranted, in
response to written complaints, if any, about the bank's performance
in meeting the credit needs of its service area(s); and
(v) A reasonable geographic distribution of loans given its
service area(s).
(2) Eligibility for an outstanding rating. A small bank that
meets each of the standards for a ``satisfactory'' rating under this
paragraph and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding''. In assessing
whether a small bank's performance is ``outstanding'', the OCC shall
consider the extent to which the bank exceeds each of the assessment
standards for a ``satisfactory'' rating and its performance in
making qualified investments (as defined in Sec. 25.23 of this part)
and its performance in providing branches, ATMs or other services
and delivery systems that enhance credit availability in its service
area(s).
(3) Needs to improve or substantial noncompliance ratings. A
small bank also may receive a rating of ``needs to improve'' or
``substantial noncompliance'' depending on the degree to which its
performance has failed to meet the standards for a ``satisfactory''
rating.
(e) Strategic plan assessment and rating. (1) Satisfactory
goals. The OCC shall approve as ``satisfactory'' measurable goals
that adequately help meet the credit needs of each of a bank's
service area(s).
(2) Outstanding goals. If the plan identifies a separate group
of measurable goals that substantially exceed the levels approved as
``satisfactory,'' the OCC shall approve those goals as
``outstanding.''
(3) Rating. The OCC shall assess the performance of a bank
operating under an approved plan to determine if the bank has met
its plan goals:
(i) If the bank substantially achieves its plan goals for a
satisfactory rating, the OCC shall rate the bank's performance under
the plan as ``satisfactory.''
(ii) If the bank exceeds its plan goals for a satisfactory
rating and substantially achieves its plan goals for an outstanding
rating, the OCC shall rate the bank's performance under the plan as
``outstanding''.
(iii) If the bank fails to substantially meet its plan goals for
a satisfactory rating, it shall be rated as either ``needs to
improve'' or ``substantial noncompliance,'' depending on the extent
to which it falls short of its plan goals, or if the bank so elected
at the time it first submitted its plan, it shall be rated under the
lending, investment and service tests (as described in Secs. 25.22
through 25.24 of this part), the community development test (as
described in Sec. 25.25 of this part), or the small bank assessment
standards (as described in Sec. 25.26 of this part), as appropriate.
Appendix B to Part 25--CRA Notice
Community Reinvestment Act Notice
Under the Federal Community Reinvestment Act (CRA), the
Comptroller of the Currency evaluates and enforces our compliance
with our obligation to help meet the credit needs of this community
consistent with safe and sound operations. The Comptroller also
takes our CRA performance into account when the Comptroller decides
on certain applications submitted by us. Your involvement is
encouraged. You should know that:
You may look at and obtain in this office information on our
performance in this community. This information includes a file that
includes: copies of all signed, written comments received by us, and
any responses we have made to those comments; a map showing our
service area; a list of our branches and ATMs in our service area; a
list of services we provide at those locations; evaluations by the
Comptroller of our CRA performance; and data on the loans we have
made in this community during the last two years. [Current CRA
information on our performance in other communities served by us is
available at our main office, located at ________________.
You may send signed, written comments about our CRA performance
in helping to meet community credit needs to (title and address of
State member bank official) and to Deputy Comptroller (address).
Your letter, together with any response by us, will be considered by
the Comptroller in evaluating our CRA performance and may be made
public.
You may ask to look at any comments received by the Deputy
Comptroller. You may also request from the Deputy Comptroller an
announcement of our applications covered by the CRA filed with the
Comptroller. We are an affiliate of (name of holding company), a
bank holding company. You may request from the Federal Reserve Bank
of ________________ (address) an announcement of applications
covered by the CRA filed by bank holding companies.
Appendix C to Part 25--CRA Loan Data Format
Instructions for the Small Business and Small Farm Loan Register
This form contains the instructions for completion of the Loan
Register for Small Business and Small Farm Loans. This register is
used in conjunction with the reporting of this information as part
of the CRA data collection process. The register and these
instructions are to be used to provide the format in which the data
should be reported. The actual data are to be submitted in machine-
readable form in accordance with the instructions for submission of
data pursuant to 12 CFR Part 203 (Regulation C).
I. Who Must File a Register
All independent insured banks and thrifts with $250 million or
more in total assets and all insured banks and thrifts that are
members of holding companies with $250 million or more in bank and
thrift assets must report this information for small business and
small farm loans outstanding beginning December 31, 1995. Banks and
thrifts with fewer assets that wish to be evaluated under 12 CFR
Secs. 25.22 through 25.24 must also report this information. Only
provide information on business or farm location and borrower
information for loans for which applications were submitted after
July 1, 1995. For loans for which applications were submitted before
that date, enter ``N/A'' for all information relating to location or
borrower.
II. Types of Loans to be Reported
The loan register should contain individual loan data on each
small business or small farm loan as defined on schedule RC-C of the
December 31 Report of Condition and Income. Include data on
individual small business loans with original loan amounts of $1
million or less and individual small farm loans with original loan
amounts of $500,000 or less that had an outstanding balance as of
December 31.
III. Submission of Data
The data must be submitted in machine-readable form consistent
with requirements for submission of data pursuant to 12 CFR Part 203
(Regulation C). The format must conform exactly to the form,
including the order of columns, column headings, etc. Contact your
federal supervisory agency for information regarding procedures and
technical specifications for automated data submission.
Your institution should decide on the procedure it wants to
follow for collection of the data consistent with the Supplemental
Instructions For Collection Of Data In Connection with Small
Business and Small Farm Loans. Keep in mind that data reported on
the register are outstandings as of December 31 and not originations
as are reported for some other regulatory purposes. Your institution
may collect the data on separate registers at different branches or
on separate registers for different loan types (small business or
small farm), but make sure each loan number is unique. Entries need
not be grouped on your registers by MSA, or chronologically, or by
census tract, or in any other particular order.
IV. Instructions for Completion of Register
Loan Information
1. Loan Number--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. Outstanding Loan Amount--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Business or Farm Location
For each loan, identify the location of the business or farm.
Location is determined by the following:
(1) Small business loans are located in the census tract or
block numbering area where the main business facilities or other
property to which the loan proceeds will be applied (as indicated by
borrower) are located;
(2) Small farm loans are located in the census tract or block
numbering area where the farm or other property to which the loan
proceeds will be applied (as indicated by borrower) is located.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. State & County--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. Census Tract/Block Numbering Area--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
Borrower Information
1. Minority-Owned Code--Use the following codes to indicate
small business or small farm loans with more than 50 percent
ownership by one or more minority individuals (as indicated by
borrower) pursuant to data collected as described in the
Supplemental Instructions For Collection of Data In Connection With
Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
2. Women-Owned Code--Use the following codes to indicate small
business or small farm loans with more than 50 percent ownership by
women (as indicated by borrower) pursuant to data collected as
described in the Supplemental Instructions For Collection of Data In
Connection With Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
3. Gross Annual Revenues $1MM CODE--Use the
following codes to indicate whether the gross annual revenues of the
small business or farm are less than or equal to $1 million. This
information should be determined based upon the revenues upon which
your institution relied in making its credit decision.
1--Yes
2--No
Supplemental Instructions for Collection of Data in Connection With
Small Business and Small Farm Loans
A. Format
Beginning July 1, 1995, financial institutions required to
report small business and small farm loan registers are to collect
information on the racial, ethnic, and gender make-up of applicants
or borrowers in connection with small business and small farm loans.
If you take a written application, you should list questions
regarding the percent of minority and gender ownership on your loan
application form or on a separate form completed by the applicant in
conjunction with an application. If you do not take a written
application, you should request the information at an appropriate
time during the application or origination process; you must request
the information for each loan you originate even if you did not take
a written application. If you neither take a written application nor
originate the loan, you do not have to request the information. See
the sample form for recommended format and language. This
information is to be maintained in the institution's in-house loan
files. This information is not to be reported to the agency, but is
to be used to complete the small business and small farm loan
register.
B. Procedures
1. You must ask for this information, but cannot require the
applicant or borrower to provide it. You may not consider whether or
not an applicant or borrower has provided this information in making
your decision whether to extend credit or in setting the terms of
credit.
2. If the applicant or borrower chooses not to provide the
information, note this fact on the form.
3. Inform the applicant or borrower that the Federal government
is requesting this information in order to monitor compliance with
Federal statutes that prohibit lenders from discriminating on these
bases.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.000
TP07OC94.001
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
Instructions for Completion of the Open- and Closed-End Consumer Loan
Registers
This form contains the instructions for completion of the Loan
Registers for Open-End Consumer Loans and Closed-End Consumer Loans.
These registers are used in conjunction with the collection of this
information as part of the CRA data collection process. The
registers and these instructions are to be used to provide the
format in which the data should be maintained. The data must be
maintained in machine-readable form. If you wish to maintain the
data in an alternative format, you must obtain approval from your
primary supervisory agency.
I. Who May Maintain a Register
Any insured bank or thrift may, at the institution's option,
collect and maintain this information for loans outstanding
beginning December 31, 1995. You need only provide information on
borrower location and gross annual income for loans for which
applications were submitted after July 1, 1995. For loans for which
applications were submitted before that date, you may enter ``N/A''
for borrower location and gross annual income.
II. Types of Loans To Be Recorded
If you collect and maintain information on your consumer loans
for consideration in your CRA evaluation, you must provide data on
all consumer loans outstanding included in the aggregate consumer
loan figure on your December 31 Report of Condition and Income.
Your institution should decide on the procedure it wants to
follow for collection of the data. Keep in mind that data recorded
on the registers are outstandings as of December 31 and not
originations as are reported for some other regulatory purposes.
Your institution may collect the data on separate registers at
different branches, but is required to maintain the data on separate
registers for each of the different consumer loan types (open-end
and closed-end). Make sure the loan numbers are unique.
III. Instructions for Completion of Register
Loan Information
1. LOAN NUMBER--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. OUTSTANDING LOAN AMOUNT--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Borrower Information
For each loan, identify the location of the borrower. Consumer
loans are located in the census tract or block numbering area where
the borrower resides.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. STATE & COUNTY--Use the Federal Information Processing Standard
(FIPS) two-digit numerical code for the state and the three-digit
numerical code for the county. These codes are available from your
regional supervisory agency. Do not use the letter abbreviations used
by the United States Postal Service.
3. CENSUS TRACT/BLOCK NUMBERING AREA--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
4. GROSS ANNUAL INCOME--Enter the gross annual income upon which
your institution relied in making the credit decision. Round all
dollar amounts to the nearest thousand.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.002
TP07OC94.003
TP07OC94.004
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
Dated: September 26, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
FEDERAL RESERVE SYSTEM
12 CFR CHAPTER II
For the reasons outlined in the joint preamble, the Board of
Governors of the Federal Reserve System proposes to amend 12 CFR
chapter II as set forth below:
PART 228--COMMUNITY REINVESTMENT (REGULATION BB)
1. The authority citation for part 228 is revised to read as
follows:
Authority: 12 U.S.C. 321, 325, 1828, 1842, 1844, and 2901 et
seq.
Sec. 228.1001 [Redesignated as Sec. 228.9]
2. Existing Sec. 228.100 is redesignated as Sec. 228.9 and
transferred immediately following Sec. 228.8.
3. Part 228 is amended by adding Subparts A through E and
Appendices A through C following Sec. 228.9 to read as follows:
Subpart A--General
Sec.
228.11 Authority, community reinvestment obligation, purposes and
scope.
228.12 Definitions.
Subpart B--Standards for Assessing Performance
228.21 Assessment tests and ratings, in general.
228.22 Lending test.
228.23 Investment test.
228.24 Service test.
228.25 Community development test for wholesale or limited purpose
banks.
228.26 Small bank assessment standards.
228.27 Strategic plan assessment.
228.28 Assigned ratings.
228.29 Effect of ratings on applications.
Subpart C--Records, Reporting and Disclosure Requirements
228.41 Service area delineation.
228.42 Data collection and reporting.
228.43 Public file and disclosure by banks.
228.44 Public notice by banks.
228.45 Publication of planned examination schedule.
Subpart D--Transition Rules
228.51 Transition rules.
Subpart E--Interpretations
228.100 Applicability of the Community Reinvestment Act to certain
special purpose banks.
Appendix A to Part 228--Ratings
Appendix B to Part 228--CRA Notice
Appendix C to Part 228--CRA Loan Data Format
Subpart A--General
Sec. 228.11 Authority, community reinvestment obligation, purposes and
scope.
(a) Authority. The Board of Governors of the Federal Reserve System
(the Board) issues this part to implement the Community Reinvestment
Act (12 U.S.C. 2901 et seq.) (CRA). The regulations in this part are
issued under the authority of the CRA and under the provisions of the
United States Code authorizing the Board:
(1) To conduct examinations of State-chartered banks that are
members of the Federal Reserve System (12 U.S.C. 325);
(2) To conduct examinations of bank holding companies and their
subsidiaries (12 U.S.C. 1844); and
(3) To consider applications for:
(i) Domestic branches by state member banks (12 U.S.C. 321);
(ii) Merger in which the resulting bank would be a state member
bank (12 U.S.C. 1828); and
(iii) Formation of, acquisition of banks by, and mergers of, bank
holding companies (12 U.S.C. 1842).
(b) Community reinvestment obligation. State member banks have a
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas, consistent
with safe and sound operations.
(c) Purposes. The purposes of this part are to implement the
community reinvestment obligation of State member banks; to explain how
the Board assesses the performance of State member banks in satisfying
the community reinvestment obligation; and to describe how that
performance is taken into account in certain applications.
(d) Scope--(1) General. This part applies to all state member banks
that are in the business of extending credit to the public, including
wholesale or limited purpose banks, as defined in Sec. 228.12 of this
part.
(2) Certain special purpose banks. This part does not apply to a
bankers bank that engages exclusively in providing services for other
depository institutions and for their officers, directors and
employees, or to other special purpose banks described in Sec. 228.100
of this part.
Sec. 228.12 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate means any company that controls, is controlled by, or
is under common control with another company. For purposes of this
part, the term ``control'' has the meaning given to that term in 12
U.S.C. 1841(a)(2), and a company is under common control with another
company if both companies are directly or indirectly controlled by the
same company.
(b) Area median income means the median family income for the MSA
in which a person or geography is located or, in the case of a person
or geography located outside an MSA, the higher of the county median
family income or the statewide nonmetropolitan median family income.
(c) Automated teller machine (ATM) means an automated, unstaffed
banking facility with a fixed site owned or operated by or operated
exclusively for the bank at which deposits are received, cash
dispersed, or money lent.
(d) Bank means a state chartered bank that is a member of the
Federal Reserve System.
(e) Branch means a staffed banking facility (shared or unshared)
licensed as a branch with a fixed site at which deposits are received,
checks paid, or money lent, including a mini-branch in a grocery store
or a branch operated in conjunction with any other local business or
nonprofit organization.
(f) Community development loan means a loan (including a line of
credit, commitment, or letter of credit) that addresses affordable
housing (including multifamily rental housing) or other community
economic development needs not being met by the private market;
provided the loan:
(1) Primarily benefits low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program;
(2) Has not been reported or collected by the bank or one of its
affiliates as a home mortgage loan, small business loan, small farm
loan, or a consumer loan pursuant to Sec. 228.42 of this part, unless
it is a multifamily dwelling loan (as described in Appendix A to 12 CFR
Part 203); and
(3) Except in the case of a wholesale or limited purpose bank,
benefits the bank's service area(s) or a broader statewide or regional
area that includes the bank's service area(s).
(g) Consumer loan means a loan extended to one or more individuals
for household, family, or other personal expenditures; provided the
loan is not secured by real estate and is not used for the purpose of
purchasing or carrying securities.
(h) Geography means a census tract delineated by the United States
Bureau of the Census in the most recent decennial census, or a block
numbering area delineating a small statistical subdivision where a
census tract has not been established.
(i) HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et
seq.).
(j) Home mortgage loan means a mortgage loan as defined in section
303(1) of HMDA (12 U.S.C. 2802(1)) and implementing regulations.
(k) Income level--(1) Low-income means, in the case of a person, an
individual income, or in the case of a geography, a median family
income, that is less than 50 percent of the adjusted area median
income, with adjustments to take into account family size and the
prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(2) Moderate-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 50 percent and less than 80 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(3) Middle-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 80 percent and less than 120 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(4) Upper-income means, in the case of a person, an individual
income or, in the case of a geography, a median family income, that is
120 percent or more of the adjusted area median income, with
adjustments to take into account family size and the prevailing levels
of residential housing construction costs or unusually high or low
family incomes.
(l) Limited purpose bank means a bank that offers only a narrow
product line (such as credit cards or automobile loans) to a national
or regional market and has, pursuant to a written request, been
designated by the Board as a limited purpose bank, as provided in
Sec. 228.25 of this part.
(m) Loan location. A loan is located in a geography as follows:
(1) A consumer loan is located where the borrower resides;
(2) A home mortgage loan is located where the property to which the
loan relates is located;
(3) A small business or small farm loan is located where the main
business facility or farm is located or where the loan proceeds
otherwise will be applied, as indicated by the borrower.
(n) Loan production office means a staffed banking facility that is
accessible to the public, and provides lending-related services such as
loan information and applications, but is not a branch.
(o) MSA means metropolitan statistical area or primary metropolitan
statistical area, as defined by the Director of the Office of
Management and Budget.
(p) Minority means an individual who is an American Indian or
Alaskan Native, an Asian or Pacific Islander, a Black, or of Hispanic
origin as provided in the Office of Management and Budget's Statistical
Policy Directive No. 15, Race and Ethnic Standards for Federal
Statistics and Administrative Reporting.
(q) Minority-owned business means a business, including a farm,
that is more than 50 percent owned by one or more minority individuals,
and that has not issued any securities registered under Section 12(g)
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has
100 or fewer shareholders.
(r) Service area means a geographical area delineated in accordance
with Sec. 228.41 of this part.
(s) Small bank means a bank with total assets of less than $250
million that is:
(1) Independent; or
(2) An affiliate of a holding company with total banking and thrift
assets of less than $250 million.
(t) Small business loan means a loan with an original amount of $1
million or less that is either a commercial or industrial loan or a
loan secured by nonfarm, nonresidential property.
(u) Small farm loan means a loan with an original amount of
$500,000 or less that is a loan secured by farmland (including a loan
to finance a farm residence or other improvements), a loan to finance
agricultural production, or any other loan to a farmer.
(v) Women-owned business means a business, including a farm, that
is more than 50 percent owned by one or more women, and that has not
issued any securities registered under Section 12(g) of the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has 100 or fewer
shareholders.
(w) Wholesale bank means a bank that is not in the business of
extending home mortgage, small business, small farm, or consumer loans
to retail customers, and has, pursuant to a written request, been
designated by the Board as a wholesale bank, as provided in Sec. 228.25
of this part.
Subpart B--Standards for Assessing Performance
Sec. 228.21 Assessment tests and ratings, in general.
(a) Assessment tests and standards. In connection with an
examination of a bank, the Board shall assess the CRA performance of
the bank as follows:
(1) Lending, investment, and service tests. The Board shall apply
these three tests, as described in Secs. 228.22 through 228.24 of this
part, in evaluating the performance of banks, except as provided in
paragraphs (a)(2), (3) and (4) of this section.
(2) Community development test for wholesale or limited purpose
banks. In evaluating the performance of wholesale or limited purpose
banks (as defined in Sec. 228.12 of this part), the Board shall apply
the community development test, as provided in Sec. 228.25 of this
part, except as provided in paragraph (a)(4) of this section.
(3) Assessment standards for small banks. In evaluating the
performance of small banks (as defined in Sec. 228.12 of this part),
the Board shall apply the assessment standards for small banks as
provided in Sec. 228.26 of this part. However, a small bank may elect
instead to be assessed as provided in paragraphs (a) (2) and (4) of
this section, or it may elect to be evaluated under paragraph (a)(1) of
this section if it has collected and reported the data required for
other banks under Sec. 228.42(a)(1) of this part.
(4) Strategic plan. Any bank may elect not to be assessed by any
tests described in paragraphs (a)(1), (2) and (3) of this section by
submitting to the Board and receiving approval of a strategic plan as
described in Sec. 228.27 of this part.
(b) Assessment context. The Board shall apply the tests and
standards in paragraph (a) of this section in the context of the
following information:
(1) Demographic data on median income levels, distribution of
household income, nature of housing stock, housing costs, and other
relevant data pertaining to a bank's service area(s);
(2) Examiner-developed information regarding the credit needs of
the bank's service area(s) obtained from community-based organizations,
state and local governments, economic development agencies, and from
any information the bank may choose to provide;
(3) The bank's product offerings and business strategy as
determined from data provided by the bank;
(4) Institutional capacity and constraints, including the size and
financial condition of the institution, the economic climate (national,
regional and local), safety and soundness limitations, and any other
factors that significantly affect the bank's ability to lend to the
different parts of its service area(s);
(5) The bank's past performance and the performance of similarly-
situated lenders;
(6) The bank's public file, as described in Sec. 228.43 of this
part, and any signed, written comments about the bank's CRA performance
submitted to the bank or the Board; and
(7) Any other information deemed relevant by the Board.
(c) Assigned ratings. The Board shall assign to each bank one of
the following four ratings as set out in Sec. 228.28 of this part and
Appendix A of this part: ``outstanding''; ``satisfactory''; ``needs to
improve''; or ``substantial noncompliance'' based on:
(1) The results of the applicable assessment test(s) or standards
or performance under an approved strategic plan; and
(2) Any evidence of discriminatory or other illegal credit
practices.
(d) Safe and sound operations. This part and the CRA do not require
any bank to make loans or investments, or to provide services that are
inconsistent with safe and sound operations. Banks are permitted and
encouraged to develop and apply flexible underwriting standards,
consistent with safe and sound operations, for loans that benefit low-
or moderate-income geographies or individuals.
(e) Compliance with community reinvestment obligation. The assigned
ratings reflect the extent of compliance or noncompliance with the
community reinvestment obligation described in Sec. 228.11(b) of this
part. A bank that receives an assigned rating of ``substantial
noncompliance'' shall be subject to enforcement actions pursuant to 12
U.S.C. 1818.
Sec. 228.22 Lending test.
(a) Scope of test. (1) The lending test evaluates a bank's
performance in helping to meet the credit needs of its service area(s)
through its lending activities, as measured by home mortgage
originations and purchases, small business and small farm loans
outstanding, and community development loans outstanding. At the bank's
option, the lending test will also evaluate the bank's consumer loans
outstanding and any other loan distribution data the bank may choose to
provide, such as data on extensions of lines of credit, commitments,
and letters of credit.
(2) When evaluating a bank's overall lending performance, the
Board shall weigh its assessments of the bank's home mortgage lending,
small business and small farm lending, and (at the bank's option)
consumer lending to reflect the relative importance of each category of
lending to the bank's overall business.
(3) The Board shall weigh the bank's community development lending
according to the characteristics and needs of the bank's service
area(s), the capacity and constraints of the bank, and the
opportunities available to the bank for this lending.
(b) Assessment criteria. The Board shall evaluate a bank's lending
performance pursuant to the following criteria:
(1) Geographic distribution. The geographic distribution of the
bank's lending (based on the location of the loan as provided in
Sec. 228.12 of this part), including:
(i) The proportion of total lending in the bank's service area(s);
(ii) The dispersion of lending throughout the bank's service
area(s); and
(iii) The number and amount of loans in low-, moderate-, middle-,
and upper-income geographies in the bank's service area(s);
(2) Borrower characteristics. The distribution, particularly in
the bank's service area, of the bank's lending (based on borrower
characteristics), including:
(i) The number and amount of home mortgage loans to low-,
moderate-, middle-, and upper-income individuals;
(ii) The number and amount of small business and small farm loans
to businesses and farms with gross annual revenues less than or equal
to $1 million;
(iii) The number and amount of small business and small farm loans
by size of loan; and
(iv) At the bank's option, the number and amount of consumer loans
to
low-, moderate-, middle-, and upper-income individuals;
(3) Community development lending. The bank's community development
lending, including the number and amount of community development loans
outstanding, their complexity and innovativeness, and the number and
amount of lines of credit, commitments, and letters of credit for
community development purposes; and
(4) Innovative or flexible lending practices. The bank's use of
innovative or flexible lending practices to address the credit needs of
low- or moderate-income individuals or geographies.
(c) Affiliate lending. (1) The Board shall, if the bank elects,
consider in its assessment of a bank's lending performance under this
section lending by an affiliate of the bank, if the bank, or its
affiliate, reports or collects the lending data pursuant to Sec. 228.42
of this part.
(2) The Board may consider in its assessment lending by a bank's
affiliate even if the bank has chosen not to have the affiliate's
lending considered if the Board determines that this lending is
integral to the business of the bank.
(3) Consideration of affiliate lending shall be subject to the
following constraints:
(i) No affiliate may claim the same loan as another institution;
and
(ii) If the Board considers loans within a particular lending
category (e.g., home mortgage, small business, small farm, consumer or
community development lending) made by one or more of the bank's
affiliates in a particular service area, the Board shall consider all
the loans within that lending category made by all of the bank's
affiliates in that particular service area.
(d) Consortia and third-party lending. Community development loans
made through consortia in which the bank participates or through third
parties in which the bank has invested:
(1) Shall be considered under the lending test, if the bank elects,
provided the data pertaining to these loans are reported by the bank
under the applicable provisions of Sec. 228.42 of this part; and
(2) May be allocated among participants or investors as they choose
for purposes of the lending test, provided that no participant or
investor claims the same loan or part of a loan as another participant
or investor, or claims in the aggregate greater than its percentage
share (based on the level of its participation or investment) of the
total loans made by the consortium or third party.
(e) Lending performance rating. The Board shall rate a bank's
lending performance as provided in Appendix A of this part.
Sec. 228.23 Investment test.
(a) Scope of test. The investment test evaluates the degree to
which a bank is helping to meet the credit needs of its service area(s)
through qualified investments. To be considered under this test, the
qualified investments of a bank must benefit its service area(s) or a
broader statewide or regional geographic area that includes the bank's
service area(s).
(b) Qualified investments. (1) Qualified investments are lawful
investments, deposits, membership shares in a credit union, or grants
that: (i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) Donating, selling on favorable terms, or making available on a
rent-free basis any branch of the bank that is located in any
predominantly minority neighborhood to any minority depository
institution or women's depository institution (as defined in 12 U.S.C.
2907(b)) shall be considered under the investment test.
(3) Activities considered under the lending or service tests may
not be considered under the investment test.
(4) At a bank's option, the Board shall consider in its assessment
of a bank's investment performance a qualified investment made by an
affiliate of the bank, provided that the qualified investment is not
claimed by any other institution.
(c) Assessment criteria. The Board shall evaluate the investment
performance of a bank pursuant to the following criteria:
(1) The dollar amount of qualified investments that directly
address credit needs;
(2) The use of innovative or complex qualified investments to
support community development initiatives; and
(3) The degree of responsiveness to credit and community economic
development needs.
(d) Investment performance rating. The Board shall rate a bank's
investment performance as provided in Appendix A of this part.
Sec. 228.24 Service test.
(a) Scope of test. The service test evaluates a bank's record of
helping to meet the credit needs of the bank's service area(s) by
analyzing both the availability and responsiveness of a bank's systems
for delivering retail banking services and the extent and
innovativeness of its community development services.
(b) Assessment criteria--retail banking services. The Board shall
evaluate the availability and responsiveness of a bank's systems for
delivering retail banking services, pursuant to the following criteria:
(1) The current distribution of the bank's branches and ATMs among
low-, moderate-, middle-, and upper-income geographies;
(2) In the context of its current distribution of the bank's
branches and ATMs, the bank's record of opening and closing branches
and ATMs, particularly branches and ATMs located in low- or moderate-
income geographies or primarily serving low- or moderate-income
individuals;
(3) The availability of alternative systems for delivering retail
banking services (e.g., banking by telephone or computer, mobile
branches and ATMs, ATMs not owned or operated by or operated
exclusively for the bank, loan production offices, and bank-at-work or
by-mail programs) in low- and moderate-income geographies and to low-
and moderate-income individuals; and
(4) The range of services provided in low-, moderate-, middle-, and
upper-income geographies and the degree to which the services are
tailored to meet the needs of those geographies.
(c) Assessment criteria--community development services.(1)
Community development services are services that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) The Board shall evaluate community development services
pursuant to the following criteria:
(i) The extent to which the bank provides community development
services; and
(ii) The innovativeness and responsiveness of community development
services.
(3) When evaluating a bank's overall service performance, the Board
shall weigh the bank's community development services according to the
characteristics and needs of the bank's service area(s), the capacity
and constraints of the bank, and the opportunities available to the
bank to provide community development services.
(4) At a bank's option, the Board shall consider in its assessment
of a bank's service performance a community development service
provided by an affiliate of the bank, provided that the community
development service is not claimed by any other institution.
(d) Service performance rating. The Board shall rate a bank's
service performance as provided in Appendix A of this part.
Sec. 228.25 Community development test for wholesale or limited
purpose banks.
(a) Scope of test. (1) The Board shall assess the degree to which a
wholesale or limited purpose bank (as defined in Sec. 228.12 of this
part) is helping to meet the credit needs of its service area(s) under
the community development test only if the bank's written request to be
designated as a wholesale or limited purpose bank has been approved by
the Board before the commencement of its CRA examination, and the
designation has not been revoked either at the request of the bank or
at the Board's own initiative.
(2) The community development test evaluates the record of a
wholesale or limited purpose bank in helping to meet the credit needs
of its service area(s) through qualified investments, community
development lending, or community development services.
(3) For purposes of the community development test only, community
development loans include small business and small farm loans and loans
to low- and moderate-income individuals and geographies, whether or not
reported or collected by the bank or one of its affiliates as home
mortgage loans, small business loans, small farm loans, or consumer
loans, pursuant to Sec. 228.42 of this part.
(b) Assessment criteria. The Board shall evaluate the community
development performance of a wholesale or limited purpose bank pursuant
to the following criteria:
(1) The number and amount of community development loans
outstanding, qualified investments (as defined in Sec. 228.23 of this
part), or community development services (as defined in Sec. 228.24 of
this part);
(2) The use of innovative or complex qualified investments,
community development loans outstanding, or community development
services and their connection to credit needs; and
(3) The degree of responsiveness to credit and community economic
development needs.
(c) Indirect activities. The Board shall, if the wholesale or
limited purpose bank elects, consider in its community development
performance assessment:
(1) Qualified investments or community development services
provided by an affiliate of the bank, provided the investment or
services are not claimed by any other institution; and
(2) Community development lending by affiliates, consortia and
third parties, subject to the requirements and limitations in
Sec. 228.22(c)(3) and (d) of this part.
(d) Benefit to service area(s)--. (1) Benefit inside service
area(s). For purposes of assessing a wholesale or limited purpose
bank's community development performance under this section, the Board
shall consider all qualified investments, community development loans
outstanding, and community development services that benefit areas
within the bank's service area(s).
(2) Benefit outside service area(s). The Board shall consider the
qualified investments, community development loans outstanding, and
community development services provided by a wholesale or limited
purpose bank that benefit areas outside the bank's service area(s) only
up to an amount equivalent to the amount of investments, loans, and
services considered under paragraph (d)(1) of this section. If a bank
demonstrates a limited need or opportunity for these investments,
lending, and services, in its service area(s), the Board may exempt the
bank from all or part of this limitation.
(e) Community development performance rating. The Board shall rate
a bank's community development performance as provided in Appendix A of
this part.
Sec. 228.26 Small bank assessment standards.
(a) Scope of assessment. The Board shall assess the degree to which
a small bank is helping to meet the credit needs of its service area(s)
under the assessment standards described in this section.
(b) Assessment criteria. The Board shall evaluate a small bank's
CRA performance pursuant to the following criteria:
(1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets or community
development lending or investment;
(2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's service area(s);
(3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
(4) The geographic distribution of the bank's loans given its
service area(s); and
(5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in meeting the credit needs
of its service area(s).
(c) Small bank performance rating. The Board shall rate a small
bank's performance as provided in Appendix A of this part.
228.27 Strategic plan assessment.
(a) Alternative election. A bank may request to be rated under a
strategic plan rather than under the lending, service, and investment
tests (Secs. 228.22 through 228.24 of this part), the community
development test (Sec. 228.25 of this part), or the small bank
assessment standards (Sec. 228.26 of this part), by submitting to the
Board a strategic plan as provided for in this section. A bank's
request to be rated under a strategic plan is not approved until the
Board approves the plan. The Board's approval of a strategic plan does
not affect the bank's obligation, if any, to report data as required by
Sec. 228.42 of this part.
(b) Strategic plans in general. (1) A plan may have a term of no
more than five years, and any multi-year plan shall include annual
interim measurable goals according to which the Board shall evaluate
the bank's performance.
(2) A bank with more than one service area may prepare a single
plan for all of its service areas or a plan for one or more but not all
of its service areas.
(3) Affiliated institutions may prepare joint plans if the plans
provide measurable goals for each institution.
(c) Public participation in strategic plan development. Before
submitting a plan to the Board for approval, the bank shall:
(1) Informally seek suggestions from the public in its service
area(s) while developing the plan;
(2) Once the bank has developed a plan, formally solicit public
comment on the plan for at least 30 days by publishing notice in a
newspaper of general circulation in each of its service areas; and
(3) During the period of formal public comment, make copies of the
plan available for review at all offices of the bank in any service
area covered by the plan.
(d) Submission of plan. The bank shall submit its plan to the Board
at least three months prior to the proposed effective date of the plan.
The bank shall also submit with its plan any public comments received,
and, if the plan was revised in light of the comments received, the
initial plan as released for public comment.
(e) Plan content--(1) Measurable goals. (i) A bank shall specify in
its plan measurable goals for helping to meet the credit needs of each
of its service area(s) covered by the plan, particularly the needs of
low- and moderate-income geographies and low- and moderate-income
individuals, through lending, investment, and the provision of
services, as appropriate.
(ii) A bank shall address all three performance categories and,
unless the bank has been designated as a wholesale or limited purpose
bank, shall emphasize lending and lending-related activities.
Nevertheless, a different emphasis, including a focus on one or more
performance categories, may be appropriate if responsive to the
characteristics and credit needs of its service area, considering
public comment and the bank's capacity and constraints, product
offerings, and business strategy.
(2) Confidential information. The bank may submit additional
information to the Board on a confidential basis, but the goals stated
in the plan shall be sufficiently specific to enable the public and the
Board to judge fairly the merits of the plan.
(3) Satisfactory and outstanding goals. A bank shall specify in its
plan measurable goals that constitute ``satisfactory'' performance. A
plan may specify measurable goals that constitute ``outstanding''
performance. In order to be considered for an ``outstanding''
performance rating, the bank shall submit both ``satisfactory'' and
``outstanding'' performance goals.
(f) Plan approval. (1) Timing. The Board shall act upon a plan
within 60 days after the complete plan and required accompanying
material are submitted. If the Board fails to act within this time
period, the plan shall be deemed approved unless the Board extends the
review period for good cause.
(2) Public participation. In evaluating the plan's goals, the Board
shall consider the public's involvement in formulating the plan, public
comment on the plan, and any response by the bank to public comment on
the plan.
(3) Criteria for evaluating plan. The Board shall evaluate a plan's
measurable goals using the following criteria, as appropriate:
(i) The extent and breadth of lending or lending-related
activities, including, as appropriate, the distribution of loans among
different geographies, businesses and farms of different sizes, and
individuals of different income levels, the extent of community
development lending, and the use of innovative or flexible lending
practices to address credit needs;
(ii) The amount and innovativeness, complexity, and responsiveness
of the bank's qualified investments, as defined in Sec. 228.23 of this
part; and
(iii) The extent and availability of the bank's services,
including, as appropriate, the accessibility of retail delivery systems
and the extent and innovativeness of community development services, as
defined in Sec. 228.24 of this part.
(g) Plan amendment. During the term of a plan, the bank may
petition the Board to approve an amendment to the plan on grounds that
a material change in circumstances has made the plan no longer
appropriate. Any amendment proposed shall be developed in accordance
with the public participation requirements of paragraph (c) of this
section.
(h) Strategic plan assessment. The Board shall approve the goals
and assess performance under a strategic plan as provided for in
Appendix A of this part.
Sec. 228.28 Assigned ratings.
(a) Ratings in general. Subject to paragraphs (b), (c), and (d) of
this section, the Board shall assign to a bank a rating of
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or
``substantial noncompliance'' based on the bank's performance under the
lending, investment and service tests, the community development test,
the small bank assessment standards, or an approved strategic plan, as
applicable.
(b) Lending, investment, and service tests. The Board shall assign
a rating for a bank assessed under the lending, investment, and service
tests in accordance with the procedures provided in Appendix A of this
part and the following principles:
(1) A bank's rating on the lending test shall be weighed so as to
count for at least 50 percent of its assigned rating;
(2) A bank that receives an ``outstanding'' rating on the lending
test shall receive an assigned rating of at least ``satisfactory'';
(3) A bank that receives an ``outstanding'' rating on the lending
test and an ``outstanding'' rating on either the service test or the
investment test shall receive an assigned rating of ``outstanding'';
(4) A bank that receives an ``outstanding'' rating on both the
service test and the investment test and a rating of at least ``high
satisfactory'' on the lending test shall receive an assigned rating of
``outstanding''; and
(5) No bank may receive an assigned rating of ``satisfactory''
unless it receives a rating of at least ``low satisfactory'' on the
lending test.
(c) Effect of evidence of discriminatory or other illegal credit
practices. Evidence of discriminatory or other illegal credit practices
shall adversely affect the Board's evaluation of a bank's performance.
In determining the effect on the bank's assigned rating, the Board
shall consider the nature and extent of the evidence, the policies and
procedures that the bank has in place to prevent discriminatory or
other illegal credit practices, any corrective action that the bank has
taken or has committed to take, particularly voluntary corrective
action resulting from self-assessment, and other relevant information,
such as the bank's past fair lending performance.
(d) Effect of successive ``needs to improve'' ratings. A bank that
would otherwise receive an assigned rating of ``needs to improve''
shall receive an assigned rating of ``substantial noncompliance'' if
the bank received no better than a ``needs to improve'' rating on each
of its two previous examinations.
Sec. 228.29 Effect of ratings on applications.
(a) CRA performance. Among other factors, the Board shall take
into account the record of performance under the CRA of each applicant
bank, and, for applications under section 3 of the Bank Holding Company
Act, of each subsidiary bank of an applicant bank holding company, and
of each proposed subsidiary bank, in considering any application:
(1) By a state member bank for the establishment of a domestic
branch or other facility that would be authorized to take deposits;
(2) For merger, consolidation, acquisition of assets, or assumption
of liabilities if the acquiring, assuming, or resulting bank is to be a
state member bank;
(3) To become a bank holding company; and
(4) By a bank holding company to acquire ownership or control of
shares or assets of a bank, or to merge or consolidate with any other
bank holding company.
(b) Interested parties. In considering CRA performance in an
application described in paragraph (a) of this section, the Board shall
take into account any views expressed by interested parties which are
submitted in accordance with the Board's Rules of Procedure set forth
in part 262 of this chapter.
(c) Denial or conditional approval of application. A bank's record
of performance may be the basis for denying or conditioning approval of
an application described in paragraph (a) of this section.
(d) Definition of bank. For purposes of this section, the term
``bank'' has the meaning given to this term in 12 U.S.C. 1841(c).
Subpart C--Records, Reporting and Disclosure Requirements
Sec. 228.41 Service area delineation.
(a) In general. Subject to paragraphs (b) and (c) of this section,
each bank may delineate its service area(s) using any method it chooses
provided that the service area(s):
(1) Do(es) not reflect illegal discrimination;
(2) Do(es) not arbitrarily exclude low- and moderate-income
geographies, taking into account the bank's size and financial
condition and the extent of its branching network, as appropriate; and
(3) Consist(s) only of whole census tracts or block numbering
areas.
(b) Banks that are not wholesale or limited purpose banks. The
service area(s) for a bank that is not a wholesale or limited purpose
bank (as defined in Sec. 228.12 of this part):
(1) Shall include those geographies in the local areas around a
bank's branches and deposit-taking ATMs in which the bank has
originated or had outstanding, during the previous calendar year, a
significant number and amount of home mortgage, small business and
small farm, and (if the bank chooses to have them considered in its CRA
evaluation) consumer loans and any other geographies equidistant from
its branches and deposit-taking ATMs, taking into account political
boundaries or significant geographic barriers; and
(2) Shall not extend substantially across MSA boundaries or state
boundaries unless the service area is located in a multistate MSA. If
the bank serves areas that extend substantially across state boundaries
or extend substantially across boundaries of an MSA, the bank shall
delineate separate service areas for the areas in each state and for
the areas inside and outside the MSA.
(c) Wholesale or limited purpose banks. The service area for a
wholesale or limited purpose bank (as defined in Sec. 228.12 of this
part) shall be delineated as an area or areas around its offices
(including its main office and branches) or a broader statewide or
regional area that includes the area or areas.
(d) Banks serving military personnel. Notwithstanding paragraphs
(a), (b), and (c) of this section, a bank whose business predominantly
consists of serving the needs of military personnel or their dependents
who are not located within a defined geographic area may delineate its
entire deposit customer base as its service area.
(e) Maintaining list and map. Each bank shall compile and maintain
a list of all the geographies within its service area or areas and a
map of each service area showing the geographies contained therein.
Sec. 228.42 Data collection and reporting.
(a) Mandatory data collection and reporting--(1) Loan data. Each
bank, except small banks, shall collect and report to the Board the
following data pertaining to its home mortgage, small business, small
farm, and community development loans:
(i) Home mortgage loans. If the bank is subject to reporting under
HMDA, the location of each home mortgage loan located outside the MSAs
in which the bank has a home or branch office (or outside any MSA) in
accordance with Regulation C, Home Mortgage Disclosure (12 CFR Part
203);
(ii) Small business and small farm loan data. All small business
and small farm loan data required to be collected and reported on the
Board's Small Business and Small Farm Loan Register (CC-______-______),
set forth in Appendix C of this part, in accordance with the
instructions in Appendix C of this part; and
(iii) Community development loan data. All community development
loan data required to be collected and reported on the Board's
Community Development Report Form (CC-______-______), set forth in
Appendix C of this part, in accordance with the instructions in
Appendix C of this part.
(2) Service area data. Each bank shall collect and report to the
Board by April 1 of each year a list of the areas the bank considers to
be its service area(s), a list of the geographies it considers to be
within its service area(s), and a map of each service area showing the
geographies contained therein.
(b) Optional data collection. (1) If a bank elects to have its
consumer lending considered under the lending test (as described in
Sec. 228.22 of this part), the bank shall collect the consumer loan
data requested on the Board's Consumer Loan Register (CC-______-
______), set forth in Appendix C of this part, in accordance with the
instructions in Appendix C of this part.
(2) At its option, a bank may:
(i) Provide information concerning outstanding small business,
small farm, or consumer loans throughout the year to account for
seasonal variations in lending for use in the evaluation of the bank
under the lending test described in Sec. 228.22 of this part; and
(ii) Provide any other information concerning its lending
performance, including additional loan distribution data.
(c) Data on affiliate lending. A bank that wishes to have the Board
consider lending by its affiliates for purposes of the lending test
shall be prepared to identify the particular home mortgage loans
reported under HMDA which it wishes the Board to consider, and shall
collect or report, pursuant to the provisions of paragraphs (a) and (b)
of this section, the requisite data concerning the small business,
small farm, or consumer loans made by its affiliates that it wishes
Board to consider.
(d) Data on consortia and third-party lending. A bank that wishes
to have the Board consider community development lending through
consortia in which the bank participates or through third parties in
which the bank has invested shall report, pursuant to paragraph
(a)(1)(iii) of this section, the requisite data concerning the
community development loans made through consortia and third parties
that it wishes the Board to consider.
Sec. 228.43 Public file and disclosure by banks.
(a) Public availability. Each bank shall maintain a file that is
readily available for public inspection containing the information
required by this section.
(b) Current information. Each bank shall include in its public file
the following information:
(1) All signed, written comments received from the public for the
current year and each of the prior two calendar years that specifically
relate to the bank's performance in helping to meet the credit needs of
its community or communities, and any response to the comments by the
bank;
(2) A copy of the public section of the bank's most recent CRA
Performance Evaluation prepared by the Board. The bank shall place this
copy in the public file within 30 business days after its receipt from
the Board;
(3) A list of the areas the bank considers to be its service
area(s), a list of the geographies it considers to be within its
service area(s), and a map of each service area showing the geographies
contained therein;
(4) A list of the bank's branches and ATMs , their street
addresses, and geographies;
(5) A list of branches and ATMs opened or closed by the bank during
the current and each of the prior two calendar years, their street
addresses, and geographies; and
(6) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the bank's branches and ATMs and descriptions of material deviations in
the availability or cost of services at particular branches and ATMs,
if any. At its option, a bank may include information regarding the
availability of alternative systems for delivering retail banking
services (e.g., banking by telephone or computer, mobile branches and
ATMs, ATMs not owned or operated by or operated exclusively for the
bank, loan production offices, and bank-at-work or by-mail programs).
(c) Information for prior years. Each bank that is not a small bank
shall include in its public file the following information for each of
the prior two calendar years derived from the data collected or
reported pursuant to Sec. 228.42 of this part:
(1) The number and amount of small business loans and small farm
loans located in low-, moderate-, middle-, and upper-income
geographies;
(2) A list of the geographies where the bank had outstanding at
least one small business loan or small farm loan;
(3) The number and amount of small business and small farm loans
located inside the bank's service area(s) and outside the bank's
service area(s);
(4) The number and amount of small business and small farm loans to
minority-owned businesses;
(5) The number and amount of small business and small farm loans to
women-owned businesses;
(6) The number and amount of small business and small farm loans to
businesses and farms with gross annual revenues less than or equal to
$1 million;
(7) The number and amount of community development loans
outstanding; and
(8) If the bank has elected to have its consumer loans considered
under the lending test (as described in Sec. 228.22 of this part), the
number and amount of consumer loans to low-, moderate-, middle-, and
upper-income individuals, the number and amount of consumer loans
located in low-, moderate-, middle-, and upper-income geographies, and
the number and amount of consumer loans located inside the bank's
service area(s) and outside the bank's service area(s).
(d) Exception. A bank shall not place in its public file any
information required under paragraph (c) of this section for a
particular year if, given special circumstances such as a small number
of loans made within a small number of designated income geographies or
to a small number of designated borrowers, the information could
reasonably be expected to disclose the identity of the borrower.
(e) HMDA statement. Each bank required to report home mortgage loan
data pursuant to the HMDA shall include in its public file a copy of
its HMDA Disclosure Statement provided by the Federal Financial
Institutions Examination Council for each of the prior two calendar
years. The statement shall be placed in the main office public file
within three business days and in the branch office public files within
10 business days of the bank's receipt of the statement.
(f) Small bank file. (1) A small bank shall include in its public
file the bank's loan-to-deposit ratio computed at the end of the most
recent calendar year. A bank may include additional data on its loan-
to-deposit ratio at its option.
(2) A small bank that elects to be evaluated under the lending,
investment and service tests (as described in Secs. 228.22 through
228.24 of this part) shall include in its public file the information
specified in paragraph (c) of this section.
(g) Strategic plan. Each bank that has been approved to be assessed
under a strategic plan as described in Sec. 228.27 of this part shall
include in its public file a copy of that plan. Information submitted
to the Board on a confidential basis in conjunction with the plan does
not have to be included in the public file.
(h) Less than satisfactory rating. Each bank that received a less
than satisfactory rating during its most recent examination shall
include in its public file a description of its current efforts to
improve its performance in helping to meet the credit needs of its
entire community. This description shall be updated quarterly.
(i) Location of public file. Each bank shall maintain its public
file as follows:
(1) The main office shall have a copy of the complete public file;
(2) At least one branch in each service area shall have a copy of
the bank's HMDA Disclosure Statements and all materials in the public
file relating to the service area in which the branch is located; and
(3) If a member of the public requests to review a bank's public
file at a branch that does not have a copy, the bank shall make a
complete copy of the file for that service area available for review at
the branch within 5 business days at no cost.
(j) Copies. Each bank shall provide copies of the information in
its public file to members of the public upon request. A bank may
charge a reasonable fee not to exceed the cost of reproduction and
mailing (if applicable).
Sec. 228.44 Public notice by banks.
(a) CRA notice for banks. Each bank shall provide in the public
lobby of its main office and each of its branches the public notice set
forth in Appendix B of this part. Bracketed material shall be used only
by banks having more than one service area.
(b) Additional notice for affiliate banks. The last two sentences
shall be included only if the bank is an affiliate of a holding company
and the last sentence only if the company is not prevented by statute
from acquiring additional banks.
Sec. 228.45 Publication of planned examination schedule.
The Board shall publish at least 30 days in advance of the
beginning of each calendar quarter a list of the banks that are
scheduled for CRA examinations in that quarter.
Subpart D--Transition Rules
Sec. 228.51 Transition rules.
(a) Effective date. Sections of this part 228 become effective over
a period of time in accordance with the schedule set forth in paragraph
(c) of this section. The provisions of part 228 become fully effective
on July 1, 1996.
(b) Data collection and reporting; strategic plan; small bank
assessment standards; and performance tests--(1) Data collection and
reporting. On July 1, 1995, the data collection and reporting
requirements set forth in Sec. 228.42 of this part become effective.
(2) Strategic plan. Beginning July 1, 1995, a bank that elects to
be evaluated under an approved strategic plan pursuant to Sec. 228.27
of this part may submit its strategic plan to the Board for approval.
(3) Small bank assessment standards. Beginning July 1, 1995, a bank
that qualifies as a small bank pursuant to Sec. 228.12 of this part may
elect to be evaluated under the small bank assessment standards set
forth in Sec. 228.26 of this part. Beginning July 1, 1996, the Board
shall evaluate each small bank under the small bank assessment
standards, unless the bank elects to be evaluated pursuant to the
performance tests set forth in Secs. 228.22 through 228.25 of this part
or under an approved strategic plan.
(4) Performance tests. On July 1, 1996, the lending, investment,
service, and community development tests set forth in Secs. 228.22
through 228.25 of this part become effective. Thereafter, the Board
shall evaluate all banks pursuant to these test(s), except small banks
evaluated under the small bank assessment standards and banks that
elect to be evaluated under an approved strategic plan.
(c) Schedule. On January 1, 1995, Secs. 228.11, 228.12, 228.29,
228.51 and 228.100 become effective, and Secs. 228.1, 228.2, 228.8, and
228.9 will expire. On July 1, 1995, Secs. 228.26, 228.27, 228.42, and
228.45 become effective, and Secs. 228.28 and 228.41 become effective
for banks that are evaluated under Secs. 228.26 or 228.27. On July 1,
1996, Secs. 228.21 through 228.25, 228.28, 228.41, 228.43, and 228.44
become effective, and Secs. 228.3 through 228.7 will expire.
Subpart E--Interpretations
Sec. 228.100 Applicability of the Community Reinvestment Act to
certain special purpose banks.
In response to its July 1978 proposed regulation, 12 CFR Part 228,
to implement the CRA, the Board received several inquiries from
institutions that, although they are chartered as banks, do not perform
commercial or retail banking services. These institutions serve solely
as correspondent banks, or as trust companies, or as clearing agents,
and they do not extend credit to the public for their own account. The
Board concludes that the CRA is not intended to cover these
institutions. It is the purpose of the CRA to require the Board to
encourage banks to meet the credit needs of their local communities. To
this end, the Board must assess banks' records of performance and take
those records into account in acting on certain applications affecting
the banks. The Board believes that these provisions were intended to
cover all banks that are in the business of extending credit to the
public, including both wholesale and retail banks. The lending
activities of these banks affect the economic health of the communities
in which they are chartered. However, the Board believes it would be
pointless to encourage or to assess the credit-granting record of
institutions that are not organized to grant credit to the public in
the ordinary course of business, other than as an incident to their
specialized operations. Accordingly, the term State member bank as used
in this part does not include banks that engage solely in correspondent
banking business, trust company business, or acting as a clearing
agent.
Appendix A to Part 228--Ratings
(a) Ratings in general. (1) In assigning a rating, the Board
shall evaluate a bank's performance under the applicable assessment
criteria in this part, subject to Sec. 228.28 of this part, which
provides for adjustments on the basis of evidence of discriminatory
or other illegal credit practices and prior ``needs to improve''
ratings.
(2) A bank's performance need not fit each aspect of a
particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The bank's overall
performance, however, should generally be consistent with the
appropriate profile stated below.
(b) Banks that are not wholesale or limited purpose banks or
small banks. (1) Lending performance rating. The Board shall assign
each bank's lending performance one of the five ratings described
below.
(i) Outstanding. The Board shall rate a bank's lending
performance ``outstanding'' if, in general, it demonstrates:
(A) Excellent responsiveness to credit needs in its service
area(s);
(B) A substantial majority of its loans are made in its service
area(s);
(C) An excellent geographic distribution of loans throughout its
service area(s);
(D) An excellent distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An excellent record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Extensive use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It is a leader in making community development loans.
(ii) High satisfactory. The Board shall rate a bank's lending
performance ``high satisfactory'' if, in general, it demonstrates:
(A) Good responsiveness to credit needs in its service area(s);
(B) A high percentage of its loans are made in its service
area(s);
(C) A good geographic distribution of loans throughout its
service area(s);
(D) A good distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A good record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Use of innovative or flexible lending practices to address
the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a relatively high level of community development
loans.
(iii) Low satisfactory. The Board shall rate a bank's lending
performance ``low satisfactory'' if, in general, it demonstrates:
(A) Adequate responsiveness to credit needs in its service
area(s);
(B) An adequate percentage of its loans are made in its service
area(s);
(C) An adequate geographic distribution of loans throughout its
service area(s);
(D) An adequate distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An adequate record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Limited use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made an adequate level of community development
loans.
(iv) Needs to improve. The Board shall rate a bank's lending
performance ``needs to improve'' if, in general, it demonstrates:
(A) Poor responsiveness to credit needs in its service area(s);
(B) A small percentage of its loans are made in its service
area(s);
(C) A poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A poor distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Little use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a limited number of community development loans.
(v) Substantial noncompliance. The Board shall rate a bank's
lending performance as being in ``substantial noncompliance'' if, in
general, it demonstrates:
(A) A very poor responsiveness to credit needs in its service
area(s);
(B) A very small percentage of its loans are made in its service
area(s);
(C) A very poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A very poor distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) A very poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) No use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made few, if any, community development loans.
(2) Investment performance rating. The Board shall assign each
bank's investment performance one of the five ratings described
below.
(i) Outstanding. The Board shall rate a bank's investment
performance ``outstanding'' if, in general, it demonstrates:
(A) An excellent level of qualified investments, often in a
leadership position, particularly those that directly address credit
needs;
(B) Extensive use of innovative or complex qualified investments
to support community development initiatives; and
(C) Excellent responsiveness to credit and community economic
development needs.
(ii) High satisfactory. The Board shall rate a bank's investment
performance ``high satisfactory'' if, in general, it demonstrates:
(A) A significant level of qualified investments, occasionally
in a leadership position, particularly those that directly address
credit needs;
(B) Significant use of innovative or complex qualified
investments to support community development initiatives; and
(C) Good responsiveness to credit and community economic
development needs.
(iii) Low satisfactory. The Board shall rate a bank's investment
performance ``low satisfactory'' if, in general, it demonstrates:
(A) An adequate level of qualified investments, although rarely
in a leadership position, particularly those that directly address
credit needs;
(B) Occasional use of innovative or complex qualified
investments to support community development initiatives; and
(C) Adequate responsiveness to credit and community economic
development needs.
(iv) Needs to improve. The Board shall rate a bank's investment
performance ``needs to improve'' if, in general, it demonstrates:
(A) A poor level of qualified investments, particularly those
that directly address credit needs;
(B) Rare use of innovative or complex qualified investments to
support community development initiatives; and
(C) Poor responsiveness to credit and community economic
development needs.
(v) Substantial noncompliance. The Board shall rate a bank's
investment performance as being in ``substantial noncompliance'' if,
in general, it demonstrates:
(A) Few, if any, qualified investments, particularly those that
directly address credit needs;
(B) No use of innovative or complex qualified investments to
support community development initiatives; and
(C) Very poor responsiveness to credit and community economic
development needs.
(3) Service performance rating. The Board shall assign each
bank's service performance one of the five ratings described below.
(i) Outstanding. The Board shall rate a bank's service
performance ``outstanding'' if, in general, the bank demonstrates:
(A) Its service delivery systems are readily accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has improved the accessibility
of its delivery systems, particularly in low- or moderate-income
geographies or to low- or moderate-income individuals;
(C) Services (including, where appropriate, business hours) are
tailored to the convenience and needs of its service area(s),
particularly low- or moderate-income geographies or low- or
moderate-income individuals; and
(D) It is a leader in providing community development services.
(ii) High satisfactory. The Board shall rate a bank's service
performance ``high satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to essentially
all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has not adversely affected the
accessibility of its delivery systems, particularly in low- and
moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences certain portions of its
service area(s), particularly low- and moderate-income geographies
and low- and moderate- income individuals; and
(D) It provides a relatively high level of community development
services.
(iii) Low satisfactory. The Board shall rate a bank's service
performance ``low satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are reasonably accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has generally not adversely
affected the accessibility of its delivery systems, particularly in
low- and moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences portions of its service
area(s), particularly low- and moderate-income geographies and low-
and moderate-income individuals; and
(D) It provides an adequate level of community development
services.
(iv) Needs to improve. The Board shall rate a bank's service
performance ``needs to improve'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to limited
portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has adversely affected the
accessibility its delivery systems, particularly in low- or
moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that inconveniences certain portions of its service
area(s), particularly low- or moderate-income geographies or low- or
moderate-income individuals; and
(D) It provides a limited level of community development
services.
(v) Substantial noncompliance. The Board shall rate a bank's
service performance as being in ``substantial noncompliance'' if, in
general, the bank demonstrates:
(A) Its service delivery systems are inaccessible to significant
portions of its service area(s), particularly low- and moderate-
income geographies or low- and moderate-income individuals;
(B) To the extent changes have been made, the bank's record of
opening and closing branches and ATMs has significantly adversely
affected the accessibility of its delivery systems, particularly in
low- or moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that significantly inconveniences many portions of its
service area(s), particularly low- or moderate-income geographies or
low- or moderate-income individuals; and
(D) It provides few, if any, community development services.
(4) Assigned rating. The Board shall use the following
procedures for assigning a rating:
(i) Assign points corresponding to the bank's performance on
each of the component tests as follows:
------------------------------------------------------------------------
Component test ratings Lending Service Investment
------------------------------------------------------------------------
Outstanding................... 12 6 6
High satisfactory............. 9 4 4
Low satisfactory.............. 6 3 3
Needs to improve.............. 3 1 1
Substantial noncompliance..... 0 0 0
------------------------------------------------------------------------
(ii) Total the points for the three tests, and use that total to
determine the composite rating according to the chart below.
However, if the total exceeds twice the number of points
attributable to the bank's lending test performance (as provided in
paragraph (b)(4)(i) of this appendix), determine the composite
rating using twice the number of points attributable to the bank's
lending test performance.
------------------------------------------------------------------------
Points Composite rating
------------------------------------------------------------------------
18 or over......................... Outstanding.
9 through 17....................... Satisfactory.
5 through 8........................ Needs to improve.
0 through 4........................ Substantial noncompliance.
------------------------------------------------------------------------
(c) Community development test for wholesale or limited purpose
banks. The Board shall assign each wholesale or limited purpose
bank's community development performance one of the four ratings
described below.
(1) Outstanding. The Board shall rate a wholesale or limited
purpose bank's community development performance ``outstanding'' if,
in general, it demonstrates:
(i) A high level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Extensive use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Excellent responsiveness to credit and community economic
development needs in its service area(s).
(2) Satisfactory. The Board shall rate a wholesale or limited
purpose bank's community development performance ``satisfactory''
if, in general, it demonstrates:
(i) An adequate level of qualified investments, community
development loans outstanding, or community development services,
particularly those that directly address credit needs;
(ii) Occasional use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Adequate responsiveness to credit and community economic
development needs in its service area(s).
(3) Needs to improve. The Board shall rate a wholesale or
limited purpose bank's community development performance as ``needs
to improve'' if, in general, it demonstrates:
(i) A poor level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Rare use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Poor responsiveness to credit and community economic
development needs in its service area(s).
(4) Substantial noncompliance. The Board shall rate a wholesale
or limited purpose bank's community development performance in
``substantial noncompliance'' if, in general, it demonstrates:
(i) Few, if any, qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) No use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Very poor responsiveness to credit and community economic
development needs in its service area(s).
(d) Assessment standards for small banks. The Board shall rate
each small bank's performance as described below.
(1) Eligibility for a satisfactory rating. The Board shall rate
a bank's performance ``satisfactory'' if, in general, the bank
demonstrates:
(i) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its service area(s), and taking into account, as
appropriate, lending-related activities such as loan originations
for sale to the secondary markets and community development lending
and investment;
(ii) A majority of its loans and, as appropriate, other lending-
related activities are in its service area(s);
(iii) A distribution of loans to and, as appropriate, other
lending related-activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's service area(s);
(iv) A record of taking appropriate action, as warranted, in
response to written complaints, if any, about the bank's performance
in meeting the credit needs of its service area(s); and
(v) A reasonable geographic distribution of loans given its
service area(s).
(2) Eligibility for an outstanding rating. A small bank that
meets each of the standards for a ``satisfactory'' rating under this
paragraph and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding''. In assessing
whether a small bank's performance is ``outstanding'', the Board
shall consider the extent to which the bank exceeds each of the
assessment standards for a ``satisfactory'' rating and its
performance in making qualified investments (as defined in
Sec. 228.23 of this part) and its performance in providing branches,
ATMs or other services and delivery systems that enhance credit
availability in its service area(s).
(3) Needs to improve or substantial noncompliance ratings. A
small bank also may receive a rating of ``needs to improve'' or
``substantial noncompliance'' depending on the degree to which its
performance has failed to meet the standards for a ``satisfactory''
rating.
(e) Strategic plan assessment and rating.
(1) Satisfactory goals. The Board shall approve as
``satisfactory'' measurable goals that adequately help meet the
credit needs of each of a bank's service area(s).
(2) Outstanding goals. If the plan identifies a separate group
of measurable goals that substantially exceed the levels approved as
``satisfactory,'' the Board shall approve those goals as
``outstanding.''
(3) Rating. The Board shall assess the performance of a bank
operating under an approved plan to determine if the bank has met
its plan goals:
(i) If the bank substantially achieves its plan goals for a
satisfactory rating, the Board shall rate the bank's performance
under the plan as ``satisfactory.''
(ii) If the bank exceeds its plan goals for a satisfactory
rating and substantially achieves its plan goals for an outstanding
rating, the Board shall rate the bank's performance under the plan
as ``outstanding''.
(iii) If the bank fails to substantially meet its plan goals for
a satisfactory rating, it shall be rated as either ``needs to
improve'' or ``substantial noncompliance,'' depending on the extent
to which it falls short of its plan goals, or if the bank so elected
at the time it first submitted its plan, it shall be rated under the
lending, investment and service tests (as described in Secs. 228.22
through 228.24 of this part), the community development test (as
described in Sec. 228.25 of this part), or the small bank assessment
standards (as described in Sec. 228.26 of this part), as
appropriate.
Appendix B to Part 228--CRA Notice
Community Reinvestment Act Notice
Under the Federal Community Reinvestment Act (CRA), the Federal
Reserve Board (Board) evaluates and enforces our compliance with our
obligation to help meet the credit needs of this community
consistent with safe and sound operations. The Board also takes our
CRA performance into account when the Board decides on certain
applications submitted by us. Your involvement is encouraged. You
should know that:
You may look at and obtain in this office information on our
performance in this community. This information includes a file that
includes: copies of all signed, written comments received by us, and
any responses we have made to those comments; a map showing our
service area; a list of our branches and ATMs in our service area; a
list of services we provide at those locations; evaluations by the
Federal Reserve System of our CRA performance; and data on the loans
we have made in this community during the last two years. [Current
CRA information on our performance in other communities served by us
is available at our main office, located at ____________.]
You may send signed, written comments about our CRA performance
in helping to meet community credit needs to (title and address of
State member bank official) and to Community Reinvestment Officer,
Federal Reserve Bank of ____________ (address). Your letter,
together with any response by us, will be considered by the Federal
Reserve System in evaluating our CRA performance and may be made
public.
You may ask to look at any comments received by the Federal
Reserve Bank of ____________. You may also request from the Federal
Reserve Bank of ____________ an announcement of our applications
covered by the CRA filed with the Federal Reserve System. We are an
affiliate of (name of holding company), a bank holding company. You
may request from the Federal Reserve Bank of ____________ (address)
an announcement of applications covered by the CRA filed by bank
holding companies.
Appendix C to Part 228--CRA Loan Data Format
Instructions for the Small Business and Small Farm Loan Register
This form contains the instructions for completion of the Loan
Register for Small Business and Small Farm Loans. This register is
used in conjunction with the reporting of this information as part
of the CRA data collection process. The register and these
instructions are to be used to provide the format in which the data
should be reported. The actual data are to be submitted in machine-
readable form in accordance with the instructions for submission of
data pursuant to 12 CFR Part 203 (Regulation C).
I. Who Must File a Register
All independent insured banks and thrifts with $250 million or
more in total assets and all insured banks and thrifts that are
members of holding companies with $250 million or more in bank and
thrift assets must report this information for small business and
small farm loans outstanding beginning December 31, 1995. Banks and
thrifts with fewer assets that wish to be evaluated under 12 CFR
228.22 through 228.24 must also report this information. Only
provide information on business or farm location and borrower
information for loans for which applications were submitted after
July 1, 1995. For loans for which applications were submitted before
that date, enter ``N/A'' for all information relating to location or
borrower.
II. Types of Loans To Be Reported
The loan register should contain individual loan data on each
small business or small farm loan as defined on schedule RC-C of the
December 31 Report of Condition and Income. Include data on
individual small business loans with original loan amounts of $1
million or less and individual small farm loans with original loan
amounts of $500,000 or less that had an outstanding balance as of
December 31.
III. Submission of Data
The data must be submitted in machine-readable form consistent
with requirements for submission of data pursuant to 12 CFR Part 203
(Regulation C). The format must conform exactly to the form,
including the order of columns, column headings, etc. Contact your
federal supervisory agency for information regarding procedures and
technical specifications for automated data submission.
Your institution should decide on the procedure it wants to
follow for collection of the data consistent with the Supplemental
Instructions For Collection Of Data In Connection with Small
Business and Small Farm Loans. Keep in mind that data reported on
the register are outstanding as of December 31 and not originations
as are reported for some other regulatory purposes. Your institution
may collect the data on separate registers at different branches or
on separate registers for different loan types (small business or
small farm), but make sure each loan number is unique. Entries need
not be grouped on your registers by MSA, or chronologically, or by
census tract, or in any other particular order.
IV. Instructions for Completion of Register
Loan Information
1. LOAN NUMBER--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contain data for branch offices, for example, use a letter
or a numerical code to identify the loans of different branches or
assign a certain series of numbers to particular branches to avoid
duplicate numbers. The use of the borrower's tax-payer
identification number or social security number is strongly
discouraged for privacy reasons.
2. OUTSTANDING LOAN AMOUNT--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Business or Farm Location
For each loan, identify the location of the business or farm.
Location is determined by the following:
(1) Small business loans are located in the census tract or
block numbering area where the main business facilities or other
property to which the loan proceeds will be applied (as indicated by
borrower) are located;
(2) Small farm loans are located in the census tract or block
numbering area where the farm or other property to which the loan
proceeds will be applied (as indicated by borrower) is located.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. STATE & COUNTY--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. CENSUS TRACT/BLOCK NUMBERING AREA--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
Borrower Information
1. MINORITY-OWNED CODE--Use the following codes to indicate
small business or small farm loans with more than 50 percent
ownership by one or more minority individuals (as indicated by
borrower) pursuant to data collected as described in the
Supplemental Instructions For Collection of Data In Connection With
Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
2. WOMEN-OWNED CODE--Use the following codes to indicate small
business or small farm loans with more than 50 percent ownership by
women (as indicated by borrower) pursuant to data collected as
described in the Supplemental Instructions For Collection of Data In
Connection With Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
3. GROSS ANNUAL REVENUES $1MM CODE--Use the
following codes to indicate whether the gross annual revenues of the
small business or farm are less than or equal to $1 million. This
information should be determined based upon the revenues upon which
your institution relied in making its credit decision.
1--Yes
2--No
Supplemental instructions for collection of data in connection with
small business and small farm loans
A. Format
Beginning July 1, 1995, financial institutions required to
report small business and small farm loan registers are to collect
information on the racial, ethnic, and gender make-up of applicants
or borrowers in connection with small business and small farm loans.
If you take a written application, you should list questions
regarding the percent of minority and gender ownership on your loan
application form or on a separate form completed by the applicant in
conjunction with an application. If you do not take a written
application, you should request the information at an appropriate
time during the application or origination process; you must request
the information for each loan you originate even if you did not take
a written application. If you neither take a written application nor
originate the loan, you do not have to request the information. See
the sample form for recommended format and language. This
information is to be maintained in the institution's in-house loan
files. This information is not to be reported to the agency, but is
to be used to complete the small business and small farm loan
register.
B. Procedures
1. You must ask for this information, but cannot require the
applicant or borrower to provide it. You may not consider whether or
not an applicant or borrower has provided this information in making
your decision whether to extend credit or in setting the terms of
credit.
2. If the applicant or borrower chooses not to provide the
information, note this fact on the form.
3. Inform the applicant or borrower that the Federal government
is requesting this information in order to monitor compliance with
Federal statutes that prohibit lenders from discriminating on these
bases.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.005
TP07OC94.006
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
Instructions for completion of the open- and closed-end consumer loan
registers
This form contains the instructions for completion of the Loan
Registers for Open-End Consumer Loans and Closed-End Consumer Loans.
These registers are used in conjunction with the collection of this
information as part of the CRA data collection process. The
registers and these instructions are to be used to provide the
format in which the data should be maintained. The data must be
maintained in machine-readable form. If you wish to maintain the
data in an alternative format, you must obtain approval from your
primary supervisory agency.
I. Who May Maintain a Register
Any insured bank or thrift may, at the institution's option,
collect and maintain this information for loans outstanding
beginning December 31, 1995. You need only provide information on
borrower location and gross annual income for loans for which
applications were submitted after July 1, 1995. For loans for which
applications were submitted before that date, you may enter ``N/A''
for borrower location and gross annual income.
II. Types of Loans to be Recorded
If you collect and maintain information on your consumer loans
for consideration in your CRA evaluation, you must provide data on
all consumer loans outstanding included in the aggregate consumer
loan figure on your December 31 Report of Condition and Income.
Your institution should decide on the procedure it wants to
follow for collection of the data. Keep in mind that data recorded
on the registers are outstandings as of December 31 and not
originations as are reported for some other regulatory purposes.
Your institution may collect the data on separate registers at
different branches, but is required to maintain the data on separate
registers for each of the different consumer loan types (open-end
and closed-end). Make sure the loan numbers are unique.
III. Instructions for Completion of Register
Loan Information
1. LOAN NUMBER--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. OUTSTANDING LOAN AMOUNT--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Borrower Information
For each loan, identify the location of the borrower. Consumer
loans are located in the census tract or block numbering area where
the borrower resides.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. STATE & COUNTY--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. CENSUS TRACT/BLOCK NUMBERING AREA--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
4. GROSS ANNUAL INCOME--Enter the gross annual income upon which
your institution relied in making the credit decision. Round all
dollar amounts to the nearest thousand.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.007
TP07OC94.008
TP07OC94.009
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
By order of the Board of Governors of the Federal Reserve
System, September 27, 1994.
William W. Wiles,
Secretary of the Board.
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR CHAPTER III
For the reasons outlined in the joint preamble, the Board of
Directors of the Federal Deposit Insurance Corporation proposes to
amend 12 CFR chapter III as set forth below:
PART 345--COMMUNITY REINVESTMENT
1. The authority citation for part 345 is revised to read as
follows:
Authority: 12 U.S.C. 1815-1820, 1828, 2901-2907, and 3104.
Secs. 345.101, 345,102 [Redesignated as Secs. 345.9, 345.10]
2. Existing Sec. 345.101 and Sec. 345.102 are redesignated as
Sec. 345.9 and Sec. 345.10, respectively, and transferred with their
undesignated center heading immediately following Sec. 345.8.
3. Part 345 is amended by adding Subparts A through E and
Appendices A through C following Sec. 345.10 to read as follows:
Subpart A--General
Sec.
345.11 Authority, community reinvestment obligation, purposes and
scope.
345.12 Definitions.
Subpart B--Standards for Assessing Performance
345.21 Assessment tests and ratings, in general.
345.22 Lending test.
345.23 Investment test.
345.24 Service test.
345.25 Community development test for wholesale or limited purpose
banks.
345.26 Small bank assessment standards.
345.27 Strategic plan assessment.
345.28 Assigned ratings.
345.29 Effect of ratings on applications.
Subpart C--Records, Reporting and Disclosure Requirements
345.41 Service area delineation.
345.42 Data collection and reporting.
345.43 Public file and disclosure by banks.
345.44 Public notice by banks.
345.45 Publication of planned examination schedule.
Subpart D--Transition Rules
345.51 Transition rules.
Subpart E--Interpretations
345.100 Applicability of the Community Reinvestment Act to certain
special purpose banks.
Appendix A to Part 345--Ratings
Appendix B to Part 345--CRA Notice
Appendix C to Part 345--CRA Loan Data Format
Subpart A--General
Sec. 345.11 Authority, community reinvestment obligation, purposes and
scope.
(a) Authority. This part 345 implements the Community Reinvestment
Act of 1977 (12 U.S.C. 2901 et seq.) (CRA). It is issued by the Federal
Deposit Insurance Corporation (FDIC) pursuant to its authority under
the CRA and 12 U.S.C. 1815-1820, 1828, and 3104.
(b) Community reinvestment obligation. Insured state nonmember
banks have a continuing and affirmative obligation to help meet the
credit needs of their communities, including low- and moderate-income
areas, consistent with safe and sound operations.
(c) Purposes. The purposes of this part are to implement the
community reinvestment obligation of insured state nonmember banks; to
explain how the FDIC assesses the performance of state nonmember banks
in satisfying the community reinvestment obligation; and to describe
how that performance is taken into account in certain applications.
(d) Scope--(1) General. This part applies to all insured state
nonmember banks that are in the business of extending credit to the
public, including wholesale or limited purpose banks, as defined in
Sec. 345.12 of this part.
(2) Certain special purpose banks. This part does not apply to a
bankers bank that engages exclusively in providing services for other
depository institutions and for their officers, directors and
employees, or to other special purpose banks described in Sec. 345.100
of this part.
(3) Insured State branches. This part applies to ``insured State
branches,'' which are branches of a foreign bank established and
operating under the laws of any State, the deposits of which are
insured in accordance with the provisions of the Federal Deposit
Insurance Act. References in this part to ``main office'' mean, in the
case of insured state branches, the principal branch within the United
States. The term ``branch'' or ``branches'' refers to any insured State
branch or branches located within the United States. The ``service
area'' of an insured State branch refers to the community or
communities located within the United States served by the branch as
described in Sec. 345.41 of this part.
Sec. 345.12 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate means any company that controls, is controlled by, or
is under common control with another company. For purposes of this
part, the term ``control'' has the meaning given to that term in 12
U.S.C. 1841(a)(2), and a company is under common control with another
company if both companies are directly or indirectly controlled by the
same company.
(b) Area median income means the median family income for the MSA
in which a person or geography is located or, in the case of a person
or geography located outside an MSA, the higher of the county median
family income or the statewide nonmetropolitan median family income.
(c) Remote Service Facility (RSF) means an automated, unstaffed
banking facility with a fixed site owned or operated by or operated
exclusively for the bank, such as an automated teller machine, cash
dispensing machine, point-of-sale terminal, or other remote electronic
facility where deposits are received, checks paid, or money lent.
(d) Bank means a state nonmember bank as that term is defined in
section 3(e)(2) of the Federal Deposit Insurance Act, as amended (FDIA)
(12 U.S.C. 1813(e)(2)).
(e) Branch means a staffed banking facility (shared or unshared)
licensed as a branch with a fixed site at which deposits are received,
checks paid, or money lent, including a mini-branch in a grocery store
or a branch operated in conjunction with any other local business or
nonprofit organization. The term ``branch'' only includes a ``domestic
branch'' as that term is defined in section 3(o) of the FDIA (12 U.S.C.
1813(o)).
(f) Community development loan means a loan (including a line of
credit, commitment, or letter of credit) that addresses affordable
housing (including multifamily rental housing) or other community
economic development needs not being met by the private market;
provided the loan:
(1) Primarily benefits low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program;
(2) Has not been reported or collected by the bank or one of its
affiliates as a home mortgage loan, small business loan, small farm
loan, or a consumer loan pursuant to Sec. 345.42 of this part, unless
it is a multifamily dwelling loan (as described in Appendix A to 12 CFR
Part 203); and
(3) Except in the case of a wholesale or limited purpose bank,
benefits the bank's service area(s) or a broader statewide or regional
area that includes the bank's service area(s).
(g) Consumer loan means a loan extended to one or more individuals
for household, family, or other personal expenditures; provided the
loan is not secured by real estate and is not used for the purpose of
purchasing or carrying securities.
(h) Geography means a census tract delineated by the United States
Bureau of the Census in the most recent decennial census, or a block
numbering area delineating a small statistical subdivision where a
census tract has not been established.
(i) HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et
seq.).
(j) Home mortgage loan means a mortgage loan as defined in section
303(1) of HMDA (12 U.S.C. 2802(1)) and implementing regulations.
(k) Income level--(1) Low-income means, in the case of a person, an
individual income, or in the case of a geography, a median family
income, that is less than 50 percent of the adjusted area median
income, with adjustments to take into account family size and the
prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(2) Moderate-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 50 percent and less than 80 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(3) Middle-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 80 percent and less than 120 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(4) Upper-income means, in the case of a person, an individual
income or, in the case of a geography, a median family income, that is
120 percent or more of the adjusted area median income, with
adjustments to take into account family size and the prevailing levels
of residential housing construction costs or unusually high or low
family incomes.
(l) Limited purpose bank means a bank that offers only a narrow
product line (such as credit cards or automobile loans) to a national
or regional market and has, pursuant to a written request, been
designated by the FDIC as a limited purpose bank, as provided in
Sec. 345.25 of this part.
(m) Loan location. A loan is located in a geography as follows:
(1) A consumer loan is located where the borrower resides;
(2) A home mortgage loan is located where the property to which the
loan relates is located;
(3) A small business or small farm loan is located where the main
business facility or farm is located or where the loan proceeds
otherwise will be applied, as indicated by the borrower.
(n) Loan production office means a staffed banking facility that is
accessible to the public, and provides lending-related services such as
loan information and applications, but is not a branch.
(o) MSA means metropolitan statistical area or primary metropolitan
statistical area, as defined by the Director of the Office of
Management and Budget.
(p) Minority means an individual who is an American Indian or
Alaskan Native, an Asian or Pacific Islander, a Black, or of Hispanic
origin as provided in the Office of Management and Budget's Statistical
Policy Directive No. 15, Race and Ethnic Standards for Federal
Statistics and Administrative Reporting.
(q) Minority-owned business means a business, including a farm,
that is more than 50 percent owned by one or more minority individuals,
and that has not issued any securities registered under section 12(g)
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has
100 or fewer shareholders.
(r) Service area means a geographical area delineated in accordance
with Sec. 345.41 of this part.
(s) Small bank means a bank with total assets of less than $250
million that is:
(1) Independent; or
(2) An affiliate of a holding company with total banking and thrift
assets of less than $250 million.
(t) Small business loan means a loan with an original amount of $1
million or less that is either a commercial or industrial loan or a
loan secured by nonfarm, nonresidential property.
(u) Small farm loan means a loan with an original amount of
$500,000 or less that is a loan secured by farmland (including a loan
to finance a farm residence or other improvements), a loan to finance
agricultural production, or any other loan to a farmer.
(v) Women-owned business means a business, including a farm, that
is more than 50 percent owned by one or more women, and that has not
issued any securities registered under section 12(g) of the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has 100 or fewer
shareholders.
(w) Wholesale bank means a bank that is not in the business of
extending home mortgage, small business, small farm, or consumer loans
to retail customers, and has, pursuant to a written request, been
designated by the FDIC as a wholesale bank, as provided in Sec. 345.25
of this part.
Subpart B--Standards for Assessing Performance
Sec. 345.21 Assessment tests and ratings, in general.
(a) Assessment tests and standards. In connection with an
examination of a bank, the FDIC shall assess the CRA performance of the
bank as follows:
(1) Lending, investment, and service tests. The FDIC shall apply
these three tests, as described in Secs. 345.22 through 345.24 of this
part, in evaluating the performance of banks, except as provided in
paragraphs (a)(2), (3) and (4) of this section.
(2) Community development test for wholesale or limited purpose
banks. In evaluating the performance of wholesale or limited purpose
banks (as defined in Sec. 345.12 of this part), the FDIC shall apply
the community development test, as provided in Sec. 345.25 of this
part, except as provided in paragraph (a)(4) of this section.
(3) Assessment standards for small banks. In evaluating the
performance of small banks (as defined in Sec. 345.12 of this part),
the FDIC shall apply the assessment standards for small banks as
provided in Sec. 345.26 of this part. However, a small bank may elect
instead to be assessed as provided in paragraphs (a)(2) and (4) of this
section, or it may elect to be evaluated under paragraph (a)(1) of this
section if it has collected and reported the data required for other
banks under Sec. 345.42(a)(1) of this part.
(4) Strategic plan. Any bank may elect not to be assessed by any
tests described in paragraphs (a)(1), (2) and (3) of this section by
submitting to the FDIC and receiving approval of a strategic plan as
described in Sec. 345.27 of this part.
(b) Assessment context. The FDIC shall apply the tests and
standards in paragraph (a) of this section in the context of the
following information:
(1) Demographic data on median income levels, distribution of
household income, nature of housing stock, housing costs, and other
relevant data pertaining to a bank's service area(s);
(2) Examiner-developed information regarding the credit needs of
the bank's service area(s) obtained from community-based organizations,
state and local governments, economic development agencies, and from
any information the bank may choose to provide;
(3) The bank's product offerings and business strategy as
determined from data provided by the bank;
(4) Institutional capacity and constraints, including the size and
financial condition of the institution, the economic climate (national,
regional and local), safety and soundness limitations, and any other
factors that significantly affect the bank's ability to lend to the
different parts of its service area(s);
(5) The bank's past performance and the performance of similarly-
situated lenders;
(6) The bank's public file, as described in Sec. 345.43 of this
part, and any signed, written comments about the bank's CRA performance
submitted to the bank or the FDIC; and
(7) Any other information deemed relevant by the FDIC.
(c) Assigned ratings. The FDIC shall assign to each bank one of the
following four ratings as set out in Sec. 345.28 of this part and
Appendix A of this part: ``outstanding''; ``satisfactory''; ``needs to
improve''; or ``substantial noncompliance'' based on:
(1) The results of the applicable assessment test(s) or standards
or performance under an approved strategic plan; and
(2) Any evidence of discriminatory or other illegal credit
practices.
(d) Safe and sound operations. This part and the CRA do not require
any bank to make loans or investments, or to provide services that are
inconsistent with safe and sound operations. Banks are permitted and
encouraged to develop and apply flexible underwriting standards,
consistent with safe and sound operations, for loans that benefit low-
or moderate-income geographies or individuals.
(e) Compliance with community reinvestment obligation. The assigned
ratings reflect the extent of compliance or noncompliance with the
community reinvestment obligation described in Sec. 345.11(b) of this
part. A bank that receives an assigned rating of ``substantial
noncompliance'' shall be subject to enforcement actions pursuant to 12
U.S.C. 1818.
Sec. 345.22 Lending test.
(a) Scope of test. (1) The lending test evaluates a bank's
performance in helping to meet the credit needs of its service area(s)
through its lending activities, as measured by home mortgage
originations and purchases, small business and small farm loans
outstanding, and community development loans outstanding. At the bank's
option, the lending test will also evaluate the bank's consumer loans
outstanding and any other loan distribution data the bank may choose to
provide, such as data on extensions of lines of credit, commitments,
and letters of credit.
(2) When evaluating a bank's overall lending performance, the FDIC
shall weigh its assessments of the bank's home mortgage lending, small
business and small farm lending, and (at the bank's option) consumer
lending to reflect the relative importance of each category of lending
to the bank's overall business.
(3) The FDIC shall weigh the bank's community development lending
according to the characteristics and needs of the bank's service
area(s), the capacity and constraints of the bank, and the
opportunities available to the bank for this lending.
(b) Assessment criteria. The FDIC shall evaluate a bank's lending
performance pursuant to the following criteria:
(1) Geographic distribution. The geographic distribution of the
bank's lending (based on the location of the loan as provided in
Sec. 345.12 of this part), including:
(i) The proportion of total lending in the bank's service area(s);
(ii) The dispersion of lending throughout the bank's service
area(s); and
(iii) The number and amount of loans in low-, moderate-, middle-,
and upper-income geographies in the bank's service area(s);
(2) Borrower characteristics. The distribution, particularly in the
bank's service area, of the bank's lending (based on borrower
characteristics), including:
(i) The number and amount of home mortgage loans to low-, moderate-
, middle-, and upper-income individuals;
(ii) The number and amount of small business and small farm loans
to businesses and farms with gross annual revenues less than or equal
to $1 million;
(iii) The number and amount of small business and small farm loans
by size of loan; and
(iv) At the bank's option, the number and amount of consumer loans
to
low-, moderate-, middle-, and upper-income individuals;
(3) Community development lending. The bank's community development
lending, including the number and amount of community development loans
outstanding, their complexity and innovativeness, and the number and
amount of lines of credit, commitments, and letters of credit for
community development purposes; and
(4) Innovative or flexible lending practices. The bank's use of
innovative or flexible lending practices to address the credit needs of
low- or moderate-income individuals or geographies.
(c) Affiliate lending. (1) The FDIC shall, if the bank elects,
consider in its assessment of a bank's lending performance under this
section lending by an affiliate of the bank, if the bank, or its
affiliate, reports or collects the lending data pursuant to Sec. 345.42
of this part.
(2) The FDIC may consider in its assessment lending by a bank's
affiliate even if the bank has chosen not to have the affiliate's
lending considered if the FDIC determines that this lending is integral
to the business of the bank.
(3) Consideration of affiliate lending shall be subject to the
following constraints:
(i) No affiliate may claim the same loan as another institution;
and
(ii) If the FDIC considers loans within a particular lending
category (e.g., home mortgage, small business, small farm, consumer or
community development lending) made by one or more of the bank's
affiliates in a particular service area, the FDIC shall consider all
the loans within that lending category made by all of the bank's
affiliates in that particular service area.
(d) Consortia and third-party lending. Community development loans
made through consortia in which the bank participates or through third
parties in which the bank has invested:
(1) Shall be considered under the lending test, if the bank elects,
provided the data pertaining to these loans are reported by the bank
under the applicable provisions of Sec. 345.42 of this part; and
(2) May be allocated among participants or investors as they choose
for purposes of the lending test, provided that no participant or
investor claims the same loan or part of a loan as another participant
or investor, or claims in the aggregate greater than its percentage
share (based on the level of its participation or investment) of the
total loans made by the consortium or third party.
(e) Lending performance rating. The FDIC shall rate a bank's
lending performance as provided in Appendix A to this part.
Sec. 345.23 Investment test.
(a) Scope of test. The investment test evaluates the degree to
which a bank is helping to meet the credit needs of its service area(s)
through qualified investments. To be considered under this test, the
qualified investments of a bank must benefit its service area(s) or a
broader statewide or regional geographic area that includes the bank's
service area(s).
(b) Qualified investments. (1) Qualified investments are lawful
investments, deposits, membership shares in a credit union, or grants
that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) Donating, selling on favorable terms, or making available on a
rent-free basis any branch of the bank that is located in any
predominantly minority neighborhood to any minority depository
institution or women's depository institution (as defined in 12 U.S.C.
2907(b)) shall be considered under the investment test.
(3) Activities considered under the lending or service tests may
not be considered under the investment test.
(4) At a bank's option, the FDIC shall consider in its assessment
of a bank's investment performance a qualified investment made by an
affiliate of the bank, provided that the qualified investment is not
claimed by any other institution.
(c) Assessment criteria. The FDIC shall evaluate the investment
performance of a bank pursuant to the following criteria:
(1) The dollar amount of qualified investments that directly
address credit needs;
(2) The use of innovative or complex qualified investments to
support community development initiatives; and
(3) The degree of responsiveness to credit and community economic
development needs.
(d) Investment performance rating. The FDIC shall rate a bank's
investment performance as provided in Appendix A of this part.
Sec. 345.24 Service test.
(a) Scope of test. The service test evaluates a bank's record of
helping to meet the credit needs of the bank's service area(s) by
analyzing both the availability and responsiveness of a bank's systems
for delivering retail banking services and the extent and
innovativeness of its community development services.
(b) Assessment criteria--retail banking services. The FDIC shall
evaluate the availability and responsiveness of a bank's systems for
delivering retail banking services, pursuant to the following criteria:
(1) The current distribution of the bank's branches and RSFs among
low-, moderate-, middle-, and upper-income geographies;
(2) In the context of its current distribution of the bank's
branches and RSFs, the bank's record of opening and closing branches
and RSFs, particularly branches and RSFs located in low- or moderate-
income geographies or primarily serving low- or moderate-income
individuals;
(3) The availability of alternative systems for delivering retail
banking services (e.g., banking by telephone or computer, mobile
branches and RSFs, RSFs not owned or operated by or operated
exclusively for the bank, loan production offices, and bank-at-work or
by-mail programs) in low- and moderate-income geographies and to low-
and moderate-income individuals; and
(4) The range of services provided in low-, moderate-, middle-, and
upper-income geographies and the degree to which the services are
tailored to meet the needs of those geographies.
(c) Assessment criteria--community development services. (1)
Community development services are services that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) The FDIC shall evaluate community development services pursuant
to the following criteria:
(i) The extent to which the bank provides community development
services; and
(ii) The innovativeness and responsiveness of community development
services.
(3) When evaluating a bank's overall service performance, the FDIC
shall weigh the bank's community development services according to the
characteristics and needs of the bank's service area(s), the capacity
and constraints of the bank, and the opportunities available to the
bank to provide community development services.
(4) At a bank's option, the FDIC shall consider in its assessment
of a bank's service performance a community development service
provided by an affiliate of the bank, provided that the community
development service is not claimed by any other institution.
(d) Service performance rating. The FDIC shall rate a bank's
service performance as provided in Appendix A of this part.
Sec. 345.25 Community development test for wholesale or limited
purpose banks.
(a) Scope of test. (1) The FDIC shall assess the degree to which a
wholesale or limited purpose bank (as defined in Sec. 345.12 of this
part) is helping to meet the credit needs of its service area(s) under
the community development test only if the bank's written request to be
designated as a wholesale or limited purpose bank has been approved by
the FDIC before the commencement of its CRA examination, and the
designation has not been revoked either at the request of the bank or
at the FDIC's own initiative.
(2) The community development test evaluates the record of a
wholesale or limited purpose bank in helping to meet the credit needs
of its service area(s) through qualified investments, community
development lending, or community development services.
(3) For purposes of the community development test only, community
development loans include small business and small farm loans and loans
to low- and moderate-income individuals and geographies, whether or not
reported or collected by the bank or one of its affiliates as home
mortgage loans, small business loans, small farm loans, or consumer
loans, pursuant to Sec. 345.42 of this part.
(b) Assessment criteria. The FDIC shall evaluate the community
development performance of a wholesale or limited purpose bank pursuant
to the following criteria:
(1) The number and amount of community development loans
outstanding, qualified investments (as defined in Sec. 345.23 of this
part), or community development services (as defined in Sec. 345.24 of
this part);
(2) The use of innovative or complex qualified investments,
community development loans outstanding, or community development
services and their connection to credit needs; and
(3) The degree of responsiveness to credit and community economic
development needs.
(c) Indirect activities. The FDIC shall, if the wholesale or
limited purpose bank elects, consider in its community development
performance assessment:
(1) Qualified investments or community development services
provided by an affiliate of the bank, provided the investment or
services are not claimed by any other institution; and
(2) Community development lending by affiliates, consortia and
third parties, subject to the requirements and limitations in
Sec. 345.22 (c)(3) and (d) of this part.
(d) Benefit to service area(s).--(1) Benefit inside service
area(s). For purposes of assessing a wholesale or limited purpose
bank's community development performance under this section, the FDIC
shall consider all qualified investments, community development loans
outstanding, and community development services that benefit areas
within the bank's service area(s).
(2) Benefit outside service area(s). The FDIC shall consider the
qualified investments, community development loans outstanding, and
community development services provided by a wholesale or limited
purpose bank that benefit areas outside the bank's service area(s) only
up to an amount equivalent to the amount of investments, loans, and
services considered under paragraph (d)(1) of this section. If a bank
demonstrates a limited need or opportunity for these investments,
lending, and services, in its service area(s), the FDIC may exempt the
bank from all or part of this limitation.
(e) Community development performance rating. The FDIC shall rate a
bank's community development performance as provided in Appendix A of
this part.
Sec. 345.26 Small bank assessment standards.
(a) Scope of assessment. The FDIC shall assess the degree to which
a small bank is helping to meet the credit needs of its service area(s)
under the assessment standards described in this section.
(b) Assessment criteria. The FDIC shall evaluate a small bank's CRA
performance pursuant to the following criteria:
(1) The bank's loan-to-deposit ratio, adjusted for seasonal
variation and, as appropriate, other lending-related activities, such
as loan originations for sale to the secondary markets or community
development lending or investment;
(2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's service area(s);
(3) The bank's record of lending to and, as appropriate, engaging
in other lending-related activities for borrowers of different income
levels and businesses and farms of different sizes;
(4) The geographic distribution of the bank's loans given its
service area(s); and
(5) The bank's record of taking action, if warranted, in response
to written complaints about its performance in meeting the credit needs
of its service area(s).
(c) Small bank performance rating. The FDIC shall rate a small
bank's performance as provided in Appendix A of this part.
Sec. 345.27 Strategic plan assessment.
(a) Alternative election. A bank may request to be rated under a
strategic plan rather than under the lending, service, and investment
tests (Secs. 345.22 through 345.24 of this part), the community
development test (Sec. 345.25 of this part), or the small bank
assessment standards (Sec. 345.26 of this part), by submitting to the
FDIC a strategic plan as provided for in this section. A bank's request
to be rated under a strategic plan is not approved until the FDIC
approves the plan. The FDIC's approval of a strategic plan does not
affect the bank's obligation, if any, to report data as required by
Sec. 345.42 of this part.
(b) Strategic plans in general. (1) A plan may have a term of no
more than five years, and any multi-year plan shall include annual
interim measurable goals according to which the FDIC shall evaluate the
bank's performance.
(2) A bank with more than one service area may prepare a single
plan for all of its service areas or a plan for one or more but not all
of its service areas.
(3) Affiliated institutions may prepare joint plans if the plans
provide measurable goals for each institution.
(c) Public participation in strategic plan development. Before
submitting a plan to the FDIC for approval, the bank shall:
(1) Informally seek suggestions from the public in its service
area(s) while developing the plan;
(2) Once the bank has developed a plan, formally solicit public
comment on the plan for at least 30 days by publishing notice in a
newspaper of general circulation in each of its service areas; and
(3) During the period of formal public comment, make copies of the
plan available for review at all offices of the bank in any service
area covered by the plan.
(d) Submission of plan.--The bank shall submit its plan to the FDIC
at least three months prior to the proposed effective date of the plan.
The bank shall also submit with its plan any public comments received,
and, if the plan was revised in light of the comments received, the
initial plan as released for public comment.
(e) Plan content.--(1) Measurable goals. (i) A bank shall specify
in its plan measurable goals for helping to meet the credit needs of
each of its service area(s) covered by the plan, particularly the needs
of low- and moderate-income geographies and low- and moderate-income
individuals, through lending, investment, and the provision of
services, as appropriate.
(ii) A bank shall address all three performance categories and,
unless the bank has been designated as a wholesale or limited purpose
bank, shall emphasize lending and lending-related activities.
Nevertheless, a different emphasis, including a focus on one or more
performance categories, may be appropriate if responsive to the
characteristics and credit needs of its service area, considering
public comment and the bank's capacity and constraints, product
offerings, and business strategy.
(2) Confidential information. The bank may submit additional
information to the FDIC on a confidential basis, but the goals stated
in the plan shall be sufficiently specific to enable the public and the
FDIC to judge fairly the merits of the plan.
(3) Satisfactory and outstanding goals. A bank shall specify in its
plan measurable goals that constitute ``satisfactory'' performance. A
plan may specify measurable goals that constitute ``outstanding''
performance. In order to be considered for an ``outstanding''
performance rating, the bank shall submit both ``satisfactory'' and
``outstanding'' performance goals.
(f) Plan approval.--(1) Timing. The FDIC shall act upon a plan
within 60 days after the complete plan and required accompanying
material are submitted. If the FDIC fails to act within this time
period, the plan shall be deemed approved unless the FDIC extends the
review period for good cause.
(2) Public participation. In evaluating the plan's goals, the FDIC
shall consider the public's involvement in formulating the plan, public
comment on the plan, and any response by the bank to public comment on
the plan.
(3) Criteria for evaluating plan. The FDIC shall evaluate a plan's
measurable goals using the following criteria, as appropriate:
(i) The extent and breadth of lending or lending-related
activities, including, as appropriate, the distribution of loans among
different geographies, businesses and farms of different sizes, and
individuals of different income levels, the extent of community
development lending, and the use of innovative or flexible lending
practices to address credit needs;
(ii) The amount and innovativeness, complexity, and responsiveness
of the bank's qualified investments, as defined in Sec. 345.23 of this
part; and
(iii) The extent and availability of the bank's services,
including, as appropriate, the accessibility of retail delivery systems
and the extent and innovativeness of community development services, as
defined in Sec. 345.24 of this part.
(g) Plan amendment.--During the term of a plan, the bank may
petition the FDIC to approve an amendment to the plan on grounds that a
material change in circumstances has made the plan no longer
appropriate. Any amendment proposed shall be developed in accordance
with the public participation requirements of paragraph (c) of this
section.
(h) Strategic plan assessment.--The FDIC shall approve the goals
and assess performance under a strategic plan as provided for in
Appendix A of this part.
Sec. 345.28 Assigned ratings.
(a) Ratings in general. Subject to paragraphs (b), (c), and (d) of
this section, the FDIC shall assign to a bank a rating of
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or
``substantial noncompliance'' based on the bank's performance under the
lending, investment and service tests, the community development test,
the small bank assessment standards, or an approved strategic plan, as
applicable.
(b) Lending, investment, and service tests. The FDIC shall assign a
rating for a bank assessed under the lending, investment, and service
tests in accordance with the procedures provided in Appendix A of this
part and the following principles:
(1) A bank's rating on the lending test shall be weighed so as to
count for at least 50 percent of its assigned rating;
(2) A bank that receives an ``outstanding'' rating on the lending
test shall receive an assigned rating of at least ``satisfactory'';
(3) A bank that receives an ``outstanding'' rating on the lending
test and an ``outstanding'' rating on either the service test or the
investment test shall receive an assigned rating of ``outstanding'';
(4) A bank that receives an ``outstanding'' rating on both the
service test and the investment test and a rating of at least ``high
satisfactory'' on the lending test shall receive an assigned rating of
``outstanding''; and
(5) No bank may receive an assigned rating of ``satisfactory''
unless it receives a rating of at least ``low satisfactory'' on the
lending test.
(c) Effect of evidence of discriminatory or other illegal credit
practices. Evidence of discriminatory or other illegal credit practices
shall adversely affect the FDIC's evaluation of a bank's performance.
In determining the effect on the bank's assigned rating, the FDIC shall
consider the nature and extent of the evidence, the policies and
procedures that the bank has in place to prevent discriminatory or
other illegal credit practices, any corrective action that the bank has
taken or has committed to take, particularly voluntary corrective
action resulting from self-assessment, and other relevant information,
such as the bank's past fair lending performance.
(d) Effect of successive ``needs to improve'' ratings. A bank that
would otherwise receive an assigned rating of ``needs to improve''
shall receive an assigned rating of ``substantial noncompliance'' if
the bank received no better than a ``needs to improve'' rating on each
of its two previous examinations.
Sec. 345.29 Effect of ratings on applications.
(a) CRA performance. Among other factors, the FDIC shall take into
account a bank's record of performance under the CRA in considering
applications for approval of:
(1) The establishment of a branch or other facility with the
ability to accept deposits;
(2) The relocation of a bank's main office, a branch office or
other facility with the ability to accept deposits;
(3) The merger, consolidation, acquisition of assets, or assumption
of liabilities; and
(4) Deposit insurance for an operating non-insured financial
institution.
(b) New banks. A newly chartered bank shall submit a description of
its proposed CRA performance when an application for deposit insurance
is made. In considering the application, the FDIC shall take into
account the bank's proposed CRA performance.
(c) Interested parties. In considering CRA performance in an
application described in paragraph (a) of this section, the FDIC shall
take into account any views expressed by interested parties which are
submitted in accordance with the FDIC's procedures and rules of
practice set forth in Part 303 of this chapter.
(d) Denial or conditional approval of application. A bank's record
of performance may be the basis for denying or conditioning approval of
an application described in paragraph (a) of this section.
Subpart C--Records, Reporting and Disclosure Requirements
Sec. 345.41 Service area delineation.
(a) In general. Subject to paragraphs (b) and (c) of this section,
each bank may delineate its service area(s) using any method it chooses
provided that the service area(s):
(1) Do(es) not reflect illegal discrimination;
(2) Do(es) not arbitrarily exclude low- and moderate-income
geographies, taking into account the bank's size and financial
condition and the extent of its branching network, as appropriate; and
(3) Consist(s) only of whole census tracts or block numbering
areas.
(b) Banks that are not wholesale or limited purpose banks. The
service area(s) for a bank that is not a wholesale or limited purpose
bank (as defined in Sec. 345.12 of this part):
(1) Shall include those geographies in the local areas around a
bank's branches and deposit-taking RSFs in which the bank has
originated or had outstanding, during the previous calendar year, a
significant number and amount of home mortgage, small business and
small farm, and (if the bank chooses to have them considered in its CRA
evaluation) consumer loans and any other geographies equidistant from
its branches and deposit-taking RSFs, taking into account political
boundaries or significant geographic barriers; and
(2) Shall not extend substantially across MSA boundaries or state
boundaries unless the service area is located in a multistate MSA. If
the bank serves areas that extend substantially across state boundaries
or extend substantially across boundaries of an MSA, the bank shall
delineate separate service areas for the areas in each state and for
the areas inside and outside the MSA.
(c) Wholesale or limited purpose banks. The service area for a
wholesale or limited purpose bank (as defined in Sec. 345.12 of this
part) shall be delineated as an area or areas around its offices
(including its main office and branches) or a broader statewide or
regional area that includes the area or areas.
(d) Banks serving military personnel. Notwithstanding paragraphs
(a), (b), and (c) of this section, a bank whose business predominantly
consists of serving the needs of military personnel or their dependents
who are not located within a defined geographic area may delineate its
entire deposit customer base as its service area.
(e) Maintaining list and map. Each bank shall compile and maintain
a list of all the geographies within its service area or areas and a
map of each service area showing the geographies contained therein.
Sec. 345.42 Data collection and reporting.
(a) Mandatory data collection and reporting--(1) Loan data. Each
bank, except small banks, shall collect and report to the FDIC the
following data pertaining to its home mortgage, small business, small
farm, and community development loans:
(i) Home mortgage loans. If the bank is subject to reporting under
HMDA, the location of each home mortgage loan located outside the MSAs
in which the bank has a home or branch office (or outside any MSA) in
accordance with Regulation C, Home Mortgage Disclosure (12 CFR Part
203);
(ii) Small business and small farm loan data. All small business
and small farm loan data required to be collected and reported on the
FDIC's Small Business and Small Farm Loan Register (CC-______-______),
set forth in appendix C of this part, in accordance with the
instructions in appendix C of this part; and
(iii) Community development loan data. All community development
loan data required to be collected and reported on the FDIC's Community
Development Report Form (CC-______-______), set forth in appendix C of
this part, in accordance with the instructions in appendix C of this
part.
(2) Service area data. Each bank shall collect and report to the
FDIC by April 1 of each year a list of the areas the bank considers to
be its service area(s), a list of the geographies it considers to be
within its service area(s), and a map of each service area showing the
geographies contained therein.
(b) Optional data collection. (1) If a bank elects to have its
consumer lending considered under the lending test (as described in
Sec. 345.22 of this part), the bank shall collect the consumer loan
data requested on the FDIC's Consumer Loan Register (CC-______-______),
set forth in appendix C of this part, in accordance with the
instructions in appendix C of this part.
(2) At its option, a bank may:
(i) Provide information concerning outstanding small business,
small farm, or consumer loans throughout the year to account for
seasonal variations in lending for use in the evaluation of the bank
under the lending test described in Sec. 345.22 of this part; and
(ii) Provide any other information concerning its lending
performance, including additional loan distribution data.
(c) Data on affiliate lending. A bank that wishes to have the FDIC
consider lending by its affiliates for purposes of the lending test
shall be prepared to identify the particular home mortgage loans
reported under HMDA which it wishes the FDIC to consider, and shall
collect or report, pursuant to the provisions of paragraphs (a) and (b)
of this section, the requisite data concerning the small business,
small farm, or consumer loans made by its affiliates that it wishes
FDIC to consider.
(d) Data on consortia and third-party lending. A bank that wishes
to have the FDIC consider community development lending through
consortia in which the bank participates or through third parties in
which the bank has invested shall report, pursuant to paragraph
(a)(1)(iii) of this section, the requisite data concerning the
community development loans made through consortia and third parties
that it wishes the FDIC to consider.
Sec. 345.43 Public file and disclosure by banks.
(a) Public availability. Each bank shall maintain a file that is
readily available for public inspection containing the information
required by this section.
(b) Current information. Each bank shall include in its public file
the following information:
(1) All signed, written comments received from the public for the
current year and each of the prior two calendar years that specifically
relate to the bank's performance in helping to meet the credit needs of
its community or communities, and any response to the comments by the
bank;
(2) A copy of the public section of the bank's most recent CRA
Performance Evaluation prepared by the FDIC. The bank shall place this
copy in the public file within 30 business days after its receipt from
the FDIC;
(3) A list of the areas the bank considers to be its service
area(s), a list of the geographies it considers to be within its
service area(s), and a map of each service area showing the geographies
contained therein;
(4) A list of the bank's branches and RSFs, their street addresses,
and geographies;
(5) A list of branches and RSFs opened or closed by the bank during
the current and each of the prior two calendar years, their street
addresses, and geographies; and
(6) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the bank's branches and RSFs and descriptions of material deviations in
the availability or cost of services at particular branches and RSFs,
if any. At its option, a bank may include information regarding the
availability of alternative systems for delivering retail banking
services (e.g., banking by telephone or computer, mobile branches and
RSFs, RSFs not owned or operated by or operated exclusively for the
bank, loan production offices, and bank-at-work or by-mail programs).
(c) Information for prior years. Each bank that is not a small bank
shall include in its public file the following information for each of
the prior two calendar years derived from the data collected or
reported pursuant to Sec. 345.42 of this part:
(1) The number and amount of small business loans and small farm
loans located in low-, moderate-, middle-, and upper-income
geographies;
(2) A list of the geographies where the bank had outstanding at
least one small business loan or small farm loan;
(3) The number and amount of small business and small farm loans
located inside the bank's service area(s) and outside the bank's
service area(s);
(4) The number and amount of small business and small farm loans to
minority-owned businesses;
(5) The number and amount of small business and small farm loans to
women-owned businesses;
(6) The number and amount of small business and small farm loans to
businesses and farms with gross annual revenues less than or equal to
$1 million;
(7) The number and amount of community development loans
outstanding; and
(8) If the bank has elected to have its consumer loans considered
under the lending test (as described in Sec. 345.22 of this part), the
number and amount of consumer loans to low-, moderate-, middle-, and
upper-income individuals, the number and amount of consumer loans
located in low-, moderate-, middle-, and upper-income geographies, and
the number and amount of consumer loans located inside the bank's
service area(s) and outside the bank's service area(s).
(d) Exception. A bank shall not place in its public file any
information required under paragraph (c) of this section for a
particular year if, given special circumstances such as a small number
of loans made within a small number of designated income geographies or
to a small number of designated borrowers, the information could
reasonably be expected to disclose the identity of the borrower.
(e) HMDA statement. Each bank required to report home mortgage loan
data pursuant to the HMDA shall include in its public file a copy of
its HMDA Disclosure Statement provided by the Federal Financial
Institutions Examination Council for each of the prior two calendar
years. The statement shall be placed in the main office public file
within three business days and in the branch office public files within
10 business days of the bank's receipt of the statement.
(f) Small bank file. (1) A small bank shall include in its public
file the bank's loan-to-deposit ratio computed at the end of the most
recent calendar year. A bank may include additional data on its loan-
to-deposit ratio at its option.
(2) A small bank that elects to be evaluated under the lending,
investment and service tests (as described in Secs. 345.22 through
345.24 of this part) shall include in its public file the information
specified in paragraph (c) of this section.
(g) Strategic plan. Each bank that has been approved to be assessed
under a strategic plan as described in Sec. 345.27 of this part shall
include in its public file a copy of that plan. Information submitted
to the FDIC on a confidential basis in conjunction with the plan does
not have to be included in the public file.
(h) Less than satisfactory rating. Each bank that received a less
than satisfactory rating during its most recent examination shall
include in its public file a description of its current efforts to
improve its performance in helping to meet the credit needs of its
entire community. This description shall be updated quarterly.
(i) Location of public file. Each bank shall maintain its public
file as follows:
(1) The main office shall have a copy of the complete public file;
(2) At least one branch in each service area shall have a copy of
the bank's HMDA Disclosure Statements and all materials in the public
file relating to the service area in which the branch is located; and
(3) If a member of the public requests to review a bank's public
file at a branch that does not have a copy, the bank shall make a
complete copy of the file for that service area available for review at
the branch within 5 business days at no cost.
(j) Copies. Each bank shall provide copies of the information in
its public file to members of the public upon request. A bank may
charge a reasonable fee not to exceed the cost of reproduction and
mailing (if applicable).
Sec. 345.44 Public notice by banks.
(a) CRA notice for banks. Each bank shall provide in the public
lobby of its main office and each of its branches the public notice set
forth in Appendix B to this part. Bracketed material shall be used only
by banks having more than one service area.
(b) Additional notice for affiliate banks. The last two sentences
shall be included only if the bank is an affiliate of a holding company
and the last sentence only if the company is not prevented by statute
from acquiring additional banks.
Sec. 345.45 Publication of planned examination schedule.
The FDIC shall publish at least 30 days in advance of the beginning
of each calendar quarter a list of the banks that are scheduled for CRA
examinations in that quarter.
Subpart D--Transition Rules
Sec. 345.51 Transition rules.
(a) Effective date. Sections of this part 345 become effective over
a period of time in accordance with the schedule set forth in paragraph
(c) of this section. The provisions of part 345 become fully effective
on July 1, 1996.
(b) Data collection and reporting; strategic plan; small bank
assessment standards; and performance tests--(1) Data collection and
reporting. On July 1, 1995, the data collection and reporting
requirements set forth in Sec. 345.42 of this part become effective.
(2) Strategic plan. Beginning July 1, 1995, a bank that elects to
be evaluated under an approved strategic plan pursuant to Sec. 345.27
of this part may submit its strategic plan to the FDIC for approval.
(3) Small bank assessment standards. Beginning July 1, 1995, a bank
that qualifies as a small bank pursuant to Sec. 345.12 of this part may
elect to be evaluated under the small bank assessment standards set
forth in Sec. 345.26 of this part. Beginning July 1, 1996, the FDIC
shall evaluate each small bank under the small bank assessment
standards, unless the bank elects to be evaluated pursuant to the
performance tests set forth in Secs. 345.22 through 345.25 of this part
or under an approved strategic plan.
(4) Performance tests. On July 1, 1996, the lending, investment,
service, and community development tests set forth in Secs. 345.22
through 345.25 of this part become effective. Thereafter, the FDIC
shall evaluate all banks pursuant to these test(s), except small banks
evaluated under the small bank assessment standards and banks that
elect to be evaluated under an approved strategic plan.
(c) Schedule. On January 1, 1995, Secs. 345.11, 345.12, 345.29,
345.51 and 345.100 become effective, and Secs. 345.1, 345.2, 345.8,
345.9, and 345.10 will expire. On July 1, 1995, Secs. 345.26, 345.27,
345.42, and 345.45 become effective, and Secs. 345.21, 345.28 and
345.41 become effective for banks that are evaluated under Secs. 345.26
or 345.27. On July 1, 1996, Secs. 345.21 through 345.25, 345.28,
345.41, 345.43, and 345.44 become effective, and Secs. 345.3 through
345.7 will expire.
Subpart E--Interpretations
Sec. 345.100 Applicability of the Community Reinvestment Act to
certain special purpose banks.
In response to its July 1978 proposed regulation, 12 CFR Part 345,
to implement the CRA, the FDIC received several inquiries from
institutions that, although they were chartered as banks, did not
perform commercial or retail banking services. These institutions
served solely as correspondent banks, or as trust companies, or as
clearing agents, and they did not extend credit to the public for their
own account. The FDIC concludes that the CRA is not intended to cover
these institutions. It is the purpose of the CRA to require the FDIC to
encourage banks to meet the credit needs of their local communities. To
this end the FDIC must assess banks' records of performance and take
those records into account in acting on certain applications affecting
the banks. The FDIC believes that these provisions were intended to
cover all banks that are in the business of extending credit to the
public including both wholesale and retail banks. The lending
activities of these banks affect the economic health of the communities
in which they are chartered. However, the FDIC believes it would be
pointless to encourage or to assess the credit granting record of
institutions that are not organized to grant credit to the public in
the ordinary course of business, other than as an incident to their
specialized operations. Accordingly the term bank as used in the FDIC's
regulation, part 345 (12 CFR part 345), does not include banks that
engage solely in correspondent banking business, trust company
business, or acting as a clearing agent.
Appendix A to Part 345--Ratings
(a) Ratings in general. (1) In assigning a rating, the FDIC
shall evaluate a bank's performance under the applicable assessment
criteria in this part, subject to Sec. 345.28 of this part, which
provides for adjustments on the basis of evidence of discriminatory
or other illegal credit practices and prior ``needs to improve''
ratings.
(2) A bank's performance need not fit each aspect of a
particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The bank's overall
performance, however, should generally be consistent with the
appropriate profile stated below.
(b) Banks that are not wholesale or limited purpose banks or
small banks.
(1) Lending performance rating. The FDIC shall assign each
bank's lending performance one of the five ratings described below.
(i) Outstanding. The FDIC shall rate a bank's lending
performance ``outstanding'' if, in general, it demonstrates:
(A) Excellent responsiveness to credit needs in its service
area(s);
(B) A substantial majority of its loans are made in its service
area(s);
(C) An excellent geographic distribution of loans throughout its
service area(s);
(D) An excellent distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An excellent record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Extensive use of innovative or flexible lending practices to
address the credit needs of low-or moderate-income individuals or
geographies; and
(G) It is a leader in making community development loans.
(ii) High satisfactory. The FDIC shall rate a bank's lending
performance ``high satisfactory'' if, in general, it demonstrates:
(A) Good responsiveness to credit needs in its service area(s);
(B) A high percentage of its loans are made in its service
area(s);
(C) A good geographic distribution of loans throughout its
service area(s);
(D) A good distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A good record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Use of innovative or flexible lending practices to address
the credit needs of low-or moderate-income individuals or
geographies; and
(G) It has made a relatively high level of community development
loans.
(iii) Low satisfactory. The FDIC shall rate a bank's lending
performance ``low satisfactory'' if, in general, it demonstrates:
(A) Adequate responsiveness to credit needs in its service
area(s);
(B) An adequate percentage of its loans are made in its service
area(s);
(C) An adequate geographic distribution of loans throughout its
service area(s);
(D) An adequate distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) An adequate record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Limited use of innovative or flexible lending practices) to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made an adequate level of community development
loans.
(iv) Needs to improve. The FDIC shall rate a bank's lending
performance ``needs to improve'' if, in general, it demonstrates:
(A) Poor responsiveness to credit needs in its service area(s);
(B) A small percentage of its loans are made in its service
area(s);
(C) A poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A poor distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the bank;
(E) A poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Little use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a limited number of community development loans.
(v) Substantial noncompliance. The FDIC shall rate a bank's
lending performance as being in ``substantial noncompliance'' if, in
general, it demonstrates:
(A) A very poor responsiveness to credit needs in its service
area(s);
(B) A very small percentage of its loans are made in its service
area(s);
(C) A very poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A very poor distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the bank;
(E) A very poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) No use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made few, if any, community development loans.
(2) Investment performance rating. The FDIC shall assign each
bank's investment performance one of the five ratings described
below.
(i) Outstanding. The FDIC shall rate a bank's investment
performance ``outstanding'' if, in general, it demonstrates:
(A) An excellent level of qualified investments, often in a
leadership position, particularly those that directly address credit
needs;
(B) Extensive use of innovative or complex qualified investments
to support community development initiatives; and
(C) Excellent responsiveness to credit and community economic
development needs.
(ii) High satisfactory. The FDIC shall rate a bank's investment
performance ``high satisfactory'' if, in general, it demonstrates:
(A) A significant level of qualified investments, occasionally
in a leadership position, particularly those that directly address
credit needs;
(B) Significant use of innovative or complex qualified
investments to support community development initiatives; and
(C) Good responsiveness to credit and community economic
development needs.
(iii) Low satisfactory. The FDIC shall rate a bank's investment
performance ``low satisfactory'' if, in general, it demonstrates:
(A) An adequate level of qualified investments, although rarely
in a leadership position, particularly those that directly address
credit needs;
(B) Occasional use of innovative or complex qualified
investments to support community development initiatives; and
(C) Adequate responsiveness to credit and community economic
development needs.
(iv) Needs to improve. The FDIC shall rate a bank's investment
performance ``needs to improve'' if, in general, it demonstrates:
(A) A poor level of qualified investments, particularly those
that directly address credit needs;
(B) Rare use of innovative or complex qualified investments to
support community development initiatives; and
(C) Poor responsiveness to credit and community economic
development needs.
(v) Substantial noncompliance. The FDIC shall rate a bank's
investment performance as being in ``substantial noncompliance'' if,
in general, it demonstrates:
(A) Few, if any, qualified investments, particularly those that
directly address credit needs;
(B) No use of innovative or complex qualified investments to
support community development initiatives; and
(C) Very poor responsiveness to credit and community economic
development needs.
(3) Service performance rating. The FDIC shall assign each
bank's service performance one of the five ratings described below.
(i) Outstanding. The FDIC shall rate a bank's service
performance ``outstanding'' if, in general, the bank demonstrates:
(A) Its service delivery systems are readily accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and RSFs has improved the accessibility
of its delivery systems, particularly in low- or moderate-income
geographies or to low- or moderate-income individuals;
(C) Services (including, where appropriate, business hours) are
tailored to the convenience and needs of its service area(s),
particularly low- or moderate-income geographies or low- or
moderate-income individuals; and
(D) It is a leader in providing community development services.
(ii) High satisfactory. The FDIC shall rate a bank's service
performance ``high satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to essentially
all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and RSFs has not adversely affected the
accessibility of its delivery systems, particularly in low- and
moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences certain portions of its
service area(s), particularly low- and moderate-income geographies
and low- and moderate- income individuals; and
(D) It provides a relatively high level of community development
services.
(iii) Low satisfactory. The FDIC shall rate a bank's service
performance ``low satisfactory'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are reasonably accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and RSFs has generally not adversely
affected the accessibility of its delivery systems, particularly in
low- and moderate-income geographies and to low- and moderate-income
individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences portions of its service
area(s), particularly low- and moderate-income geographies and low-
and moderate-income individuals; and
(D) It provides an adequate level of community development
services.
(iv) Needs to improve. The FDIC shall rate a bank's service
performance ``needs to improve'' if, in general, the bank
demonstrates:
(A) Its service delivery systems are accessible to limited
portions of its service area(s);
(B) To the extent changes have been made, the bank's record of
opening and closing branches and RSFs has adversely affected the
accessibility its delivery systems, particularly in low- or
moderate-income geographies or to lowor moderate-income individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that inconveniences certain portions of its service
area(s), particularly lowor moderate-income geographies or low- or
moderate-income individuals; and
(D) It provides a limited level of community development
services.
(v) Substantial noncompliance. The FDIC shall rate a bank's
service performance as being in ``substantial noncompliance'' if, in
general, the bank demonstrates:
(A) Its service delivery systems are inaccessible to significant
portions of its service area(s), particularly low- and moderate-
income geographies or low- and moderate-income individuals;
(B) To the extent changes have been made, the bank's record of
opening and closing branches and RSFs has significantly adversely
affected the accessibility of its delivery systems, particularly in
low- or moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that significantly inconveniences many portions of its
service area(s), particularly low- or moderate-income geographies or
low- or moderate-income individuals; and
(D) It provides few, if any, community development services.
(4) Assigned rating. The FDIC shall use the following procedures
for assigning a rating:
(i) Assign points corresponding to the bank's performance on
each of the component tests as follows:
------------------------------------------------------------------------
Component test ratings Lending Service Investment
------------------------------------------------------------------------
Outstanding................... 12 6 6
High Satisfactory............. 9 4 4
Low Satisfactory.............. 6 3 3
Needs to Improve.............. 3 1 1
Substantial Noncompliance..... 0 0 0
------------------------------------------------------------------------
(ii) Total the points for the three tests, and use that total to
determine the composite rating according to the chart below.
However, if the total exceeds twice the number of points
attributable to the bank's lending test performance (as provided in
paragraph (b)(4)(i) of this appendix), determine the composite
rating using twice the number of points attributable to the bank's
lending test performance.
------------------------------------------------------------------------
Points Composite rating
------------------------------------------------------------------------
18 or over......................... Outstanding
9 through 17....................... Satisfactory
5 through 8........................ Needs to Improve
0 through 4........................ Substantial Noncompliance.
------------------------------------------------------------------------
(c) Community development test for wholesale or limited purpose
banks. The FDIC shall assign each wholesale or limited purpose
bank's community development performance one of the four ratings
described below.
(1) Outstanding. The FDIC shall rate a wholesale or limited
purpose bank's community development performance ``outstanding'' if,
in general, it demonstrates:
(i) A high level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Extensive use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Excellent responsiveness to credit and community economic
development needs in its service area(s).
(2) Satisfactory. The FDIC shall rate a wholesale or limited
purpose bank's community development performance ``satisfactory''
if, in general, it demonstrates:
(i) An adequate level of qualified investments, community
development loans outstanding, or community development services,
particularly those that directly address credit needs;
(ii) Occasional use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Adequate responsiveness to credit and community economic
development needs in its service area(s).
(3) Needs to improve. The FDIC shall rate a wholesale or limited
purpose bank's community development performance as ``needs to
improve'' if, in general, it demonstrates:
(i) A poor level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Rare use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Poor responsiveness to credit and community economic
development needs in its service area(s).
(4) Substantial noncompliance. The FDIC shall rate a wholesale
or limited purpose bank's community development performance in
``substantial noncompliance'' if, in general, it demonstrates:
(i) Few, if any, qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) No use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Very poor responsiveness to credit and community economic
development needs in its service area(s).
(d) Assessment standards for small banks. The FDIC shall rate
each small bank's performance as described below.
(1) Eligibility for a satisfactory rating. The FDIC shall rate a
bank's performance ``satisfactory'' if, in general, the bank
demonstrates:
(i) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the bank's size, financial condition, the credit
needs of its service area(s), and taking into account, as
appropriate, lending-related activities such as loan originations
for sale to the secondary markets and community development lending
and investment;
(ii) A majority of its loans and, as appropriate, other lending-
related activities are in its service area(s);
(iii) A distribution of loans to and, as appropriate, other
lending related-activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the bank's service area(s);
(iv) A record of taking appropriate action, as warranted, in
response to written complaints, if any, about the bank's performance
in meeting the credit needs of its service area(s); and
(v) A reasonable geographic distribution of loans given its
service area(s).
(2) Eligibility for an outstanding rating. A small bank that
meets each of the standards for a ``satisfactory'' rating under this
paragraph and exceeds some or all of those standards may warrant
consideration for an overall rating of ``outstanding''. In assessing
whether a small bank's performance is ``outstanding'', the FDIC
shall consider the extent to which the bank exceeds each of the
assessment standards for a ``satisfactory'' rating and its
performance in making qualified investments (as defined in
Sec. 345.23 of this part) and its performance in providing branches,
RSFs or other services and delivery systems that enhance credit
availability in its service area(s).
(3) Needs to improve or substantial noncompliance ratings. A
small bank also may receive a rating of ``needs to improve'' or
``substantial noncompliance'' depending on the degree to which its
performance has failed to meet the standards for a ``satisfactory''
rating.
(e) Strategic plan assessment and rating. (1) Satisfactory
goals. The FDIC shall approve as ``satisfactory'' measurable goals
that adequately help meet the credit needs of each of a bank's
service area(s).
(2) Outstanding goals. If the plan identifies a separate group
of measurable goals that substantially exceed the levels approved as
``satisfactory,'' the FDIC shall approve those goals as
``outstanding.''
(3) Rating. The FDIC shall assess the performance of a bank
operating under an approved plan to determine if the bank has met
its plan goals:
(i) If the bank substantially achieves its plan goals for a
satisfactory rating, the FDIC shall rate the bank's performance
under the plan as ``satisfactory.''
(ii) If the bank exceeds its plan goals for a satisfactory
rating and substantially achieves its plan goals for an outstanding
rating, the FDIC shall rate the bank's performance under the plan as
``outstanding''.
(iii) If the bank fails to substantially meet its plan goals for
a satisfactory rating, it shall be rated as either ``needs to
improve'' or ``substantial noncompliance,'' depending on the extent
to which it falls short of its plan goals, or if the bank so elected
at the time it first submitted its plan, it shall be rated under the
lending, investment and service tests (as described in Secs. 345.22
through 345.24 of this part), the community development test (as
described in Sec. 345.25 of this part), or the small bank assessment
standards (as described in Sec. 345.26 of this part), as
appropriate.
Appendix B to Part 345--CRA Notice
Community Reinvestment Act Notice
Under the Federal Community Reinvestment Act (CRA), the Federal
Deposit Insurance Corporation (FDIC) evaluates and enforces our
compliance with our obligation to help meet the credit needs of this
community consistent with safe and sound operations. The FDIC also
takes our CRA performance into account when the FDIC decides on
certain applications submitted by us. Your involvement is
encouraged. You should know that:
You may look at and obtain in this office information on our
performance in this community. This information includes a file that
includes: copies of all signed, written comments received by us, and
any responses we have made to those comments; a map showing our
service area; a list of our branches and remote service facilities,
such as ATMS, in our service area; a list of services we provide at
those locations; evaluations by the FDIC of our CRA performance; and
data on the loans we have made in this community during the last two
years. [Current CRA information on our performance in other
communities served by us is available at our main office, located at
________________.]
You may send signed, written comments about our CRA performance
in helping to meet community credit needs to (title and address of
bank official) and to the FDIC Regional Manager, Division of
Compliance and Consumer Affairs (address). Your letter, together
with any response by us, will be considered by the FDIC in
evaluating our CRA performance and may be made public.
You may ask the FDIC to look at any comments received by the
Regional Manager. You may also request from the FDIC, 550 17th
Street, N.W., Washington, DC 20429, an announcement of our
applications covered by the CRA filed with the FDIC. We are an
affiliate of (name of holding company), a bank holding company. You
may request from the Federal Reserve Bank of (city, address), an
announcement of applications covered by the CRA filed by bank
holding companies.
Appendix C to Part 345--CRA Loan Data Format
Instructions for the Small Business and Small Farm Loan Register
This form contains the instructions for completion of the Loan
Register for Small Business and Small Farm Loans. This register is
used in conjunction with the reporting of this information as part
of the CRA data collection process. The register and these
instructions are to be used to provide the format in which the data
should be reported. The actual data are to be submitted in machine-
readable form in accordance with the instructions for submission of
data pursuant to 12 CFR Part 203 (Regulation C).
I. Who Must File a Register
All independent insured banks and thrifts with $250 million or
more in total assets and all insured banks and thrifts that are
members of holding companies with $250 million or more in bank and
thrift assets must report this information for small business and
small farm loans outstanding beginning December 31, 1995. Banks and
thrifts with fewer assets that wish to be evaluated under 12 CFR
Secs. 345.22 through 345.24 must also report this information. Only
provide information on business or farm location and borrower
information for loans for which applications were submitted after
July 1, 1995. For loans for which applications were submitted before
that date, enter ``N/A'' for all information relating to location or
borrower.
II. Types of Loans to be Reported
The loan register should contain individual loan data on each
small business or small farm loan as defined on schedule RC-C of the
December 31 Report of Condition and Income. Include data on
individual small business loans with original loan amounts of $1
million or less and individual small farm loans with original loan
amounts of $500,000 or less that had an outstanding balance as of
December 31.
III. Submission of Data
The data must be submitted in machine-readable form consistent
with requirements for submission of data pursuant to 12 CFR Part 203
(Regulation C). The format must conform exactly to the form,
including the order of columns, column headings, etc. Contact your
federal supervisory agency for information regarding procedures and
technical specifications for automated data submission.
Your institution should decide on the procedure it wants to
follow for collection of the data consistent with the Supplemental
Instructions For Collection Of Data In Connection with Small
Business and Small Farm Loans. Keep in mind that data reported on
the register are outstandings as of December 31 and not originations
as are reported for some other regulatory purposes. Your institution
may collect the data on separate registers at different branches or
on separate registers for different loan types (small business or
small farm), but make sure each loan number is unique. Entries need
not be grouped on your registers by MSA, or chronologically, or by
census tract, or in any other particular order.
IV. Instructions for Completion of Register
Loan Information
1. Loan Number--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. Outstanding Loan Amount--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Business or Farm Location
For each loan, identify the location of the business or farm.
Location is determined by the following:
(1) Small business loans are located in the census tract or
block numbering area where the main business facilities or other
property to which the loan proceeds will be applied (as indicated by
borrower) are located;
(2) Small farm loans are located in the census tract or block
numbering area where the farm or other property to which the loan
proceeds will be applied (as indicated by borrower) is located.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. State & County--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. Census Tract/Block Numbering Area--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
Borrower Information
1. Minority-Owned Code--Use the following codes to indicate
small business or small farm loans with more than 50 percent
ownership by one or more minority individuals (as indicated by
borrower) pursuant to data collected as described in the
Supplemental Instructions For Collection of Data In Connection With
Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
2. Women-Owned Code--Use the following codes to indicate small
business or small farm loans with more than 50 percent ownership by
women (as indicated by borrower) pursuant to data collected as
described in the Supplemental Instructions For Collection of Data In
Connection With Small Business and Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
3. Gross Annual Revenues $1MM Code--Use the following
codes to indicate whether the gross annual revenues of the small
business or farm are less than or equal to $1 million. This
information should be determined based upon the revenues upon which
your institution relied in making its credit decision.
1--Yes
2--No
Supplemental Instructions for Collection of Data in Connection With
Small Business and Small Farm Loans
A. Format
Beginning July 1, 1995, financial institutions required to
report small business and small farm loan registers are to collect
information on the racial, ethnic, and gender make-up of applicants
or borrowers in connection with small business and small farm loans.
If you take a written application, you should list questions
regarding the percent of minority and gender ownership on your loan
application form or on a separate form completed by the applicant in
conjunction with an application. If you do not take a written
application, you should request the information at an appropriate
time during the application or origination process; you must request
the information for each loan you originate even if you did not take
a written application. If you neither take a written application nor
originate the loan, you do not have to request the information. See
the sample form for recommended format and language. This
information is to be maintained in the institution's in-house loan
files. This information is not to be reported to the agency, but is
to be used to complete the small business and small farm loan
register.
B. Procedures
1. You must ask for this information, but cannot require the
applicant or borrower to provide it. You may not consider whether or
not an applicant or borrower has provided this information in making
your decision whether to extend credit or in setting the terms of
credit.
2. If the applicant or borrower chooses not to provide the
information, note this fact on the form.
3. Inform the applicant or borrower that the Federal government
is requesting this information in order to monitor compliance with
Federal statutes that prohibit lenders from discriminating on these
bases.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.010
TP07OC94.011
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
Instructions for Completion of the Open- and Closed-end Consumer Loan
Registers
This form contains the instructions for completion of the Loan
Registers for Open-End Consumer Loans and Closed-End Consumer Loans.
These registers are used in conjunction with the collection of this
information as part of the CRA data collection process. The
registers and these instructions are to be used to provide the
format in which the data should be maintained. The data must be
maintained in machine-readable form. If you wish to maintain the
data in an alternative format, you must obtain approval from your
primary supervisory agency.
I. Who May Maintain a Register
Any insured bank or thrift may, at the institution's option,
collect and maintain this information for loans outstanding
beginning December 31, 1995. You need only provide information on
borrower location and gross annual income for loans for which
applications were submitted after July 1, 1995. For loans for which
applications were submitted before that date, you may enter ``N/A''
for borrower location and gross annual income.
II. Types of Loans to be Recorded
If you collect and maintain information on your consumer loans
for consideration in your CRA evaluation, you must provide data on
all consumer loans outstanding included in the aggregate consumer
loan figure on your December 31 Report of Condition and Income.
Your institution should decide on the procedure it wants to
follow for collection of the data. Keep in mind that data recorded
on the registers are outstandings as of December 31 and not
originations as are reported for some other regulatory purposes.
Your institution may collect the data on separate registers at
different branches, but is required to maintain the data on separate
registers for each of the different consumer loan types (open-end
and closed-end). Make sure the loan numbers are unique.
III. Instructions for Completion of Register
Loan Information
1. Loan Number--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. Outstanding Loan Amount--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Borrower Information
For each loan, identify the location of the borrower. Consumer
loans are located in the census tract or block numbering area where
the borrower resides.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. State & County--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. Census Tract/Block Numbering Area--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
4. Gross Annual Income--Enter the gross annual income upon which
your institution relied in making the credit decision. Round all
dollar amounts to the nearest thousand.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P; OTS 6720-01-P (25%)
TP07OC94.012
TP07OC94.013
TP07OC94.014
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
By order of the Board of Directors of the Federal Deposit
Insurance Corporation.
Dated: September 26, 1994.
Robert E. Feldman,
Acting Executive Secretary.
OFFICE OF THRIFT SUPERVISION
12 CFR CHAPTER V
For the reasons outlined in the joint preamble, the Office of
Thrift Supervision hereby proposes to amend 12 CFR chapter V as set
forth below:
PART 563e--COMMUNITY REINVESTMENT
1. The authority citation for part 563e is revised to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816, 1818,
1828(c), and 2901 through 2907.
2. Part 563e is amended by adding subparts A through D and
appendices A through C following Sec. 563e.8 to read as follows:
Subpart A--General
Sec.
563e.11 Authority, community reinvestment obligation, purposes and
scope.
563e.12 Definitions.
Subpart B--Standards for Assessing Performance
563e.21 Assessment tests and ratings, in general.
563e.22 Lending test.
563e.23 Investment test.
563e.24 Service test.
563e.25 Community development test for wholesale or limited purpose
savings associations.
563e.26 Small savings association assessment standards.
563e.27 Strategic plan assessment.
563e.28 Assigned ratings.
563e.29 Effect of ratings on applications.
Subpart C--Records, Reporting and Disclosure Requirements
563e.41 Service area delineation.
563e.42 Data collection and reporting.
563e.43 Public file and disclosure.
563e.44 Public notice by savings associations.
563e.45 Publication of planned examination schedule.
Subpart D--Transition Rules
563e.51 Transition rules.
Appendix A to Part 563e--Ratings
Appendix B to Part 563e--CRA Notice
Appendix C to Part 563e--CRA Loan Data Format
Subpart A--General
Sec. 563e.11 Authority, community reinvestment obligation, purposes
and scope.
(a) Authority. The provisions of this part are issued under the
Community Reinvestment Act of 1977 (CRA), as amended (12 U.S.C. 2901 et
seq.); section 5, as amended, and sections 3, 4, and 10, as added, of
the Home Owners' Loan Act of 1933 (12 U.S.C. 1462a, 1463, 1464, and
1467a); and sections 4, 6, 8, and 18(c), as amended of the Federal
Deposit Insurance Act (12 U.S.C. 1814, 1816, 1818, 1828(c)).
(b) Community reinvestment obligation. Savings associations have a
continuing and affirmative obligation to help meet the credit needs of
their communities, including low- and moderate-income areas, consistent
with safe and sound operations.
(c) Purposes. The purposes of this part are to implement the
community reinvestment obligation of savings associations; to explain
how the Office of Thrift Supervision (OTS) assesses the performance of
savings associations in satisfying the community reinvestment
obligation; and to describe how that performance is taken into account
in certain applications.
(d) Scope. This part applies to all savings associations as
defined in 561.43 of this subchapter.
Sec. 563e.12 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate means any company that controls, is controlled by, or
is under common control with another company. For purposes of this
part, the term ``control'' has the meaning given to that term in 12
U.S.C. 1841(a)(2), and a company is under common control with another
company if both companies are directly or indirectly controlled by the
same company.
(b) Area median income means the median family income for the MSA
in which a person or geography is located or, in the case of a person
or geography located outside an MSA, the higher of the county median
family income or the statewide nonmetropolitan median family income.
(c) Automated teller machine (ATM) means an automated, unstaffed
banking facility with a fixed site owned or operated by or operated
exclusively for the savings association at which deposits are received,
cash dispersed, or money lent.
(d) Branch means a staffed banking facility (shared or unshared)
licensed as a branch with a fixed site at which deposits are received,
checks paid, or money lent, including a mini-branch in a grocery store
or a branch operated in conjunction with any other local business or
nonprofit organization.
(e) Community development loan means a loan (including a line of
credit, commitment, or letter of credit) that addresses affordable
housing (including multifamily rental housing) or other community
economic development needs not being met by the private market;
provided the loan:
(1) Primarily benefits low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program;
(2) Has not been reported or collected by the savings association
or one of its affiliates as a home mortgage loan, small business loan,
small farm loan, or a consumer loan pursuant to Sec. 563e.42 of this
part, unless it is a multifamily dwelling loan (as described in
Appendix A to 12 CFR Part 203); and
(3) Except in the case of a wholesale or limited purpose savings
association, benefits the savings association's service area(s) or a
broader statewide or regional area that includes the savings
association's service area(s).
(f) Consumer loan means a loan extended to one or more individuals
for household, family, or other personal expenditures; provided the
loan is not secured by real estate and is not used for the purpose of
purchasing or carrying securities.
(g) Geography means a census tract delineated by the United States
Bureau of the Census in the most recent decennial census, or a block
numbering area delineating a small statistical subdivision where a
census tract has not been established.
(h) HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et
seq.).
(i) Home mortgage loan means a mortgage loan as defined in section
303(1) of HMDA (12 U.S.C. 2802(1)) and implementing regulations.
(j) Income level--(1) Low-income means, in the case of a person, an
individual income, or in the case of a geography, a median family
income, that is less than 50 percent of the adjusted area median
income, with adjustments to take into account family size and the
prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(2) Moderate-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 50 percent and less than 80 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(3) Middle-income means, in the case of a person, an individual
income, or in the case of a geography, a median family income, that is
at least 80 percent and less than 120 percent of the adjusted area
median income, with adjustments to take into account family size and
the prevailing levels of residential housing construction costs or
unusually high or low family incomes.
(4) Upper-income means, in the case of a person, an individual
income or, in the case of a geography, a median family income, that is
120 percent or more of the adjusted area median income, with
adjustments to take into account family size and the prevailing levels
of residential housing construction costs or unusually high or low
family incomes.
(k) Limited purpose savings association means a savings association
that offers only a narrow product line (such as credit cards or
automobile loans) to a national or regional market and has, pursuant to
a written request, been designated by the OTS as a limited purpose
savings association, as provided in Sec. 563e.25 of this part.
(l) Loan location. A loan is located in a geography as follows:
(1) A consumer loan is located where the borrower resides;
(2) A home mortgage loan is located where the property to which the
loan relates is located;
(3) A small business or small farm loan is located where the main
business facility or farm is located or where the loan proceeds
otherwise will be applied, as indicated by the borrower.
(m) Loan production office means a staffed banking facility that is
accessible to the public, and provides lending-related services such as
loan information and applications, but is not a branch.
(n) MSA means metropolitan statistical area or primary metropolitan
statistical area, as defined by the Director of the Office of
Management and Budget.
(o) Minority means an individual who is an American Indian or
Alaskan Native, an Asian or Pacific Islander, a Black, or of Hispanic
origin as provided in the Office of Management and Budget's Statistical
Policy Directive No. 15, Race and Ethnic Standards for Federal
Statistics and Administrative Reporting.
(p) Minority-owned business means a business, including a farm,
that is more than 50 percent owned by one or more minority individuals,
and that has not issued any securities registered under Section 12(g)
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has
100 or fewer shareholders.
(q) Service area means a geographical area delineated in accordance
with Sec. 563e.41 of this part.
(r) Small savings association means a savings association with
total assets of less than $250 million that is:
(1) Independent; or
(2) An affiliate of a holding company with total banking and thrift
assets of less than $250 million.
(s) Small business loan means a loan with an original amount of $1
million or less that is either a commercial or industrial loan or a
loan secured by nonfarm, nonresidential property.
(t) Small farm loan means a loan with an original amount of
$500,000 or less that is a loan secured by farmland (including a loan
to finance a farm residence or other improvements), a loan to finance
agricultural production, or any other loan to a farmer.
(u) Women-owned business means a business, including a farm, that
is more than 50 percent owned by one or more women, and that has not
issued any securities registered under Section 12(g) of the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) and has 100 or fewer
shareholders.
(v) Wholesale savings association means a savings association that
is not in the business of extending home mortgage, small business,
small farm, or consumer loans to retail customers, and has, pursuant to
a written request, been designated by the OTS as a wholesale savings
association, as provided in Sec. 563e.25 of this part.
Subpart B--Standards for Assessing Performance
Sec. 563e.21 Assessment tests and ratings, in general.
(a) Assessment tests and standards. In connection with an
examination of a savings association, the OTS shall assess the CRA
performance of the savings association as follows:
(1) Lending, investment, and service tests. The OTS shall apply
these three tests, as described in Secs. 563e.22 through 563e.24 of
this part, in evaluating the performance of savings associations,
except as provided in paragraphs (a)(2), (3) and (4) of this section.
(2) Community development test for wholesale or limited purpose
savings associations. In evaluating the performance of wholesale or
limited purpose savings associations (as defined in Sec. 563e.12 of
this part), the OTS shall apply the community development test, as
provided in Sec. 563e.25 of this part, except as provided in paragraph
(a)(4) of this section.
(3) Assessment standards for small savings associations. In
evaluating the performance of small savings associations (as defined in
Sec. 563e.12 of this part), the OTS shall apply the assessment
standards for small savings associations as provided in Sec. 563e.26 of
this part. However, a small savings association may elect instead to be
assessed as provided in paragraphs (a)(2) and (4) of this section, or
it may elect to be evaluated under paragraph (a)(1) of this section if
it has collected and reported the data required for other savings
associations under Sec. 563e.42(a)(1) of this part.
(4) Strategic plan. Any savings association may elect not to be
assessed by any tests described in paragraphs (a)(1), (2) and (3) of
this section by submitting to the OTS and receiving approval of a
strategic plan as described in Sec. 563e.27 of this part.
(b) Assessment context. The OTS shall apply the tests and standards
in paragraph (a) of this section in the context of the following
information:
(1) Demographic data on median income levels, distribution of
household income, nature of housing stock, housing costs, and other
relevant data pertaining to a savings association's service area(s);
(2) Examiner-developed information regarding the credit needs of
the savings association's service area(s) obtained from community-based
organizations, state and local governments, economic development
agencies, and from any information the savings association may choose
to provide;
(3) The savings association's product offerings and business
strategy as determined from data provided by the savings association;
(4) Institutional capacity and constraints, including the size and
financial condition of the institution, the economic climate (national,
regional and local), safety and soundness limitations, and any other
factors that significantly affect the savings association's ability to
lend to the different parts of its service area(s);
(5) The savings association's past performance and the performance
of similarly-situated lenders;
(6) The savings association's public file, as described in
Sec. 563e.43 of this part, and any signed, written comments about the
savings association's CRA performance submitted to the savings
association or the OTS; and
(7) Any other information deemed relevant by the OTS.
(c) Assigned ratings. The OTS shall assign to each savings
association one of the following four ratings as set out in
Sec. 563e.28 of this part and Appendix A of this part: ``outstanding'';
``satisfactory''; ``needs to improve''; or ``substantial
noncompliance'' based on:
(1) The results of the applicable assessment test(s) or standards
or performance under an approved strategic plan; and
(2) Any evidence of discriminatory or other illegal credit
practices.
(d) Safe and sound operations. This part and the CRA do not require
any savings association to make loans or investments, or to provide
services that are inconsistent with safe and sound banking operations.
Savings associations are permitted and encouraged to develop and apply
flexible underwriting standards, consistent with safe and sound banking
operations, for loans that benefit low- or moderate-income geographies
or individuals.
(e) Compliance with community reinvestment obligation. The assigned
ratings reflect the extent of compliance or noncompliance with the
community reinvestment obligation described in Sec. 563e.11(b) of this
part. A savings association that receives an assigned rating of
``substantial noncompliance'' shall be subject to enforcement actions
pursuant to 12 U.S.C. 1818.
Sec. 563e.22 Lending test.
(a) Scope of test. (1) The lending test evaluates a savings
association's performance in helping to meet the credit needs of its
service area(s) through its lending activities, as measured by home
mortgage originations and purchases, small business and small farm
loans outstanding, and community development loans outstanding. At the
savings association's option, the lending test will also evaluate the
savings association's consumer loans outstanding and any other loan
distribution data the savings association may choose to provide, such
as data on extensions of lines of credit, commitments, and letters of
credit.
(2) When evaluating a savings association's overall lending
performance, the OTS shall weigh its assessments of the savings
association's home mortgage lending, small business and small farm
lending, and (at the savings association's option) consumer lending to
reflect the relative importance of each category of lending to the
savings association's overall business.
(3) The OTS shall weigh the savings association's community
development lending according to the characteristics and needs of the
savings association's service area(s), the capacity and constraints of
the savings association, and the opportunities available to the savings
association for this lending.
(b) Assessment criteria. The OTS shall evaluate a savings
association's lending performance pursuant to the following criteria:
(1) Geographic distribution. The geographic distribution of the
savings association's lending (based on the location of the loan as
provided in Sec. 563e.12 of this part), including:
(i) The proportion of total lending in the savings association's
service area(s);
(ii) The dispersion of lending throughout the savings association's
service area(s); and
(iii) The number and amount of loans in low-, moderate-, middle-,
and upper-income geographies in the savings association's service
area(s);
(2) Borrower characteristics. The distribution, particularly in the
savings association's service area, of the savings association's
lending (based on borrower characteristics), including:
(i) The number and amount of home mortgage loans to low-, moderate-
, middle-, and upper-income individuals;
(ii) The number and amount of small business and small farm loans
to businesses and farms with gross annual revenues less than or equal
to $1 million;
(iii) The number and amount of small business and small farm loans
by size of loan; and
(iv) At the savings association's option, the number and amount of
consumer loans to low-, moderate-, middle-, and upper-income
individuals;
(3) Community development lending. The savings association's
community development lending, including the number and amount of
community development loans outstanding, their complexity and
innovativeness, and the number and amount of lines of credit,
commitments, and letters of credit for community development purposes;
and
(4) Innovative or flexible lending practices. The savings
association's use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies.
(c) Affiliate lending. (1) The OTS shall, if the savings
association elects, consider in its assessment of a savings
association's lending performance under this section lending by an
affiliate of the savings association, if the savings association, or
its affiliate, reports or collects the lending data pursuant to
Sec. 563e.42 of this part.
(2) The OTS may consider in its assessment lending by a savings
association's affiliate even if the savings association has chosen not
to have the affiliate's lending considered if the OTS determines that
this lending is integral to the business of the savings association.
(3) Consideration of affiliate lending shall be subject to the
following constraints:
(i) No affiliate may claim the same loan as another institution;
and
(ii) If the OTS considers loans within a particular lending
category (e.g., home mortgage, small business, small farm, consumer or
community development lending) made by one or more of the savings
association's affiliates in a particular service area, the OTS shall
consider all the loans within that lending category made by all of the
savings association's affiliates in that particular service area.
(d) Consortia and third-party lending. Community development loans
made through consortia in which the savings association participates or
through third parties in which the savings association has invested:
(1) Shall be considered under the lending test, if the savings
association elects, provided the data pertaining to these loans are
reported by the savings association under the applicable provisions of
Sec. 563e.42 of this part; and
(2) May be allocated among participants or investors as they choose
for purposes of the lending test, provided that no participant or
investor claims the same loan or part of a loan as another participant
or investor, or claims in the aggregate greater than its percentage
share (based on the level of its participation or investment) of the
total loans made by the consortium or third party.
(e) Lending performance rating. The OTS shall rate a savings
association's lending performance as provided in Appendix A of this
part.
Sec. 563e.23 Investment test.
(a) Scope of test. The investment test evaluates the degree to
which a savings association is helping to meet the credit needs of its
service area(s) through qualified investments. To be considered under
this test, the qualified investments of a savings association must
benefit its service area(s) or a broader statewide or regional
geographic area that includes the savings association's service
area(s).
(b) Qualified investments. (1) Qualified investments are lawful
investments, deposits, membership shares in a credit union, or grants
that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) Donating, selling on favorable terms, or making available on a
rent- free basis any branch of the savings association that is located
in any predominantly minority neighborhood to any minority depository
institution or women's depository institution (as defined in 12 U.S.C.
2907(b)) shall be considered under the investment test.
(3) Activities considered under the lending or service tests may
not be considered under the investment test.
(4) At a savings association's option, the OTS shall consider in
its assessment of a savings association's investment performance a
qualified investment made by an affiliate of the savings association,
provided that the qualified investment is not claimed by any other
institution.
(c) Assessment criteria. The OTS shall evaluate the investment
performance of a savings association pursuant to the following
criteria:
(1) The dollar amount of qualified investments that directly
address credit needs;
(2) The use of innovative or complex qualified investments to
support community development initiatives; and
(3) The degree of responsiveness to credit and community economic
development needs.
(d) Investment performance rating. The OTS shall rate a savings
association's investment performance as provided in Appendix A of this
part.
Sec. 563e.24 Service test.
(a) Scope of test. The service test evaluates a savings
association's record of helping to meet the credit needs of the savings
association's service area(s) by analyzing both the availability and
responsiveness of a savings association's systems for delivering retail
banking services and the extent and innovativeness of its community
development services.
(b) Assessment criteria--retail banking services. The OTS shall
evaluate the availability and responsiveness of a savings association's
systems for delivering retail banking services, pursuant to the
following criteria:
(1) The current distribution of the savings association's branches
and ATMs among low-, moderate-,
middle-, and upper-income geographies;
(2) In the context of its current distribution of the savings
association's branches and ATMs, the savings association's record of
opening and closing branches and ATMs, particularly branches and ATMs
located in low- or moderate-income geographies or primarily serving
low- or moderate-income individuals;
(3) The availability of alternative systems for delivering retail
banking services (e.g., banking by telephone or computer, mobile
branches and ATMs, ATMs not owned or operated by or operated
exclusively for the savings association, loan production offices, and
bank-at-work or by-mail programs) in low- and moderate-income
geographies and to low- and moderate-income individuals; and
(4) The range of services provided in low-, moderate-, middle-, and
upper-income geographies and the degree to which the services are
tailored to meet the needs of those geographies.
(c) Assessment criteria--community development services.
(1) Community development services are services that:
(i) Primarily benefit low- or moderate-income individuals,
businesses or farms with gross annual revenues less than or equal to $1
million, or businesses or farms that qualify as small businesses under
a Small Business Administration program; and
(ii) Address affordable housing (including multifamily rental
housing) or other community economic development needs that are not
being met by the private market.
(2) The OTS shall evaluate community development services pursuant
to the following criteria:
(i) The extent to which the savings association provides community
development services; and
(ii) The innovativeness and responsiveness of community development
services.
(3) When evaluating a savings association's overall service
performance, the OTS shall weigh the savings association's community
development services according to the characteristics and needs of the
savings association's service area(s), the capacity and constraints of
the savings association, and the opportunities available to the savings
association to provide community development services.
(4) At a savings association's option, the OTS shall consider in
its assessment of a savings association's service performance a
community development service provided by an affiliate of the savings
association, provided that the community development service is not
claimed by any other institution.
(d) Service performance rating. The OTS shall rate a savings
association's service performance as provided in Appendix A of this
part.
Sec. 563e.25 Community development test for wholesale or limited
purpose savings associations.
(a) Scope of test. (1) The OTS shall assess the degree to which a
wholesale or limited purpose savings association (as defined in
Sec. 563e.12 of this part) is helping to meet the credit needs of its
service area(s) under the community development test only if the
savings association's written request to be designated as a wholesale
or limited purpose savings association has been approved by the OTS
before the commencement of its CRA examination, and the designation has
not been revoked either at the request of the savings association or at
the OTS's own initiative.
(2) The community development test evaluates the record of a
wholesale or limited purpose savings association in helping to meet the
credit needs of its service area(s) through qualified investments,
community development lending, or community development services.
(3) For purposes of the community development test only, community
development loans include small business and small farm loans and loans
to low- and moderate-income individuals and geographies, whether or not
reported or collected by the savings association or one of its
affiliates as home mortgage loans, small business loans, small farm
loans, or consumer loans, pursuant to Sec. 563e.42 of this part.
(b) Assessment criteria. The OTS shall evaluate the community
development performance of a wholesale or limited purpose savings
association pursuant to the following criteria:
(1) The number and amount of community development loans
outstanding, qualified investments (as defined in Sec. 563e.23 of this
part), or community development services (as defined in Sec. 563e.24 of
this part);
(2) The use of innovative or complex qualified investments,
community development loans outstanding, or community development
services and their connection to credit needs; and
(3) The degree of responsiveness to credit and community economic
development needs.
(c) Indirect activities. The OTS shall, if the wholesale or limited
purpose savings association elects, consider in its community
development performance assessment:
(1) Qualified investments or community development services
provided by an affiliate of the savings association, provided the
investment or services are not claimed by any other institution; and
(2) Community development lending by affiliates, consortia and
third parties, subject to the requirements and limitations in
Sec. 563e.22(c)(3) and (d) of this part.
(d) Benefit to service area(s)--(1) Benefit inside service area(s).
For purposes of assessing a wholesale or limited purpose savings
association's community development performance under this section, the
OTS shall consider all qualified investments, community development
loans outstanding, and community development services that benefit
areas within the savings association's service area(s).
(2) Benefit outside service area(s). The OTS shall consider the
qualified investments, community development loans outstanding, and
community development services provided by a wholesale or limited
purpose savings association that benefit areas outside the savings
association's service area(s) only up to an amount equivalent to the
amount of investments, loans, and services considered under paragraph
(d)(1) of this section. If a savings association demonstrates a limited
need or opportunity for these investments, lending, and services, in
its service area(s), the OTS may exempt the savings association from
all or part of this limitation.
(e) Community development performance rating. The OTS shall rate a
savings association's community development performance as provided in
Appendix A of this part.
Sec. 563e.26 Small savings association assessment standards.
(a) Scope of assessment. The OTS shall assess the degree to which a
small savings association is helping to meet the credit needs of its
service area(s) under the assessment standards described in this
section.
(b) Assessment criteria. The OTS shall evaluate a small savings
association's CRA performance pursuant to the following criteria:
(1) The savings association's loan-to-deposit ratio, adjusted for
seasonal variation and, as appropriate, other lending-related
activities, such as loan originations for sale to the secondary markets
or community development lending or investment;
(2) The percentage of loans and, as appropriate, other lending-
related activities located in the savings association's service
area(s);
(3) The savings association's record of lending to and, as
appropriate, engaging in other lending-related activities for,
borrowers of different income levels and businesses and farms of
different sizes;
(4) The geographic distribution of the savings association's loans
given its service area(s); and
(5) The savings association's record of taking action, if
warranted, in response to written complaints about its performance in
meeting the credit needs of its service area(s).
(c) Small savings association performance rating. The OTS shall
rate a small savings association's performance as provided in Appendix
A of this part.
Sec. 563e.27 Strategic plan assessment.
(a) Alternative election. A savings association may request to be
rated under a strategic plan rather than under the lending, service,
and investment tests (Secs. 563e.22 through 563e.24 of this part), the
community development test (Sec. 563e.25 of this part), or the small
savings association assessment standards (Sec. 563e.26 of this part),
by submitting to the OTS a strategic plan as provided for in this
section. A savings association's request to be rated under a strategic
plan is not approved until the OTS approves the plan. The OTS's
approval of a strategic plan does not affect the savings association's
obligation, if any, to report data as required by Sec. Part 563e.42 of
this part.
(b) Strategic plans in general. (1) A plan may have a term of no
more than five years, and any multi-year plan shall include annual
interim measurable goals according to which the OTS shall evaluate the
savings association's performance.
(2) A savings association with more than one service area may
prepare a single plan for all of its service areas or a plan for one or
more but not all of its service areas.
(3) Affiliated institutions may prepare joint plans if the plans
provide measurable goals for each institution.
(c) Public participation in strategic plan development. Before
submitting a plan to the OTS for approval, the savings association
shall:
(1) Informally seek suggestions from the public in its service
area(s) while developing the plan;
(2) Once the savings association has developed a plan, formally
solicit public comment on the plan for at least 30 days by publishing
notice in a newspaper of general circulation in each of its service
areas; and
(3) During the period of formal public comment, make copies of the
plan available for review at all offices of the savings association in
any service area covered by the plan.
(d) Submission of plan. The savings association shall submit its
plan to the OTS at least three months prior to the proposed effective
date of the plan. The savings association shall also submit with its
plan any public comments received, and, if the plan was revised in
light of the comments received, the initial plan as released for public
comment.
(e) Plan content--(1) Measurable goals. (i) A savings association
shall specify in its plan measurable goals for helping to meet the
credit needs of each of its service area(s) covered by the plan,
particularly the needs of low- and moderate-income geographies and low-
and moderate-income individuals, through lending, investment, and the
provision of services, as appropriate.
(ii) A savings association shall address all three performance
categories and, unless the savings association has been designated as a
wholesale or limited purpose savings association, shall emphasize
lending and lending-related activities. Nevertheless, a different
emphasis, including a focus on one or more performance categories, may
be appropriate if responsive to the characteristics and credit needs of
its service area, considering public comment and the savings
association's capacity and constraints, product offerings, and business
strategy.
(2) Confidential information. The savings association may submit
additional information to the OTS on a confidential basis, but the
goals stated in the plan shall be sufficiently specific to enable the
public and the OTS to judge fairly the merits of the plan.
(3) Satisfactory and outstanding goals. A savings association shall
specify in its plan measurable goals that constitute ``satisfactory''
performance. A plan may specify measurable goals that constitute
``outstanding'' performance. In order to be considered for an
``outstanding'' performance rating, the savings association shall
submit both ``satisfactory'' and ``outstanding'' performance goals.
(f) Plan approval--(1) Timing. The OTS shall act upon a plan within
60 days after the complete plan and required accompanying material are
submitted. If the OTS fails to act within this time period, the plan
shall be deemed approved unless the OTS extends the review period for
good cause.
(2) Public participation. In evaluating the plan's goals, the OTS
shall consider the public's involvement in formulating the plan, public
comment on the plan, and any response by the savings association to
public comment on the plan.
(3) Criteria for evaluating plan. The OTS shall evaluate a plan's
measurable goals using the following criteria, as appropriate:
(i) The extent and breadth of lending or lending-related
activities, including, as appropriate, the distribution of loans among
different geographies, businesses and farms of different sizes, and
individuals of different income levels, the extent of community
development lending, and the use of innovative or flexible lending
practices to address credit needs;
(ii) The amount and innovativeness, complexity, and responsiveness
of the savings association's qualified investments, as defined in
Sec. 563e.23 of this part; and
(iii) The extent and availability of the savings association's
services, including, as appropriate, the accessibility of retail
delivery systems and the extent and innovativeness of community
development services, as defined in Sec. 563e.24 of this part.
(g) Plan amendment. During the term of a plan, the savings
association may petition the OTS to approve an amendment to the plan on
grounds that a material change in circumstances has made the plan no
longer appropriate. Any amendment proposed shall be developed in
accordance with the public participation requirements of paragraph (c)
of this section.
(h) Strategic plan assessment. The OTS shall approve the goals and
assess performance under a strategic plan as provided for in Appendix A
of this part.
Sec. 563e.28 Assigned ratings.
(a) Ratings in general. Subject to paragraphs (b), (c), and (d) of
this section, the OTS shall assign to a savings association a rating of
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or
``substantial noncompliance'' based on the savings association's
performance under the lending, investment and service tests, the
community development test, the small savings association assessment
standards, or an approved strategic plan, as applicable.
(b) Lending, investment, and service tests. The OTS shall assign a
rating for a savings association assessed under the lending,
investment, and service tests in accordance with the procedures
provided in Appendix A of this part and the following principles:
(1) A savings association's rating on the lending test shall be
weighed so as to count for at least 50 percent of its assigned rating;
(2) A savings association that receives an ``outstanding'' rating
on the lending test shall receive an assigned rating of at least
``satisfactory'';
(3) A savings association that receives an ``outstanding'' rating
on the lending test and an ``outstanding'' rating on either the service
test or the investment test shall receive an assigned rating of
``outstanding'';
(4) A savings association that receives an ``outstanding'' rating
on both the service test and the investment test and a rating of at
least ``high satisfactory'' on the lending test shall receive an
assigned rating of ``outstanding''; and
(5) No savings association may receive an assigned rating of
``satisfactory'' unless it receives a rating of at least ``low
satisfactory'' on the lending test.
(c) Effect of evidence of discriminatory or other illegal credit
practices. Evidence of discriminatory or other illegal credit practices
shall adversely affect the OTS's evaluation of a savings association's
performance. In determining the effect on the savings association's
assigned rating, the OTS shall consider the nature and extent of the
evidence, the policies and procedures that the savings association has
in place to prevent discriminatory or other illegal credit practices,
any corrective action that the savings association has taken or has
committed to take, particularly voluntary corrective action resulting
from self-assessment, and other relevant information, such as the
savings association's past fair lending performance.
(d) Effect of successive ``needs to improve'' ratings. A savings
association that would otherwise receive an assigned rating of ``needs
to improve'' shall receive an assigned rating of ``substantial
noncompliance'' if the savings association received no better than a
``needs to improve'' rating on each of its two previous examinations.
Sec. 563e.29 Effect of ratings on applications.
(a) CRA performance. Among other factors, the OTS shall take into
account the record of performance under the CRA of each applicant
savings association, and for applications under section 10(e) of the
Home Owners' Loan Act, of each subsidiary of an applicant, and of each
proposed subsidiary savings association, in considering any
application:
(1) For establishment of a domestic branch or other facility that
would be authorized to take deposits;
(2) For relocation of the home office or a branch office;
(3) For merger or consolidation with or the acquisition of assets
or assumption of liabilities of a depository institution;
(4) For a Federal thrift charter; and
(5) For acquisitions subject to section 10(e) of the Home Owners'
Loan Act.
(b) Charter application. An applicant for a Federal thrift charter
shall submit a description of how it will meet its CRA objectives when
the application is made. In considering the application, the OTS shall
take the description into account and may deny or condition approval on
that basis.
(c) Interested parties. In considering CRA performance in an
application described in paragraph (a) of this section, the OTS shall
take into account any views expressed by State or other Federal
financial supervisory agencies or other interested parties which are
submitted in accordance with the applicable public comment procedures.
(d) Denial or conditional approval of application. An applicant's
record of performance may be the basis for denying or conditioning
approval of an application described in paragraph (a) of this section.
Subpart C--Records, Reporting and Disclosure Requirements
Sec. 563e.41 Service area delineation.
(a) In general. Subject to paragraphs (b) and (c) of this section,
each savings association may delineate its service area(s) using any
method it chooses provided that the service area(s):
(1) Do(es) not reflect illegal discrimination;
(2) Do(es) not arbitrarily exclude low- and moderate-income
geographies, taking into account the savings association's size and
financial condition and the extent of its branching network, as
appropriate; and
(3) Consist(s) only of whole census tracts or block numbering
areas.
(b) Savings associations that are not wholesale or limited purpose
savings associations. The service area(s) for a savings association
that is not a wholesale or limited purpose savings association (as
defined in Sec. 563e.12 of this part):
(1) Shall include those geographies in the local areas around a
savings association's branches and deposit-taking ATMs in which the
savings association has originated or had outstanding, during the
previous calendar year, a significant number and amount of home
mortgage, small business and small farm, and (if the savings
association chooses to have them considered in its CRA evaluation)
consumer loans and any other geographies equidistant from its branches
and deposit-taking ATMs, taking into account political boundaries or
significant geographic barriers; and
(2) Shall not extend substantially across MSA boundaries or state
boundaries unless the service area is located in a multistate MSA. If
the savings association serves areas that extend substantially across
state boundaries or extend substantially across boundaries of an MSA,
the savings association shall delineate separate service areas for the
areas in each state and for the areas inside and outside the MSA.
(c) Wholesale or limited purpose savings associations. The service
area for a wholesale or limited purpose savings association (as defined
in Sec. 563e.12 of this part) shall be delineated as an area or areas
around its offices (including its home office and branches) or a
broader statewide or regional area that includes the area or areas.
(d) Savings associations serving military personnel.
Notwithstanding paragraphs (a), (b), and (c) of this section, a savings
association whose business predominantly consists of serving the needs
of military personnel or their dependents who are not located within a
defined geographic area may delineate its entire deposit customer base
as its service area.
(e) Maintaining list and map. Each savings association shall
compile and maintain a list of all the geographies within its service
area or areas and a map of each service area showing the geographies
contained therein.
Sec. 563e.42 Data collection and reporting.
(a) Mandatory data collection and reporting--(1) Loan data. Each
savings association, except small savings association, shall collect
and report to the OTS the following data pertaining to its home
mortgage, small business, small farm, and community development loans:
(i) Home mortgage loans. If the savings association is subject to
reporting under HMDA, the location of each home mortgage loan located
outside the MSAs in which the savings association has a home or branch
office (or outside any MSA) in accordance with Regulation C, Home
Mortgage Disclosure (12 CFR Part 203);
(ii) Small business and small farm loan data. All small business
and small farm loan data required to be collected and reported on the
OTS's Small Business and Small Farm Loan Register (OTS-________-
________), set forth in Appendix C of this part, in accordance with the
instructions in Appendix C of this part; and
(iii) Community development loan data. All community development
loan data required to be collected and reported on the OTS's Community
Development Report Form (OTS-________-________), set forth in Appendix
C of this part, in accordance with the instructions in Appendix C of
this part.
(2) Service area data. Each savings association shall collect and
report to the OTS by April 1 of each year a list of the areas the
savings association considers to be its service area(s), a list of the
geographies it considers to be within its service area(s), and a map of
each service area showing the geographies contained therein.
(b) Optional data collection and reporting. (1) If a savings
association elects to have its consumer lending considered under the
lending test (as described in Sec. 563e.22 of this part), the savings
association shall collect the consumer loan data requested on the OTS's
Consumer Loan Register (OTS-________-________), set forth in Appendix C
of this part, in accordance with the instructions in Appendix C of this
part.
(2) At its option, a savings association may:
(i) Provide information concerning outstanding small business,
small farm, or consumer loans throughout the year to account for
seasonal variations in lending for use in the evaluation of the savings
association under the lending test described in Sec. 563e.22 of this
part; and
(ii) Provide any other information concerning its lending
performance, including additional loan distribution data.
(c) Data on affiliate lending. A savings association that wishes to
have the OTS consider lending by its affiliates for purposes of the
lending test shall be prepared to identify the particular home mortgage
loans reported under HMDA which it wishes the OTS to consider, and
shall collect or report, pursuant to the provisions of paragraphs (a)
and (b) of this section, the requisite data concerning the small
business, small farm, or consumer loans made by its affiliates that it
wishes OTS to consider.
(d) Data on consortia and third-party lending. A savings
association that wishes to have the OTS consider community development
lending through consortia in which the savings association participates
or through third parties in which the savings association has invested
shall report, pursuant to paragraph (a)(1)(iii) of this section, the
requisite data concerning the community development loans made through
consortia and third parties that it wishes the OTS to consider.
Sec. 563e.43 Public file and disclosure by savings associations.
(a) Public availability. Each savings association shall maintain a
file that is readily available for public inspection containing the
information required by this section.
(b) Current information. Each savings association shall include in
its public file the following information:
(1) All signed, written comments received from the public for the
current year and each of the prior two calendar years that specifically
relate to the savings association's performance in helping to meet the
credit needs of its community or communities, and any response to the
comments by the savings association;
(2) A copy of the public section of the savings association's most
recent CRA Performance Evaluation prepared by the OTS. The savings
association shall place this copy in the public file within 30 business
days after its receipt from the OTS;
(3) A list of the areas the savings association considers to be its
service area(s), a list of the geographies it considers to be within
its service area(s), and a map of each service area showing the
geographies contained therein;
(4) A list of the savings association's branches and ATMs, their
street addresses, and geographies;
(5) A list of branches and ATMs opened or closed by the savings
association during the current and each of the prior two calendar
years, their street addresses, and geographies; and
(6) A list of services (including hours of operation, available
loan and deposit products, and transaction fees) generally offered at
the savings association's branches and ATMs and descriptions of
material deviations in the availability or cost of services at
particular branches and ATMs, if any. At its option, a savings
association may include information regarding the availability of
alternative systems for delivering retail banking services (e.g.,
banking by telephone or computer, mobile branches and ATMs, ATMs not
owned or operated by or operated exclusively for the savings
association, loan production offices, and bank-at-work or by-mail
programs).
(c) Information for prior years. Each savings association that is
not a small savings association shall include in its public file the
following information for each of the prior two calendar years derived
from the data collected or reported pursuant to Sec. 563e.42 of this
part:
(1) The number and amount of small business loans and small farm
loans located in low-, moderate-, middle-, and upper-income
geographies;
(2) A list of the geographies where the savings association had
outstanding at least one small business loan or small farm loan;
(3) The number and amount of small business and small farm loans
located inside the savings association's service area(s) and outside
the savings association's service area(s);
(4) The number and amount of small business and small farm loans to
minority-owned businesses;
(5) The number and amount of small business and small farm loans to
women-owned businesses;
(6) The number and amount of small business and small farm loans to
businesses and farms with gross annual revenues less than or equal to
$1 million;
(7) The number and amount of community development loans
outstanding; and
(8) If the savings association has elected to have its consumer
loans considered under the lending test (as described in Sec. 563e.22
of this part), the number and amount of consumer loans to low-,
moderate-, middle-, and upper- income individuals, the number and
amount of consumer loans located in low-, moderate-, middle-, and
upper-income geographies, and the number and amount of consumer loans
located inside the savings association's service area(s) and outside
the savings association's service area(s).
(d) Exception. A savings association shall not place in its public
file any information required under paragraph (c) of this section for a
particular year if, given special circumstances such as a small number
of loans made within a small number of designated income geographies or
to a small number of designated borrowers, the information could
reasonably be expected to disclose the identity of the borrower.
(e) HMDA statement. Every savings association required to report
home mortgage loan data pursuant to the HMDA shall include in its
public file a copy of its HMDA Disclosure Statement provided by the
Federal Financial Institutions Examination Council for each of the
prior two calendar years. The statement shall be placed in the home
office public file within three business days and in the branch office
public files within 10 business days of the savings association's
receipt of the statement.
(f) Small savings association file. (1) A small savings association
shall include in its public file the savings association's loan-to-
deposit ratio computed at the end of the most recent calendar year. A
savings association may include additional data on its loan-to-deposit
ratio at its option.
(2) A small savings association that elects to be evaluated under
the lending, investment and service tests (as described in
Secs. 563e.22 through 563e.24 of this part) shall include in its public
file the information specified in paragraph (c) of this section.
(g) Strategic plan. Each savings association that has been approved
to be assessed under a strategic plan as described in Sec. 563e.27 of
this part shall include in its public file a copy of that plan.
Information submitted to the OTS on a confidential basis in conjunction
with the plan does not have to be included in the public file.
(h) Less than satisfactory rating. Each savings association that
received a less than satisfactory rating during its most recent
examination shall include in its public file a description of its
current efforts to improve its performance in helping to meet the
credit needs of its entire community. This description shall be updated
quarterly.
(i) Location of public file. Each savings association shall
maintain its public file as follows:
(1) The home office shall have a copy of the complete public file;
(2) At least one branch in each service area shall have a copy of
the savings association's HMDA Disclosure Statements and all materials
in the public file relating to the service area in which the branch is
located; and
(3) If a member of the public requests to review a savings
association's public file at a branch that does not have a copy, the
savings association shall make a complete copy of the file for that
service area available for review at the branch within 5 business days
at no cost.
(j) Copies. Each savings association shall provide copies of the
information in its public file to members of the public upon request. A
savings association may charge a reasonable fee not to exceed the cost
of reproduction and mailing (if applicable).
Sec. 563e.44 Public notice by savings associations.
(a) CRA notice for savings associations. Each savings association
shall provide in the public lobby of its home office and each of its
branches the public notice set forth in Appendix B of this part.
Bracketed material shall be used only by savings associations having
more than one service area.
(b) Additional notice for affiliate savings associations. The last
two sentences shall be included only if the savings association is an
affiliate of a holding company.
Sec. 563e.45 Publication of planned examination schedule.
The OTS shall publish at least 30 days in advance of the beginning
of each calendar quarter a list of the savings associations that are
scheduled for CRA examinations in that quarter.
Subpart D--Transition Rules
Sec. 563e.51 Transition rules.
(a) Effective date. Sections of this part 563e become effective
over a period of time in accordance with the schedule set forth in
paragraph (c) of this section. The provisions of part 563e become fully
effective on July 1, 1996.
(b) Data collection and reporting; strategic plan; small savings
association assessment standards; and performance tests.--(1) Data
collection and reporting. On July 1, 1995, the data collection and
reporting requirements set forth in Sec. 563e.42 of this part become
effective.
(2) Strategic plan. Beginning July 1, 1995, a savings association
that elects to be evaluated under an approved strategic plan pursuant
to Sec. 563e.27 of this part may submit its strategic plan to the OTS
for approval.
(3) Small savings association assessment standards. Beginning July
1, 1995, a savings association that qualifies as a small savings
association pursuant to Sec. 563e.12 of this part may elect to be
evaluated under the small savings association assessment standards set
forth in Sec. 563e.26 of this part. Beginning July 1, 1996, the OTS
shall evaluate each small savings association under the small savings
association assessment standards, unless the savings association elects
to be evaluated pursuant to the performance tests set forth in
Secs. 563e.22 through 563e.25 of this part or under an approved
strategic plan.
(4) Performance tests. On July 1, 1996, the lending, investment,
service, and community development tests set forth in Secs. 563e.22
through 563e.25 of this part become effective. Thereafter, the OTS
shall evaluate all savings associations pursuant to these test(s),
except small savings associations evaluated under the small savings
association assessment standards and savings associations that elect to
be evaluated under an approved strategic plan.
(c) Schedule. On January 1, 1995, Secs. 563e.11, 563e.12, 563e.29,
and 563e.51 become effective, and Secs. 563e.1, 563e.2, and 563e.8
expire. On July 1, 1995, Secs. 563e.26, 563e.27, 563e.42, and 563e.45
become effective, and Secs. 563e.28 and 563e.41 become effective for
savings associations that are evaluated under Secs. 563e.26 or 563e.27.
On July 1, 1996, Secs. 563e.21 through 563e.25, 563e.28, 563e.41,
563e.43, and 563e.44 become effective, and Secs. 563e.3 through 563e.7
expire.
Appendix A to Part 563e--Ratings
(a) Ratings in general. (1) In assigning a rating, the OTS shall
evaluate a savings association's performance under the applicable
assessment criteria in this part, subject to Sec. 563e.28 of this
part, which provides for adjustments on the basis of evidence of
discriminatory or other illegal credit practices and prior ``needs
to improve'' ratings.
(2) A savings association's performance need not fit each aspect
of a particular rating profile in order to receive that rating, and
exceptionally strong performance with respect to some aspects may
compensate for weak performance in others. The savings association's
overall performance, however, should generally be consistent with
the appropriate profile stated below.
(b) Savings associations that are not wholesale or limited
purpose savings associations or small savings associations. (1)
Lending performance rating. The OTS shall assign each savings
association's lending performance one of the five ratings described
below.
(i) Outstanding. The OTS shall rate a savings association's
lending performance ``outstanding'' if, in general, it demonstrates:
(A) Excellent responsiveness to credit needs in its service
area(s);
(B) A substantial majority of its loans are made in its service
area(s);
(C) An excellent geographic distribution of loans throughout its
service area(s);
(D) An excellent distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the savings association;
(E) An excellent record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Extensive use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It is a leader in making community development loans.
(ii) High satisfactory. The OTS shall rate a savings
association's lending performance ``high satisfactory'' if, in
general, it demonstrates:
(A) Good responsiveness to credit needs in its service area(s);
(B) A high percentage of its loans are made in its service
area(s);
(C) A good geographic distribution of loans throughout its
service area(s);
(D) A good distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the savings association;
(E) A good record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Use of innovative or flexible lending practices to address
the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a relatively high level of community development
loans.
(iii) Low satisfactory. The OTS shall rate a savings
association's lending performance ``low satisfactory'' if, in
general, it demonstrates:
(A) Adequate responsiveness to credit needs in its service
area(s);
(B) An adequate percentage of its loans are made in its service
area(s);
(C) An adequate geographic distribution of loans throughout its
service area(s);
(D) An adequate distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the savings association;
(E) An adequate record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Limited use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made an adequate level of community development
loans.
(iv) Needs to improve. The OTS shall rate a savings
association's lending performance ``needs to improve'' if, in
general, it demonstrates:
(A) Poor responsiveness to credit needs in its service area(s);
(B) A small percentage of its loans are made in its service
area(s);
(C) A poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A poor distribution, particularly in its service area(s), of
loans among individuals of different income levels and businesses
(including farms) of different size given the product lines offered
by the savings association;
(E) A poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) Little use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made a limited number of community development loans.
(v) Substantial noncompliance. The OTS shall rate a savings
association's lending performance as being in ``substantial
noncompliance'' if, in general, it demonstrates:
(A) A very poor responsiveness to credit needs in its service
area(s);
(B) A very small percentage of its loans are made in its service
area(s);
(C) A very poor geographic distribution of loans throughout its
service area(s), particularly to low- or moderate-income geographies
in the service area(s);
(D) A very poor distribution, particularly in its service
area(s), of loans among individuals of different income levels and
businesses (including farms) of different size given the product
lines offered by the savings association;
(E) A very poor record of serving the credit needs of the most
economically disadvantaged areas of its service area(s), low-income
individuals, or businesses (including farms) with gross annual
revenues less than or equal to $1 million, consistent with safe and
sound operations;
(F) No use of innovative or flexible lending practices to
address the credit needs of low- or moderate-income individuals or
geographies; and
(G) It has made few, if any, community development loans.
(2) Investment performance rating. The OTS shall assign each
savings association's investment performance one of the five ratings
described below.
(i) Outstanding. The OTS shall rate a savings association's
investment performance ``outstanding'' if, in general, it
demonstrates:
(A) An excellent level of qualified investments, often in a
leadership position, particularly those that directly address credit
needs;
(B) Extensive use of innovative or complex qualified investments
to support community development initiatives; and
(C) Excellent responsiveness to credit and community economic
development needs.
(ii) High satisfactory. The OTS shall rate a savings
association's investment performance ``high satisfactory'' if, in
general, it demonstrates:
(A) A significant level of qualified investments, occasionally
in a leadership position, particularly those that directly address
credit needs;
(B) Significant use of innovative or complex qualified
investments to support community development initiatives; and
(C) Good responsiveness to credit and community economic
development needs.
(iii) Low satisfactory. The OTS shall rate a savings
association's investment performance ``low satisfactory'' if, in
general, it demonstrates:
(A) An adequate level of qualified investments, although rarely
in a leadership position, particularly those that directly address
credit needs;
(B) Occasional use of innovative or complex qualified
investments to support community development initiatives; and
(C) Adequate responsiveness to credit and community economic
development needs.
(iv) Needs to improve. The OTS shall rate a savings
association's investment performance ``needs to improve'' if, in
general, it demonstrates:
(A) A poor level of qualified investments, particularly those
that directly address credit needs;
(B) Rare use of innovative or complex qualified investments to
support community development initiatives; and
(C) Poor responsiveness to credit and community economic
development needs.
(v) Substantial noncompliance. The OTS shall rate a savings
association's investment performance as being in ``substantial
noncompliance'' if, in general, it demonstrates:
(A) Few, if any, qualified investments, particularly those that
directly address credit needs;
(B) No use of innovative or complex qualified investments to
support community development initiatives; and
(C) Very poor responsiveness to credit and community economic
development needs.
(3) Service performance rating. The OTS shall assign each
savings association's service performance one of the five ratings
described below.
(i) Outstanding. The OTS shall rate a savings association's
service performance ``outstanding'' if, in general, the savings
association demonstrates:
(A) Its service delivery systems are readily accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the savings
association's record of opening and closing branches and ATMs has
improved the accessibility of its delivery systems, particularly in
low- or moderate-income geographies or to low- or moderate-income
individuals;
(C) Services (including, where appropriate, business hours) are
tailored to the convenience and needs of its service area(s),
particularly low- or moderate- income geographies or low- or
moderate-income individuals; and
(D) It is a leader in providing community development services.
(ii) High satisfactory. The OTS shall rate a savings
association's service performance ``high satisfactory'' if, in
general, the savings association demonstrates:
(A) Its service delivery systems are accessible to essentially
all portions of its service area(s);
(B) To the extent changes have been made, the savings
association's record of opening and closing branches and ATMs has
not adversely affected the accessibility of its delivery systems,
particularly in low- and moderate- income geographies and to low-
and moderate-income individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences certain portions of its
service area(s), particularly lowand moderate-income geographies and
low- and moderate-income individuals; and
(D) It provides a relatively high level of community
development services.
(iii) Low satisfactory. The OTS shall rate a savings
association's service performance ``low satisfactory'' if, in
general, the savings association demonstrates:
(A) Its service delivery systems are reasonably accessible to
essentially all portions of its service area(s);
(B) To the extent changes have been made, the savings
association's record of opening and closing branches and ATMs has
generally not adversely affected the accessibility of its delivery
systems, particularly in low- and moderate-income geographies and to
low- and moderate-income individuals;
(C) Services (including, where appropriate, business hours) do
not vary in a way that inconveniences portions of its service
area(s), particularly low- and moderate-income geographies and low-
and moderate-income individuals; and
(D) It provides an adequate level of community development
services.
(iv) Needs to improve. The OTS shall rate a savings
association's service performance ``needs to improve'' if, in
general, the savings association demonstrates:
(A) Its service delivery systems are accessible to limited
portions of its service area(s);
(B) To the extent changes have been made, the savings
association's record of opening and closing branches and ATMs has
adversely affected the accessibility its delivery systems,
particularly in low- or moderate-income geographies or to low- or
moderate-income individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that inconveniences certain portions of its service
area(s), particularly low- or moderate-income geographies or low- or
moderate-income individuals; and
(D) It provides a limited level of community development
services.
(v) Substantial noncompliance. The OTS shall rate a savings
association's service performance as being in ``substantial
noncompliance'' if, in general, the savings association
demonstrates:
(A) Its service delivery systems are inaccessible to significant
portions of its service area(s), particularly low- and moderate-
income geographies or low- and moderate-income individuals;
(B) To the extent changes have been made, the savings
association's record of opening and closing branches and ATMs has
significantly adversely affected the accessibility of its delivery
systems, particularly in low- or moderate-income geographies or to
low- or moderate-income individuals;
(C) Services (including, where appropriate, business hours) vary
in a way that significantly inconveniences many portions of its
service area(s), particularly low- or moderate-income geographies or
low- or moderate-income individuals; and
(D) It provides few, if any, community development services.
(4) Assigned rating. The OTS shall use the following procedures
for assigning a rating:
(i) Assign points corresponding to the savings association's
performance on each of the component tests as follows:
------------------------------------------------------------------------
Component test ratings Lending Service Investment
------------------------------------------------------------------------
Outstanding................... 12 6 6
High Satisfactory............. 9 4 4
Low Satisfactory.............. 6 3 3
Needs to Improve.............. 3 1 1
Substantial Noncompliance..... 0 0 0
------------------------------------------------------------------------
(ii) Total the points for the three tests, and use that total to
determine the composite rating according to the chart below.
However, if the total exceeds twice the number of points
attributable to the savings association's lending test performance
(as provided in paragraph (b)(4)(i) of this appendix), determine the
composite rating using twice the number of points attributable to
the savings association's lending test performance.
------------------------------------------------------------------------
Points Composite rating
------------------------------------------------------------------------
18 or over......................... Outstanding.
9 through 17....................... Satisfactory.
5 through 8........................ Needs to Improve.
0 through 4........................ Substantial Noncompliance.
------------------------------------------------------------------------
(c) Community development test for wholesale or limited purpose
savings associations. The OTS shall assign each wholesale or limited
purpose savings association's community development performance one
of the four ratings described below.
(1) Outstanding. The OTS shall rate a wholesale or limited
purpose savings association's community development performance
``outstanding'' if, in general, it demonstrates:
(i) A high level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Extensive use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Excellent responsiveness to credit and community economic
development needs in its service area(s).
(2) Satisfactory. The OTS shall rate a wholesale or limited
purpose savings association's community development performance
``satisfactory'' if, in general, it demonstrates:
(i) An adequate level of qualified investments, community
development loans outstanding, or community development services,
particularly those that directly address credit needs;
(ii) Occasional use of innovative or complex qualified
investments, community development loans, or community development
services, to support community development initiatives; and
(iii) Adequate responsiveness to credit and community economic
development needs in its service area(s).
(3) Needs to improve. The OTS shall rate a wholesale or limited
purpose savings association's community development performance as
``needs to improve'' if, in general, it demonstrates:
(i) A poor level of qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) Rare use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Poor responsiveness to credit and community economic
development needs in its service area(s).
(4) Substantial noncompliance. The OTS shall rate a wholesale or
limited purpose savings association's community development
performance in ``substantial noncompliance'' if, in general, it
demonstrates:
(i) Few, if any, qualified investments, community development
loans outstanding, or community development services, particularly
those that directly address credit needs;
(ii) No use of innovative or complex qualified investments,
community development loans, or community development services, to
support community development initiatives; and
(iii) Very poor responsiveness to credit and community economic
development needs in its service area(s).
(d) Assessment standards for small savings associations. The OTS
shall rate each small savings association's performance as described
below.
(1) Eligibility for a satisfactory rating. The OTS shall rate a
savings association's performance ``satisfactory'' if, in general,
the savings association demonstrates:
(i) A reasonable loan-to-deposit ratio (considering seasonal
variations) given the savings association's size, financial
condition, the credit needs of its service area(s), and taking into
account, as appropriate, lending-related activities such as loan
originations for sale to the secondary markets and community
development lending and investment;
(ii) A majority of its loans and, as appropriate, other lending-
related activities are in its service area(s);
(iii) A distribution of loans to and, as appropriate, other
lending related-activities for individuals of different income
levels (including low- and moderate-income individuals) and
businesses and farms of different sizes that is reasonable given the
demographics of the savings association's service area(s);
(iv) A record of taking appropriate action, as warranted, in
response to written complaints, if any, about the savings
association's performance in meeting the credit needs of its service
area(s); and
(v) A reasonable geographic distribution of loans given its
service area(s).
(2) Eligibility for an outstanding rating. A small savings
association that meets each of the standards for a ``satisfactory''
rating under this paragraph and exceeds some or all of those
standards may warrant consideration for an overall rating of
``outstanding''. In assessing whether a small savings association's
performance is ``outstanding'', the OTS shall consider the extent to
which the savings association exceeds each of the assessment
standards for a ``satisfactory'' rating and its performance in
making qualified investments (as defined in Sec. 563e.23 of this
part) and its performance in providing branches, ATMs or other
services and delivery systems that enhance credit availability in
its service area(s).
(3) Needs to improve or substantial noncompliance ratings. A
small savings association also may receive a rating of ``needs to
improve'' or ``substantial noncompliance'' depending on the degree
to which its performance has failed to meet the standards for a
``satisfactory'' rating.
(e) Strategic plan assessment and rating. (1) Satisfactory
goals. The OTS shall approve as ``satisfactory'' measurable goals
that adequately help meet the credit needs of each of a savings
association's service area(s).
(2) Outstanding goals. If the plan identifies a separate group
of measurable goals that substantially exceed the levels approved as
``satisfactory,'' the OTS shall approve those goals as
``outstanding.''
(3) Rating. The OTS shall assess the performance of a savings
association operating under an approved plan to determine if the
savings association has met its plan goals:
(i) If the savings association substantially achieves its plan
goals for a satisfactory rating, the OTS shall rate the savings
association's performance under the plan as ``satisfactory.''
(ii) If the savings association exceeds its plan goals for a
satisfactory rating and substantially achieves its plan goals for an
outstanding rating, the OTS shall rate the savings association's
performance under the plan as ``outstanding''.
(iii) If the savings association fails to substantially meet its
plan goals for a satisfactory rating, it shall be rated as either
``needs to improve'' or ``substantial noncompliance,'' depending on
the extent to which it falls short of its plan goals, or if the
savings association so elected at the time it first submitted its
plan, it shall be rated under the lending, investment and service
tests (as described in Secs. 563e.22 through 563e.24 of this part),
the community development test (as described in Sec. 563e.25 of this
part), or the small savings association assessment standards (as
described in Sec. 563e.26 of this part), as appropriate.
Appendix B to Part 563e--CRA Notice
Community Reinvestment Act Notice
Under the Federal Community Reinvestment Act (CRA), the Office
of Thrift Supervision (OTS) evaluates and enforces our compliance
with our obligation to help meet the credit needs of this community
consistent with safe and sound operations. The OTS also takes our
CRA performance into account when deciding on certain applications
submitted by us. Your involvement is encouraged. You should know
that:
You may look at and obtain in this office information on our
performance in this community. This information includes a file of
all signed, written comments received by us, any responses we have
made to the comments, evaluations by the OTS of our CRA performance,
and data on the loans we have made in this community during the past
two years. [Current CRA information on our performance in other
communities served by us is available at our home office, located at
________________.]
You may send signed, written comments about our CRA performance
in helping to meet community credit needs to (title and address of
savings association official) and to the Regional Director
(address). Your letter, together with any response by us, will be
considered by the OTS in evaluating our CRA performance and may be
made public.
You may ask the Director of the OTS to look at any comments
received by the Regional Director. You also may request from the
Regional Director an announcement of our applications covered by the
CRA filed with the OTS. We are a subsidiary of (name of holding
company), a savings and loan holding company. You may request from
the Regional Director (address) an announcement of applications
covered by the CRA filed by savings and loan holding companies.
Appendix C to Part 563e--CRA Loan Data Format
Instruction for the Small Business and Small Farm Loan Register
This form contains the instructions for completion of the Loan
Register for Small Business and Small Farm Loans. This register is
used in conjunction with the reporting of this information as part
of the CRA data collection process. The register and these
instructions are to be used to provide the format in which the data
should be reported. The actual data are to be submitted in machine-
readable form in accordance with the instructions for submission of
data pursuant to 12 CFR Part 203 (Regulation C).
I. Who Must File a Register
All independent insured banks and thrifts with $250 million or
more in total assets and all insured banks and thrifts that are
members of holding companies with $250 million or more in bank and
thrift assets must report this information for small business and
small farm loans outstanding beginning December 31, 1995. Banks and
thrifts with fewer assets that wish to be evaluated under 12 CFR
563e.22 through 563e.24 must also report this information. Only
provide information on business or farm location and borrower
information for loans for which applications were submitted after
July 1, 1995. For loans for which applications were submitted before
that date, enter ``N/A'' for all information relating to location or
borrower.
II. Types of Loans to be Reported
The loan register should contain individual loan data on each
small business or small farm loan as defined on schedule SB of the
December 31 Thrift Financial Report. Include data on individual
small business loans with original loan amounts of $1 million or
less and individual small farm loans with original loan amounts of
$500,000 or less that had an outstanding balance as of December 31.
III. Submission of Data
The data must be submitted in machine-readable form consistent
with requirements for submission of data pursuant to 12 CFR Part 203
(Regulation C). The format must conform exactly to the form,
including the order of columns, column headings, etc. Contact your
federal supervisory agency for information regarding procedures and
technical specifications for automated data submission.
Your institution should decide on the procedure it wants to
follow for collection of the data consistent with the Supplemental
Instructions For Collection Of Data In Connection with Small
Business and Small Farm Loans. Keep in mind that data reported on
the register are outstandings as of December 31 and not originations
as are reported for some other regulatory purposes. Your institution
may collect the data on separate registers at different branches or
on separate registers for different loan types (small business or
small farm), but make sure each loan number is unique. Entries need
not be grouped on your registers by MSA, or chronologically, or by
census tract, or in any other particular order.
IV. Instructions for Completion of Register
Loan Information
1. Loan Number--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. Outstanding Loan Amount--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Business or Farm Location
For each loan, identify the location of the business or farm.
Location is determined by the following:
(1) Small business loans are located in the census tract or
block numbering area where the main business facilities or other
property to which the loan proceeds will be applied (as indicated by
borrower) are located;
(2) Small farm loans are located in the census tract or block
numbering area where the farm or other property to which the loan
proceeds will be applied (as indicated by borrower) is located.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. State and County--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. Census Tract/Block Numbering Area--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
Borrower Information
1. Minority-Owned Code--Use the following codes to indicate
small business or small farm loans with more than 50 percent
ownership by one or more minority individuals (as indicated by
borrower) pursuant to data collected as described in the
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
2. Women-Owned Code--Use the following codes to incidate small
businesses to small farm loans with more than 50 percent ownship by
women (as indicated by borrowers) pursuant to data collected as
described in the Supplemental Instructions For Collection of Data In
connection With Small Business sand Small Farm Loans.
1--Yes
2--No
3--Publicly traded business or farm (i.e. has securities registered
under Section 12(g) of the Securities Exchange Act of 1934 or has
more than 100 shareholders)
4--Information not provided by borrower
3. Gross Annual Revenues$1MM Code--Use the following
codes to indicate whether the gross annual revenues of the small
business or farm are less than or equal to $1 million. This
information should be determined based upon the revenues upon which
your institution relied in making its credit decision.
1--Yes
2--No
Supplemental Instructions for Collection of Data In Connection With
Small Business and Small Farm Loans
A. Format
Beginning July 1, 1995, financial institutions required to
report small business and small farm loan registers are to collect
information on the racial, ethnic, and gender make-up of applicants
or borrowers in connection with small business and small farm loans.
If you take a written application, you should list questions
regarding the percent of minority and gender ownership on your loan
application form or on a separate form completed by the applicant in
conjunction with an application. If you do not take a written
application, you should request the information at an appropriate
time during the application or origination process; you must request
the information for each loan you originate even if you did not take
a written application. If you neither take a written application nor
originate the loan, you do not have to request the information. See
the sample form for recommended format and language. This
information is to be maintained in the institution's in-house loan
files. This information is not to be reported to the agency, but is
to be used to complete the small business and small farm loan
register.
B. Procedures
1. You must ask for this information, but cannot require the
applicant or borrower to provide it. You may not consider whether or
not an applicant or borrower has provided this information in making
your decision whether to extend credit or in setting the terms of
credit.
2. If the applicant or borrower chooses not to provide the
information, note this fact on the form.
3. Inform the applicant or borrower that the Federal government
is requesting this information in order to monitor compliance with
Federal statutes that prohibit lenders from discriminating on these
bases.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714--
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.015
TP07OC94.016
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714--
01-C (25%); OTS 6720-01-C (25%)
Instructions for Completion of the Open- and Closed-End Consumer Loan
Registers
This form contains the instructions for completion of the Loan
Registers for Open-End Consumer Loans and Closed-End Consumer Loans.
These registers are used in conjunction with the collection of this
information as part of the CRA data collection process. The
registers and these instructions are to be used to provide the
format in which the data should be maintained. The data must be
maintained in machine-readable form. If you wish to maintain the
data in an alternative format, you must obtain approval from your
primary supervisory agency.
I. Who May Maintain A Register
Any insured bank or thrift may, at the institution's option,
collect and maintain this information for loans outstanding
beginning December 31, 1995. You need only provide information on
borrower location and gross annual income for loans for which
applications were submitted after July 1, 1995. For loans for which
applications were submitted before that date, you may enter ``N/A''
for borrower location and gross annual income.
II. Types of Loans To Be Recorded
If you collect and maintain information on your consumer loans
for consideration in your CRA evaluation, you must provide data on
all consumer loans outstanding included in the aggregate consumer
loan figure on your December 31 Thrift Financial Report.
Your institution should decide on the procedure it wants to
follow for collection of the data. Keep in mind that data recorded
on the registers are outstandings as of December 31 and not
originations as are reported for some other regulatory purposes.
Your institution may collect the data on separate registers at
different branches, but is required to maintain the data on separate
registers for each of the different consumer loan types (open-end
and closed-end). Make sure the loan numbers are unique.
III. Instructions for Completion of Register
Loan Information
1. Loan Number--Enter an identifying number that can be used to
retrieve the loan file. It can be any number (not exceeding 25
characters). Use letters, numerals, or a combination of both. Make
sure that all numbers are unique within the institution. If
registers contains data for branch offices, for example, use a
letter or a numerical code to identify the loans of different
branches or assign a certain series of numbers to particular
branches to avoid duplicate numbers. The use of the borrower's tax-
payer identification number or social security number is strongly
discouraged for privacy reasons.
2. Outstanding Loan Amount--Enter the outstanding loan amount
(balance) as of December 31. Show the amount in thousands rounding
to the nearest thousand. Do not report loans with balances below
$500. For example, a loan with a balance of $500 would be rounded to
$1,000; a loan balance of $50,300 would be rounded to $50,000; and a
balance of $15,700 would be rounded to $16,000.
Borrower Information
For each loan, identify the location of the borrower. Consumer
loans are located in the census tract or block numbering area where
the borrower resides.
1. MSA--For each loan in a MSA, indicate the location of the
loan by the four digit MSA number. Enter only the MSA number, not
the MSA name. Use MSA boundaries that were in effect on January 1 of
the calendar year for which you are reporting. A listing of MSAs is
available from your regional supervisory agency. (In these
instructions, the term MSA refers to metropolitan statistical area
or primary metropolitan statistical area.) For loans outside MSAs,
enter ``N/A''.
2. State & County--Use the Federal Information Processing
Standard (FIPS) two-digit numerical code for the state and the
three-digit numerical code for the county. These codes are available
from your regional supervisory agency. Do not use the letter
abbreviations used by the United States Postal Service.
3. Census Tract/Block Numbering Area--Enter the census tract
number or block numbering area from the U.S. Census Bureau's Census
Tract/Street Index for the most recent census reporting period. For
addresses not listed in the index, consult the Census Bureau's
census tract outline maps.
4. Gross Annual Income--Enter the gross annual income upon which
your institution relied in making the credit decision. Round all
dollar amounts to the nearest thousand.
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
TP07OC94.017
TP07OC94.018
TP07OC94.019
BILLING CODES: OCC 4810-33-C (25%); Board 6210-01-C (25%); FDIC 6714-
01-C (25%); OTS 6720-01-C (25%)
Dated: September 26, 1994.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 94-24323 Filed 10-6-94; 8:45am]
BILLING CODES: OCC 4810-33-P (25%); Board 6210-01-P (25%); FDIC 6714-
01-P (25%); OTS 6720-01-P (25%)
