# COMMUNITY REINVESTMENT ACT

### EXAMINATION PROCEDURES FOR LIMITED PURPOSE AND WHOLESALE INSTITUTIONS 

**[Examination Scope]{.underline}**

1.  For institutions with more than one assessment area, identify
    assessment areas for full scope review. In making those selections,
    review prior performance evaluations, available community contact
    materials, reported lending data and demographic data on each
    assessment area and consider factors such as:

> a\. The lending, investment, and service activity in the different
> assessment areas, particularly community development activities;
>
> b\. The lending, investment, and service opportunities available in
> the different assessment areas, particularly community development
> opportunities;
>
> c\. The length of time since the assessment area(s) received a full
> scope review;
>
> d\. The institution\'s prior CRA performance in different assessment
> areas;
>
> e\. The number of other institutions in the assessment areas and the
> importance of the institution under examination in addressing
> community development needs in the different assessment areas,
> particularly in areas with a limited number of financial service
> providers;
>
> f\. The existence of apparent anomalies in the reported HMDA data for
> any particular assessment area;
>
> g\. Examiners' knowledge of the same or similar assessment areas; and
>
> h\. Comments from the public regarding the institution\'s CRA
> performance.

2.  For interstate institutions, a rating must be assigned for each
    state where the institution has a branch and for each multi-state
    metropolitan statistical areas/metropolitan divisions (MSA/MD) where
    the institution has branches in two or more of the states that
    comprise the multi-state MSA/MD. Select one or more assessment areas
    in each state for examination using the full scope procedures.

    **[Performance Context]{.underline}**

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1.  Review standardized worksheets and other agency information sources
    to obtain relevant demographic, economic, and loan data, to the
    extent available, for each assessment area under review. Consider,
    among other things, whether housing costs are particularly high in
    relation to area median income.

2.  Consider any information the institution may provide on its local
    community and economy and its community development lending,
    qualified investment, and community development service capacity or
    that otherwise assists in the evaluation of the institution\'s
    community development activities.

3.  Review community contact forms prepared by the regulatory agencies
    to obtain information that assists in the evaluation of the
    institution\'s community development activities. Contact local
    community, government, or economic development representatives to
    update or supplement information about community development
    activities in the assessment area(s) or the broader statewide or
    regional areas of which the assessment area(s) is a part.

4.  Identify barriers, if any, to participation by the institution in
    local community development activities. For example, evaluate the
    institution\'s ability and capacity to help meet the community
    development needs of its assessment area(s) through a review of the
    Uniform Bank Performance Report (UBPR) / Uniform Thrift Performance
    Report (UTPR), the Consolidated Report of Condition (Call Report) /
    Thrift Financial Report (TFR), annual reports, supervisory reports,
    prior CRA performance evaluations, and financial information for
    other wholesale/limited purpose institutions serving approximately
    the same assessment area(s).

5.  Review the institution\'s public file and any comments received by
    the institution or the agency since the last CRA performance
    evaluation for information that assists in the evaluation of the
    institution.

6.  Document the performance context information gathered for use in
    evaluating the institution\'s CRA record.

    **[Assessment Area]{.underline}**

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1.  Review the institution\'s stated assessment area(s) to ensure that
    it:

> a\. Consists of one or more MSAs/MDs or contiguous political
> subdivisions (i.e., counties, cities, or towns) where the institution
> has its main office, branches, and deposit-taking ATMs;
>
> b\. Consists only of whole census tracts;
>
> c\. Consists of separate delineations for areas that extend
> substantially across MSA/MD or state boundaries unless the assessment
> area is located in a multistate MSA/MD;
>
> d\. Does not reflect illegal discrimination; and
>
> e\. Does not arbitrarily exclude any low- or moderate-income area(s)
> taking into account the institution\'s size and financial condition.

2.  If the assessment area(s) does not coincide with the boundaries of
    an MSA/MD or political subdivision(s), assess whether the
    adjustments to the boundaries were made because the assessment area
    would otherwise be too large for the institution to reasonably
    serve, have an unusual configuration, or include significant
    geographic barriers.

3.  If the assessment area(s) fails to comply with the applicable
    criteria described above, develop, based on discussions with
    management, a revised assessment area(s) that complies with the
    criteria. Use this assessment area(s) to evaluate the institution\'s
    performance, but do not otherwise consider the revision in
    determining the institution\'s rating.

**[Community Development Test]{.underline}**

1.  Identify the number and amount of the institution\'s community
    development loans, (originations and purchases of loans and any
    other data the institution chooses to provide), qualified
    investments, and community development services. Obtain this
    information through discussions with management, HMDA data collected
    by the institution, as applicable; investment portfolios; any other
    relevant financial records; and materials available to the public.
    Include, at the institution\'s option:

> a\. Community development loans, qualified investments, and community
> development services provided by affiliates, if they are not claimed
> by any other institution; and
>
> b\. Community development lending by consortia or third parties.

2.  Review community development loans, qualified investments, and
    community development services to verify that they qualify as
    community development.

3.  If the institution participates in community development lending by
    consortia or third parties, or claims activities provided by
    affiliates, review records provided to the institution by the
    consortia or third parties or affiliates to ensure that the
    community development loans claimed by the institution do not
    account for more than the institution\'s share (based on the level
    of its participation or investment) of the total loans originated by
    the consortium or third party.

4.  Considering the institution\'s capacity and constraints and other
    information obtained through the performance context review, form
    conclusions about:

> a\. The extent, by number and dollar amount of community development
> loans, services, and qualified investments;
>
> b\. The degree of innovation in community development activities
> (e.g., serving low- or moderate-income borrowers in new ways or
> serving groups of creditworthy borrowers not previously served by the
> institution);
>
> c\. The complexity of those community development activities, such as
> the use of enhancements or other features specifically designed to
> expand community development lending;
>
> d\. The responsiveness to the opportunities for community development
> lending, qualified investments, and community development services;
> and
>
> e\. The degree to which the institution\'s qualified investments serve
> needs not routinely provided by other private investors.

5.  Summarize conclusions regarding the institution\'s community
    development performance and retain in the work papers.

    **[Ratings]{.underline}**

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1.  Review the analyses of the institution\'s performance in each
    assessment area examined, considering only those community
    development activities that benefit the assessment area(s) and the
    broader statewide or regional area(s) that include the assessment
    area(s).

2.  Group the analyses of the assessment areas examined by MSA[^1] and
    nonmetropolitan areas within each state where the institution has
    branches. If an institution has branches in two or more states of a
    multi-state MSA, group the assessment areas in that MSA.

3.  Summarize conclusions about the institution\'s performance in each
    MSA and the nonmetropolitan portion of each state in which an
    assessment area was examined using these procedures. If two or more
    assessment areas in an MSA or in the nonmetropolitan portion of a
    state were examined using these procedures, determine the relative
    significance of the institution\'s performance in each assessment
    area by considering:

> a\. The significance of the institution\'s activities in each compared
> to the institution\'s overall activities;
>
> b\. The community development opportunities in each;
>
> c\. The significance of the institution\'s activities for each,
> particularly in light of the number of other institutions and the
> extent of their activities in each; and
>
> d\. Demographic and economic conditions in each.

4.  For assessment areas in MSAs and nonmetropolitan areas that were not
    examined, consider facts and data related to the institution\'s
    community development lending, investment, and service activities to
    ensure that performance in those areas is not inconsistent with the
    conclusions based on the assessment areas examined.

5.  Assign a preliminary rating for an institution with operations in
    one state only using the Community Development Ratings Matrix. For
    an institution with operations in more than one state or multi-state
    MSA, assign a preliminary rating for each state, using the Community
    Development Ratings Matrix. To determine the relative significance
    of each MSA and nonmetropolitan area to the institution\'s overall
    rating (institutions operating in only one state) or state-wide or
    multi-state MSA rating (institutions operating in more that one
    state), consider:

> a\. The significance of the institution\'s activities in each compared
> to the institution\'s overall activities;
>
> b\. The community development opportunities in each;
>
> c\. The significance of the institution\'s activities for each,
> particularly in light of the number of other institutions and the
> extent of their activities in each; and
>
> d\. Demographic and economic conditions in each.

6.  For institutions with operations in more than one state or
    multi-state MSA, assign a preliminary rating for the institution as
    a whole. To determine the relative significance of each state or
    multi-state MSA consider:

> a\. The significance of the institution\'s activities in each compared
> to the institution\'s overall activities;
>
> b\. The community development opportunities in each;
>
> c\. The significance of the institution\'s activities for each,
> particularly in light of the number of other institutions and the
> extent of their activities in each; and
>
> d\. Demographic and economic conditions in each.

7.  If the institution is adequately meeting the community development
    needs of each of its assessment area(s), consider those community
    development activities, if any, that benefit areas outside of the
    assessment area(s) or a broader statewide or regional area that
    includes the assessment area(s). Determine whether those activities
    enhance the preliminary rating. If so, adjust the rating(s)
    accordingly.

8.  Consider an institution\'s past performance if the prior rating was
    \"Needs to Improve.\" If the poor performance has continued, an
    institution could be considered for a \"Substantial Noncompliance\"
    rating.

9.  Review the results of the most recent compliance examination and
    determine whether evidence of discrimination or other illegal credit
    practices that violate an applicable law, rule, or regulation should
    lower the institution\'s preliminary composite rating or the
    preliminary CRA rating for a state or multistate MSA.[^2] If
    evidence of discrimination or other illegal credit practices by the
    institution in any geography, or in any assessment area by any
    affiliate whose loans have been considered as part of the bank's
    lending performance, was found, consider the following:

.

> a\. The nature, extent, and strength of the evidence of the practices;
>
> b\. The policies and procedures that the institution (or affiliate, as
> applicable) has in place to prevent the practices;
>
> c\. Any corrective action the institution (or affiliate, as
> applicable) has taken, or has committed to take, including voluntary
> corrective action resulting from self-assessment; and
>
> d\. Any other relevant information.

10. Assign a final composite rating to the institution, considering the
    preliminary rating and any evidence of discriminatory or other
    illegal credit practices, and discuss conclusions with management.

11. Write comments for the public evaluation and examination report.

12. Prepare recommendations for supervisory strategy and matters that
    require attention for follow-up activities.

    **[Public File Checklist]{.underline}**

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1.  There is no need to review each branch or each complete public file
    during every examination. In determining the extent to which the
    institution's public files should be reviewed, consider the
    institution\'s record of compliance with the public file
    requirements in previous examinations, its branching structure and
    changes to it since its last examination, complaints about the
    institution\'s compliance with the public file requirements, and any
    other relevant information.

2.  In any review of the public file undertaken, determine whether
    branches display an accurate public notice in their lobbies, a
    complete public file is available in the institution\'s main office
    and at least one branch in each state, and the public file(s) in the
    main office and in each state contain:

> a\. All written comments from the public relating to the
> institution\'s CRA performance and any responses to them for the
> current and preceding two calendar years (except those that reflect
> adversely on the good name or reputation of any persons other than the
> institution);
>
> b\. The institution\'s most recent CRA Performance Evaluation;
>
> c\. A map of each assessment area showing its boundaries and, on the
> map or in a separate list, the geographies contained within the
> assessment area;
>
> d\. A list of the institution\'s branches, branches opened and closed
> during the current and each of the prior two calendar years, their
> street addresses and geographies;
>
> e\. A list of services (loan and deposit products and transaction fees
> generally offered, and hours of operation at the institution\'s
> branches), including a description of any material differences in the
> availability or cost of services between those locations;
>
> f\. The institution\'s CRA Disclosure Statement(s) for the prior two
> calendar years;
>
> g\. A quarterly report of the institution\'s efforts to improve its
> record if it received a less than satisfactory rating during its most
> recent CRA examination;
>
> h\. HMDA Disclosure Statements for the prior two calendar years and
> those of each non-depository affiliate the institution has elected to
> include in assessment of its CRA record, if applicable; and
>
> i\. If applicable, the number and dollar amount of consumer loans made
> to the four income categories of borrowers and geographies (low-,
> moderate-, middle-, and upper-income), located inside and outside of
> the assessment area(s).

3.  In any branch review undertaken, determine whether the branch
    provides the most recent public evaluation, and a list of services
    generally available at its branches, and a description of any
    material differences in the availability or cost of services at the
    branch (or a list of services available at the branch).

**Community Development Ratings Matrix**

+-------------+-------------+-------------+-------------+------------+
| Community   | OUTSTANDING | S           | NEEDS TO    | S          |
| Development |             | ATISFACTORY | IMPROVE     | UBSTANTIAL |
| Test        |             |             |             | NON        |
| Cha         |             |             |             | COMPLIANCE |
| racteristic |             |             |             |            |
+-------------+-------------+-------------+-------------+------------+
| Investment, | The         | The         | The         | The        |
| loan, and   | institution | institution | institution | i          |
| service     | has a high  | has an      | has a poor  | nstitution |
| activity    | level of    | adequate    | level of    | has few,   |
|             | community   | level of    | community   | if any,    |
|             | development | community   | development | community  |
|             | loans,      | development | loans,      | d          |
|             | community   | loans,      | community   | evelopment |
|             | development | community   | development | loans,     |
|             | services,   |             | services,   | community  |
|             | or          | development | or          | d          |
|             | qualified   | services,   | qualified   | evelopment |
|             | i           | or          | i           | services,  |
|             | nvestments, | qualified   | nvestments, | or         |
|             | p           | i           | p           | qualified  |
|             | articularly | nvestments, | articularly | in         |
|             | investments | p           | investments | vestments, |
|             | that are    | articularly | that are    | pa         |
|             | not         | investments | not         | rticularly |
|             | routinely   | that are    | routinely   | i          |
|             | provided by | not         | provided by | nvestments |
|             | private     | routinely   | private     | that are   |
|             | investors.  | provided by | investors   | not        |
|             |             | private     |             | routinely  |
|             |             | investors.  |             | provided   |
|             |             |             |             | by private |
|             |             |             |             | investors. |
+-------------+-------------+-------------+-------------+------------+
| Investment, | The         | The         | The         | The        |
| loan, and   | institution | institution | institution | i          |
| service     | extensively | o           | rarely uses | nstitution |
| initiatives | uses        | ccasionally | innovative  | does not   |
|             | innovative  | uses        | or complex  | use        |
|             | or complex  | innovative  | qualified   | innovative |
|             | qualified   | or complex  | i           | or complex |
|             | i           | qualified   | nvestments, | qualified  |
|             | nvestments, | i           | community   | in         |
|             | community   | nvestments, | development | vestments, |
|             | development | community   | loans, or   | community  |
|             | loans, or   | development | community   | d          |
|             | community   | loans, or   | development | evelopment |
|             | development | community   | services.   | loans, or  |
|             | services.   | development |             | community  |
|             |             | services.   |             | d          |
|             |             |             |             | evelopment |
|             |             |             |             | services.  |
+-------------+-------------+-------------+-------------+------------+
| Res         | The         | The         | The         | The        |
| ponsiveness | institution | institution | institution | i          |
| to          | exhibits    | exhibits    | exhibits    | nstitution |
| community   | excellent   | adequate    | poor        | exhibits   |
| development | res         | res         | res         | very poor  |
| needs       | ponsiveness | ponsiveness | ponsiveness | resp       |
|             | to credit   | to credit   | to credit   | onsiveness |
|             | and         | and         | and         | to credit  |
|             | community   | community   | community   | and        |
|             | economic    | economic    | economic    | community  |
|             | development | development | needs in    | economic   |
|             | needs in    | needs in    | its         | d          |
|             | its         | its         | assessment  | evelopment |
|             | assessment  | assessment  | area(s).    | needs in   |
|             | area(s).    | area(s).    |             | its        |
|             |             |             |             | assessment |
|             |             |             |             | area(s).   |
+-------------+-------------+-------------+-------------+------------+

[^1]: The reference to MSA may also reference MD.

[^2]: "Evidence of discriminatory or other illegal credit practices"
    includes, but is not limited to: (a) Discrimination against
    applicants on a prohibited basis in violation, for example, of the
    Equal Credit Opportunity Act or the Fair Housing Act; (b) Violations
    of the Home Ownership and Equity Protection Act; (c) Violations of
    section 5 of the Federal Trade Commission Act; (d) Violations of
    section 8 of the Real Estate Settlement Procedures Act; and (e)
    Violations of the Truth in Lending Act regarding a consumer's right
    of rescission.