11642 Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Notices 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

[Docket ID OCC–2010–0002] 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1349] 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

RIN—3064–AC97 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

[Docket ID OTS–2010–0004] 

Community Reinvestment Act; 

Interagency Questions and Answers 

Regarding Community Reinvestment; 

Notice 

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: Notice. 

SUMMARY: The OCC, Board, FDIC, and 

OTS (the agencies) are adopting as final 

the Interagency Questions and Answers 

Regarding Community Reinvestment 

(Questions and Answers) that were 

proposed on January 6, 2009. In 

response to comments received, the 

agencies made minor clarifications to 

the new and revised questions and 

answers that were proposed. 

DATES: Effective Date: March 11, 2010. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Gregory Nagel or Karen Tucker, 

National Bank Examiners, Compliance 

Policy Division, (202) 874–4428; or 

Margaret Hesse, Special Counsel, 

Community and Consumer Law 

Division, (202) 874–5750, Office of the 

Comptroller of the Currency, 250 E 

Street, SW., Washington, DC 20219. 

Board: Cathy Gates, Senior Project 

Manager, (202) 452–3946; or Brent 

Lattin, Attorney, (202) 452–3667, 

Division of Consumer and Community 

Affairs, Board of Governors of the 

Federal Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

FDIC: Janet R. Gordon, Senior Policy 

Analyst, Division of Supervision and 

Consumer Protection, Compliance 

Policy Branch, (202) 898–3850; or Susan 

van den Toorn, Counsel, Legal Division, 

(202) 898–8707, Federal Deposit 

Insurance Corporation, 550 17th Street, 

NW., Washington, DC 20429. 

OTS: Stephanie M. Caputo, Senior 

Compliance Program Analyst, 

Compliance and Consumer Protection, 

(202) 906–6549; or Richard Bennett, 

Senior Compliance Counsel, 

Regulations and Legislation Division, 

(202) 906–7409, Office of Thrift 

Supervision, 1700 G Street, NW., 

Washington, DC 20552. 

SUPPLEMENTARY INFORMATION: 

Background 

The OCC, Board, FDIC, and OTS 

implement the Community 

Reinvestment Act (CRA) (12 U.S.C. 2901 

et seq.) through their CRA regulations. 

See 12 CFR parts 25, 228, 345, and 563e. 

The agencies’ regulations are interpreted 

primarily through the ‘‘Interagency 

Questions and Answers Regarding 

Community Reinvestment’’ (Questions 

and Answers), which provide guidance 

for use by agency personnel, financial 

institutions, and the public. The 

Questions and Answers were first 

published under the auspices of the 

Federal Financial Institutions 

Examination Council (FFIEC) in 1996 

(61 FR 54647), and were last revised on 

January 6, 2009 (2009 Questions and 

Answers) (74 FR 498). 

The SUPPLEMENTARY INFORMATION

published with the 2009 Questions and 

Answers also proposed for comment 

one new question and answer (Q&A) 

and two revised Q&As. 74 FR 504–06. 

Together, the agencies received 

comments from 19 different parties. The 

commenters represented financial 

institutions and their trade associations, 

community development advocates and 

organizations, and others. 

As discussed below, this document 

adopts the three new and revised Q&As 

that were proposed in January 2009, 

with minor clarifications, as 

appropriate, in response to comments 

received. The agencies are also adopting 

conforming revisions to an existing 

Q&A. 

The Interagency Questions and 

Answers are grouped by the provision of 

the CRA regulations that they discuss, 

are presented in the same order as the 

regulatory provisions, and employ an 

abbreviated method of citing to the 

regulations. For example, the small bank 

performance standards for national 

banks appear at 12 CFR 25.26; for 

Federal Reserve System member banks 

supervised by the Board, they appear at 

12 CFR 228.26; for state nonmember 

banks, they appear at 12 CFR 345.26; 

and for thrifts, the small savings 

association performance standards 

appear at 12 CFR 563e.26. Accordingly, 

the citation would be to 12 CFR ll.26. 

Each Q&A is numbered using a system 

that consists of the regulatory citation 

and a number, connected by a dash. For 

example, the first Q&A addressing 12 

CFR ll.26 would be identified as 

§ll.26—1. 

Although a particular Q&A may 

provide guidance on one regulatory 

provision, e.g., 12 CFR ll.22, which 

relates to the lending test applicable to 

large institutions, its content may also 

be applicable to, for example, small 

institutions, which are evaluated 

pursuant to small institution 

performance standards found at 12 CFR 

ll.26. Thus, readers with a particular 

interest in small institution issues, for 

example, should also consult the 

guidance that describes the lending, 

investment, and service tests. 

The Questions and Answers are 

indexed to aid readers in locating 

specific information in the document. 

The index contains keywords, listed 

alphabetically, along with numerical 

indicators of questions and answers that 

relate to that keyword. The list of Q&As 

addressing each keyword in the index is 

not intended to be exhaustive. 

New and Revised Q&As 

New Q&A: Community Services 

Targeted to Low- or Moderate-Income 

Individuals 

The agencies proposed a new Q&A, 

§ll.12(g)(2)—1, that would provide 

examples of ways an institution that 

provides community services could 

determine that the community services 

are targeted to low- and moderateincome individuals when the institution 

does not know the actual income of the 

individuals. Several comments were 

received from community groups and 

banking organizations that supported 

the examples in the proposal. In 

addition, one suggestion was made to 

clarify that community services can 

include those provided by an entity 

with a broad mission, provided that the 

activities themselves qualify as 

community services. This suggestion 

was incorporated into the Q&A 

examples as a new fourth bullet. 

Another commenter suggested that 

the definition of community services be 

broadened to cover financial literacy 

programs provided to school children of 

any income level in any school. 

Financial literacy programs are an 

example of community development 

services. See Q&A §ll.12(i)—3. The 

commenter’s suggestion was not 

adopted because community 

development services must have a 

primary purpose of community 

development, which would require the 

financial literacy programs to be 

targeted to low- or moderate-income 

individuals. 


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The new Q&A is being adopted as 

revised. 

Revised Q&A §ll.12(h)—8: Primary 

Purpose of Community Development 

The regulations require community 

development activities to have a 

‘‘primary purpose of community 

development.’’ See 12 CFR ll.12(h), 

ll.12(i), and ll.12(t). Q&A 

§ll.12(h)—8 historically has 

provided two methods of determining 

whether an activity has a primary 

purpose of community development: (1) 

If a majority of the dollars or 

beneficiaries of the activity are 

identifiable to one or more of the 

enumerated community development 

purposes, then an activity will be 

considered to possess the requisite 

primary purpose; and (2) if the express, 

bona fide intent of the activity, as stated, 

for example, in a prospectus, loan 

proposal, or community action plan, is 

primarily one or more of the 

enumerated community development 

purposes; the activity is specifically 

structured (given any relevant market or 

legal constraints or performance context 

factors) to achieve the expressed 

community development purpose; and 

the activity accomplishes, or is 

reasonably certain to accomplish, the 

community development purpose 

involved, then the requisite primary 

purpose may be found. 

To date, the agencies have generally 

indicated that if an activity has a 

primary purpose of community 

development (determined by either 

method above), the entire investment, 

loan, or service would be considered in 

an institution’s CRA evaluation. 

However, if an activity does not have a 

primary purpose of community 

development applying these standards, 

then it would not be considered as a 

qualified investment, community 

development loan, or community 

development service. 

The agencies proposed to revise Q&A 

§ll.12(h)—8 to allow pro rata 

consideration for an activity that 

provides some affordable housing 

targeted to low- or moderate-income 

individuals, but when it would not be 

deemed to have a primary purpose of 

community development measured by a 

majority of the entire activity’s 

beneficiaries or dollar value, or by 

relying on the express purpose of the 

activity. The proposed Q&A would 

specifically allow activities related to 

the provision of mixed-income housing, 

such as in connection with a 

development that has a mixed-income 

housing component or an affordable 

housing set-aside required by federal, 

state, or local government, to be eligible 

for consideration as an activity that has 

a ‘‘primary purpose’’ of community 

development at the election of the 

institution. In those cases, the proposed 

Q&A would allow an institution to 

receive pro rata consideration for the 

portion of the activity that provides 

affordable housing to low- or moderateincome individuals. 

Commenters generally supported the 

proposed revision. One commenter 

suggested that the agencies should allow 

only pro rata treatment in all situations 

where less than a majority of an 

activity’s dollars will be used for 

community development. This 

commenter further suggested that the 

agencies should eliminate full 

consideration of activities that have an 

‘‘express, bona fide intent’’ of 

community development when the 

measurable portion of any benefit 

bestowed or dollars applied is less than 

a majority of the entire activity’s 

benefits or dollar value. The agencies 

decline to adopt this suggestion. If the 

express, bona fide intent of an activity 

is community development, even 

though the measurable portion of any 

benefit bestowed or dollars applied is 

less than a majority of the entire 

activity’s benefits or dollar value, the 

agencies continue to believe that it is 

important that such activities, such as 

projects involving low-income housing 

tax credits, receive full consideration. 

Several commenters were concerned 

that the proposal would result in a 

reduction of the amount of CRA 

consideration provided to financial 

institutions’ loans or investments in 

mixed-income properties. The agencies 

do not intend this result. In fact, the 

proposed revision should increase the 

amount of consideration available to 

institutions. Some commenters believed 

that all activities in connection with 

properties with a set-aside for affordable 

units received total quantitative CRA 

consideration. Although this is true if 

the express, bona fide intent of the 

entire project is community 

development, that is not always the 

intent. For example, a private 

development in which a developer is 

required to set aside a small percentage 

of the units as affordable housing in 

order to receive zoning approval would 

not have the requisite express, bona fide 

intent. As a result of the revision, 

however, the financial institution could 

receive consideration for the pro rata 

amount of the affordable housing setaside. 

The agencies had asked whether 

allowing pro rata consideration would 

spur the construction and rehabilitation 

of housing for low- or moderate-income 

persons. Commenters provided mixed 

responses. A number of commenters 

believed that allowing pro rata 

consideration may provide an added 

incentive to financial institutions. A 

couple of commenters, however, 

believed that the revision would not 

spur additional construction and 

rehabilitation because, for example, the 

development of local housing is based 

on a local agency’s determination of its 

community housing needs and is not 

influenced by a financial institution’s 

CRA requirements. 

Commenters responded nearly 

unanimously that the pro rata treatment 

should not be restricted only to 

instances where a governmental entity 

requires a set-aside. Commenters 

believed that the voluntary inclusion of 

affordable housing components in 

development by private developers 

should also receive consideration. As 

one commenter stated, ‘‘Affordable 

housing is affordable housing.’’ The final 

question and answer would allow pro 

rata treatment in connection with any 

project that provides affordable housing, 

regardless of whether a governmental 

entity requires a set-aside. 

In response to the agencies’ question 

about how the amount of the pro rata 

share should be determined for 

reporting purposes (by units or by loan 

proceeds), several commenters urged 

flexibility. Several commenters believed 

that the entire amount of the loan 

should be reported. Other commenters 

suggested that when the actual amount 

of funds attributed to the affordable 

units is readily apparent, for example in 

connection with a construction loan, the 

actual dollar amount should be 

considered. However, in other cases, 

where the actual amount of funds is not 

readily apparent, the pro rata share 

should be determined based on the 

percentage of set-aside units. 

The final question and answer has 

been clarified. Institutions will 

determine the pro rata share of the 

activity that provides affordable housing 

to low- or moderate-income individuals 

based on the percentage of units setaside for affordable housing for low- or 

moderate-income individuals. The 

Agencies believe that this method of 

determining the portion of a loan or 

investment that provides affordable 

housing for low- or moderate-income 

individuals imposes the least amount of 

burden on developers and lenders to 

differentiate the construction costs, 

including the proportional share of costs 

related to infrastructure, common areas, 

and site amenities, between market and 

affordable units. 

The proposed revision restricted the 

pro rata treatment only to affordable 

housing activities by financial 


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institutions. The agencies asked 

whether the pro rata treatment should 

apply only to affordable housing or 

whether the pro rata treatment should 

also apply to loans or investments with 

other community development 

purposes. 

Since the CRA regulations were 

revised in 1995, affordable housing 

initiatives have included more and more 

mixed-income housing. Fewer new or 

rehabilitated housing projects provide 

primarily low-income housing. Mixedincome housing is an important goal in 

government housing assistance 

programs. Because of the compelling 

public interest in affordable housing 

programs, the agencies believe that it is 

appropriate that the pro rata treatment 

be adopted with regard to affordable 

housing. However, the agencies decline 

to expand the coverage of this treatment 

to activities other than those providing 

affordable housing at this time. The 

agencies will keep abreast of 

developments in other types of 

community development activities and 

evaluate the effectiveness of the pro rata 

treatment in connection with affordable 

housing programs. We will reassess 

whether such treatment should be 

afforded other types of community 

development activities at a later date. 

The agencies have added clarifying 

language to the final answer to 

emphasize that the pro rata treatment 

applies only to affordable housing 

activities. 

Finally, the agencies asked for 

comment on whether the adoption of 

pro rata treatment would lead to 

unjustifiable inflation of community 

development activities. Commenters 

unanimously asserted that it would not. 

The agencies are adopting the revised 

Q&A with the clarifications described 

above. 

Revised Q&A §ll.42(b)(2)—3: Data 

Collection 

The agencies explained in January 

2009 that if the proposed revision to 

Q&A §ll.12(h)—8, described above, 

were adopted, the agencies would also 

revise Q&A §ll.42(b)(2)—3 to address 

data collection and reporting of the pro 

rata share of the mixed-income housing 

loans described in the Q&A. The 

agencies proposed that, if an institution 

were to elect to have the portion of 

mixed-income housing loans that were 

set aside for low- or moderate-income 

housing considered as community 

development loans, in order to receive 

consideration for such loans, the 

institution would need to collect and 

report data on only the portions of the 

loans that provide housing that is 

affordable for low- or moderate-income 

individuals. 

Three commenters addressed the 

proposed revision to this Q&A. The 

general concern addressed by the 

commenters was the potential for 

confusion in reporting the pro rata share 

of an affordable housing activity. As in 

the past, the full amount of the loan 

should be collected and reported if the 

majority of the dollars or beneficiaries 

are identifiable to a community 

development purpose. Similarly, the 

full amount of the loan should be 

collected and reported if the express, 

bona fide intent of the loan or 

investment is community development, 

even though a majority of the dollars or 

beneficiaries are not identifiable with a 

community development purpose. In 

connection with affordable housing 

projects that provide mixed-income 

housing, but where a majority of the 

dollars or units do not have a 

community development purpose and 

the express, bona fide intent of the loan 

is not community development, the 

institution must report only the pro rata 

dollar amount of the portion of the loan 

that provides affordable housing to lowor moderate-income individuals. The 

pro rata dollar amount of the total 

activity will be based on the percentage 

of units set-aside for affordable housing 

for low- or moderate-income 

individuals. The agencies are adopting 

the proposed revision to the Q&A, but 

have added a sentence to the final 

answer to clarify this guidance. 

Conforming Revision to Q&A 

§ll.22(a)(2)—4: Other Loan Data 

Q&A §ll.22(a)(2)—4, as adopted in 

January of 2009 (74 FR 517), stated that 

loans that do not have a primary 

purpose of community development, 

but where a certain amount or 

percentage of units is set aside for 

affordable housing, should be submitted 

by the financial institution for 

consideration as ‘‘other loan data.’’ In the 

supplementary information published 

with the proposed revisions to the 

interagency questions and answers, the 

agencies advised that, if the proposed 

revision to Q&A §ll.12(h)—8 were 

adopted, a conforming change to Q&A 

§ll.22(a)(2)—4 would be made. The 

answer to Q&A §ll.22(a)(2)—4 has 

been revised to remove the reference to 

‘‘loans that do not have a primary 

purpose of community development, 

but where a certain amount or 

percentage of units is set aside for 

affordable housing’’ as an example of 

‘‘other loan data’’ because such activities 

are eligible for pro rata treatment. 

The text of the final Interagency 

Questions and Answers follows: 

Interagency Questions and Answers 

Regarding Community Reinvestment 

§ll.11—Authority, purposes, and 

scope 

§ll.11(c) Scope 

§§ll.11(c)(3) & 563e.11(c)(2) Certain 

special purpose institutions 

§§ll.11(c)(3) & 563e.11(c)(2)—1: Is 

the list of special purpose institutions 

exclusive? 

A1. No, there may be other examples 

of special purpose institutions. These 

institutions engage in specialized 

activities that do not involve granting 

credit to the public in the ordinary 

course of business. Special purpose 

institutions typically serve as 

correspondent banks, trust companies, 

or clearing agents or engage only in 

specialized services, such as cash 

management controlled disbursement 

services. A financial institution, 

however, does not become a special 

purpose institution merely by ceasing to 

make loans and, instead, making 

investments and providing other retail 

banking services. 

§§ll.11(c)(3) & 563e.11(c)(2)—2: To 

be a special purpose institution, must 

an institution limit its activities in its 

charter? 

A2. No. A special purpose institution 

may, but is not required to, limit the 

scope of its activities in its charter, 

articles of association, or other corporate 

organizational documents. An 

institution that does not have legal 

limitations on its activities, but has 

voluntarily limited its activities, 

however, would no longer be exempt 

from Community Reinvestment Act 

(CRA) requirements if it subsequently 

engaged in activities that involve 

granting credit to the public in the 

ordinary course of business. An 

institution that believes it is exempt 

from CRA as a special purpose 

institution should seek confirmation of 

this status from its supervisory agency. 

§ll.12—Definitions 

§ll.12(a) Affiliate 

§ll.12(a)—1: Does the definition of 

‘‘affiliate’’ include subsidiaries of an 

institution? 

A1. Yes, ‘‘affiliate’’ includes any 

company that controls, is controlled by, 

or is under common control with 

another company. An institution’s 

subsidiary is controlled by the 

institution and is, therefore, an affiliate. 

§ll.12(f) Branch 

§ll.12(f)—1: Do the definitions of 

‘‘branch,’’ ‘‘automated teller machine 

(ATM),’’ and ‘‘remote service facility 


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(RSF)’’ include mobile branches, ATMs, 

and RSFs? 

A1. Yes. Staffed mobile offices that 

are authorized as branches are 

considered ‘‘branches,’’ and mobile 

ATMs and RSFs are considered ‘‘ATMs’’ 

and ‘‘RSFs.’’ 

§ll.12(f)—2: Are loan production 

offices (LPOs) branches for purposes of 

the CRA? 

A2. LPOs and other offices are not 

‘‘branches’’ unless they are authorized as 

branches of the institution through the 

regulatory approval process of the 

institution’s supervisory agency. 

§ll.12(g) Community development 

§ll.12(g)—1: Are community 

development activities limited to those 

that promote economic development? 

A1. No. Although the definition of 

‘‘community development’’ includes 

activities that promote economic 

development by financing small 

businesses or farms, the rule does not 

limit community development loans 

and services and qualified investments 

to those activities. Community 

development also includes communityor tribal-based child care, educational, 

health, or social services targeted to 

low- or moderate-income persons, 

affordable housing for low- or moderateincome individuals, and activities that 

revitalize or stabilize low- or moderateincome areas, designated disaster areas, 

or underserved or distressed 

nonmetropolitan middle-income 

geographies. 

§ll.12(g)—2: Must a community 

development activity occur inside a lowor moderate-income area, designated 

disaster area, or underserved or 

distressed nonmetropolitan middleincome area in order for an institution 

to receive CRA consideration for the 

activity? 

A2. No. Community development 

includes activities, regardless of their 

location, that provide affordable 

housing for, or community services 

targeted to, low- or moderate-income 

individuals and activities that promote 

economic development by financing 

small businesses and farms. Activities 

that stabilize or revitalize particular 

low- or moderate-income areas, 

designated disaster areas, or 

underserved or distressed 

nonmetropolitan middle-income areas 

(including by creating, retaining, or 

improving jobs for low- or moderateincome persons) also qualify as 

community development, even if the 

activities are not located in these areas. 

One example is financing a supermarket 

that serves as an anchor store in a small 

strip mall located at the edge of a 

middle-income area, if the mall 

stabilizes the adjacent low-income 

community by providing needed 

shopping services that are not otherwise 

available in the low-income community. 

§ll.12(g)—3: Does the regulation 

provide flexibility in considering 

performance in high-cost areas? 

A3. Yes, the flexibility of the 

performance standards allows 

examiners to account in their 

evaluations for conditions in high-cost 

areas. Examiners consider lending and 

services to individuals and geographies 

of all income levels and businesses of 

all sizes and revenues. In addition, the 

flexibility in the requirement that 

community development loans, 

community development services, and 

qualified investments have as their 

‘‘primary’’ purpose community 

development allows examiners to 

account for conditions in high-cost 

areas. For example, examiners could 

take into account the fact that activities 

address a credit shortage among middleincome people or areas caused by the 

disproportionately high cost of building, 

maintaining or acquiring a house when 

determining whether an institution’s 

loan to or investment in an organization 

that funds affordable housing for 

middle-income people or areas, as well 

as low- and moderate-income people or 

areas, has as its primary purpose 

community development. See also Q&A 

§ll.12(h)—8 for more information on 

‘‘primary purpose.’’ 

§ll.12(g)—4: The CRA provides 

that, in assessing the CRA performance 

of non-minority- and non-women-owned 

(majority-owned) financial institutions, 

examiners may consider as a factor 

capital investments, loan participations, 

and other ventures undertaken by the 

institutions in cooperation with 

minority- or women-owned financial 

institutions and low-income credit 

unions (MWLIs), provided that these 

activities help meet the credit needs of 

local communities in which the MWLIs 

are chartered. Must such activities also 

benefit the majority-owned financial 

institution’s assessment area? 

A4. No. Although the regulations 

generally provide that an institution’s 

CRA activities will be evaluated for the 

extent to which they benefit the 

institution’s assessment area(s) or a 

broader statewide or regional area that 

includes the institution’s assessment 

area(s), the agencies apply a broader 

geographic criterion when evaluating 

capital investments, loan participations, 

and other ventures undertaken by that 

institution in cooperation with MWLIs, 

as provided by the CRA. Thus, such 

activities will be favorably considered 

in the CRA performance evaluation of 

the institution (as loans, investments, or 

services, as appropriate), even if the 

MWLIs are not located in, or such 

activities do not benefit, the assessment 

area(s) of the majority-owned institution 

or the broader statewide or regional area 

that includes its assessment area(s). The 

activities must, however, help meet the 

credit needs of the local communities in 

which the MWLIs are chartered. The 

impact of a majority-owned institution’s 

activities in cooperation with MWLIs on 

the majority-owned institution’s CRA 

rating will be determined in conjunction 

with its overall performance in its 

assessment area(s). 

Examples of activities undertaken by 

a majority-owned financial institution 

in cooperation with MWLIs that would 

receive CRA consideration may include: 

• Making a deposit or capital 

investment; 

• Purchasing a participation in a loan; 

• Loaning an officer or providing 

other technical expertise to assist an 

MWLI in improving its lending policies 

and practices; 

• Providing financial support to 

enable an MWLI to partner with schools 

or universities to offer financial literacy 

education to members of its local 

community; or 

• Providing free or discounted data 

processing systems, or office facilities to 

aid an MWLI in serving its customers. 

§ll.12(g)(1) Affordable housing 

(including multifamily rental housing) 

for low- or moderate-income individuals 

§ll.12(g)(1)—1: When determining 

whether a project is ‘‘affordable housing 

for low- or moderate-income 

individuals,’’ thereby meeting the 

definition of ‘‘community development,’’ 

will it be sufficient to use a formula that 

relates the cost of ownership, rental, or 

borrowing to the income levels in the 

area as the only factor, regardless of 

whether the users, likely users, or 

beneficiaries of that affordable housing 

are low- or moderate-income 

individuals? 

A1. The concept of ‘‘affordable 

housing’’ for low- or moderate-income 

individuals does hinge on whether lowor moderate-income individuals benefit, 

or are likely to benefit, from the 

housing. It would be inappropriate to 

give consideration to a project that 

exclusively or predominately houses 

families that are not low- or moderateincome simply because the rents or 

housing prices are set according to a 

particular formula. 

For projects that do not yet have 

occupants, and for which the income of 

the potential occupants cannot be 

determined in advance, or in other 

projects where the income of occupants 

cannot be verified, examiners will 


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review factors such as demographic, 

economic, and market data to determine 

the likelihood that the housing will 

‘‘primarily’’ accommodate low- or 

moderate-income individuals. For 

example, examiners may look at median 

rents of the assessment area and the 

project; the median home value of either 

the assessment area, low- or moderateincome geographies or the project; the 

low- or moderate-income population in 

the area of the project; or the past 

performance record of the 

organization(s) undertaking the project. 

Further, such a project could receive 

consideration if its express, bona fide 

intent, as stated, for example, in a 

prospectus, loan proposal, or 

community action plan, is community 

development. 

§ll.12(g)(2) Community services 

targeted to low- or moderate-income 

individuals 

§ll.12(g)(2)—1: Community 

development includes community 

services targeted to low- or moderateincome individuals. What are examples 

of ways that an institution could 

determine that community services are 

offered to low- or moderate-income 

individuals? 

A1: Examples of ways in which an 

institution could determine that 

community services are targeted to lowor moderate-income persons include: 

• The community service is targeted 

to the clients of a nonprofit organization 

that has a defined mission of serving 

low- and moderate-income persons, or, 

because of government grants, for 

example, is limited to offering services 

only to low- or moderate-income 

persons. 

• The community service is offered 

by a nonprofit organization that is 

located in and serves a low- or 

moderate-income geography. 

• The community service is 

conducted in a low- or moderate-income 

area and targeted to the residents of the 

area. 

• The community service is a clearly 

defined program that benefits primarily 

low- or moderate-income persons, even 

if it is provided by an entity that offers 

other programs that serve individuals of 

all income levels. 

• The community service is offered at 

a workplace to workers who are lowand moderate-income, based on readily 

available data for the average wage for 

workers in that particular occupation or 

industry (see, e.g., http://www.bls.gov/ 

bls/blswage.htm (Bureau of Labor 

Statistics)). 

§ll.12(g)(3) Activities that promote 

economic development by financing 

businesses or farms that meet certain 

size eligibility standards 

§ll.12(g)(3)—1: ‘‘Community 

development’’ includes activities that 

promote economic development by 

financing businesses or farms that meet 

certain size eligibility standards. Are all 

activities that finance businesses and 

farms that meet these size eligibility 

standards considered to be community 

development? 

A1. No. The concept of ‘‘community 

development’’ under 12 CFR 

ll.12(g)(3) involves both a ‘‘size’’ test 

and a ‘‘purpose’’ test. An institution’s 

loan, investment, or service meets the 

‘‘size’’ test if it finances, either directly 

or through an intermediary, entities that 

either meet the size eligibility standards 

of the Small Business Administration’s 

Development Company (SBDC) or Small 

Business Investment Company (SBIC) 

programs, or have gross annual revenues 

of $1 million or less. 

To meet the ‘‘purpose test,’’ the 

institution’s loan, investment, or service 

must promote economic development. 

These activities are considered to 

promote economic development if they 

support permanent job creation, 

retention, and/or improvement for 

persons who are currently low- or 

moderate-income, or supports 

permanent job creation, retention, and/ 

or improvement either in low- or 

moderate-income geographies or in 

areas targeted for redevelopment by 

Federal, state, local, or tribal 

governments. The agencies will 

presume that any loan to or investment 

in a SBDC, SBIC, Rural Business 

Investment Company, New Markets 

Venture Capital Company, or New 

Markets Tax Credit-eligible Community 

Development Entity promotes economic 

development. (But also refer to Q&As 

§ll.42(b)(2)—2, §ll.12(h)—2, and 

§ll.12(h)—3 for more information 

about which loans may be considered 

community development loans.) 

In addition to their quantitative 

assessment of the amount of a financial 

institution’s community development 

activities, examiners must make 

qualitative assessments of an 

institution’s leadership in community 

development matters and the 

complexity, responsiveness, and impact 

of the community development 

activities of the institution. In reaching 

a conclusion about the impact of an 

institution’s community development 

activities, examiners may, for example, 

determine that a loan to a small 

business in a low- or moderate-income 

geography that provides needed jobs 

and services in that area may have a 

greater impact and be more responsive 

to the community credit needs than 

does a loan to a small business in the 

same geography that does not directly 

provide additional jobs or services to 

the community. 

§ll.12(g)(4) Activities that revitalize 

or stabilize certain geographies 

§ll.12(g)(4)—1: Is the revised 

definition of community development, 

effective September 1, 2005 (under the 

OCC, Board, and FDIC rules) and 

effective April 12, 2006 (under OTS’s 

rule), applicable to all institutions or 

only to intermediate small institutions? 

A1. The revised definition of 

community development is applicable 

to all institutions. Examiners will not 

use the revised definition to qualify 

activities that were funded or provided 

prior to September 1, 2005 (under the 

OCC, Board, and FDIC rules) or prior to 

April 12, 2006 (under OTS’s rule). 

§ ll.12(g)(4)—2: Will activities that 

provide housing for middle-income and 

upper-income persons qualify for 

favorable consideration as community 

development activities when they help 

to revitalize or stabilize a distressed or 

underserved nonmetropolitan middleincome geography or designated 

disaster areas? 

A2. An activity that provides housing 

for middle- or upper-income individuals 

qualifies as an activity that revitalizes or 

stabilizes a distressed nonmetropolitan 

middle-income geography or a 

designated disaster area if the housing 

directly helps to revitalize or stabilize 

the community by attracting new, or 

retaining existing, businesses or 

residents and, in the case of a 

designated disaster area, is related to 

disaster recovery. The Agencies 

generally will consider all activities that 

revitalize or stabilize a distressed 

nonmetropolitan middle-income 

geography or designated disaster area, 

but will give greater weight to those 

activities that are most responsive to 

community needs, including needs of 

low- or moderate-income individuals or 

neighborhoods. Thus, for example, a 

loan solely to develop middle- or upperincome housing in a community in need 

of low- and moderate-income housing 

would be given very little weight if 

there is only a short-term benefit to lowand moderate-income individuals in the 

community through the creation of 

temporary construction jobs. (Except in 

connection with intermediate small 

institutions, a housing-related loan is 

not evaluated as a ‘‘community 

development loan’’ if it has been 

reported or collected by the institution 

or its affiliate as a home mortgage loan, 


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unless it is a multifamily dwelling loan. 

See 12 CFR ll.12(h)(2)(i) and Q&As 

§ll.12(h)—2 and §ll.12(h)—3.) An 

activity will be presumed to revitalize or 

stabilize such a geography or area if the 

activity is consistent with a bona fide 

government revitalization or 

stabilization plan or disaster recovery 

plan. See Q&As §ll.12(g)(4)(i)—1 and 

§ll.12(h)—5. 

In underserved nonmetropolitan 

middle-income geographies, activities 

that provide housing for middle- and 

upper-income individuals may qualify 

as activities that revitalize or stabilize 

such underserved areas if the activities 

also provide housing for low- or 

moderate-income individuals. For 

example, a loan to build a mixedincome housing development that 

provides housing for middle- and 

upper-income individuals in an 

underserved nonmetropolitan middleincome geography would receive 

positive consideration if it also provides 

housing for low- or moderate-income 

individuals. 

§ll.12(g)(4)(i) Activities that 

revitalize or stabilize low- or moderateincome geographies 

§ll.12(g)(4)(i)—1: What activities 

are considered to ‘‘revitalize or stabilize’’ 

a low- or moderate-income geography, 

and how are those activities considered? 

A1. Activities that revitalize or 

stabilize a low- or moderate-income 

geography are activities that help to 

attract new, or retain existing, 

businesses or residents. Examiners will 

presume that an activity revitalizes or 

stabilizes a low- or moderate-income 

geography if the activity has been 

approved by the governing board of an 

Enterprise Community or Empowerment 

Zone (designated pursuant to 26 U.S.C. 

§ 1391) and is consistent with the 

board’s strategic plan. They will make 

the same presumption if the activity has 

received similar official designation as 

consistent with a federal, state, local, or 

tribal government plan for the 

revitalization or stabilization of the lowor moderate-income geography. For 

example, foreclosure prevention 

programs with the objective of 

providing affordable, sustainable, longterm loan restructurings or 

modifications to homeowners in low- or 

moderate-income geographies, 

consistent with safe and sound banking 

practices, may help to revitalize or 

stabilize those geographies. 

To determine whether other activities 

revitalize or stabilize a low- or 

moderate-income geography, examiners 

will evaluate the activity’s actual impact 

on the geography, if information about 

this is available. If not, examiners will 

determine whether the activity is 

consistent with the community’s formal 

or informal plans for the revitalization 

and stabilization of the low- or 

moderate-income geography. For more 

information on what activities revitalize 

or stabilize a low- or moderate-income 

geography, see Q&As §ll.12(g)—2 

and §ll.12(h)—5. 

§ll.12(g)(4)(ii) Activities that 

revitalize or stabilize designated 

disaster areas 

§ll.12(g)(4)(ii)—1: What is a 

‘‘designated disaster area’’ and how long 

does it last? 

A1. A ‘‘designated disaster area’’ is a 

major disaster area designated by the 

federal government. Such disaster 

designations include, in particular, 

Major Disaster Declarations 

administered by the Federal Emergency 

Management Agency (FEMA) (http:// 

www.fema.gov), but excludes counties 

designated to receive only FEMA Public 

Assistance Emergency Work Category A 

(Debris Removal) and/or Category B 

(Emergency Protective Measures). 

Examiners will consider institution 

activities related to disaster recovery 

that revitalize or stabilize a designated 

disaster area for 36 months following 

the date of designation. Where there is 

a demonstrable community need to 

extend the period for recognizing 

revitalization or stabilization activities 

in a particular disaster area to assist in 

long-term recovery efforts, this time 

period may be extended. 

§ll.12(g)(4)(ii)—2: What activities 

are considered to ‘‘revitalize or stabilize’’ 

a designated disaster area, and how are 

those activities considered? 

A2. The Agencies generally will 

consider an activity to revitalize or 

stabilize a designated disaster area if it 

helps to attract new, or retain existing, 

businesses or residents and is related to 

disaster recovery. An activity will be 

presumed to revitalize or stabilize the 

area if the activity is consistent with a 

bona fide government revitalization or 

stabilization plan or disaster recovery 

plan. The Agencies generally will 

consider all activities relating to disaster 

recovery that revitalize or stabilize a 

designated disaster area, but will give 

greater weight to those activities that are 

most responsive to community needs, 

including the needs of low- or 

moderate-income individuals or 

neighborhoods. Qualifying activities 

may include, for example, providing 

financing to help retain businesses in 

the area that employ local residents, 

including low- and moderate-income 

individuals; providing financing to 

attract a major new employer that will 

create long-term job opportunities, 

including for low- and moderate-income 

individuals; providing financing or 

other assistance for essential 

community-wide infrastructure, 

community services, and rebuilding 

needs; and activities that provide 

housing, financial assistance, and 

services to individuals in designated 

disaster areas and to individuals who 

have been displaced from those areas, 

including low- and moderate-income 

individuals (see, e.g., Q&As 

§ll.12(i)—3; §ll.12(t)—4; 

§ll.22(b)(2) & (3)—4; §ll.22(b)(2) & 

(3)—5; and §ll.24(d)(3)—1). 

§ ll.12(g)(4)(iii) Activities that 

revitalize or stabilize distressed or 

underserved nonmetropolitan middleincome geographies 

§ll.12(g)(4)(iii)—1: What criteria 

are used to identify distressed or 

underserved nonmetropolitan, middleincome geographies? 

A1. Eligible nonmetropolitan middleincome geographies are those 

designated by the Agencies as being in 

distress or that could have difficulty 

meeting essential community needs 

(underserved). A particular geography 

could be designated as both distressed 

and underserved. As defined in 12 CFR 

ll.12(k), a geography is a census tract 

delineated by the United States Bureau 

of the Census. 

A nonmetropolitan middle-income 

geography will be designated as 

distressed if it is in a county that meets 

one or more of the following triggers: (1) 

An unemployment rate of at least 1.5 

times the national average, (2) a poverty 

rate of 20 percent or more, or (3) a 

population loss of 10 percent or more 

between the previous and most recent 

decennial census or a net migration loss 

of five percent or more over the fiveyear period preceding the most recent 

census. 

A nonmetropolitan middle-income 

geography will be designated as 

underserved if it meets criteria for 

population size, density, and dispersion 

that indicate the area’s population is 

sufficiently small, thin, and distant from 

a population center that the tract is 

likely to have difficulty financing the 

fixed costs of meeting essential 

community needs. The Agencies will 

use as the basis for these designations 

the ‘‘urban influence codes,’’ numbered 

‘‘7,’’ ‘‘10,’’ ‘‘11,’’ and ‘‘12,’’ maintained by 

the Economic Research Service of the 

United States Department of 

Agriculture. 

The Agencies publish data source 

information along with the list of 

eligible nonmetropolitan census tracts 

on the Federal Financial Institutions 


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Examination Council Web site (http:// 

www.ffiec.gov). 

§ll.12(g)(4)(iii)—2: How often will 

the Agencies update the list of 

designated distressed and underserved 

nonmetropolitan middle-income 

geographies? 

A2. The Agencies will review and 

update the list annually. The list is 

published on the Federal Financial 

Institutions Examination Council Web 

site (http://www.ffiec.gov). 

To the extent that changes to the 

designated census tracts occur, the 

Agencies have determined to adopt a 

one-year ‘‘lag period.’’ This lag period 

will be in effect for the twelve months 

immediately following the date when a 

census tract that was designated as 

distressed or underserved is removed 

from the designated list. Revitalization 

or stabilization activities undertaken 

during the lag period will receive 

consideration as community 

development activities if they would 

have been considered to have a primary 

purpose of community development if 

the census tract in which they were 

located were still designated as 

distressed or underserved. 

§ll.12(g)(4)(iii)—3: What activities 

are considered to ‘‘revitalize or stabilize’’ 

a distressed nonmetropolitan middleincome geography, and how are those 

activities evaluated? 

A3. An activity revitalizes or 

stabilizes a distressed nonmetropolitan 

middle-income geography if it helps to 

attract new, or retain existing, 

businesses or residents. An activity will 

be presumed to revitalize or stabilize the 

area if the activity is consistent with a 

bona fide government revitalization or 

stabilization plan. The Agencies 

generally will consider all activities that 

revitalize or stabilize a distressed 

nonmetropolitan middle-income 

geography, but will give greater weight 

to those activities that are most 

responsive to community needs, 

including needs of low- or moderateincome individuals or neighborhoods. 

Qualifying activities may include, for 

example, providing financing to attract 

a major new employer that will create 

long-term job opportunities, including 

for low- and moderate-income 

individuals, and activities that provide 

financing or other assistance for 

essential infrastructure or facilities 

necessary to attract or retain businesses 

or residents. See Q&As 

§ll.12(g)(4)(i)—1 and §ll.12(h)—5. 

§ll.12(g)(4)(iii)—4: What activities 

are considered to ‘‘revitalize or stabilize’’ 

an underserved nonmetropolitan 

middle-income geography, and how are 

those activities evaluated? 

A4. The regulation provides that 

activities revitalize or stabilize an 

underserved nonmetropolitan middleincome geography if they help to meet 

essential community needs, including 

needs of low- or moderate-income 

individuals. Activities such as financing 

for the construction, expansion, 

improvement, maintenance, or 

operation of essential infrastructure or 

facilities for health services, education, 

public safety, public services, industrial 

parks, or affordable housing, will be 

evaluated under these criteria to 

determine if they qualify for 

revitalization or stabilization 

consideration. Examples of the types of 

projects that qualify as meeting essential 

community needs, including needs of 

low- or moderate-income individuals, 

would be a new or expanded hospital 

that serves the entire county, including 

low- and moderate-income residents; an 

industrial park for businesses whose 

employees include low- or moderateincome individuals; a new or 

rehabilitated sewer line that serves 

community residents, including low- or 

moderate-income residents; a mixedincome housing development that 

includes affordable housing for low- and 

moderate-income families; or a 

renovated elementary school that serves 

children from the community, including 

children from low- and moderateincome families. 

Other activities in the area, such as 

financing a project to build a sewer line 

spur that connects services to a middleor upper-income housing development 

while bypassing a low- or moderateincome development that also needs the 

sewer services, generally would not 

qualify for revitalization or stabilization 

consideration in geographies designated 

as underserved. However, if an 

underserved geography is also 

designated as distressed or a disaster 

area, additional activities may be 

considered to revitalize or stabilize the 

geography, as explained in Q&As 

§ll.12(g)(4)(ii)—2 and 

§ll.12(g)(4)(iii)—3. 

§ll.12(h) Community development 

loan 

§ll.12(h)—1: What are examples of 

community development loans? 

A1. Examples of community 

development loans include, but are not 

limited to, loans to: 

• Borrowers for affordable housing 

rehabilitation and construction, 

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 

development needs; 

• Borrowers to construct or 

rehabilitate community facilities that 

are located in low- and moderateincome areas or that serve primarily 

low- and moderate-income individuals; 

• Financial intermediaries including 

Community Development Financial 

Institutions (CDFIs), New Markets Tax 

Credit-eligible Community Development 

Entities, Community Development 

Corporations (CDCs), minority- and 

women-owned financial institutions, 

community loan funds or pools, and 

low-income or community development 

credit unions that primarily lend or 

facilitate lending to promote community 

development; 

• Local, state, and tribal governments 

for community development activities; 

• Borrowers to finance environmental 

clean-up or redevelopment of an 

industrial site as part of an effort to 

revitalize the low- or moderate-income 

community in which the property is 

located; and 

• Businesses, in an amount greater 

than $1 million, when made as part of 

the Small Business Administration’s 

504 Certified Development Company 

program. 

The rehabilitation and construction of 

affordable housing or community 

facilities, referred to above, may include 

the abatement or remediation of, or 

other actions to correct, environmental 

hazards, such as lead-based paint, that 

are present in the housing, facilities, or 

site. 

§ll.12(h)—2: If a retail institution 

that is not required to report under the 

Home Mortgage Disclosure Act (HMDA) 

makes affordable home mortgage loans 

that would be HMDA-reportable home 

mortgage loans if it were a reporting 

institution, or if a small institution that 

is not required to collect and report loan 

data under the CRA makes small 

business and small farm loans and 

consumer loans that would be collected 

and/or reported if the institution were a 

large institution, may the institution 

have these loans considered as 

community development loans? 

A2. No. Although small institutions 

are not required to report or collect 

information on small business and small 

farm loans and consumer loans, and 

some institutions are not required to 

report information about their home 

mortgage loans under HMDA, if these 

institutions are retail institutions, the 

agencies will consider in their CRA 

evaluations the institutions’ originations 

and purchases of loans that would have 

been collected or reported as small 

business, small farm, consumer or home 

mortgage loans, had the institution been 


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a collecting and reporting institution 

under the CRA or the HMDA. Therefore, 

these loans will not be considered as 

community development loans, unless 

the small institution is an intermediate 

small institution (see §ll.12(h)—3). 

Multifamily dwelling loans, however, 

may be considered as community 

development loans as well as home 

mortgage loans. See also Q&A 

§ll.42(b)(2)—2. 

§ll.12(h)—3: May an intermediate 

small institution that is not subject to 

HMDA reporting have home mortgage 

loans considered as community 

development loans? Similarly, may an 

intermediate small institution have 

small business and small farm loans 

and consumer loans considered as 

community development loans? 

A3. Yes. In instances where 

intermediate small institutions are not 

required to report HMDA or small 

business or small farm loans, these 

loans may be considered, at the 

institution’s option, as community 

development loans, provided they meet 

the regulatory definition of ‘‘community 

development.’’ If small business or small 

farm loan data have been reported to the 

agencies to preserve the option to be 

evaluated as a large institution, but the 

institution ultimately chooses to be 

evaluated under the intermediate small 

institution examination standards, then 

the institution would continue to have 

the option to have such loans 

considered as community development 

loans. However, if the institution opts to 

be evaluated under the lending, 

investment, and service tests applicable 

to large institutions, it may not choose 

to have home mortgage, small business, 

small farm, or consumer loans 

considered as community development 

loans. 

Loans other than multifamily 

dwelling loans may not be considered 

under both the lending test and the 

community development test for 

intermediate small institutions. Thus, if 

an institution elects to have certain 

loans considered under the community 

development test, those loans may not 

also be considered under the lending 

test, and would be excluded from the 

lending test analysis. 

Intermediate small institutions may 

choose individual loans within their 

portfolio for community development 

consideration. Examiners will evaluate 

an intermediate small institution’s 

community development activities 

within the context of the responsiveness 

of the activity to the community 

development needs of the institution’s 

assessment area. 

§ll.12(h)—4: Do secured credit 

cards or other credit card programs 

targeted to low- or moderate-income 

individuals qualify as community 

development loans? 

A4. No. Credit cards issued to low- or 

moderate-income individuals for 

household, family, or other personal 

expenditures, whether as part of a 

program targeted to such individuals or 

otherwise, do not qualify as community 

development loans because they do not 

have as their primary purpose any of the 

activities included in the definition of 

‘‘community development.’’ 

§ll.12(h)—5: The regulation 

indicates that community development 

includes ‘‘activities that revitalize or 

stabilize low- or moderate-income 

geographies.’’ Do all loans in a low- to 

moderate-income geography have a 

stabilizing effect? 

A5. No. Some loans may provide only 

indirect or short-term benefits to low- or 

moderate-income individuals in a lowor moderate-income geography. These 

loans are not considered to have a 

community development purpose. For 

example, a loan for upper-income 

housing in a low- or moderate-income 

area is not considered to have a 

community development purpose 

simply because of the indirect benefit to 

low- or moderate-income persons from 

construction jobs or the increase in the 

local tax base that supports enhanced 

services to low- and moderate-income 

area residents. On the other hand, a loan 

for an anchor business in a low- or 

moderate-income area (or a nearby area) 

that employs or serves residents of the 

area and, thus, stabilizes the area, may 

be considered to have a community 

development purpose. For example, in a 

low-income area, a loan for a pharmacy 

that employs and serves residents of the 

area promotes community development. 

§ll.12(h)—6: Must there be some 

immediate or direct benefit to the 

institution’s assessment area(s) to 

satisfy the regulations’ requirement that 

qualified investments and community 

development loans or services benefit an 

institution’s assessment area(s) or a 

broader statewide or regional area that 

includes the institution’s assessment 

area(s)? 

A6. No. The regulations recognize that 

community development organizations 

and programs are efficient and effective 

ways for institutions to promote 

community development. These 

organizations and programs often 

operate on a statewide or even 

multistate basis. Therefore, an 

institution’s activity is considered a 

community development loan or service 

or a qualified investment if it supports 

an organization or activity that covers 

an area that is larger than, but includes, 

the institution’s assessment area(s). The 

institution’s assessment area(s) need not 

receive an immediate or direct benefit 

from the institution’s specific 

participation in the broader organization 

or activity, provided that the purpose, 

mandate, or function of the organization 

or activity includes serving geographies 

or individuals located within the 

institution’s assessment area(s). 

In addition, a retail institution that, 

considering its performance context, has 

adequately addressed the community 

development needs of its assessment 

area(s) will receive consideration for 

certain other community development 

activities. These community 

development activities must benefit 

geographies or individuals located 

somewhere within a broader statewide 

or regional area that includes the 

institution’s assessment area(s). 

Examiners will consider these activities 

even if they will not benefit the 

institution’s assessment area(s). 

§ll.12(h)—7: What is meant by the 

term ‘‘regional area’’? 

A7. A ‘‘regional area’’ may be as large 

as a multistate area. For example, the 

‘‘mid-Atlantic states’’ may comprise a 

regional area. 

Community development loans and 

services and qualified investments to 

statewide or regional organizations that 

have a bona fide purpose, mandate, or 

function that includes serving the 

geographies or individuals within the 

institution’s assessment area(s) will be 

considered as addressing assessment 

area needs. When examiners evaluate 

community development loans and 

services and qualified investments that 

benefit a regional area that includes the 

institution’s assessment area(s), they 

will consider the institution’s 

performance context as well as the size 

of the regional area and the actual or 

potential benefit to the institution’s 

assessment area(s). With larger regional 

areas, benefit to the institution’s 

assessment area(s) may be diffused and, 

thus, less responsive to assessment area 

needs. 

In addition, as long as an institution 

has adequately addressed the 

community development needs of its 

assessment area(s), it will also receive 

consideration for community 

development activities that benefit 

geographies or individuals located 

somewhere within the broader 

statewide or regional area that includes 

the institution’s assessment area(s), even 

if those activities do not benefit its 

assessment area(s). 

§ll.12(h)—8: What is meant by the 

term ‘‘primary purpose’’ as that term is 

used to define what constitutes a 

community development loan, a 


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qualified investment, or a community 

development service? 

A8. A loan, investment, or service has 

as its primary purpose community 

development when it is designed for the 

express purpose of revitalizing or 

stabilizing low- or moderate-income 

areas, designated disaster areas, or 

underserved or distressed 

nonmetropolitan middle-income areas, 

providing affordable housing for, or 

community services targeted to, low- or 

moderate-income persons, or promoting 

economic development by financing 

small businesses and farms that meet 

the requirements set forth in 12 CFR 

ll.12(g). To determine whether an 

activity is designed for an express 

community development purpose, the 

agencies apply one of two approaches. 

First, if a majority of the dollars or 

beneficiaries of the activity are 

identifiable to one or more of the 

enumerated community development 

purposes, then the activity will be 

considered to possess the requisite 

primary purpose. Alternatively, where 

the measurable portion of any benefit 

bestowed or dollars applied to the 

community development purpose is less 

than a majority of the entire activity’s 

benefits or dollar value, then the activity 

may still be considered to possess the 

requisite primary purpose, and the 

institution may receive CRA 

consideration for the entire activity, if 

(1) the express, bona fide intent of the 

activity, as stated, for example, in a 

prospectus, loan proposal, or 

community action plan, is primarily one 

or more of the enumerated community 

development purposes; (2) the activity 

is specifically structured (given any 

relevant market or legal constraints or 

performance context factors) to achieve 

the expressed community development 

purpose; and (3) the activity 

accomplishes, or is reasonably certain to 

accomplish, the community 

development purpose involved. 

Generally, a loan, investment, or 

service will be determined to have a 

‘‘primary purpose’’ of community 

development only if it meets the criteria 

described above. However, an activity 

involving the provision of affordable 

housing also may be deemed to have a 

‘‘primary purpose’’ of community 

development in certain other limited 

circumstances in which these criteria 

have not been met. Specifically, 

activities related to the provision of 

mixed-income housing, such as in 

connection with a development that has 

a mixed-income housing component or 

an affordable housing set-aside required 

by federal, state, or local government, 

also would be eligible for consideration 

as an activity that has a ‘‘primary 

purpose’’ of community development at 

the election of the institution. In such 

cases, an institution may receive pro 

rata consideration for the portion of 

such activities that helps to provide 

affordable housing to low- or moderateincome individuals. For example, if an 

institution makes a $10 million loan to 

finance a mixed-income housing 

development in which ten percent of 

the units will be set aside as affordable 

housing for low- and moderate-income 

individuals, the institution may elect to 

treat $1 million of such loan as a 

community development loan. In other 

words, the pro rata dollar amount of the 

total activity will be based on the 

percentage of units set-aside for 

affordable housing for low- or moderateincome individuals. 

The fact that an activity provides 

indirect or short-term benefits to low- or 

moderate-income persons does not 

make the activity community 

development, nor does the mere 

presence of such indirect or short-term 

benefits constitute a primary purpose of 

community development. Financial 

institutions that want examiners to 

consider certain activities should be 

prepared to demonstrate the activities’ 

qualifications. 

§ll.12(i) Community development 

service 

§ll.12(i)—1: In addition to meeting 

the definition of ‘‘community 

development’’ in the regulation, 

community development services must 

also be related to the provision of 

financial services. What is meant by 

‘‘provision of financial services’’? 

A1. Providing financial services 

means providing services of the type 

generally provided by the financial 

services industry. Providing financial 

services often involves informing 

community members about how to get 

or use credit or otherwise providing 

credit services or information to the 

community. For example, service on the 

board of directors of an organization 

that promotes credit availability or 

finances affordable housing is related to 

the provision of financial services. 

Providing technical assistance about 

financial services to community-based 

groups, local or tribal government 

agencies, or intermediaries that help to 

meet the credit needs of low- and 

moderate-income individuals or small 

businesses and farms is also providing 

financial services. By contrast, activities 

that do not take advantage of the 

employees’ financial expertise, such as 

neighborhood cleanups, do not involve 

the provision of financial services. 

§ll.12(i)—2: Are personal 

charitable activities provided by an 

institution’s employees or directors 

outside the ordinary course of their 

employment considered community 

development services? 

A2. No. Services must be provided as 

a representative of the institution. For 

example, if a financial institution’s 

director, on her own time and not as a 

representative of the institution, 

volunteers one evening a week at a local 

community development corporation’s 

financial counseling program, the 

institution may not consider this 

activity a community development 

service. 

§ll.12(i)—3: What are examples of 

community development services? 

A3. Examples of community 

development services include, but are 

not limited to, the following: 

• Providing financial services to lowand moderate-income individuals 

through branches and other facilities 

located in low- and moderate-income 

areas, unless the provision of such 

services has been considered in the 

evaluation of an institution’s retail 

banking services under 12 CFR 

ll.24(d); 

• Increasing access to financial 

services by opening or maintaining 

branches or other facilities that help to 

revitalize or stabilize a low- or 

moderate-income geography, a 

designated disaster area, or a distressed 

or underserved nonmetropolitan 

middle-income geography, unless the 

opening or maintaining of such 

branches or other facilities has been 

considered in the evaluation of the 

institution’s retail banking services 

under 12 CFR ll.24(d); 

• Providing technical assistance on 

financial matters to nonprofit, tribal, or 

government organizations serving lowand moderate-income housing or 

economic revitalization and 

development needs; 

• Providing technical assistance on 

financial matters to small businesses or 

community development organizations, 

including organizations and individuals 

who apply for loans or grants under the 

Federal Home Loan Banks’ Affordable 

Housing Program; 

• Lending employees to provide 

financial services for organizations 

facilitating affordable housing 

construction and rehabilitation or 

development of affordable housing; 

• Providing credit counseling, homebuyer and home-maintenance 

counseling, financial planning or other 

financial services education to promote 

community development and affordable 

housing, including credit counseling to 

assist low- or moderate-income 

borrowers in avoiding foreclosure on 

their homes; 


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• Establishing school savings 

programs or developing or teaching 

financial education or literacy curricula 

for low- or moderate-income 

individuals; 

• Providing electronic benefits 

transfer and point of sale terminal 

systems to improve access to financial 

services, such as by decreasing costs, for 

low- or moderate-income individuals; 

• Providing international remittance 

services that increase access to financial 

services by low- and moderate-income 

persons (for example, by offering 

reasonably priced international 

remittance services in connection with 

a low-cost account); 

• Providing other financial services 

with the primary purpose of community 

development, such as low-cost savings 

or checking accounts, including 

‘‘Electronic Transfer Accounts’’ provided 

pursuant to the Debt Collection 

Improvement Act of 1996, individual 

development accounts (IDAs), or free or 

low-cost government, payroll, or other 

check cashing services, that increase 

access to financial services for low- or 

moderate-income individuals; and 

• Providing foreclosure prevention 

programs to low- or moderate-income 

homeowners who are facing foreclosure 

on their primary residence with the 

objective of providing affordable, 

sustainable, long-term loan 

modifications and restructurings. 

Examples of technical assistance 

activities that might be provided to 

community development organizations 

include: 

• Serving on a loan review 

committee; 

• Developing loan application and 

underwriting standards; 

• Developing loan processing 

systems; 

• Developing secondary market 

vehicles or programs; 

• Assisting in marketing financial 

services, including development of 

advertising and promotions, 

publications, workshops and 

conferences; 

• Furnishing financial services 

training for staff and management; 

• Contributing accounting/ 

bookkeeping services; and 

• Assisting in fund raising, including 

soliciting or arranging investments. 

§ll.12(j) Consumer loan 

§ll.12(j)—1: Are home equity loans 

considered ‘‘consumer loans’’? 

A1. Home equity loans made for 

purposes other than home purchase, 

home improvement or refinancing home 

purchase or home improvement loans 

are consumer loans if they are extended 

to one or more individuals for 

household, family, or other personal 

expenditures. 

§ll.12(j)—2: May a home equity 

line of credit be considered a ‘‘consumer 

loan’’ even if part of the line is for home 

improvement purposes? 

A2. If the predominant purpose of the 

line is home improvement, the line may 

only be reported under HMDA and may 

not be considered a consumer loan. 

However, the full amount of the line 

may be considered a ‘‘consumer loan’’ if 

its predominant purpose is for 

household, family, or other personal 

expenditures, and to a lesser extent 

home improvement, and the full amount 

of the line has not been reported under 

HMDA. This is the case even though 

there may be ‘‘double counting’’ because 

part of the line may also have been 

reported under HMDA. 

§ll.12(j)—3: How should an 

institution collect or report information 

on loans the proceeds of which will be 

used for multiple purposes? 

A3. If an institution makes a single 

loan or provides a line of credit to a 

customer to be used for both consumer 

and small business purposes, consistent 

with the Call Report and TFR 

instructions, the institution should 

determine the major (predominant) 

component of the loan or the credit line 

and collect or report the entire loan or 

credit line in accordance with the 

regulation’s specifications for that loan 

type. 

§ll.12(l) Home mortgage loan 

§ll.12(l)—1: Does the term ‘‘home 

mortgage loan’’ include loans other than 

‘‘home purchase loans’’? 

A1. Yes. ‘‘Home mortgage loan’’ 

includes ‘‘home improvement loan,’’ 

‘‘home purchase loan,’’ and 

‘‘refinancing,’’ as defined in the HMDA 

regulation, Regulation C, 12 CFR part 

203. This definition also includes 

multifamily (five-or-more families) 

dwelling loans, and loans for the 

purchase of manufactured homes. See 

also Q&A §ll.22(a)(2)—7. 

§ll.12(l)—2: Some financial 

institutions broker home mortgage 

loans. They typically take the borrower’s 

application and perform other 

settlement activities; however, they do 

not make the credit decision. The broker 

institutions may also initially fund these 

mortgage loans, then immediately 

assign them to another lender. Because 

the broker institution does not make the 

credit decision, under Regulation C 

(HMDA), they do not record the loans on 

their HMDA–LARs, even if they fund the 

loans. May an institution receive any 

consideration under CRA for its home 

mortgage loan brokerage activities? 

A2. Yes. A financial institution that 

funds home mortgage loans but 

immediately assigns the loans to the 

lender that made the credit decisions 

may present information about these 

loans to examiners for consideration 

under the lending test as ‘‘other loan 

data.’’ Under Regulation C, the broker 

institution does not record the loans on 

its HMDA–LAR because it does not 

make the credit decisions, even if it 

funds the loans. An institution electing 

to have these home mortgage loans 

considered must maintain information 

about all of the home mortgage loans 

that it has funded in this way. 

Examiners will consider these other 

loan data using the same criteria by 

which home mortgage loans originated 

or purchased by an institution are 

evaluated. 

Institutions that do not provide 

funding but merely take applications 

and provide settlement services for 

another lender that makes the credit 

decisions will receive consideration for 

this service as a retail banking service. 

Examiners will consider an institution’s 

mortgage brokerage services when 

evaluating the range of services 

provided to low-, moderate-, middleand upper-income geographies and the 

degree to which the services are tailored 

to meet the needs of those geographies. 

Alternatively, an institution’s mortgage 

brokerage service may be considered a 

community development service if the 

primary purpose of the service is 

community development. An institution 

wishing to have its mortgage brokerage 

service considered as a community 

development service must provide 

sufficient information to substantiate 

that its primary purpose is community 

development and to establish the extent 

of the services provided. 

§ll.12(m) Income level 

§ll.12(m)—1: Where do institutions 

find income level data for geographies 

and individuals? 

A1. The income levels for 

geographies, i.e., census tracts, are 

derived from Census Bureau 

information and are updated 

approximately every ten years. The 

income levels for individuals are 

derived from information calculated by 

the Department of Housing and Urban 

Development (HUD) and updated 

annually. 

Institutions may obtain 2000 

geography income information and the 

annually updated HUD median family 

incomes for metropolitan statistical 

areas (MSAs) and statewide 

nonmetropolitan areas by accessing the 

Federal Financial Institution 

Examination Council’s (FFIEC’s) Web 


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site at http://www.ffiec.gov/cra or by 

calling the FFIEC’s CRA Assistance Line 

at (202) 872–7584. 

§ll.12(n) Limited purpose institution 

§ll.12(n)—1: What constitutes a 

‘‘narrow product line’’ in the definition 

of ‘‘limited purpose institution’’? 

A1. An institution offers a narrow 

product line by limiting its lending 

activities to a product line other than a 

traditional retail product line required 

to be evaluated under the lending test 

(i.e., home mortgage, small business, 

and small farm loans). Thus, an 

institution engaged only in making 

credit card or motor vehicle loans offers 

a narrow product line, while an 

institution limiting its lending activities 

to home mortgages is not offering a 

narrow product line. 

§ll.12(n)—2: What factors will the 

agencies consider to determine whether 

an institution that, if limited purpose, 

makes loans outside a narrow product 

line, or, if wholesale, engages in retail 

lending, will lose its limited purpose or 

wholesale designation because of too 

much other lending? 

A2. Wholesale institutions may 

engage in some retail lending without 

losing their designation if this activity is 

incidental and done on an 

accommodation basis. Similarly, limited 

purpose institutions continue to meet 

the narrow product line requirement if 

they provide other types of loans on an 

infrequent basis. In reviewing other 

lending activities by these institutions, 

the agencies will consider the following 

factors: 

• Is the retail lending provided as an 

incident to the institution’s wholesale 

lending? 

• Are the retail loans provided as an 

accommodation to the institution’s 

wholesale customers? 

• Are the other types of loans made 

only infrequently to the limited purpose 

institution’s customers? 

• Does only an insignificant portion 

of the institution’s total assets and 

income result from the other lending? 

• How significant a role does the 

institution play in providing that type(s) 

of loan(s) in the institution’s assessment 

area(s)? 

• Does the institution hold itself out 

as offering that type(s) of loan(s)? 

• Does the lending test or the 

community development test present a 

more accurate picture of the 

institution’s CRA performance? 

§ll.12(n)—3: Do ‘‘niche 

institutions’’ qualify as limited purpose 

(or wholesale) institutions? 

A3. Generally, no. Institutions that are 

in the business of lending to the public, 

but specialize in certain types of retail 

loans (for example, home mortgage or 

small business loans) to certain types of 

borrowers (for example, to high-end 

income level customers or to 

corporations or partnerships of licensed 

professional practitioners) (‘‘niche 

institutions’’) generally would not 

qualify as limited purpose (or 

wholesale) institutions. 

§ll.12(t) Qualified investment 

§ll.12(t)—1: Does the CRA 

regulation provide authority for 

institutions to make investments? 

A1. No. The CRA regulation does not 

provide authority for institutions to 

make investments that are not otherwise 

allowed by Federal law. 

§ll.12(t)—2: Are mortgage-backed 

securities or municipal bonds ‘‘qualified 

investments’’? 

A2. As a general rule, mortgagebacked securities and municipal bonds 

are not qualified investments because 

they do not have as their primary 

purpose community development, as 

defined in the CRA regulations. 

Nonetheless, mortgage-backed securities 

or municipal bonds designed primarily 

to finance community development 

generally are qualified investments. 

Municipal bonds or other securities 

with a primary purpose of community 

development need not be housingrelated. For example, a bond to fund a 

community facility or park or to provide 

sewage services as part of a plan to 

redevelop a low-income neighborhood 

is a qualified investment. Certain 

municipal bonds in underserved 

nonmetropolitan middle-income 

geographies may also be qualified 

investments. See Q&A 

§ll.12(g)(4)(iii)—4. Housing-related 

bonds or securities must primarily 

address affordable housing (including 

multifamily rental housing) needs of 

low- or moderate-income individuals in 

order to qualify. See also Q&A 

§ll.23(b)—2. 

§ll.12(t)—3: Are Federal Home 

Loan Bank stocks or unpaid dividends 

and membership reserves with the 

Federal Reserve Banks ‘‘qualified 

investments’’? 

A3. No. Federal Home Loan Bank 

(FHLB) stocks or unpaid dividends, and 

membership reserves with the Federal 

Reserve Banks do not have a sufficient 

connection to community development 

to be qualified investments. However, 

FHLB member institutions may receive 

CRA consideration as a community 

development service for technical 

assistance they provide on behalf of 

applicants and recipients of funding 

from the FHLB’s Affordable Housing 

Program. See Q&A §ll.12(i)—3. 

§ll.12(t)—4: What are examples of 

qualified investments? 

A4. Examples of qualified 

investments include, but are not limited 

to, investments, grants, deposits, or 

shares in or to: 

• Financial intermediaries (including 

Community Development Financial 

Institutions (CDFIs), New Markets Tax 

Credit-eligible Community Development 

Entities, Community Development 

Corporations (CDCs), minority- and 

women-owned financial institutions, 

community loan funds, 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 

community development, such as a 

CDFI that promotes economic 

development on an Indian reservation; 

• Organizations engaged in affordable 

housing rehabilitation and construction, 

including multifamily rental housing; 

• Organizations, including, for 

example, Small Business Investment 

Companies (SBICs), specialized SBICs, 

and Rural Business Investment 

Companies (RBICs) that promote 

economic development by financing 

small businesses; 

• Community development venture 

capital companies that promote 

economic development by financing 

small businesses; 

• Facilities that promote community 

development by providing community 

services for low- and moderate-income 

individuals, such as youth programs, 

homeless centers, soup kitchens, health 

care facilities, battered women’s centers, 

and alcohol and drug recovery centers; 

• Projects eligible for low-income 

housing tax credits; 

• State and municipal obligations, 

such as revenue bonds, that specifically 

support affordable housing or other 

community development; 

• Not-for-profit organizations serving 

low- and moderate-income housing or 

other community development needs, 

such as counseling for credit, homeownership, home maintenance, and 

other financial literacy programs; and 

• Organizations supporting activities 

essential to the capacity of low- and 

moderate-income individuals or 

geographies to utilize credit or to 

sustain economic development, such as, 

for example, day care operations and job 

training programs that enable low- or 

moderate-income individuals to work. 

See also Q&As §ll.12(g)(4)(ii)—2; 

§ll.12(g)(4)(iii)—3; 

§ll.12(g)(4)(iii)—4. 

§ll.12(t)—5: Will an institution 

receive consideration for charitable 


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contributions as ‘‘qualified 

investments’’? 

A5. Yes, provided they have as their 

primary purpose community 

development as defined in the 

regulations. A charitable contribution, 

whether in cash or an in-kind 

contribution of property, is included in 

the term ‘‘grant.’’ A qualified investment 

is not disqualified because an 

institution receives favorable treatment 

for it (for example, as a tax deduction 

or credit) under the Internal Revenue 

Code. 

§ll.12(t)—6: An institution makes 

or participates in a community 

development loan. The institution 

provided the loan at below-market 

interest rates or ‘‘bought down’’ the 

interest rate to the borrower. Is the lost 

income resulting from the lower interest 

rate or buy-down a qualified 

investment? 

A6. No. The agencies will, however, 

consider the responsiveness, 

innovativeness, and complexity of the 

community development loan within 

the bounds of safe and sound banking 

practices. 

§ll.12(t)—7: Will the agencies 

consider as a qualified investment the 

wages or other compensation of an 

employee or director who provides 

assistance to a community development 

organization on behalf of the 

institution? 

A7. No. However, the agencies will 

consider donated labor of employees or 

directors of a financial institution as a 

community development service if the 

activity meets the regulatory definition 

of ‘‘community development service.’’ 

§ll.12(t)—8: When evaluating a 

qualified investment, what 

consideration will be given for priorperiod investments? 

A8. When evaluating an institution’s 

qualified investment record, examiners 

will consider investments that were 

made prior to the current examination, 

but that are still outstanding. Qualitative 

factors will affect the weighting given to 

both current period and outstanding 

prior-period qualified investments. For 

example, a prior-period outstanding 

investment with a multi-year impact 

that addresses assessment area 

community development needs may 

receive more consideration than a 

current period investment of a 

comparable amount that is less 

responsive to area community 

development needs. 

§ll.12(u) Small institution 

§ll.12(u)—1: How are Federal and 

State branch assets of a foreign bank 

calculated for purposes of the CRA? 

A1. A Federal or State branch of a 

foreign bank is considered a small 

institution if the Federal or State branch 

has assets less than the asset threshold 

delineated in 12 CFR ll.12(u)(1) for 

small institutions. 

§ll.12(u)(2) Small institution 

adjustment 

§ll.12(u)(2)—1: How often will the 

asset size thresholds for small 

institutions and intermediate small 

institutions be changed, and how will 

these adjustments be communicated? 

A1. The asset size thresholds for 

‘‘small institutions’’ and ‘‘intermediate 

small institutions’’ will be adjusted 

annually based on changes to the 

Consumer Price Index. More 

specifically, the dollar thresholds will 

be adjusted annually based on the yearto-year change in the average of the 

Consumer Price Index for Urban Wage 

Earners and Clerical Workers, not 

seasonally adjusted for each twelvemonth period ending in November, with 

rounding to the nearest million. Any 

changes in the asset size thresholds will 

be published in the Federal Register. 

Historical and current asset-size 

threshold information may be found on 

the FFIEC’s Web site at http:// 

www.ffiec.gov/cra. 

§ll.12(v) Small business loan 

§ll.12(v)—1: Are loans to nonprofit 

organizations considered small business 

loans or are they considered community 

development loans? 

A1. To be considered a small business 

loan, a loan must meet the definition of 

‘‘loan to small business’’ in the 

instructions in the ‘‘Consolidated 

Reports of Conditions and Income’’ (Call 

Report) and ‘‘Thrift Financial Report’’ 

(TFR). In general, a loan to a nonprofit 

organization, for business or farm 

purposes, where the loan is secured by 

nonfarm nonresidential property and 

the original amount of the loan is 

$1 million or less, if a business loan, or 

$500,000 or less, if a farm loan, would 

be reported in the Call Report and TFR 

as a small business or small farm loan. 

If a loan to a nonprofit organization is 

reportable as a small business or small 

farm loan, it cannot also be considered 

as a community development loan, 

except by a wholesale or limited 

purpose institution. Loans to nonprofit 

organizations that are not small business 

or small farm loans for Call Report and 

TFR purposes may be considered as 

community development loans if they 

meet the regulatory definition of 

‘‘community development.’’ 

§ll.12(v)—2: Are loans secured by 

commercial real estate considered small 

business loans? 

A2. Yes, depending on their principal 

amount. Small business loans include 

loans secured by ‘‘nonfarm 

nonresidential properties,’’ as defined in 

the Call Report and TFR, in amounts of 

$1 million or less. 

§ll.12(v)—3: Are loans secured by 

nonfarm residential real estate to 

finance small businesses ‘‘small 

business loans’’? 

A3. Applicable to banks filing Call 

Reports: Typically not. Loans secured 

by nonfarm residential real estate that 

are used to finance small businesses are 

not included as ‘‘small business’’ loans 

for Call Report purposes unless the 

security interest in the nonfarm 

residential real estate is taken only as an 

abundance of caution. (See Call Report 

Glossary definition of ‘‘Loan Secured by 

Real Estate.’’) The agencies recognize 

that many small businesses are financed 

by loans that would not have been made 

or would have been made on less 

favorable terms had they not been 

secured by residential real estate. If 

these loans promote community 

development, as defined in the 

regulation, they may be considered as 

community development loans. 

Otherwise, at an institution’s option, the 

institution may collect and maintain 

data separately concerning these loans 

and request that the data be considered 

in its CRA evaluation as ‘‘Other Secured 

Lines/Loans for Purposes of Small 

Business.’’ See also Q&A 

§ll.22(a)(2)—7. 

Applicable to institutions that file 

TFRs: Possibly, depending how the loan 

is classified for TFR purposes. Loans 

secured by nonfarm residential real 

estate to finance small businesses may 

be included as small business loans 

only if they are reported on the TFR as 

nonmortgage, commercial loans. (See 

TFR Q&A No. 62.) Otherwise, loans that 

meet the definition of mortgage loans, 

for TFR reporting purposes, may be 

classified as mortgage loans. 

§ll.12(v)—4: Are credit cards 

issued to small businesses considered 

‘‘small business loans’’? 

A4. Credit cards issued to a small 

business or to individuals to be used, 

with the institution’s knowledge, as 

business accounts are small business 

loans if they meet the definitional 

requirements in the Call Report or TFR 

instructions. 

§ll.12(x) Wholesale institution 

§ll.12(x)—1: What factors will the 

agencies consider in determining 

whether an institution is in the business 

of extending home mortgage, small 

business, small farm, or consumer loans 

to retail customers? 


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A1. The agencies will consider 

whether: 

• The institution holds itself out to 

the retail public as providing such 

loans; and 

• The institution’s revenues from 

extending such loans are significant 

when compared to its overall 

operations, including off-balance sheet 

activities. 

A wholesale institution may make 

some retail loans without losing its 

wholesale designation as described 

above in Q&A §ll.12(n)—2. 

§ll.21—Performance tests, 

standards, and ratings, in general 

§ll.21(a) Performance tests and 

standards 

§ll.21(a)—1: How will examiners 

apply the performance criteria? 

A1. Examiners will apply the 

performance criteria reasonably and 

fairly, in accord with the regulations, 

the examination procedures, and this 

guidance. In doing so, examiners will 

disregard efforts by an institution to 

manipulate business operations or 

present information in an artificial light 

that does not accurately reflect an 

institution’s overall record of lending 

performance. 

§ll.21(a)—2: Are all community 

development activities weighted equally 

by examiners? 

A2. No. Examiners will consider the 

responsiveness to credit and community 

development needs, as well as the 

innovativeness and complexity, if 

applicable, of an institution’s 

community development lending, 

qualified investments, and community 

development services. These criteria 

include consideration of the degree to 

which they serve as a catalyst for other 

community development activities. The 

criteria are designed to add a qualitative 

element to the evaluation of an 

institution’s performance. 

(‘‘Innovativeness’’ and ‘‘complexity’’ are 

not factors in the community 

development test applicable to 

intermediate small institutions.) 

§ll.21(b) Performance context 

§ll.21(b)—1: What is the 

performance context? 

A1. The performance context is a 

broad range of economic, demographic, 

and institution- and community-specific 

information that an examiner reviews to 

understand the context in which an 

institution’s record of performance 

should be evaluated. The agencies will 

provide examiners with some of this 

information. The performance context is 

not a formal assessment of community 

credit needs. 

§ll.21(b)(2) Information maintained 

by the institution or obtained from 

community contacts 

§ll.21(b)(2)—1: Will examiners 

consider performance context 

information provided by institutions? 

A1. Yes. An institution may provide 

examiners with any information it 

deems relevant, including information 

on the lending, investment, and service 

opportunities in its assessment area(s). 

This information may include data on 

the business opportunities addressed by 

lenders not subject to the CRA. 

Institutions are not required, however, 

to prepare a formal needs assessment. If 

an institution provides information to 

examiners, the agencies will not expect 

information other than what the 

institution normally would develop to 

prepare a business plan or to identify 

potential markets and customers, 

including low- and moderate-income 

persons and geographies in its 

assessment area(s). The agencies will 

not evaluate an institution’s efforts to 

ascertain community credit needs or 

rate an institution on the quality of any 

information it provides. 

§ll.21(b)(2)—2: Will examiners 

conduct community contact interviews 

as part of the examination process? 

A2. Yes. Examiners will consider 

information obtained from interviews 

with local community, civic, and 

government leaders. These interviews 

provide examiners with knowledge 

regarding the local community, its 

economic base, and community 

development initiatives. To ensure that 

information from local leaders is 

considered—particularly in areas where 

the number of potential contacts may be 

limited—examiners may use 

information obtained through an 

interview with a single community 

contact for examinations of more than 

one institution in a given market. In 

addition, the agencies may consider 

information obtained from interviews 

conducted by other agency staff and by 

the other agencies. In order to augment 

contacts previously used by the agencies 

and foster a wider array of contacts, the 

agencies may share community contact 

information. 

§ll.21(b)(4) Institutional capacity 

and constraints 

§ll.21(b)(4)—1: Will examiners 

consider factors outside of an 

institution’s control that prevent it from 

engaging in certain activities? 

A1. Yes. Examiners will take into 

account statutory and supervisory 

limitations on an institution’s ability to 

engage in any lending, investment, and 

service activities. For example, a savings 

association that has made few or no 

qualified investments due to its limited 

investment authority may still receive a 

low satisfactory rating under the 

investment test if it has a strong lending 

record. 

§ll.21(b)(5) Institution’s past 

performance and the performance of 

similarly situated lenders 

§ll.21(b)(5)—1: Can an 

institution’s assigned rating be 

adversely affected by poor past 

performance? 

A1. Yes. The agencies will consider 

an institution’s past performance in its 

overall evaluation. For example, an 

institution that received a rating of 

‘‘needs to improve’’ in the past may 

receive a rating of ‘‘substantial 

noncompliance’’ if its performance has 

not improved. 

§ll.21(b)(5)—2: How will 

examiners consider the performance of 

similarly situated lenders? 

A2. The performance context section 

of the regulation permits the 

performance of similarly situated 

lenders to be considered, for example, 

as one of a number of considerations in 

evaluating the geographic distribution of 

an institution’s loans to low-, 

moderate-, middle-, and upper-income 

geographies. This analysis, as well as 

other analyses, may be used, for 

example, where groups of contiguous 

geographies within an institution’s 

assessment area(s) exhibit abnormally 

low penetration. In this regard, the 

performance of similarly situated 

lenders may be analyzed if such an 

analysis would provide accurate insight 

into the institution’s lack of 

performance in those areas. The 

regulation does not require the use of a 

specific type of analysis under these 

circumstances. Moreover, no ratio 

developed from any type of analysis is 

linked to any lending test rating. 

§ll.22—Lending test 

§ll.22(a) Scope of test 

§ll.22(a)—1: Are there any types of 

lending activities that help meet the 

credit needs of an institution’s 

assessment area(s) and that may 

warrant favorable consideration as 

activities that are responsive to the 

needs of the institution’s assessment 

area(s)? 

A1. Credit needs vary from 

community to community. However, 

there are some lending activities that are 

likely to be responsive in helping to 

meet the credit needs of many 

communities. These activities include: 

• Providing loan programs that 

include a financial education 


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component about how to avoid lending 

activities that may be abusive or 

otherwise unsuitable; 

• Establishing loan programs that 

provide small, unsecured consumer 

loans in a safe and sound manner (i.e., 

based on the borrower’s ability to repay) 

and with reasonable terms; 

• Offering lending programs, which 

feature reporting to consumer reporting 

agencies, that transition borrowers from 

loans with higher interest rates and fees 

(based on credit risk) to lower-cost 

loans, consistent with safe and sound 

lending practices. Reporting to 

consumer reporting agencies allows 

borrowers accessing these programs the 

opportunity to improve their credit 

histories and thereby improve their 

access to competitive credit products; 

• Establishing loan programs with the 

objective of providing affordable, 

sustainable, long-term relief, for 

example, through loan refinancings, 

restructures, or modifications, to 

homeowners who are facing foreclosure 

on their primary residences. 

Examiners may consider favorably 

such lending activities, which have 

features augmenting the success and 

effectiveness of the small, intermediate 

small, or large institution’s lending 

programs. 

§ll.22(a)(1) Types of loans 

considered 

§ll.22(a)(1)—1: If a large retail 

institution is not required to collect and 

report home mortgage data under the 

HMDA, will the agencies still evaluate 

the institution’s home mortgage lending 

performance? 

A1. Yes. The agencies will sample the 

institution’s home mortgage loan files in 

order to assess its performance under 

the lending test criteria. 

§ll.22(a)(1)—2: When will 

examiners consider consumer loans as 

part of an institution’s CRA evaluation? 

A2. Consumer loans will be evaluated 

if the institution so elects and has 

collected and maintained the data; an 

institution that elects not to have its 

consumer loans evaluated will not be 

viewed less favorably by examiners than 

one that does. However, if consumer 

loans constitute a substantial majority of 

the institution’s business, the agencies 

will evaluate them even if the 

institution does not so elect. The 

agencies interpret ‘‘substantial majority’’ 

to be so significant a portion of the 

institution’s lending activity by number 

and dollar volume of loans that the 

lending test evaluation would not 

meaningfully reflect its lending 

performance if consumer loans were 

excluded. 

§ll.22(a)(2) Loan originations and 

purchases/other loan data 

§ll.22(a)(2)—1: How are lending 

commitments (such as letters of credit) 

evaluated under the regulation? 

A1. The agencies consider lending 

commitments (such as letters of credit) 

only at the option of the institution, 

regardless of examination type. 

Commitments must be legally binding 

between an institution and a borrower 

in order to be considered. Information 

about lending commitments will be 

used by examiners to enhance their 

understanding of an institution’s 

performance, but will be evaluated 

separately from the loans. 

§ll.22(a)(2)—2: Will examiners 

review application data as part of the 

lending test? 

A2. Application activity is not a 

performance criterion of the lending 

test. However, examiners may consider 

this information in the performance 

context analysis because this 

information may give examiners insight 

on, for example, the demand for loans. 

§ll.22(a)(2)—3: May a financial 

institution receive consideration under 

CRA for home mortgage loan 

modification, extension, and 

consolidation agreements (MECAs), in 

which it obtains home mortgage loans 

from other institutions without actually 

purchasing or refinancing the home 

mortgage loans, as those terms have 

been interpreted under CRA and HMDA, 

as implemented by 12 CFR part 203? 

A3. Yes. In some states, MECAs, 

which are not considered loan 

refinancings because the existing loan 

obligations are not satisfied and 

replaced, are common. Although these 

transactions are not considered to be 

purchases or refinancings, as those 

terms have been interpreted under CRA, 

they do achieve the same results. A 

small, intermediate small, or large 

institution may present information 

about its MECA activities with respect 

to home mortgages to examiners for 

consideration under the lending test as 

‘‘other loan data.’’ 

§ll.22(a)(2)—4: In addition to 

MECAs, what are other examples of 

‘‘other loan data’’? 

A4. Other loan data include, for 

example: 

• Loans funded for sale to the 

secondary markets that an institution 

has not reported under HMDA; 

• Unfunded loan commitments and 

letters of credit; 

• Commercial and consumer leases; 

• Loans secured by nonfarm 

residential real estate, not taken as an 

abundance of caution, that are used to 

finance small businesses or small farms 

and that are not reported as small 

business/small farm loans or reported 

under HMDA; and 

• An increase to a small business or 

small farm line of credit if the increase 

would cause the total line of credit to 

exceed $1 million, in the case of a small 

business line; or $500,000, in the case 

of a small farm line. 

§ll.22(a)(2)—5: Do institutions 

receive consideration for originating or 

purchasing loans that are fully 

guaranteed? 

A5. Yes. For all examination types, 

examiners evaluate an institution’s 

record of helping to meet the credit 

needs of its assessment area(s) through 

the origination or purchase of specified 

types of loans. Examiners do not take 

into account whether or not such loans 

are guaranteed. 

§ll.22(a)(2)—6: Do institutions 

receive consideration for purchasing 

loan participations? 

A6. Yes. Examiners will consider the 

amount of loan participations purchased 

when evaluating an institution’s record 

of helping to meet the credit needs of its 

assessment area(s) through the 

origination or purchase of specified 

types of loans, regardless of examination 

type. As with other loan purchases, 

examiners will evaluate whether 

participations in loan purchased, which 

have been sold and purchased a number 

of times, artificially inflate CRA 

performance. See, e.g., §ll.21(a)—1. 

§ll.22(a)(2)—7: How are 

refinancings of small business loans, 

which are secured by a one-to-four 

family residence and that have been 

reported under HMDA as a refinancing, 

evaluated under CRA? 

A7. For banks subject to the Call 

Report instructions: A loan of $1 million 

or less with a business purpose that is 

secured by a one-to-four family 

residence is considered a small business 

loan for CRA purposes only if the 

security interest in the residential 

property was taken as an abundance of 

caution and where the terms have not 

been made more favorable than they 

would have been in the absence of the 

lien. (See Call Report Glossary 

definition of ‘‘Loan Secured by Real 

Estate.’’) If this same loan is refinanced 

and the new loan is also secured by a 

one-to-four family residence, but only 

through an abundance of caution, this 

loan is reported not only as a 

refinancing under HMDA, but also as a 

small business loan under CRA. (Note 

that small farm loans are similarly 

treated.) 

It is not anticipated that ‘‘doublereported’’ loans will be so numerous as 

to affect the typical institution’s CRA 

rating. In the event that an institution 


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reports a significant number or amount 

of loans as both home mortgage and 

small business loans, examiners will 

consider that overlap in evaluating the 

institution’s performance and generally 

will consider the ‘‘double-reported’’ 

loans as small business loans for CRA 

consideration. 

The origination of a small business or 

small farm loan that is secured by a oneto-four family residence is not 

reportable under HMDA, unless the 

purpose of the loan is home purchase or 

home improvement. Nor is the loan 

reported as a small business or small 

farm loan if the security interest is not 

taken merely as an abundance of 

caution. Any such loan may be provided 

to examiners as ‘‘other loan data’’ 

(‘‘Other Secured Lines/Loans for 

Purposes of Small Business’’) for 

consideration during a CRA evaluation. 

See Q&A §ll.12(v)—3. The 

refinancings of such loans would be 

reported under HMDA. 

For savings associations subject to the 

Thrift Financial Reporting instructions: 

A loan of $1 million or less with a 

business purpose secured by a one-tofour family residence is considered a 

small business loan for CRA purposes if 

it is reported as a small business loan 

for TFR purposes and was not reported 

on the TFR as a mortgage loan (TFR 

Instructions for Commercial Loans: 

Secured). If this same loan is refinanced 

and the new loan is also secured by a 

one-to-four family residence, and was 

not reported for TFR purposes as a 

mortgage loan, this loan is reported not 

only as a refinancing for HMDA, but is 

also reported as a small business loan 

under the TFR and CRA. The 

origination of a small business or small 

farm loan that is secured by a one-tofour family residence is not reportable 

under HMDA, unless the purpose of the 

loan is home purchase or home 

improvement. Nor is the loan reported 

as small business or small farm if it was 

reported as a mortgage on the TFR 

report. 

OTS does not anticipate that ‘‘doublereported’’ loans will be so numerous as 

to affect the typical institution’s CRA 

rating. In the event that an institution 

reports a significant number or amount 

of loans as both home mortgage and 

small business loans, examiners will 

consider that overlap in evaluating the 

institution’s performance and generally 

will consider the ‘‘double-reported’’ 

loans as small business loans for CRA 

consideration. 

The origination of a small business or 

small farm loan that is secured by a oneto-four family residence should be 

reported in accordance with Q&A 

§ll.12(v)—3. The refinancings of 

such loans would be reported under 

HMDA. 

§ll.22(b) Performance criteria 

§ll.22(b)(1) Lending activity 

§ll.22(b)(1)—1: How will the 

agencies apply the lending activity 

criterion to discourage an institution 

from originating loans that are viewed 

favorably under CRA in the institution 

itself and referring other loans, which 

are not viewed as favorably, for 

origination by an affiliate? 

A1. Examiners will review closely 

institutions with (1) a small number and 

amount of home mortgage loans with an 

unusually good distribution among lowand moderate-income areas and lowand moderate-income borrowers and (2) 

a policy of referring most, but not all, of 

their home mortgage loans to affiliated 

institutions. If an institution is making 

loans mostly to low- and moderateincome individuals and areas and 

referring the rest of the loan applicants 

to an affiliate for the purpose of 

receiving a favorable CRA rating, 

examiners may conclude that the 

institution’s lending activity is not 

satisfactory because it has 

inappropriately attempted to influence 

the rating. In evaluating an institution’s 

lending, examiners will consider 

legitimate business reasons for the 

allocation of the lending activity. 

§ll.22(b)(2) & (3) Geographic 

distribution and borrower 

characteristics 

§ll.22(b)(2) & (3)—1: How do the 

geographic distribution of loans and the 

distribution of lending by borrower 

characteristics interact in the lending 

test applicable to either large or small 

institutions? 

A1. Examiners generally will consider 

both the distribution of an institution’s 

loans among geographies of different 

income levels, and among borrowers of 

different income levels and businesses 

and farms of different sizes. The 

importance of the borrower distribution 

criterion, particularly in relation to the 

geographic distribution criterion, will 

depend on the performance context. For 

example, distribution among borrowers 

with different income levels may be 

more important in areas without 

identifiable geographies of different 

income categories. On the other hand, 

geographic distribution may be more 

important in areas with the full range of 

geographies of different income 

categories. 

§ll.22(b)(2) & (3)—2: Must an 

institution lend to all portions of its 

assessment area? 

A2. The term ‘‘assessment area’’ 

describes the geographic area within 

which the agencies assess how well an 

institution, regardless of examination 

type, has met the specific performance 

tests and standards in the rule. The 

agencies do not expect that simply 

because a census tract is within an 

institution’s assessment area(s), the 

institution must lend to that census 

tract. Rather the agencies will be 

concerned with conspicuous gaps in 

loan distribution that are not explained 

by the performance context. Similarly, if 

an institution delineated the entire 

county in which it is located as its 

assessment area, but could have 

delineated its assessment area as only a 

portion of the county, it will not be 

penalized for lending only in that 

portion of the county, so long as that 

portion does not reflect illegal 

discrimination or arbitrarily exclude 

low- or moderate-income geographies. 

The capacity and constraints of an 

institution, its business decisions about 

how it can best help to meet the needs 

of its assessment area(s), including those 

of low- and moderate-income 

neighborhoods, and other aspects of the 

performance context, are all relevant to 

explain why the institution is serving or 

not serving portions of its assessment 

area(s). 

§ll.22(b)(2) & (3)—3: Will 

examiners take into account loans made 

by affiliates when evaluating the 

proportion of an institution’s lending in 

its assessment area(s)? 

A3. Examiners will not take into 

account loans made by affiliates when 

determining the proportion of an 

institution’s lending in its assessment 

area(s), even if the institution elects to 

have its affiliate lending considered in 

the remainder of the lending test 

evaluation. However, examiners may 

consider an institution’s business 

strategy of conducting lending through 

an affiliate in order to determine 

whether a low proportion of lending in 

the assessment area(s) should adversely 

affect the institution’s lending test 

rating. 

§ll.22(b)(2) & (3)—4: When will 

examiners consider loans (other than 

community development loans) made 

outside an institution’s assessment 

area(s)? 

A4. Consideration will be given for 

loans to low- and moderate-income 

persons and small business and farm 

loans outside of an institution’s 

assessment area(s), provided the 

institution has adequately addressed the 

needs of borrowers within its 

assessment area(s). The agencies will 

apply this consideration not only to 

loans made by large retail institutions 

being evaluated under the lending test, 

but also to loans made by small and 


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intermediate small institutions being 

evaluated under their respective 

performance standards. Loans to lowand moderate-income persons and small 

businesses and farms outside of an 

institution’s assessment area(s), 

however, will not compensate for poor 

lending performance within the 

institution’s assessment area(s). 

§ll.22(b)(2) & (3)—5: Under the 

lending test applicable to small, 

intermediate small, or large institutions, 

how will examiners evaluate home 

mortgage loans to middle- or upperincome individuals in a low- or 

moderate-income geography? 

A5. Examiners will consider these 

home mortgage loans under the 

performance criteria of the lending test, 

i.e., by number and amount of home 

mortgage loans, whether they are inside 

or outside the financial institution’s 

assessment area(s), their geographic 

distribution, and the income levels of 

the borrowers. Examiners will use 

information regarding the financial 

institution’s performance context to 

determine how to evaluate the loans 

under these performance criteria. 

Depending on the performance context, 

examiners could view home mortgage 

loans to middle-income individuals in a 

low-income geography very differently. 

For example, if the loans are for homes 

or multifamily housing located in an 

area for which the local, state, tribal, or 

Federal government or a communitybased development organization has 

developed a revitalization or 

stabilization plan (such as a Federal 

enterprise community or empowerment 

zone) that includes attracting mixedincome residents to establish a 

stabilized, economically diverse 

neighborhood, examiners may give more 

consideration to such loans, which may 

be viewed as serving the low- or 

moderate-income community’s needs as 

well as serving those of the middle- or 

upper-income borrowers. If, on the other 

hand, no such plan exists and there is 

no other evidence of governmental 

support for a revitalization or 

stabilization project in the area and the 

loans to middle- or upper-income 

borrowers significantly disadvantage or 

primarily have the effect of displacing 

low- or moderate-income residents, 

examiners may view these loans simply 

as home mortgage loans to middle- or 

upper-income borrowers who happen to 

reside in a low- or moderate-income 

geography and weigh them accordingly 

in their evaluation of the institution. 

§ll.22(b)(4) Community development 

lending 

§ll.22(b)(4)—1: When evaluating 

an institution’s record of community 

development lending under the lending 

test applicable to large institutions, may 

an examiner distinguish among 

community development loans on the 

basis of the actual amount of the loan 

that advances the community 

development purpose? 

A1. Yes. When evaluating the 

institution’s record of community 

development lending under 12 CFR 

ll.22(b)(4), it is appropriate to give 

greater weight to the amount of the loan 

that is targeted to the intended 

community development purpose. For 

example, consider two $10 million 

projects (with a total of 100 units each) 

that have as their express primary 

purpose affordable housing and are 

located in the same community. One of 

these projects sets aside 40 percent of its 

units for low-income residents and the 

other project allocates 65 percent of its 

units for low-income residents. An 

institution would report both loans as 

$10 million community development 

loans under the 12 CFR ll.42(b)(2) 

aggregate reporting obligation. However, 

transaction complexity, innovation and 

all other relevant considerations being 

equal, an examiner should also take into 

account that the 65 percent project 

provides more affordable housing for 

more people per dollar expended. 

Under 12 CFR ll.22(b)(4), the 

extent of CRA consideration an 

institution receives for its community 

development loans should bear a direct 

relation to the benefits received by the 

community and the innovation or 

complexity of the loans required to 

accomplish the activity, not simply to 

the dollar amount expended on a 

particular transaction. By applying all 

lending test performance criteria, a 

community development loan of a lower 

dollar amount could meet the credit 

needs of the institution’s community to 

a greater extent than a community 

development loan with a higher dollar 

amount, but with less innovation, 

complexity, or impact on the 

community. 

§ll.22(b)(5) Innovative or flexible 

lending practices 

§ll.22(b)(5)—1: What is the range 

of practices that examiners may 

consider in evaluating the 

innovativeness or flexibility of an 

institution’s lending under the lending 

test applicable to large institutions? 

A1. In evaluating the innovativeness 

or flexibility of an institution’s lending 

practices (and the complexity and 

innovativeness of its community 

development lending), examiners will 

not be limited to reviewing the overall 

variety and specific terms and 

conditions of the credit products 

themselves. In connection with the 

evaluation of an institution’s lending, 

examiners also may give consideration 

to related innovations when they 

augment the success and effectiveness 

of the institution’s lending under its 

community development loan programs 

or, more generally, its lending under its 

loan programs that address the credit 

needs of low- and moderate-income 

geographies or individuals. For 

example: 

• In connection with a community 

development loan program, an 

institution may establish a technical 

assistance program under which the 

institution, directly or through third 

parties, provides affordable housing 

developers and other loan recipients 

with financial consulting services. Such 

a technical assistance program may, by 

itself, constitute a community 

development service eligible for 

consideration under the service test of 

the CRA regulations. In addition, the 

technical assistance may be favorably 

considered as an innovation that 

augments the success and effectiveness 

of the related community development 

loan program. 

• In connection with a small business 

lending program in a low- or moderateincome area and consistent with safe 

and sound lending practices, an 

institution may implement a program 

under which, in addition to providing 

financing, the institution also contracts 

with the small business borrowers. Such 

a contracting arrangement would not, 

standing alone, qualify for CRA 

consideration. However, it may be 

favorably considered as an innovation 

that augments the loan program’s 

success and effectiveness, and improves 

the program’s ability to serve 

community development purposes by 

helping to promote economic 

development through support of small 

business activities and revitalization or 

stabilization of low- or moderate-income 

geographies. 

§ll.22(c) Affiliate lending 

§ll.22(c)(1) In general 

§ll.22(c)(1)—1: If an institution, 

regardless of examination type, elects to 

have loans by its affiliate(s) considered, 

may it elect to have only certain 

categories of loans considered? 

A1. Yes. An institution may elect to 

have only a particular category of its 

affiliate’s lending considered. The basic 

categories of loans are home mortgage 

loans, small business loans, small farm 

loans, community development loans, 

and the five categories of consumer 

loans (motor vehicle loans, credit card 


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loans, home equity loans, other secured 

loans, and other unsecured loans). 

§ll.22(c)(2) Constraints on affiliate 

lending 

§ll.22(c)(2)(i) No affiliate may claim 

a loan origination or loan purchase if 

another institution claims the same loan 

origination or purchase 

§ll.22(c)(2)(i)—1: Regardless of 

examination type, how is this constraint 

on affiliate lending applied? 

A1. This constraint prohibits one 

affiliate from claiming a loan origination 

or purchase claimed by another affiliate. 

However, an institution can count as a 

purchase a loan originated by an 

affiliate that the institution 

subsequently purchases, or count as an 

origination a loan later sold to an 

affiliate, provided the same loans are 

not sold several times to inflate their 

value for CRA purposes. For example, 

assume that two institutions are 

affiliated. Bank A originates a loan and 

claims it as a loan origination. Bank B 

later purchases the loan. Bank B may 

count the loan as a purchased loan. 

The same institution may not count 

both the origination and purchase. 

Thus, for example, if an institution 

claims loans made by an affiliated 

mortgage company as loan originations, 

the institution may not also count the 

loans as purchased loans if it later 

purchases the loans from its affiliate. 

See also Q&As §ll.22(c)(2)(ii)—1 and 

§ll.22(c)(2)(ii)—2. 

§ll.22(c)(2)(ii) If an institution elects 

to have its supervisory agency consider 

loans within a particular lending 

category made by one or more of the 

institution’s affiliates in a particular 

assessment area, the institution shall 

elect to have the agency consider all 

loans within that lending category in 

that particular assessment area made by 

all of the institution’s affiliates 

§ll.22(c)(2)(ii)—1: Regardless of 

examination type, how is this constraint 

on affiliate lending applied? 

A1. This constraint prohibits ‘‘cherrypicking’’ affiliate loans within any one 

category of loans. The constraint 

requires an institution that elects to 

have a particular category of affiliate 

lending in a particular assessment area 

considered to include all loans of that 

type made by all of its affiliates in that 

particular assessment area. For example, 

assume that an institution has several 

affiliates, including a mortgage company 

that makes loans in the institution’s 

assessment area. If the institution elects 

to include the mortgage company’s 

home mortgage loans, it must include 

all of its affiliates’ home mortgage loans 

made in its assessment area. In addition, 

the institution cannot elect to include 

only those low- and moderate-income 

home mortgage loans made by its 

affiliates and not home mortgage loans 

to middle- and upper-income 

individuals or areas. 

§ll.22(c)(2)(ii)—2: Regardless of 

examination type, how is this constraint 

applied if an institution’s affiliates are 

also insured depository institutions 

subject to the CRA? 

A2. Strict application of this 

constraint against ‘‘cherry-picking’’ to 

loans of an affiliate that is also an 

insured depository institution covered 

by the CRA would produce the 

anomalous result that the other 

institution would, without its consent, 

not be able to count its own loans. 

Because the agencies did not intend to 

deprive an institution subject to the 

CRA of receiving consideration for its 

own lending, the agencies read this 

constraint slightly differently in cases 

involving a group of affiliated 

institutions, some of which are subject 

to the CRA and share the same 

assessment area(s). In those 

circumstances, an institution that elects 

to include all of its mortgage affiliate’s 

home mortgage loans in its assessment 

area would not automatically be 

required to include all home mortgage 

loans in its assessment area of another 

affiliate institution subject to the CRA. 

However, all loans of a particular type 

made by any affiliate in the institution’s 

assessment area(s) must either be 

counted by the lending institution or by 

another affiliate institution that is 

subject to the CRA. This reading reflects 

the fact that a holding company may, for 

business reasons, choose to transact 

different aspects of its business in 

different subsidiary institutions. 

However, the method by which loans 

are allocated among the institutions for 

CRA purposes must reflect actual 

business decisions about the allocation 

of banking activities among the 

institutions and should not be designed 

solely to enhance their CRA evaluations. 

§ll.22(d) Lending by a consortium or 

a third party 

§ll.22(d)—1: Will equity and 

equity-type investments in a third party 

receive consideration under the lending 

test? 

A1. If an institution has made an 

equity or equity-type investment in a 

third party, community development 

loans made by the third party may be 

considered under the lending test. On 

the other hand, asset-backed and debt 

securities that do not represent an 

equity-type interest in a third party will 

not be considered under the lending test 

unless the securities are booked by the 

purchasing institution as a loan. For 

example, if an institution purchases 

stock in a community development 

corporation (‘‘CDC’’) that primarily lends 

in low- and moderate-income areas or to 

low- and moderate-income individuals 

in order to promote community 

development, the institution may claim 

a pro rata share of the CDC’s loans as 

community development loans. The 

institution’s pro rata share is based on 

its percentage of equity ownership in 

the CDC. Q&A §ll.23(b)—1 provides 

information concerning consideration of 

an equity or equity-type investment 

under the investment test and both the 

lending and investment tests. (Note that 

in connection with an intermediate 

small institution’s CRA performance 

evaluation, community development 

loans, including pro-rata shares of 

community development loans, are 

considered only in the community 

development test.) 

§ll.22(d)—2: Regardless of 

examination type, how will examiners 

evaluate loans made by consortia or 

third parties? 

A2. Loans originated or purchased by 

consortia in which an institution 

participates or by third parties in which 

an institution invests will be considered 

only if they qualify as community 

development loans and will be 

considered only under the community 

development criterion. However, loans 

originated directly on the books of an 

institution or purchased by the 

institution are considered to have been 

made or purchased directly by the 

institution, even if the institution 

originated or purchased the loans as a 

result of its participation in a loan 

consortium. These loans would be 

considered under the lending test or 

community development test criteria 

appropriate to them depending on the 

type of loan and type of examination. 

§ll.22(d)—3: In some 

circumstances, an institution may invest 

in a third party, such as a community 

development bank, that is also an 

insured depository institution and is 

thus subject to CRA requirements. If the 

investing institution requests its 

supervisory agency to consider its pro 

rata share of community development 

loans made by the third party, as 

allowed under 12 CFR ll.22(d), may 

the third party also receive 

consideration for these loans? 

A3. Yes, regardless of examination 

type, as long as the financial institution 

and the third party are not affiliates. The 

regulations state, at 12 CFR 

ll.22(c)(2)(i), that two affiliates may 

not both claim the same loan origination 

or loan purchase. However, if the 


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financial institution and the third party 

are not affiliates, the third party may 

receive consideration for the community 

development loans it originates, and the 

financial institution that invested in the 

third party may also receive 

consideration for its pro rata share of the 

same community development loans 

under 12 CFR ll.22(d). 

§ll.23—Investment test 

§ll.23(a) Scope of test 

§ll.23(a)—1: May an institution, 

regardless of examination type, receive 

consideration under the CRA 

regulations if it invests indirectly 

through a fund, the purpose of which is 

community development, as that is 

defined in the CRA regulations? 

A1. Yes, the direct or indirect nature 

of the qualified investment does not 

affect whether an institution will 

receive consideration under the CRA 

regulations because the regulations do 

not distinguish between ‘‘direct’’ and 

‘‘indirect’’ investments. Thus, an 

institution’s investment in an equity 

fund that, in turn, invests in projects 

that, for example, provide affordable 

housing to low- and moderate-income 

individuals, would receive 

consideration as a qualified investment 

under the CRA regulations, provided the 

investment benefits one or more of the 

institution’s assessment area(s) or a 

broader statewide or regional area(s) 

that includes one or more of the 

institution’s assessment area(s). 

Similarly, an institution may receive 

consideration for a direct qualified 

investment in a nonprofit organization 

that, for example, supports affordable 

housing for low- and moderate-income 

individuals in the institution’s 

assessment area(s) or a broader 

statewide or regional area(s) that 

includes the institution’s assessment 

area(s). 

§ll.23(a)—2: In order to receive 

CRA consideration, what information 

may an institution provide that would 

demonstrate that an investment in a 

nationwide fund with a primary purpose 

of community development will directly 

or indirectly benefit one or more of the 

institution’s assessment area(s) or a 

broader statewide or regional area that 

includes the institution’s assessment 

area(s)? 

A2. There are several ways to 

demonstrate that the institution’s 

investment in a nationwide fund meets 

the geographic requirements, and the 

agencies will employ appropriate 

flexibility in this regard in reviewing 

information the institution provides that 

reasonably supports this determination. 

As an initial matter, in making this 

determination, the agencies would 

consider whether the purpose, mandate, 

or function of the fund includes serving 

geographies or individuals located 

within the institution’s assessment 

area(s) or a broader statewide or regional 

area that includes the institution’s 

assessment area(s). Typically, 

information about where a fund’s 

investments are expected to be made or 

targeted will be found in the fund’s 

prospectus, or other documents 

provided by the fund prior to or at the 

time of the institution’s investment, and 

the institution, at its option, may 

provide such documentation in 

connection with its CRA evaluation. At 

the institution’s option, written 

documentation provided by fund 

managers in connection with the 

institution’s investment indicating that 

the fund will use its best efforts to 

invest in a qualifying activity that meets 

the institution’s geographic 

requirements also may be used for these 

purposes. Similarly, at the institution’s 

option, information that a fund has 

explicitly earmarked its projects or 

investments to its investors and their 

specific assessment area(s) or broader 

statewide or regional areas that include 

the assessment area(s) also may be used 

for these purposes. (If any 

documentation that has been provided 

at the institution’s option as described 

above clearly indicates that the fund 

‘‘double-counts’’ investments, by 

earmarking the same dollars or the same 

portions of projects or investments in a 

particular geography to more than one 

investor, the investment may be 

determined not to meet the geographic 

requirements of the CRA regulations.) In 

addition, at the institution’s option, an 

allocation method may be used to 

permit the institution to claim a pro-rata 

share of each project of the fund. 

Nationwide funds are important 

sources of investments for low- and 

moderate-income and underserved 

communities throughout the country 

and can be an efficient vehicle for 

institutions in making qualified 

investments that help meet community 

development needs. Prior to investing in 

such a fund, an institution should 

consider reviewing the fund’s 

investment record to see if it is generally 

consistent with the institution’s 

investment goals and the geographic 

considerations in the regulations. See 

also Q&As §ll.12(h)—6 and 

§ll12(h)—7 (additional information 

about recognition of investments 

benefiting an area outside an 

institution’s assessment area(s).) 

§ll.23(b) Exclusion 

§ll.23(b)—1: Even though the 

regulations state that an activity that is 

considered under the lending or service 

tests cannot also be considered under 

the investment test, may parts of an 

activity be considered under one test 

and other parts be considered under 

another test? 

A1. Yes, in some instances the nature 

of an activity may make it eligible for 

consideration under more than one of 

the performance tests. For example, 

certain investments and related support 

provided by a large retail institution to 

a CDC may be evaluated under the 

lending, investment, and service tests. 

Under the service test, the institution 

may receive consideration for any 

community development services that it 

provides to the CDC, such as service by 

an executive of the institution on the 

CDC’s board of directors. If the 

institution makes an investment in the 

CDC that the CDC uses to make 

community development loans, the 

institution may receive consideration 

under the lending test for its pro-rata 

share of community development loans 

made by the CDC. Alternatively, the 

institution’s investment may be 

considered under the investment test, 

assuming it is a qualified investment. In 

addition, an institution may elect to 

have a part of its investment considered 

under the lending test and the 

remaining part considered under the 

investment test. If the investing 

institution opts to have a portion of its 

investment evaluated under the lending 

test by claiming its pro rata share of the 

CDC’s community development loans, 

the amount of investment considered 

under the investment test will be offset 

by that portion. Thus, the institution 

would receive consideration under the 

investment test for only the amount of 

its investment multiplied by the 

percentage of the CDC’s assets that meet 

the definition of a qualified investment. 

§ll.23(b)—2: If home mortgage 

loans to low- and moderate-income 

borrowers have been considered under 

an institution’s lending test, may the 

institution that originated or purchased 

them also receive consideration under 

the investment test if it subsequently 

purchases mortgage-backed securities 

that are primarily or exclusively backed 

by such loans? 

A2. No. Because the institution 

received lending test consideration for 

the loans that underlie the securities, 

the institution may not also receive 

consideration under the investment test 

for its purchase of the securities. Of 

course, an institution may receive 

investment test consideration for 


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purchases of mortgage-backed securities 

that are backed by loans to low- and 

moderate-income individuals as long as 

the securities are not backed primarily 

or exclusively by loans that the same 

institution originated or purchased. 

§ll.23(e) Performance criteria 

§ll.23(e)—1: When applying the 

four performance criteria of 12 CFR 

ll.23(e), may an examiner distinguish 

among qualified investments based on 

how much of the investment actually 

supports the underlying community 

development purpose? 

A1. Yes. By applying all the criteria, 

a qualified investment of a lower dollar 

amount may be weighed more heavily 

under the investment test than a 

qualified investment with a higher 

dollar amount that has fewer qualitative 

enhancements. The criteria permit an 

examiner to qualitatively weight certain 

investments differently or to make other 

appropriate distinctions when 

evaluating an institution’s record of 

making qualified investments. For 

instance, an examiner should take into 

account that a targeted mortgage-backed 

security that qualifies as an affordable 

housing issue that has only 60 percent 

of its face value supported by loans to 

low- or moderate-income borrowers 

would not provide as much affordable 

housing for low- and moderate-income 

individuals as a targeted mortgagebacked security with 100 percent of its 

face value supported by affordable 

housing loans to low- and moderateincome borrowers. The examiner should 

describe any differential weighting (or 

other adjustment), and its basis in the 

Performance Evaluation. See also Q&A 

§ll.12(t)—8 for a discussion about 

the qualitative consideration of prior 

period investments. 

§ll.23(e)—2: How do examiners 

evaluate an institution’s qualified 

investment in a fund, the primary 

purpose of which is community 

development, as defined in the CRA 

regulations? 

A2. When evaluating qualified 

investments that benefit an institution’s 

assessment area(s) or a broader 

statewide or regional area that includes 

its assessment area(s), examiners will 

look at the following four performance 

criteria: 

(1) The dollar amount of qualified 

investments; 

(2) The innovativeness or complexity 

of qualified investments; 

(3) The responsiveness of qualified 

investments to credit and community 

development needs; and 

(4) The degree to which the qualified 

investments are not routinely provided 

by private investors. 

With respect to the first criterion, 

examiners will determine the dollar 

amount of qualified investments by 

relying on the figures recorded by the 

institution according to generally 

accepted accounting principles (GAAP). 

Although institutions may exercise a 

range of investment strategies, including 

short-term investments, long-term 

investments, investments that are 

immediately funded, and investments 

with a binding, up-front commitment 

that are funded over a period of time, 

institutions making the same dollar 

amount of investments over the same 

number of years, all other performance 

criteria being equal, would receive the 

same level of consideration. Examiners 

will include both new and outstanding 

investments in this determination. The 

dollar amount of qualified investments 

also will include the dollar amount of 

legally binding commitments recorded 

by the institution according to GAAP. 

The extent to which qualified 

investments receive consideration, 

however, depends on how examiners 

evaluate the investments under the 

remaining three performance criteria— 

innovativeness and complexity, 

responsiveness, and degree to which the 

investment is not routinely provided by 

private investors. Examiners also will 

consider factors relevant to the 

institution’s CRA performance context, 

such as the effect of outstanding longterm qualified investments, the pay-in 

schedule, and the amount of any cash 

call, on the capacity of the institution to 

make new investments. 

§ll.24—Service test 

§ll.24(d) Performance criteria—retail 

banking services 

§ll.24(d)—1: How do examiners 

evaluate the availability and 

effectiveness of an institution’s systems 

for delivering retail banking services? 

A1. Convenient access to full service 

branches within a community is an 

important factor in determining the 

availability of credit and non-credit 

services. Therefore, the service test 

performance standards place primary 

emphasis on full service branches while 

still considering alternative systems, 

such as automated teller machines 

(‘‘ATMs’’). The principal focus is on an 

institution’s current distribution of 

branches and its record of opening and 

closing branches, particularly branches 

located in low- or moderate-income 

geographies or primarily serving low- or 

moderate-income individuals. However, 

an institution is not required to expand 

its branch network or operate 

unprofitable branches. Under the 

service test, alternative systems for 

delivering retail banking services, such 

as ATMs, are considered only to the 

extent that they are effective alternatives 

in providing needed services to lowand moderate-income areas and 

individuals. 

§ll.24(d)—2: How do examiners 

evaluate an institution’s activities in 

connection with Individual 

Development Accounts (IDAs)? 

A2. Although there is no standard 

IDA program, IDAs typically are deposit 

accounts targeted to low- and moderateincome families that are designed to 

help them accumulate savings for 

education or job-training, downpayment and closing costs on a new 

home, or start-up capital for a small 

business. Once participants have 

successfully funded an IDA, their 

personal IDA savings are matched by a 

public or private entity. Financial 

institution participation in IDA 

programs comes in a variety of forms, 

including providing retail banking 

services to IDA account holders, 

providing matching dollars or operating 

funds to an IDA program, designing or 

implementing IDA programs, providing 

consumer financial education to IDA 

account holders or prospective account 

holders, or other means. The extent of 

financial institutions’ involvement in 

IDAs and the products and services they 

offer in connection with the accounts 

will vary. Thus, subject to 12 CFR 

ll.23(b), examiners evaluate the 

actual services and products provided 

by an institution in connection with 

IDA programs as one or more of the 

following: community development 

services, retail banking services, 

qualified investments, home mortgage 

loans, small business loans, consumer 

loans, or community development 

loans. See, e.g., Q&A §ll.12(i)—3. 

Note that all types of institutions may 

participate in IDA programs. Their IDA 

activities are evaluated under the 

performance criteria of the type of 

examination applicable to the particular 

institution. 

§ll.24(d)(3) Availability and 

effectiveness of alternative systems for 

delivering retail banking services 

§ll.24(d)(3)—1: How will 

examiners evaluate alternative systems 

for delivering retail banking services? 

A1. The regulation recognizes the 

multitude of ways in which an 

institution can provide services, for 

example, ATMs, banking by telephone 

or computer, and bank-by-mail 

programs. Delivery systems other than 

branches will be considered under the 

regulation to the extent that they are 

effective alternatives to branches in 

providing needed services to low- and 


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moderate-income areas and individuals. 

The list of systems in the regulation is 

not intended to be comprehensive. 

§ll.24(d)(3)—2: Are debit cards 

considered under the service test as an 

alternative delivery system? 

A2. By themselves, no. However, if 

debit cards are a part of a larger 

combination of products, such as a 

comprehensive electronic banking 

service, that allows an institution to 

deliver needed services to low- and 

moderate-income areas and individuals 

in its community, the overall delivery 

system that includes the debit card 

feature would be considered an 

alternative delivery system. 

§ll.24(e) Performance criteria— 

community development services 

§ll.24(e)—1: Under what 

conditions may an institution receive 

consideration for community 

development services offered by 

affiliates or third parties? 

A1. At an institution’s option, the 

agencies will consider services 

performed by an affiliate or by a third 

party on the institution’s behalf under 

the service test if the services provided 

enable the institution to help meet the 

credit needs of its community. Indirect 

services that enhance an institution’s 

ability to deliver credit products or 

deposit services within its community 

and that can be quantified may be 

considered under the service test, if 

those services have not been considered 

already under the lending or investment 

test (see Q&A §ll.23(b)—1). For 

example, an institution that contracts 

with a community organization to 

provide home ownership counseling to 

low- and moderate-income home buyers 

as part of the institution’s mortgage 

program may receive consideration for 

that indirect service under the service 

test. In contrast, donations to a 

community organization that offers 

financial services to low- or moderateincome individuals may be considered 

under the investment test, but would 

not also be eligible for consideration 

under the service test. Services 

performed by an affiliate will be treated 

the same as affiliate loans and 

investments made in the institution’s 

assessment area and may be considered 

if the service is not claimed by any other 

institution. See 12 CFR ll.22(c) and 

ll.23(c). 

§ll.25 Community development test 

for wholesale or limited purpose 

institutions 

§ll.25(a) Scope of test 

§ll.25(a)—1: How can certain 

credit card banks help to meet the credit 

needs of their communities without 

losing their exemption from the 

definition of ‘‘bank’’ in the Bank Holding 

Company Act (the BHCA), as amended 

by the Competitive Equality Banking Act 

of 1987 (CEBA)? 

A1. Although the BHCA restricts 

institutions known as CEBA credit card 

banks to credit card operations, a CEBA 

credit card bank can engage in 

community development activities 

without losing its exemption under the 

BHCA. A CEBA credit card bank could 

provide community development 

services and investments without 

engaging in operations other than credit 

card operations. For example, the bank 

could provide credit card counseling, or 

the financial expertise of its executives, 

free of charge, to community 

development organizations. In addition, 

a CEBA credit card bank could make 

qualified investments, as long as the 

investments meet the guidelines for 

passive and noncontrolling investments 

provided in the BHC Act and the 

Board’s Regulation Y. Finally, although 

a CEBA credit card bank cannot make 

any loans other than credit card loans, 

under 12 CFR ll.25(d)(2) (community 

development test—indirect activities), 

the bank could elect to have part of its 

qualified passive and noncontrolling 

investments in a third-party lending 

consortium considered as community 

development lending, provided that the 

consortium’s loans otherwise meet the 

requirements for community 

development lending. When assessing a 

CEBA credit card bank’s CRA 

performance under the community 

development test, examiners will take 

into account the bank’s performance 

context. In particular, examiners will 

consider the legal constraints imposed 

by the BHCA on the bank’s activities, as 

part of the bank’s performance context 

in 12 CFR ll.21(b)(4). 

§ll.25(d) Indirect activities 

§ll.25(d)—1: How are investments 

in third party community development 

organizations considered under the 

community development test? 

A1. Similar to the lending test for 

retail institutions, investments in third 

party community development 

organizations may be considered as 

qualified investments or as community 

development loans or both (provided 

there is no double counting), at the 

institution’s option, as described above 

in the discussion regarding 12 CFR 

ll.22(d) and ll.23(b). 

§ll.25(e) Benefit to assessment 

area(s) 

§ll.25(e)—1: How do examiners 

evaluate a wholesale or limited purpose 

institution’s qualified investment in a 

fund that invests in projects nationwide 

and which has a primary purpose of 

community development, as that is 

defined in the regulations? 

A1. If examiners find that a wholesale 

or limited purpose institution has 

adequately addressed the needs of its 

assessment area(s), they will give 

consideration to qualified investments, 

as well as community development 

loans and community development 

services, by that institution nationwide. 

In determining whether an institution 

has adequately addressed the needs of 

its assessment area(s), examiners will 

consider qualified investments that 

benefit a broader statewide or regional 

area that includes the institution’s 

assessment area(s). 

§ll.25(f) Community development 

performance rating 

§ll.25(f)—1: Must a wholesale or 

limited purpose institution engage in all 

three categories of community 

development activities (lending, 

investment, and service) to perform well 

under the community development test? 

A1. No, a wholesale or limited 

purpose institution may perform well 

under the community development test 

by engaging in one or more of these 

activities. 

§ll.26—Small institution 

performance standards 

§ ll.26—1: When evaluating a small 

or intermediate small institution’s 

performance, will examiners consider, 

at the institution’s request, retail and 

community development loans 

originated or purchased by affiliates, 

qualified investments made by affiliates, 

or community development services 

provided by affiliates? 

A1. Yes. However, a small institution 

that elects to have examiners consider 

affiliate activities must maintain 

sufficient information that the 

examiners may evaluate these activities 

under the appropriate performance 

criteria and ensure that the activities are 

not claimed by another institution. The 

constraints applicable to affiliate 

activities claimed by large institutions 

also apply to small and intermediate 

small institutions. See Q&As addressing 

12 CFR ll.22(c)(2) and related 

guidance provided to large institutions 

regarding affiliate activities. Examiners 

will not include affiliate lending in 

calculating the percentage of loans and, 

as appropriate, other lending-related 

activities located in an institution’s 

assessment area. 


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§ll.26(a) Performance criteria 

§ll.26(a)(2) Intermediate small 

institutions 

§ll.26(a)(2)—1: When is an 

institution examined as an intermediate 

small institution? 

A1. When a small institution has met 

the intermediate small institution asset 

threshold delineated in 12 CFR 

ll.12(u)(1) for two consecutive 

calendar year-ends, the institution may 

be examined under the intermediate 

small institution examination 

procedures. The regulation does not 

specify an additional lag period between 

becoming an intermediate small 

institution and being examined as an 

intermediate small institution, as it does 

for large institutions, because an 

intermediate small institution is not 

subject to CRA data collection and 

reporting requirements. Institutions 

should contact their primary regulator 

for information on examination 

schedules. 

§ll.26(b) Lending test 

§ll.26(b)—1: May examiners 

consider, under one or more of the 

performance criteria of the small 

institution performance standards, 

lending-related activities, such as 

community development loans and 

lending-related qualified investments, 

when evaluating a small institution? 

A1. Yes. Examiners can consider 

‘‘lending-related activities,’’ including 

community development loans and 

lending-related qualified investments, 

when evaluating the first four 

performance criteria of the small 

institution performance test. Although 

lending-related activities are specifically 

mentioned in the regulation in 

connection with only the first three 

criteria (i.e., loan-to-deposit ratio, 

percentage of loans in the institution’s 

assessment area, and lending to 

borrowers of different incomes and 

businesses of different sizes), examiners 

can also consider these activities when 

they evaluate the fourth criteria— 

geographic distribution of the 

institution’s loans. 

Although lending-related community 

development activities are evaluated 

under the community development test 

applicable to intermediate small 

institutions, these activities may also 

augment the loan-to-deposit ratio 

analysis (12 CFR ll.26(b)(1)) and the 

percentage of loans in the intermediate 

small institution’s assessment area 

analysis (12 CFR ll.26(b)(2)), if 

appropriate. 

§ll.26(b)—2: What is meant by ‘‘as 

appropriate’’ when referring to the fact 

that lending-related activities will be 

considered, ‘‘as appropriate,’’ under the 

various small institution performance 

criteria? 

A2. ‘‘As appropriate’’ means that 

lending-related activities will be 

considered when it is necessary to 

determine whether an institution meets 

or exceeds the standards for a 

satisfactory rating. Examiners will also 

consider other lending-related activities 

at an institution’s request, provided they 

have not also been considered under the 

community development test applicable 

to intermediate small institutions. 

§ll.26(b)—3: When evaluating a 

small institution’s lending performance, 

will examiners consider, at the 

institution’s request, community 

development loans originated or 

purchased by a consortium in which the 

institution participates or by a third 

party in which the institution has 

invested? 

A3. Yes. However, a small institution 

that elects to have examiners consider 

community development loans 

originated or purchased by a consortium 

or third party must maintain sufficient 

information on its share of the 

community development loans so that 

the examiners may evaluate these loans 

under the small institution performance 

criteria. 

§ll.26(b)—4: Under the small 

institution lending test performance 

standards, will examiners consider both 

loan originations and purchases? 

A4. Yes, consistent with the other 

assessment methods in the regulation, 

examiners will consider both loans 

originated and purchased by the 

institution. Likewise, examiners may 

consider any other loan data the small 

institution chooses to provide, 

including data on loans outstanding, 

commitments, and letters of credit. 

§ll.26(b)—5: Under the small 

institution lending test performance 

standards, how will qualified 

investments be considered for purposes 

of determining whether a small 

institution receives a satisfactory CRA 

rating? 

A5. The small institution lending test 

performance standards focus on lending 

and other lending-related activities. 

Therefore, examiners will consider only 

lending-related qualified investments 

for the purpose of determining whether 

a small institution that is not an 

intermediate small institution receives a 

satisfactory CRA rating. 

§ll.26(b)(1) Loan-to-deposit ratio 

§ll.26(b)(1)—1: How is the loan-todeposit ratio calculated? 

A1. A small institution’s loan-todeposit ratio is calculated in the same 

manner that the Uniform Bank 

Performance Report/Uniform Thrift 

Performance Report (UBPR/UTPR) 

determines the ratio. It is calculated by 

dividing the institution’s net loans and 

leases by its total deposits. The ratio is 

found in the Liquidity and Investment 

Portfolio section of the UBPR and 

UTPR. Examiners will use this ratio to 

calculate an average since the last 

examination by adding the quarterly 

loan-to-deposit ratios and dividing the 

total by the number of quarters. 

§ll.26(b)(1)—2: How is the 

‘‘reasonableness’’ of a loan-to-deposit 

ratio evaluated? 

A2. No specific ratio is reasonable in 

every circumstance, and each small 

institution’s ratio is evaluated in light of 

information from the performance 

context, including the institution’s 

capacity to lend, demographic and 

economic factors present in the 

assessment area, and the lending 

opportunities available in the 

assessment area(s). If a small 

institution’s loan-to-deposit ratio 

appears unreasonable after considering 

this information, lending performance 

may still be satisfactory under this 

criterion taking into consideration the 

number and the dollar volume of loans 

sold to the secondary market or the 

number and amount and innovativeness 

or complexity of community 

development loans and lending-related 

qualified investments. 

§ll.26(b)(1)—3: If an institution 

makes a large number of loans off-shore, 

will examiners segregate the domestic 

loan-to-deposit ratio from the foreign 

loan-to-deposit ratio? 

A3. No. Examiners will look at the 

institution’s net loan-to-deposit ratio for 

the whole institution, without any 

adjustments. 

§ll.26(b)(2) Percentage of lending 

within assessment area(s) 

§ll.26(b)(2)—1: Must a small 

institution have a majority of its lending 

in its assessment area(s) to receive a 

satisfactory performance rating? 

A1. No. The percentage of loans and, 

as appropriate, other lending-related 

activities located in the institution’s 

assessment area(s) is but one of the 

performance criteria upon which small 

institutions are evaluated. If the 

percentage of loans and other lending 

related activities in an institution’s 

assessment area(s) is less than a 

majority, then the institution does not 

meet the standards for satisfactory 

performance only under this criterion. 

The effect on the overall performance 

rating of the institution, however, is 

considered in light of the performance 

context, including information 

regarding economic conditions; loan 

demand; the institution’s size, financial 


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condition, business strategies, and 

branching network; and other aspects of 

the institution’s lending record. 

§ll.26(b)(3) & (4) Distribution of 

lending within assessment area(s) by 

borrower income and geographic 

location 

§ll.26(b)(3) & (4)—1: How will a 

small institution’s performance be 

assessed under these lending 

distribution criteria? 

A1. Distribution of loans, like other 

small institution performance criteria, is 

considered in light of the performance 

context. For example, a small institution 

is not required to lend evenly 

throughout its assessment area(s) or in 

any particular geography. However, in 

order to meet the standards for 

satisfactory performance under this 

criterion, conspicuous gaps in a small 

institution’s loan distribution must be 

adequately explained by performance 

context factors such as lending 

opportunities in the institution’s 

assessment area(s), the institution’s 

product offerings and business strategy, 

and institutional capacity and 

constraints. In addition, it may be 

impracticable to review the geographic 

distribution of the lending of an 

institution with very few 

demographically distinct geographies 

within an assessment area. If sufficient 

information on the income levels of 

individual borrowers or the revenues or 

sizes of business borrowers is not 

available, examiners may use loan size 

as a proxy for estimating borrower 

characteristics, where appropriate. 

§ll.26(c) Intermediate small 

institution community development test 

§ll.26(c)—1: How will the 

community development test be applied 

flexibly for intermediate small 

institutions? 

A1. Generally, intermediate small 

institutions engage in a combination of 

community development loans, 

qualified investments, and community 

development services. An institution 

may not simply ignore one or more of 

these categories of community 

development, nor do the regulations 

prescribe a required threshold for 

community development loans, 

qualified investments, and community 

development services. Instead, based on 

the institution’s assessment of 

community development needs in its 

assessment area(s), it may engage in 

different categories of community 

development activities that are 

responsive to those needs and 

consistent with the institution’s 

capacity. 

An intermediate small institution has 

the flexibility to allocate its resources 

among community development loans, 

qualified investments, and community 

development services in amounts that it 

reasonably determines are most 

responsive to community development 

needs and opportunities. Appropriate 

levels of each of these activities would 

depend on the capacity and business 

strategy of the institution, community 

needs, and number and types of 

opportunities for community 

development. 

§ll.26(c)(3) Community development 

services 

§ll.26(c)(3)—1: What will 

examiners consider when evaluating the 

provision of community development 

services by an intermediate small 

institution? 

A1. Examiners will consider not only 

the types of services provided to benefit 

low- and moderate-income individuals, 

such as low-cost checking accounts and 

low-cost remittance services, but also 

the provision and availability of services 

to low- and moderate-income 

individuals, including through branches 

and other facilities located in low- and 

moderate-income areas. Generally, the 

presence of branches located in lowand moderate-income geographies will 

help to demonstrate the availability of 

banking services to low- and moderateincome individuals. 

§ll.26(c)(4) Responsiveness to 

community development needs 

§ll.26(c)(4)—1: When evaluating 

an intermediate small institution’s 

community development record, what 

will examiners consider when reviewing 

the responsiveness of community 

development lending, qualified 

investments, and community 

development services to the community 

development needs of the area? 

A1. When evaluating an intermediate 

small institution’s community 

development record, examiners will 

consider not only quantitative measures 

of performance, such as the number and 

amount of community development 

loans, qualified investments, and 

community development services, but 

also qualitative aspects of performance. 

In particular, examiners will evaluate 

the responsiveness of the institution’s 

community development activities in 

light of the institution’s capacity, 

business strategy, the needs of the 

community, and the number and types 

of opportunities for each type of 

community development activity (its 

performance context). Examiners also 

will consider the results of any 

assessment by the institution of 

community development needs, and 

how the institution’s activities respond 

to those needs. 

An evaluation of the degree of 

responsiveness considers the following 

factors: the volume, mix, and qualitative 

aspects of community development 

loans, qualified investments, and 

community development services. 

Consideration of the qualitative aspects 

of performance recognizes that 

community development activities 

sometimes require special expertise or 

effort on the part of the institution or 

provide a benefit to the community that 

would not otherwise be made available. 

(However, ‘‘innovativeness’’ and 

‘‘complexity,’’ factors examiners 

consider when evaluating a large 

institution under the lending, 

investment, and service tests, are not 

criteria in the intermediate small 

institutions’ community development 

test.) In some cases, a smaller loan may 

have more qualitative benefit to a 

community than a larger loan. Activities 

are considered particularly responsive 

to community development needs if 

they benefit low- and moderate-income 

individuals in low- or moderate-income 

geographies, designated disaster areas, 

or distressed or underserved 

nonmetropolitan middle-income 

geographies. Activities are also 

considered particularly responsive to 

community development needs if they 

benefit low- or moderate-income 

geographies. 

§ll.26(d) Performance rating 

§ll.26(d)—1: How can a small 

institution that is not an intermediate 

small institution achieve an 

‘‘outstanding’’ performance rating? 

A1. A small institution that is not an 

intermediate small institution that 

meets each of the standards in the 

lending test for a ‘‘satisfactory’’ rating 

and exceeds some or all of those 

standards may warrant an ‘‘outstanding’’ 

performance rating. In assessing 

performance at the ‘‘outstanding’’ level, 

the agencies consider the extent to 

which the institution exceeds each of 

the performance standards and, at the 

institution’s option, its performance in 

making qualified investments and 

providing services that enhance credit 

availability in its assessment area(s). In 

some cases, a small institution may 

qualify for an ‘‘outstanding’’ 

performance rating solely on the basis of 

its lending activities, but only if its 

performance materially exceeds the 

standards for a ‘‘satisfactory’’ rating, 

particularly with respect to the 

penetration of borrowers at all income 

levels and the dispersion of loans 

throughout the geographies in its 


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assessment area(s) that display income 

variation. An institution with a high 

loan-to-deposit ratio and a high 

percentage of loans in its assessment 

area(s), but with only a reasonable 

penetration of borrowers at all income 

levels or a reasonable dispersion of 

loans throughout geographies of 

differing income levels in its assessment 

area(s), generally will not be rated 

‘‘outstanding’’ based only on its lending 

performance. However, the institution’s 

performance in making qualified 

investments and its performance in 

providing branches and other services 

and delivery systems that enhance 

credit availability in its assessment 

area(s) may augment the institution’s 

satisfactory rating to the extent that it 

may be rated ‘‘outstanding.’’ 

§ll.26(d)—2: Will a small 

institution’s qualified investments, 

community development loans, and 

community development services be 

considered if they do not directly benefit 

its assessment area(s)? 

A2. Yes. These activities are eligible 

for consideration if they benefit a 

broader statewide or regional area that 

includes a small institution’s 

assessment area(s), as discussed more 

fully in Q&As §ll.12(h)—6 and 

§ll.12(h)—7. 

§ll.27—Strategic plan 

§ll.27(c) Plans in general 

§ll.27(c)—1: To what extent will 

the agencies provide guidance to an 

institution during the development of its 

strategic plan? 

A1. An institution will have an 

opportunity to consult with and provide 

information to the agencies on a 

proposed strategic plan. Through this 

process, an institution is provided 

guidance on procedures and on the 

information necessary to ensure a 

complete submission. For example, the 

agencies will provide guidance on 

whether the level of detail as set out in 

the proposed plan would be sufficient to 

permit agency evaluation of the plan. 

However, the agencies’ guidance during 

plan development and, particularly, 

prior to the public comment period, will 

not include commenting on the merits 

of a proposed strategic plan or on the 

adequacy of measurable goals. 

§ll.27(c)—2: How will a joint 

strategic plan be reviewed if the 

affiliates have different primary Federal 

supervisors? 

A2. The agencies will coordinate 

review of and action on the joint plan. 

Each agency will evaluate the 

measurable goals for those affiliates for 

which it is the primary regulator. 

§ll.27(f) Plan content 

§ll.27(f)(1) Measurable goals 

§ll.27(f)(1)—1: How should annual 

measurable goals be specified in a 

strategic plan? 

A1. Annual measurable goals (e.g., 

number of loans, dollar amount, 

geographic location of activity, and 

benefit to low- and moderate-income 

areas or individuals) must be stated 

with sufficient specificity to permit the 

public and the agencies to quantify what 

performance will be expected. However, 

institutions are provided flexibility in 

specifying goals. For example, an 

institution may provide ranges of 

lending amounts in different categories 

of loans. Measurable goals may also be 

linked to funding requirements of 

certain public programs or indexed to 

other external factors as long as these 

mechanisms provide a quantifiable 

standard. 

§ll.27(g) Plan approval 

§ll.27(g)(2) Public participation 

§ll.27(g)(2)—1: How will the public 

receive notice of a proposed strategic 

plan? 

A1. An institution submitting a 

strategic plan for approval by the 

agencies is required to solicit public 

comment on the plan for a period of 

thirty (30) days after publishing notice 

of the plan at least once in a newspaper 

of general circulation. The notice should 

be sufficiently prominent to attract 

public attention and should make clear 

that public comment is desired. An 

institution may, in addition, provide 

notice to the public in any other manner 

it chooses. 

§ll.28—Assigned ratings 

§ll.28—1: Are innovative lending 

practices, innovative or complex 

qualified investments, and innovative 

community development services 

required for a ‘‘satisfactory’’ or 

‘‘outstanding’’ CRA rating? 

A1. No. The performance criterion of 

‘‘innovativeness’’ applies only under the 

lending, investment, and service tests 

applicable to large institutions and the 

community development test applicable 

to wholesale and limited purpose 

institutions. Moreover, even under these 

tests, the lack of innovative lending 

practices, innovative or complex 

qualified investments, or innovative 

community development services alone 

will not result in a ‘‘needs to improve’’ 

CRA rating. However, under these tests, 

the use of innovative lending practices, 

innovative or complex qualified 

investments, and innovative community 

development services may augment the 

consideration given to an institution’s 

performance under the quantitative 

criteria of the regulations, resulting in a 

higher level of performance rating. See 

also Q&A §ll.26(c)(4)—1 for a 

discussion about responsiveness to 

community development needs under 

the community development test 

applicable to intermediate small 

institutions. 

§ll.28(a) Ratings in general 

§ll.28(a)—1: How are institutions 

with domestic branches in more than 

one state assigned a rating? 

A1. The evaluation of an institution 

that maintains domestic branches in 

more than one state (‘‘multistate 

institution’’) will include a written 

evaluation and rating of its CRA record 

of performance as a whole and in each 

state in which it has a domestic branch. 

The written evaluation will contain a 

separate presentation on a multistate 

institution’s performance for each 

metropolitan statistical area and the 

nonmetropolitan area within each state, 

if it maintains one or more domestic 

branch offices in these areas. This 

separate presentation will contain 

conclusions, supported by facts and 

data, on performance under the 

performance tests and standards in the 

regulation. The evaluation of a 

multistate institution that maintains a 

domestic branch in two or more states 

in a multistate metropolitan area will 

include a written evaluation (containing 

the same information described above) 

and rating of its CRA record of 

performance in the multistate 

metropolitan area. In such cases, the 

statewide evaluation and rating will be 

adjusted to reflect performance in the 

portion of the state not within the 

multistate metropolitan statistical area. 

§ll.28(a)—2: How are institutions 

that operate within only a single state 

assigned a rating? 

A2. An institution that operates 

within only a single state (‘‘single-state 

institution’’) will be assigned a rating of 

its CRA record based on its performance 

within that state. In assigning this 

rating, the agencies will separately 

present a single-state institution’s 

performance for each metropolitan area 

in which the institution maintains one 

or more domestic branch offices. This 

separate presentation will contain 

conclusions, supported by facts and 

data, on the single-state institution’s 

performance under the performance 

tests and standards in the regulation. 

§ll.28(a)—3: How do the agencies 

weight performance under the lending, 

investment, and service tests for large 

retail institutions? 

A3. A rating of ‘‘outstanding,’’ ‘‘high 

satisfactory,’’ ‘‘low satisfactory,’’ ‘‘needs 


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to improve,’’ or ‘‘substantial 

noncompliance,’’ based on a judgment 

supported by facts and data, will be 

assigned under each performance test. 

Points will then be assigned to each 

rating as described in the first matrix set 

forth below. A large retail institution’s 

overall rating under the lending, 

investment and service tests will then 

be calculated in accordance with the 

second matrix set forth below, which 

incorporates the rating principles in the 

regulation. 

POINTS ASSIGNED FOR PERFORMANCE UNDER LENDING, INVESTMENT AND SERVICE TESTS

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 

COMPOSITE RATING POINT REQUIREMENTS

[Add points from three tests] 

Rating Total points 

Outstanding .............................................................................................. 20 or over. 

Satisfactory ............................................................................................... 11 through 19. 

Needs to Improve ..................................................................................... 5 through 10. 

Substantial Noncompliance ...................................................................... 0 through 4. 

Note: There is one exception to the 

Composite Rating matrix. An institution 

may not receive a rating of ‘‘satisfactory’’ 

unless it receives at least ‘‘low 

satisfactory’’ on the lending test. 

Therefore, the total points are capped at 

three times the lending test score. 

§ll.28(b) Lending, investment, and 

service test ratings 

§ll.28(b)—1: How is performance 

under the quantitative and qualitative 

performance criteria weighed when 

examiners assign a CRA rating? 

A1. The lending, investment, and 

service tests each contain a number of 

performance criteria designed to 

measure whether an institution is 

effectively helping to meet the credit 

needs of its entire community, 

including low- and moderate-income 

neighborhoods, in a safe and sound 

manner. Some of these performance 

criteria are quantitative, such as number 

and amount, and others, such as the use 

of innovative or flexible lending 

practices, the innovativeness or 

complexity of qualified investments, 

and the innovativeness and 

responsiveness of community 

development services, are qualitative. 

The performance criteria that deal with 

these qualitative aspects of performance 

recognize that these loans, qualified 

investments, and community 

development services sometimes require 

special expertise and effort on the part 

of the institution and provide a benefit 

to the community that would not 

otherwise be possible. As such, the 

agencies consider the qualitative aspects 

of an institution’s activities when 

measuring the benefits received by a 

community. An institution’s 

performance under these qualitative 

criteria may augment the consideration 

given to an institution’s performance 

under the quantitative criteria of the 

regulations, resulting in a higher level of 

performance and rating. 

§ll.28(c) Effect of evidence of 

discriminatory or other illegal credit 

practices 

§ll.28(c)—1: What is meant by 

‘‘discriminatory or other illegal credit 

practices’’? 

A1. An institution engages in 

discriminatory credit practices if it 

discourages or discriminates against 

credit applicants or borrowers on a 

prohibited basis, in violation, for 

example, of the Fair Housing Act or the 

Equal Credit Opportunity Act (as 

implemented by Regulation B). 

Examples of other illegal credit 

practices inconsistent with helping to 

meet community credit needs include 

violations of: 

• The Truth in Lending Act regarding 

rescission of certain mortgage 

transactions and regarding disclosures 

and certain loan term restrictions in 

connection with credit transactions that 

are subject to the Home Ownership and 

Equity Protection Act; 

• The Real Estate Settlement 

Procedures Act regarding the giving and 

accepting of referral fees, unearned fees, 

or kickbacks in connection with certain 

mortgage transactions; and 

• The Federal Trade Commission Act 

regarding unfair or deceptive acts or 

practices. 

Examiners will determine the effect of 

evidence of illegal credit practices as set 

forth in examination procedures and 

§ll.28(c) of the regulation. 

Violations of other provisions of the 

consumer protection laws generally will 

not adversely affect an institution’s CRA 

rating, but may warrant the inclusion of 

comments in an institution’s 

performance evaluation. These 

comments may address the institution’s 

policies, procedures, training programs, 

and internal assessment efforts. 

§ll.29—Effect of CRA performance 

on applications 

§ll.29(a) CRA performance 

§ll.29(a)—1: What weight is given 

to an institution’s CRA performance 

examination in reviewing an 

application? 

A1. In reviewing applications in 

which CRA performance is a relevant 

factor, information from a CRA 

examination of the institution is a 

particularly important consideration. 

The examination is a detailed 

evaluation of the institution’s CRA 

performance by its Federal supervisory 

agency. In this light, an examination is 

an important, and often controlling, 

factor in the consideration of an 

institution’s record. In some cases, 

however, the examination may not be 

recent, or a specific issue raised in the 

application process, such as progress in 

addressing weaknesses noted by 

examiners, progress in implementing 

commitments previously made to the 

reviewing agency, or a supported 

allegation from a commenter, is relevant 


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to CRA performance under the 

regulation and was not addressed in the 

examination. In these circumstances, 

the applicant should present sufficient 

information to supplement its record of 

performance and to respond to the 

substantive issues raised in the 

application proceeding. 

§ll.29(a)—2: What consideration is 

given to an institution’s commitments 

for future action in reviewing an 

application by those agencies that 

consider such commitments? 

A2. Commitments for future action 

are not viewed as part of the CRA record 

of performance. In general, institutions 

cannot use commitments made in the 

applications process to overcome a 

seriously deficient record of CRA 

performance. However, commitments 

for improvements in an institution’s 

performance may be appropriate to 

address specific weaknesses in an 

otherwise satisfactory record or to 

address CRA performance when a 

financially troubled institution is being 

acquired. 

§ll.29(b) Interested parties 

§ll.29(b)—1: What consideration is 

given to comments from interested 

parties in reviewing an application? 

A1. Materials relating to CRA 

performance received during the 

application process can provide 

valuable information. Written 

comments, which may express either 

support for or opposition to the 

application, are made a part of the 

record in accordance with the agencies’ 

procedures, and are carefully 

considered in making the agencies’ 

decisions. Comments should be 

supported by facts about the applicant’s 

performance and should be as specific 

as possible in explaining the basis for 

supporting or opposing the application. 

These comments must be submitted 

within the time limits provided under 

the agencies’ procedures. 

§ll.29(b)—2: Is an institution 

required to enter into agreements with 

private parties? 

A2. No. Although communications 

between an institution and members of 

its community may provide a valuable 

method for the institution to assess how 

best to address the credit needs of the 

community, the CRA does not require 

an institution to enter into agreements 

with private parties. The agencies do 

not monitor compliance with nor 

enforce these agreements. 

§ll.41—Assessment area delineation 

§ll.41(a) In general 

§ll.41(a)—1: How do the agencies 

evaluate ‘‘assessment areas’’ under the 

CRA regulations? 

A1. The rule focuses on the 

distribution and level of an institution’s 

lending, investments, and services 

rather than on how and why an 

institution delineated its assessment 

area(s) in a particular manner. 

Therefore, the agencies will not evaluate 

an institution’s delineation of its 

assessment area(s) as a separate 

performance criterion. Rather, the 

agencies will only review whether the 

assessment area delineated by the 

institution complies with the limitations 

set forth in the regulations at 

§ll.41(e). 

§ll.41(a)—2: If an institution elects 

to have the agencies consider affiliate 

lending, will this decision affect the 

institution’s assessment area(s)? 

A2. If an institution elects to have the 

lending activities of its affiliates 

considered in the evaluation of the 

institution’s lending, the geographies in 

which the affiliate lends do not affect 

the institution’s delineation of 

assessment area(s). 

§ll.41(a)—3: Can a financial 

institution identify a specific racial or 

ethnic group rather than a geographic 

area as its assessment area? 

A3. No, assessment areas must be 

based on geography. The only exception 

to the requirement to delineate an 

assessment area based on geography is 

that an institution, the business of 

which 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 assessment area. 

§ll.41(c) Geographic area(s) for 

institutions other than wholesale or 

limited purpose institutions 

§ll.41(c)(1) Generally consist of one 

or more MSAs or metropolitan divisions 

or one or more contiguous political 

subdivisions 

§ll.41(c)(1)—1: Besides cities, 

towns, and counties, what other units of 

local government are political 

subdivisions for CRA purposes? 

A1. Townships and Indian 

reservations are political subdivisions 

for CRA purposes. Institutions should 

be aware that the boundaries of 

townships and Indian reservations may 

not be consistent with the boundaries of 

the census tracts (‘‘geographies’’) in the 

area. In these cases, institutions must 

ensure that their assessment area(s) 

consists only of whole geographies by 

adding any portions of the geographies 

that lie outside the political subdivision 

to the delineated assessment area(s). 

§ll.41(c)(1)—2: Are wards, school 

districts, voting districts, and water 

districts political subdivisions for CRA 

purposes? 

A2. No. However, an institution that 

determines that it predominantly serves 

an area that is smaller than a city, town, 

or other political subdivision may 

delineate as its assessment area the 

larger political subdivision and then, in 

accordance with 12 CFR ll.41(d), 

adjust the boundaries of the assessment 

area to include only the portion of the 

political subdivision that it reasonably 

can be expected to serve. The smaller 

area that the institution delineates must 

consist of entire geographies, may not 

reflect illegal discrimination, and may 

not arbitrarily exclude low- or 

moderate-income geographies. 

§ll.41(d) Adjustments to geographic 

area(s) 

§ll.41(d)—1: When may an 

institution adjust the boundaries of an 

assessment area to include only a 

portion of a political subdivision? 

A1. Institutions must include whole 

geographies (i.e., census tracts) in their 

assessment areas and generally should 

include entire political subdivisions. 

Because census tracts are the common 

geographic areas used consistently 

nationwide for data collection, the 

agencies require that assessment areas 

be made up of whole geographies. If 

including an entire political subdivision 

would create an area that is larger than 

the area the institution can reasonably 

be expected to serve, an institution may, 

but is not required to, adjust the 

boundaries of its assessment area to 

include only portions of the political 

subdivision. For example, this 

adjustment is appropriate if the 

assessment area would otherwise be 

extremely large, of unusual 

configuration, or divided by significant 

geographic barriers (such as a river, 

mountain, or major highway system). 

When adjusting the boundaries of their 

assessment areas, institutions must not 

arbitrarily exclude low- or moderateincome geographies or set boundaries 

that reflect illegal discrimination. 

§ll.41(e) Limitations on delineation 

of an assessment area 

§ll.41(e)(3) May not arbitrarily 

exclude low- or moderate-income 

geographies 

§ll.41(e)(3)—1: How will 

examiners determine whether an 

institution has arbitrarily excluded lowor moderate-income geographies? 

A1. Examiners will make this 

determination on a case-by-case basis 

after considering the facts relevant to 

the institution’s assessment area 

delineation. Information that examiners 

will consider may include: 


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• Income levels in the institution’s 

assessment area(s) and surrounding 

geographies; 

• Locations of branches and deposittaking ATMs; 

• Loan distribution in the 

institution’s assessment area(s) and 

surrounding geographies; 

• The institution’s size; 

• The institution’s financial 

condition; and 

• The business strategy, corporate 

structure, and product offerings of the 

institution. 

§ll.41(e)(4) May not extend 

substantially beyond an MSA boundary 

or beyond a state boundary unless 

located in a multistate MSA 

§ll.41(e)(4)—1: What are the 

maximum limits on the size of an 

assessment area? 

A1. An institution may not delineate 

an assessment area extending 

substantially across the boundaries of an 

MSA unless the MSA is in a combined 

statistical area (CSA)). Although more 

than one MSA in a CSA may be 

delineated as a single assessment area, 

an institution’s CRA performance in 

individual MSAs in those assessment 

areas will be evaluated using separate 

median family incomes and other 

relevant information at the MSA level 

rather than at the CSA level. 

An assessment area also may not 

extend substantially across state 

boundaries unless the assessment area is 

located in a multistate MSA. An 

institution may not delineate a whole 

state as its assessment area unless the 

entire state is contained within an MSA. 

These limitations apply to wholesale 

and limited purpose institutions as well 

as other institutions. 

An institution must delineate separate 

assessment areas for the areas inside 

and outside an MSA if the area served 

by the institution’s branches outside the 

MSA extends substantially beyond the 

MSA boundary. Similarly, the 

institution must delineate separate 

assessment areas for the areas inside 

and outside of a state if the institution’s 

branches extend substantially beyond 

the boundary of one state (unless the 

assessment area is located in a 

multistate MSA). In addition, the 

institution should also delineate 

separate assessment areas if it has 

branches in areas within the same state 

that are widely separate and not at all 

contiguous. For example, an institution 

that has its main office in New York 

City and a branch in Buffalo, New York, 

and each office serves only the 

immediate areas around it, should 

delineate two separate assessment areas. 

§ll.41(e)(4)—2: May an institution 

delineate one assessment area that 

consists of an MSA and two large 

counties that abut the MSA but are not 

adjacent to each other? 

A2. As a general rule, an institution’s 

assessment area should not extend 

substantially beyond the boundary of an 

MSA. Therefore, the MSA would be a 

separate assessment area, and because 

the two abutting counties are not 

adjacent to each other and, in this 

example, extend substantially beyond 

the boundary of the MSA, the 

institution would delineate each county 

as a separate assessment area, assuming 

branches or deposit-taking ATMs are 

located in each county and the MSA. 

So, in this example, there would be 

three assessment areas. However, if the 

MSA and the two counties were in the 

same CSA, then the institution could 

delineate only one assessment area 

including them all. But, the institution’s 

CRA performance in the MSAs and the 

non-MSA counties in that assessment 

area would be evaluated using separate 

median family incomes and other 

relevant information at the MSA and 

state, non-MSA level, rather than at the 

CSA level. 

§ll.42—Data collection, reporting, 

and disclosure 

§ll.42—1: When must an 

institution collect and report data under 

the CRA regulations? 

A1. All institutions except small 

institutions are subject to data collection 

and reporting requirements. (‘‘Small 

institution’’ is defined in the agencies’ 

CRA regulations at §ll.12(u).) 

Examples describing the data collection 

requirements of institutions, in 

particular those that have just surpassed 

the asset-size threshold of a small 

institution, may be found on the FFIEC 

Web site at http://www.ffiec.gov/cra. All 

institutions that are subject to the data 

collection and reporting requirements 

must report the data for a calendar year 

by March 1 of the subsequent year. 

The Board of Governors of the Federal 

Reserve System processes the reports for 

all of the primary regulators. Data may 

be submitted on diskette, CD–ROM, or 

via Internet e-mail. CRA respondents are 

encouraged to send their data via the 

Internet. E-mail a properly encrypted 

CRA file (using the FFIEC software only 

Internet e-mail export feature) to the 

following e-mail address: 

crasub@frb.gov. Please mail diskette or 

CD–ROM submissions to: Board of 

Governors of the Federal Reserve 

System, Attention: CRA Processing, 

20th & Constitution Avenue, NW., MS 

N502, Washington, DC 20551–0001. 

§ll.42—2: Should an institution 

develop its own program for data 

collection, or will the regulators require 

a certain format? 

A2. An institution may use the free 

software that is provided by the FFIEC 

to reporting institutions for data 

collection and reporting or develop its 

own program. Those institutions that 

develop their own programs may create 

a data submission using the File 

Specifications and Edit Validation Rules 

that have been set forth to assist with 

electronic data submissions. For 

information about specific electronic 

formatting procedures, contact the CRA 

Assistance Line at (202) 872–7584 or 

click on ‘‘How to File’’ at http:// 

www.ffiec.gov/cra. 

§ll.42—3: How should an 

institution report data on lines of credit? 

A3. Institutions must collect and 

report data on lines of credit in the same 

way that they provide data on loan 

originations. Lines of credit are 

considered originated at the time the 

line is approved or increased; and an 

increase is considered a new 

origination. Generally, the full amount 

of the credit line is the amount that is 

considered originated. In the case of an 

increase to an existing line, the amount 

of the increase is the amount that is 

considered originated and that amount 

should be reported. However, consistent 

with the Call Report and TFR 

instructions, institutions would not 

report an increase to a small business or 

small farm line of credit if the increase 

would cause the total line of credit to 

exceed $1 million, in the case of a small 

business line, or $500,000, in the case 

of a small farm line. Of course, 

institutions may provide information 

about such line increases to examiners 

as ‘‘other loan data.’’ 

§ll.42—4: Should renewals of lines 

of credit be collected and/or reported? 

A4. Renewals of lines of credit for 

small business, small farm, consumer, 

or community development purposes 

should be collected and reported, if 

applicable, in the same manner as 

renewals of small business or small farm 

loans. See Q&A §ll.42(a)—5. 

Institutions that are HMDA reporters 

continue to collect and report home 

equity lines of credit at their option in 

accordance with the requirements of 12 

CFR part 203. 

§ll.42—5: When should merging 

institutions collect data? 

A5. Three scenarios of data collection 

responsibilities for the calendar year of 

a merger and subsequent data reporting 

responsibilities are described below. 

• Two institutions are exempt from 

CRA collection and reporting 

requirements because of asset size. The 


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institutions merge. No data collection is 

required for the year in which the 

merger takes place, regardless of the 

resulting asset size. Data collection 

would begin after two consecutive years 

in which the combined institution had 

year-end assets at least equal to the 

small institution asset-size threshold 

amount described in 12 CFR 

ll.12(u)(1). 

• Institution A, an institution 

required to collect and report the data, 

and Institution B, an exempt institution, 

merge. Institution A is the surviving 

institution. For the year of the merger, 

data collection is required for Institution 

A’s transactions. Data collection is 

optional for the transactions of the 

previously exempt institution. For the 

following year, all transactions of the 

surviving institution must be collected 

and reported. 

• Two institutions that each are 

required to collect and report the data 

merge. Data collection is required for 

the entire year of the merger and for 

subsequent years so long as the 

surviving institution is not exempt. The 

surviving institution may file either a 

consolidated submission or separate 

submissions for the year of the merger 

but must file a consolidated report for 

subsequent years. 

§ll.42—6: Can small institutions 

get a copy of the data collection 

software even though they are not 

required to collect or report data? 

A6. Yes. Any institution that is 

interested in receiving a copy of the 

software may download it from the 

FFIEC Web site at http://www.ffiec.gov/ 

cra. For assistance, institutions may call 

the CRA Assistance Line at (202) 872– 

7584 or send an e-mail to 

CRAHELP@FRB.GOV. 

§ll.42—7: If a small institution is 

designated a wholesale or limited 

purpose institution, must it collect data 

that it would not otherwise be required 

to collect because it is a small 

institution? 

A7. No. However, small institutions 

that are designated as wholesale or 

limited purpose institutions must be 

prepared to identify those loans, 

investments, and services to be 

evaluated under the community 

development test. 

§ll.42(a) Loan information required 

to be collected and maintained 

§ll.42(a)—1: Must institutions 

collect and report data on all 

commercial loans of $1 million or less 

at origination? 

A1. No. Institutions that are not 

exempt from data collection and 

reporting are required to collect and 

report only those commercial loans that 

they capture in the Call Report, 

Schedule RC–C, Part II, and in the TFR, 

Schedule SB. Small business loans are 

defined as those whose original 

amounts are $1 million or less and that 

were reported as either ‘‘Loans secured 

by nonfarm or nonresidential real 

estate’’ or ‘‘Commercial and industrial 

loans’’ in Part I of the Call Report or 

TFR. 

§ll.42(a)—2: For loans defined as 

small business loans, what information 

should be collected and maintained? 

A2. Institutions that are not exempt 

from data collection and reporting are 

required to collect and maintain, in a 

standardized, machine-readable format, 

information on each small business loan 

originated or purchased for each 

calendar year: 

• A unique number or alpha-numeric 

symbol that can be used to identify the 

relevant loan file; 

• The loan amount at origination; 

• The loan location; and 

• An indicator whether the loan was 

to a business with gross annual 

revenues of $1 million or less. 

The location of the loan must be 

maintained by census tract. In addition, 

supplemental information contained in 

the file specifications includes a date 

associated with the origination or 

purchase and whether a loan was 

originated or purchased by an affiliate. 

The same requirements apply to small 

farm loans. 

§ll.42(a)—3: Will farm loans need 

to be segregated from business loans? 

A3. Yes. 

§ll.42(a)—4: Should institutions 

collect and report data on all 

agricultural loans of $500,000 or less at 

origination? 

A4. Institutions are to report those 

farm loans that they capture in the Call 

Report, Schedule RC–C, Part II and 

Schedule SB of the TFR. Small farm 

loans are defined as those whose 

original amounts are $500,000 or less 

and were reported as either ‘‘Loans to 

finance agricultural production and 

other loans to farmers’’ or ‘‘Loans 

secured by farmland’’ in Part I of the 

Call Report or TFR. 

§ll.42(a)—5: Should institutions 

collect and report data about small 

business and small farm loans that are 

refinanced or renewed? 

A5. An institution should collect 

information about small business and 

small farm loans that it refinances or 

renews as loan originations. (A 

refinancing generally occurs when the 

existing loan obligation or note is 

satisfied and a new note is written, 

while a renewal refers to an extension 

of the term of a loan. However, for 

purposes of small business and small 

farm CRA data collection and reporting, 

it is not necessary to distinguish 

between the two.) When reporting small 

business and small farm data, however, 

an institution may only report one 

origination (including a renewal or 

refinancing treated as an origination) 

per loan per year, unless an increase in 

the loan amount is granted. However, a 

demand loan that is merely reviewed 

annually is not reported as a renewal 

because the term of the loan has not 

been extended. 

If an institution increases the amount 

of a small business or small farm loan 

when it extends the term of the loan, it 

should always report the amount of the 

increase as a small business or small 

farm loan origination. The institution 

should report only the amount of the 

increase if the original or remaining 

amount of the loan has already been 

reported one time that year. For 

example, a financial institution makes a 

term loan for $25,000; principal 

payments have resulted in a present 

outstanding balance of $15,000. In the 

next year, the customer requests an 

additional $5,000, which is approved, 

and a new note is written for $20,000. 

In this example, the institution should 

report both the $5,000 increase and the 

renewal or refinancing of the $15,000 as 

originations for that year. These two 

originations may be reported together as 

a single origination of $20,000. 

§ll.42(a)—6: Does a loan to the 

‘‘fishing industry’’ come under the 

definition of a small farm loan? 

A6. Yes. Instructions for Part I of the 

Call Report and Schedule SB of the TFR 

include loans ‘‘made for the purpose of 

financing fisheries and forestries, 

including loans to commercial 

fishermen’’ as a component of the 

definition for ‘‘Loans to finance 

agricultural production and other loans 

to farmers.’’ Part II of Schedule RC–C of 

the Call Report and Schedule SB of the 

TFR, which serve as the basis of the 

definition for small business and small 

farm loans in the regulation, capture 

both ‘‘Loans to finance agricultural 

production and other loans to farmers’’ 

and ‘‘Loans secured by farmland.’’ 

§ll.42(a)—7: How should an 

institution report a home equity line of 

credit, part of which is for home 

improvement purposes and part of 

which is for small business purposes? 

A7. When an institution originates a 

home equity line of credit that is for 

both home improvement and small 

business purposes, the institution has 

the option of reporting the portion of the 

home equity line that is for home 

improvement purposes as a home 

improvement loan under HMDA. 

Examiners would consider that portion 


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of the line when they evaluate the 

institution’s home mortgage lending. 

When an institution refinances a home 

equity line of credit into another home 

equity line of credit, HMDA reporting 

continues to be optional. If the 

institution opts to report the refinanced 

line, the entire amount of the line would 

be reported as a refinancing and 

examiners will consider the entire 

refinanced line when they evaluate the 

institution’s home mortgage lending. 

If an institution that has originated a 

home equity line of credit for both home 

improvement and small business 

purposes (or if an institution that has 

refinanced such a line into another line) 

chooses not to report a home 

improvement loan (or a refinancing) 

under HMDA, and if the line meets the 

regulatory definition of a ‘‘community 

development loan,’’ the institution 

should collect and report information 

on the entire line as a community 

development loan. If the line does not 

qualify as a community development 

loan, the institution has the option of 

collecting and maintaining (but not 

reporting) the entire line of credit as 

‘‘Other Secured Lines/Loans for 

Purposes of Small Business.’’ 

§ll.42(a)—8: When collecting small 

business and small farm data for CRA 

purposes, may an institution collect and 

report information about loans to small 

businesses and small farms located 

outside the United States? 

A8. At an institution’s option, it may 

collect data about small business and 

small farm loans located outside the 

United States; however, it cannot report 

this data because the CRA data 

collection software will not accept data 

concerning loan locations outside the 

United States. 

§ll.42(a)—9: Is an institution that 

has no small farm or small business 

loans required to report under CRA? 

A9. Each institution subject to data 

reporting requirements must, at a 

minimum, submit a transmittal sheet, 

definition of its assessment area(s), and 

a record of its community development 

loans. If the institution does not have 

community development loans to 

report, the record should be sent with 

‘‘0’’ in the community development loan 

composite data fields. An institution 

that has not purchased or originated any 

small business or small farm loans 

during the reporting period would not 

submit the composite loan records for 

small business or small farm loans. 

§ll.42(a)—10: How should an 

institution collect and report the 

location of a loan made to a small 

business or farm if the borrower 

provides an address that consists of a 

post office box number or a rural route 

and box number? 

A10. Prudent banking practices and 

Bank Secrecy Act regulations dictate 

that institutions know the location of 

their customers and loan collateral. 

Further, Bank Secrecy Act regulations 

specifically state that a post office box 

is not an acceptable address. Therefore, 

institutions typically will know the 

actual location of their borrowers or 

loan collateral beyond an address 

consisting only of a post office box. 

Many borrowers have street addresses 

in addition to rural route and box 

numbers. Institutions should ask their 

borrowers to provide the street address 

of the main business facility or farm or 

the location where the loan proceeds 

otherwise will be applied. Moreover, in 

many cases in which the borrower’s 

address consists only of a rural route 

number, the institution knows the 

location (i.e., the census tract) of the 

borrower or loan collateral. Once the 

institution has this information 

available, it should assign the census 

tract to that location (geocode) and 

report that information as required 

under the regulation. 

However, if an institution cannot 

determine a rural borrower’s street 

address, and does not know the census 

tract, the institution should report the 

borrower’s state, county, MSA or 

metropolitan division, if applicable, and 

‘‘NA,’’ for ‘‘not available,’’ in lieu of a 

census tract code. 

§ll.42(a)(2) Loan amount at 

origination 

§ll.42(a)(2)—1: When an 

institution purchases a small business 

or small farm loan, in whole or in part, 

which amount should the institution 

collect and report—the original amount 

of the loan or the amount at purchase? 

A1. When collecting and reporting 

information on purchased small 

business and small farm loans, 

including loan participations, an 

institution collects and reports the 

amount of the loan at origination, not at 

the time of purchase. This is consistent 

with the Call Report’s and TFR’s use of 

the ‘‘original amount of the loan’’ to 

determine whether a loan should be 

reported as a ‘‘loan to a small business’’ 

or a ‘‘loan to a small farm’’ and in which 

loan size category a loan should be 

reported. When assessing the volume of 

small business and small farm loan 

purchases for purposes of evaluating 

lending test performance under CRA, 

however, examiners will evaluate an 

institution’s activity based on the 

amounts at purchase. 

§ll.42(a)(2)—2: How should an 

institution collect data about multiple 

loan originations to the same business? 

A2. If an institution makes multiple 

originations to the same business, the 

loans should be collected and reported 

as separate originations rather than 

combined and reported as they are on 

the Call Report or TFR, which reflect 

loans outstanding, rather than 

originations. However, if institutions 

make multiple originations to the same 

business solely to inflate artificially the 

number or volume of loans evaluated for 

CRA lending performance, the agencies 

may combine these loans for purposes 

of evaluation under the CRA. 

§ll.42(a)(2)—3: How should an 

institution collect data pertaining to 

credit cards issued to small businesses? 

A3. If an institution agrees to issue 

credit cards to a business’s employees, 

all of the credit card lines opened on a 

particular date for that single business 

should be reported as one small 

business loan origination rather than 

reporting each individual credit card 

line, assuming the criteria in the ‘‘small 

business loan’’ definition in the 

regulation are met. The credit card 

program’s ‘‘amount at origination’’ is the 

sum of all of the employee/business 

credit cards’ credit limits opened on a 

particular date. If subsequently issued 

credit cards increase the small business 

credit line, the added amount is 

reported as a new origination. 

§ll.42(a)(3) The loan location 

§ll.42(a)(3)—1: Which location 

should an institution record if a small 

business loan’s proceeds are used in a 

variety of locations? 

A1. The institution should record the 

loan location by either the location of 

the small business borrower’s 

headquarters or the location where the 

greatest portion of the proceeds are 

applied, as indicated by the borrower. 

§ll.42(a)(4) Indicator of gross annual 

revenue 

§ll.42(a)(4)—1: When indicating 

whether a small business borrower had 

gross annual revenues of $1 million or 

less, upon what revenues should an 

institution rely? 

A1. Generally, an institution should 

rely on the revenues that it considered 

in making its credit decision. For 

example, in the case of affiliated 

businesses, such as a parent corporation 

and its subsidiary, if the institution 

considered the revenues of the entity’s 

parent or a subsidiary corporation of the 

parent as well, then the institution 

would aggregate the revenues of both 

corporations to determine whether the 

revenues are $1 million or less. 


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Alternatively, if the institution 

considered the revenues of only the 

entity to which the loan is actually 

extended, the institution should rely 

solely upon whether gross annual 

revenues are above or below $1 million 

for that entity. However, if the 

institution considered and relied on 

revenues or income of a cosigner or 

guarantor that is not an affiliate of the 

borrower, such as a sole proprietor, the 

institution should not adjust the 

borrower’s revenues for reporting 

purposes. 

§ll.42(a)(4)—2: If an institution 

that is not exempt from data collection 

and reporting does not request or 

consider revenue information to make 

the credit decision regarding a small 

business or small farm loan, must the 

institution collect revenue information 

in connection with that loan? 

A2. No. In those instances, the 

institution should enter the code 

indicating ‘‘revenues not known’’ on the 

individual loan portion of the data 

collection software or on an internally 

developed system. Loans for which the 

institution did not collect revenue 

information may not be included in the 

loans to businesses and farms with gross 

annual revenues of $1 million or less 

when reporting this data. 

§ll.42(a)(4)—3: What gross revenue 

should an institution use in determining 

the gross annual revenue of a start-up 

business? 

A3. The institution should use the 

actual gross annual revenue to date 

(including $0 if the new business has 

had no revenue to date). Although a 

start-up business will provide the 

institution with pro forma projected 

revenue figures, these figures may not 

accurately reflect actual gross revenue 

and, therefore, should not be used. 

§ll.42(a)(4)—4: When indicating 

the gross annual revenue of small 

business or small farm borrowers, do 

institutions rely on the gross annual 

revenue or the adjusted gross annual 

revenue of their borrowers? 

A4. Institutions rely on the gross 

annual revenue, rather than the adjusted 

gross annual revenue, of their small 

business or small farm borrowers when 

indicating the revenue of small business 

or small farm borrowers. The purpose of 

this data collection is to enable 

examiners and the public to judge 

whether the institution is lending to 

small businesses and small farms or 

whether it is only making small loans to 

larger businesses and farms. 

The regulation does not require 

institutions to request or consider 

revenue information when making a 

loan; however, if institutions do gather 

this information from their borrowers, 

the agencies expect them to collect and 

rely upon the borrowers’ gross annual 

revenue for purposes of CRA. The CRA 

regulations similarly do not require 

institutions to verify revenue amounts; 

thus, institutions may rely on the gross 

annual revenue amount provided by 

borrowers in the ordinary course of 

business. If an institution does not 

collect gross annual revenue 

information for its small business and 

small farm borrowers, the institution 

should enter the code ‘‘revenues not 

known.’’ (See Q&A §ll.42(a)(4)—2.) 

§ll.42(b) Loan information required 

to be reported 

§ll.42(b)(1) Small business and small 

farm loan data 

§ll.42(b)(1)—1: For small business 

and small farm loan information that is 

collected and maintained, what data 

should be reported? 

A1. Each institution that is not 

exempt from data collection and 

reporting is required to report in 

machine-readable form annually by 

March 1 the following information, 

aggregated for each census tract in 

which the institution originated or 

purchased at least one small business or 

small farm loan during the prior year: 

• The number and amount of loans 

originated or purchased with original 

amounts of $100,000 or less; 

• The number and amount of loans 

originated or purchased with original 

amounts of more than $100,000 but less 

than or equal to $250,000; 

• The number and amount of loans 

originated or purchased with original 

amounts of more than $250,000 but not 

more than $1 million, as to small 

business loans, or $500,000, as to small 

farm loans; and 

• To the extent that information is 

available, the number and amount of 

loans to businesses and farms with gross 

annual revenues of $1 million or less 

(using the revenues the institution 

considered in making its credit 

decision). 

§ll.42(b)(2) Community development 

loan data 

§ll.42(b)(2)—1: What information 

about community development loans 

must institutions report? 

A1. Institutions subject to data 

reporting requirements must report the 

aggregate number and amount of 

community development loans 

originated and purchased during the 

prior calendar year. 

§ll.42(b)(2)—2: If a loan meets the 

definition of a home mortgage, small 

business, or small farm loan AND 

qualifies as a community development 

loan, where should it be reported? Can 

FHA, VA, and SBA loans be reported as 

community development loans? 

A2. Except for multifamily affordable 

housing loans, which may be reported 

by retail institutions both under HMDA 

as home mortgage loans and as 

community development loans, in order 

to avoid double counting, retail 

institutions must report loans that meet 

the definition of ‘‘home mortgage loan,’’ 

‘‘small business loan,’’ or ‘‘small farm 

loan’’ only in those respective categories 

even if they also meet the definition of 

‘‘community development loan.’’ As a 

practical matter, this is not a 

disadvantage for institutions evaluated 

under the lending, investment, and 

service tests because any affordable 

housing mortgage, small business, small 

farm, or consumer loan that would 

otherwise meet the definition of 

‘‘community development loan’’ will be 

considered elsewhere in the lending 

test. Any of these types of loans that 

occur outside the institution’s 

assessment area can receive 

consideration under the borrower 

characteristic criteria of the lending test. 

See Q&A §ll.22(b)(2) & (3)—4. 

Limited purpose and wholesale 

institutions that meet the size threshold 

for reporting purposes also must report 

loans that meet the definitions of home 

mortgage, small business, or small farm 

loans in those respective categories. 

However, these institutions must also 

report any loans from those categories 

that meet the regulatory definition of 

‘‘community development loan’’ as 

community development loans. There is 

no double counting because wholesale 

and limited purpose institutions are not 

subject to the lending test and, 

therefore, are not evaluated on their 

level and distribution of home mortgage, 

small business, small farm, and 

consumer loans. 

§ll.42(b)(2)—3: When the primary 

purpose of a loan is to finance an 

affordable housing project for low- or 

moderate-income individuals, but, for 

example, only 40 percent of the units in 

question will actually be occupied by 

individuals or families with low or 

moderate incomes, should the entire 

loan amount be reported as a 

community development loan? 

A3. It depends. As long as the primary 

purpose of the loan is a community 

development purpose as described in 

Q&A §ll.12(h)—8, the full amount of 

the institution’s loan should be 

included in its reporting of aggregate 

amounts of community development 

lending. Even though the entire amount 

of the loan is reported, as noted in Q&A 

§ll.22(b)(4)—1, examiners may make 

qualitative distinctions among 


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community development loans on the 

basis of the extent to which the loan 

advances the community development 

purpose. 

In addition, if an institution that 

reports CRA data elects to request 

consideration for loans that provide 

mixed-income housing where only a 

portion of the loan has community 

development as its primary purpose, 

such as in connection with a 

development that has a mixed-income 

housing component or an affordable 

housing set-aside required by federal, 

state, or local government, the 

institution must report only the pro rata 

dollar amount of the portion of the loan 

that provides affordable housing to lowor moderate-income individuals. The 

pro rata dollar amount of the total 

activity will be based on the percentage 

of units that are affordable. See Q&A 

§ll.12(h)—8 for a discussion of 

‘‘primary purpose’’ of community 

development describing the distinction 

between the types of loans that would 

be reported in full and those for which 

only the pro rata amount would be 

reported. 

§ll.42(b)(2)—4: When an 

institution purchases a participation in 

a community development loan, which 

amount should the institution report— 

the entire amount of the credit 

originated by the lead lender or the 

amount of the participation purchased? 

A4. The institution reports only the 

amount of the participation purchased 

as a community development loan. 

However, the institution uses the entire 

amount of the credit originated by the 

lead lender to determine whether the 

original credit meets the definition of a 

‘‘loan to a small business,’’ ‘‘loan to a 

small farm,’’ or ‘‘community 

development loan.’’ For example, if an 

institution purchases a $400,000 

participation in a business credit that 

has a community development purpose, 

and the entire amount of the credit 

originated by the lead lender is over $1 

million, the institution would report 

$400,000 as a community development 

loan. 

§ll.42(b)(2)—5: Should institutions 

collect and report data about 

community development loans that are 

refinanced or renewed? 

A5. Yes. Institutions should collect 

information about community 

development loans that they refinance 

or renew as loan originations. 

Community development loan 

refinancings and renewals are subject to 

the reporting limitations that apply to 

refinancings and renewals of small 

business and small farm loans. See Q&A 

§ll.42(a)—5. 

§ll.42(b)(3) Home mortgage loans 

§ll.42(b)(3)—1: Must institutions 

that are not required to collect home 

mortgage loan data by the HMDA collect 

home mortgage loan data for purposes 

of the CRA? 

A1. No. If an institution is not 

required to collect home mortgage loan 

data by the HMDA, the institution need 

not collect home mortgage loan data 

under the CRA. Examiners will sample 

these loans to evaluate the institution’s 

home mortgage lending. If an institution 

wants to ensure that examiners consider 

all of its home mortgage loans, the 

institution may collect and maintain 

data on these loans. 

§ll.42(c) Optional data collection 

and maintenance 

§ll.42(c)(1) Consumer loans 

§ll.42(c)(1)—1: What are the data 

requirements regarding consumer loans? 

A1. There are no data reporting 

requirements for consumer loans. 

Institutions may, however, opt to collect 

and maintain data on consumer loans. If 

an institution chooses to collect 

information on consumer loans, it may 

collect data for one or more of the 

following categories of consumer loans: 

motor vehicle, credit card, home equity, 

other secured, and other unsecured. If 

an institution collects data for loans in 

a certain category, it must collect data 

for all loans originated or purchased 

within that category. The institution 

must maintain these data separately for 

each category for which it chooses to 

collect data. The data collected and 

maintained should include for each 

loan: 

• A unique number or alpha-numeric 

symbol that can be used to identify the 

relevant loan file; 

• The loan amount at origination or 

purchase; 

• The loan location; and 

• The gross annual income of the 

borrower that the institution considered 

in making its credit decision. 

Generally, guidance given with 

respect to data collection of small 

business and small farm loans, 

including, for example, guidance 

regarding collecting loan location data, 

and whether to collect data in 

connection with refinanced or renewed 

loans, will also apply to consumer 

loans. 

§ll.42(c)(1)(iv) Income of borrower 

§ll.42(c)(1)(iv)—1: If an institution 

does not consider income when making 

an underwriting decision in connection 

with a consumer loan, must it collect 

income information? 

A1. No. Further, if the institution 

routinely collects, but does not verify, a 

borrower’s income when making a 

credit decision, it need not verify the 

income for purposes of data 

maintenance. 

§ll.42(c)(1)(iv)—2: May an 

institution list ‘‘0’’ in the income field on 

consumer loans made to employees 

when collecting data for CRA purposes 

as the institution would be permitted to 

do under HMDA? 

A2. Yes. 

§ll.42(c)(1)(iv)—3: When collecting 

the gross annual income of consumer 

borrowers, do institutions collect the 

gross annual income or the adjusted 

gross annual income of the borrowers? 

A3. Institutions collect the gross 

annual income, rather than the adjusted 

gross annual income, of consumer 

borrowers. The purpose of income data 

collection in connection with consumer 

loans is to enable examiners to 

determine the distribution, particularly 

in the institution’s assessment area(s), of 

the institution’s consumer loans, based 

on borrower characteristics, including 

the number and amount of consumer 

loans to low-, moderate-, middle-, and 

upper-income borrowers, as determined 

on the basis of gross annual income. 

The regulation does not require 

institutions to request or consider 

income information when making a 

loan; however, if institutions do gather 

this information from their borrowers, 

the agencies expect them to collect the 

borrowers’ gross annual income for 

purposes of CRA. The CRA regulations 

similarly do not require institutions to 

verify income amounts; thus, 

institutions may rely on the gross 

annual income amount provided by 

borrowers in the ordinary course of 

business. 

§ll.42(c)(1)(iv)—4: Whose income 

does an institution collect when a 

consumer loan is made to more than 

one borrower? 

A4. An institution that chooses to 

collect and maintain information on 

consumer loans collects the gross 

annual income of all primary obligors 

for consumer loans, to the extent that 

the institution considered the income of 

the obligors when making the decision 

to extend credit. Primary obligors 

include co-applicants and co-borrowers, 

including co-signers. An institution 

does not, however, collect the income of 

guarantors on consumer loans, because 

guarantors are only secondarily liable 

for the debt. 

§ll.42(c)(2) Other loan data 

§ll.42(c)(2)—1: Schedule RC–C, 

Part II of the Call Report does not allow 

banks to report loans for commercial 

and industrial purposes that are secured 

by residential real estate, unless the 


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11672 Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Notices 

security interest in the nonfarm 

residential real estate is taken only as 

an abundance of caution. (See Q&A 

§ll.12(v)—3.) Loans extended to 

small businesses with gross annual 

revenues of $1 million or less may, 

however, be secured by residential real 

estate. May a bank collect this 

information to supplement its small 

business lending data at the time of 

examination? 

A1. Yes. If these loans promote 

community development, as defined in 

the regulation, the bank should collect 

and report information about the loans 

as community development loans. 

Otherwise, at the bank’s option, it may 

collect and maintain data concerning 

loans, purchases, and lines of credit 

extended to small businesses and 

secured by nonfarm residential real 

estate for consideration in the CRA 

evaluation of its small business lending. 

A bank may collect this information as 

‘‘Other Secured Lines/Loans for 

Purposes of Small Business’’ in the 

individual loan data. This information 

should be maintained at the bank but 

should not be submitted for central 

reporting purposes. 

§ll.42(c)(2)—2: Must an institution 

collect data on loan commitments and 

letters of credit? 

A2. No. Institutions are not required 

to collect data on loan commitments 

and letters of credit. Institutions may, 

however, provide for examiner 

consideration information on letters of 

credit and commitments. 

§ll.42(c)(2)—3: Are commercial 

and consumer leases considered loans 

for purposes of CRA data collection? 

A3. Commercial and consumer leases 

are not considered small business or 

small farm loans or consumer loans for 

purposes of the data collection 

requirements in 12 CFR ll.42(a) & 

(c)(1). However, if an institution wishes 

to collect and maintain data about 

leases, the institution may provide this 

data to examiners as ‘‘other loan data’’ 

under 12 CFR ll.42(c)(2) for 

consideration under the lending test. 

§ll.42(d) Data on affiliate lending 

§ll.42(d)—1: If an institution elects 

to have an affiliate’s home mortgage 

lending considered in its CRA 

evaluation, what data must the 

institution make available to examiners? 

A1. If the affiliate is a HMDA reporter, 

the institution must identify those loans 

reported by its affiliate under 12 CFR 

part 203 (Regulation C, implementing 

HMDA). At its option, the institution 

may provide examiners with either the 

affiliate’s entire HMDA Disclosure 

Statement or just those portions 

covering the loans in its assessment 

area(s) that it is electing to consider. If 

the affiliate is not required by HMDA to 

report home mortgage loans, the 

institution must provide sufficient data 

concerning the affiliate’s home mortgage 

loans for the examiners to apply the 

performance tests. 

§ll.43—Content and availability of 

public file 

§ll.43(a) Information available to the 

public 

§ll.43(a)(1) Public comments related 

to an institution’s CRA performance 

§ll.43(a)(1)—1: What happens to 

comments received by the agencies? 

A1. Comments received by a Federal 

financial supervisory agency will be on 

file at the agency for use by examiners. 

Those comments are also available to 

the public unless they are exempt from 

disclosure under the Freedom of 

Information Act. 

§ll.43(a)(1)—2: Is an institution 

required to respond to public 

comments? 

A2. No. All institutions should review 

comments and complaints carefully to 

determine whether any response or 

other action is warranted. A small 

institution subject to the small 

institution performance standards is 

specifically evaluated on its record of 

taking action, if warranted, in response 

to written complaints about its 

performance in helping to meet the 

credit needs in its assessment area(s) (12 

CFR ll.26(b)(5)). For all institutions, 

responding to comments may help to 

foster a dialogue with members of the 

community or to present relevant 

information to an institution’s Federal 

financial supervisory agency. If an 

institution responds in writing to a 

letter in the public file, the response 

must also be placed in that file, unless 

the response reflects adversely on any 

person or placing it in the public file 

violates a law. 

§ll.43(a)(2) CRA performance 

evaluation 

§ll.43(a)(2)—1: May an institution 

include a response to its CRA 

performance evaluation in its public 

file? 

A1. Yes. However, the format and 

content of the evaluation, as transmitted 

by the supervisory agency, may not be 

altered or abridged in any manner. In 

addition, an institution that received a 

less than satisfactory rating during its 

most recent examination must 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. 

See 12 CFR ll.43(b)(5). The 

institution must update the description 

on a quarterly basis. 

§ll.43(b) Additional information 

available to the public 

§ll.43(b)(1) Institutions other than 

small institutions 

§ll.43(b)(1)—1: Must an institution 

that elects to have affiliate lending 

considered include data on this lending 

in its public file? 

A1. Yes. The lending data to be 

contained in an institution’s public file 

covers the lending of the institution’s 

affiliates, as well as of the institution 

itself, considered in the assessment of 

the institution’s CRA performance. An 

institution that has elected to have 

mortgage loans of an affiliate considered 

must include either the affiliate’s 

HMDA Disclosure Statements for the 

two prior years or the parts of the 

Disclosure Statements that relate to the 

institution’s assessment area(s), at the 

institution’s option. 

§ll.43(b)(1)—2: May an institution 

retain its CRA disclosure statement in 

electronic format in its public file, rather 

than printing a hard copy of the CRA 

disclosure statement for retention in its 

public file? 

A2. Yes, if the institution can readily 

print out its CRA disclosure statement 

from an electronic medium (e.g., CD, 

DVD, or Internet Web site) when a 

consumer requests the public file. If the 

request is at a branch other than the 

main office or the one designated 

branch in each state that holds the 

complete public file, the institution 

should provide the CRA disclosure 

statement in a paper copy, or in another 

format acceptable to the requestor, 

within five calendar days, as required 

by 12 CFR ll.43(c)(2)(ii). 

§ll.43(c) Location of public 

information 

§ll.43(c)—1: What is an 

institution’s ‘‘main office’’? 

A1. An institution’s main office is the 

main, home, or principal office as 

designated in its charter. 

§ll.43(c)—2: May an institution 

maintain a copy of its public file on an 

intranet or the Internet? 

A2. Yes, an institution may keep all 

or part of its public file on an intranet 

or the Internet, provided that the 

institution maintains all of the 

information, either in paper or 

electronic form, that is required in 

§ll.43 of the regulations. An 

institution that opts to keep part or all 

of its public file on an intranet or the 

Internet must follow the rules in 12 CFR 

ll.43(c)(1) and (2) as to what 

information is required to be kept at a 


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main office and at a branch. The 

institution also must ensure that the 

information required to be maintained 

at a main office and branch, if kept 

electronically, can be readily 

downloaded and printed for any 

member of the public who requests a 

hard copy of the information. 

§ll.44—Public notice by institutions 

§ll.44—1: Are there any placement 

or size requirements for an institution’s 

public notice? 

A1. The notice must be placed in the 

institution’s public lobby, but the size 

and placement may vary. The notice 

should be placed in a location and be of 

a sufficient size that customers can 

easily see and read it. 

§ll.45—Publication of planned 

examination schedule 

§ll.45—1: Where will the agencies 

publish the planned examination 

schedule for the upcoming calendar 

quarter? 

A1. The agencies may use the Federal 

Register, a press release, the Internet, or 

other existing agency publications for 

disseminating the list of the institutions 

scheduled for CRA examinations during 

the upcoming calendar quarter. 

Interested parties should contact the 

appropriate Federal financial 

supervisory agency for information on 

how the agency is publishing the 

planned examination schedule. 

§ll.45—2: Is inclusion on the list of 

institutions that are scheduled to 

undergo CRA examinations in the next 

calendar quarter determinative of 

whether an institution will be examined 

in that quarter? 

A2. No. The agencies attempt to 

determine as accurately as possible 

which institutions will be examined 

during the upcoming calendar quarter. 

However, whether an institution’s name 

appears on the published list does not 

conclusively determine whether the 

institution will be examined during that 

quarter. The agencies may need to defer 

a planned examination or conduct an 

unforeseen examination because of 

scheduling difficulties or other 

circumstances. 

APPENDIX A to Part ll—Ratings 

APPENDIX A to Part ll—1: Must an 

institution’s performance fit each aspect 

of a particular rating profile in order to 

receive that rating? 

A1. No. Exceptionally strong 

performance in some aspects of a 

particular rating profile may 

compensate for weak performance in 

others. For example, a retail institution 

other than an intermediate small 

institution that uses non-branch 

delivery systems to obtain deposits and 

to deliver loans may have almost all of 

its loans outside the institution’s 

assessment area. Assume that an 

examiner, after consideration of 

performance context and other 

applicable regulatory criteria, concludes 

that the institution has weak 

performance under the lending criteria 

applicable to lending activity, 

geographic distribution, and borrower 

characteristics within the assessment 

area. The institution may compensate 

for such weak performance by 

exceptionally strong performance in 

community development lending in its 

assessment area or a broader statewide 

or regional area that includes its 

assessment area. 

APPENDIX B to Part ll—CRA Notice 

APPENDIX B to Part ll—1: What 

agency information should be added to 

the CRA notice form? 

A1. The following information should 

be added to the form: 

OCC-supervised institutions only: For 

community banks, the address of the 

deputy comptroller of the district in 

which the institution is located should 

be inserted in the appropriate blank. 

These addresses can be found at http:// 

www.occ.gov. For banks supervised 

under the large bank program, insert 

‘‘Large Bank Supervision, 250 E Street, 

SW., Washington, DC 20219–0001.’’ For 

banks supervised under the mid-size/ 

credit card bank program, insert ‘‘MidSize and Credit Card Bank Supervision, 

250 E Street, SW., Washington, DC 

20219–0001.’’ 

OCC-, FDIC-, and Board-supervised 

institutions: ‘‘Officer in Charge of 

Supervision’’ is the title of the 

responsible official at the appropriate 

Federal Reserve Bank. 

INDEX 

Keyword Q&A 

Affiliate lending .................................................................................................................................................. §ll.22(b)(2) & (3)—3 

§ll.22(c)(1)—1 

§ll.22(c)(2)(i)—1 

§ll.22(c)(2)(ii)—1 

§ll.22(c)(2)(ii)—2 

§ll.26—1 

§ll.41(a)—2 

§ll.42(d)—1 

§ll.43(b)(1)—1 

Affiliates ............................................................................................................................................................. §ll.12(a)—1 

§ll.22(d)—3 

§ll.24(e)—1 

Affordable housing ............................................................................................................................................ §ll.12(g)—1 

§ll.12(g)—2 

§ll.12(g)(1)—1 

Agreements, private .......................................................................................................................................... §ll.29(b)—2 

Alternative delivery systems ............................................................................................................................. §ll.24(d)—1 

§ll.24(d)(3)—1 

§ll.24(d)(3)—2 

Applications, corporate ...................................................................................................................................... §ll.29(a)—1 

§ll.29(a)—2 

§ll.29(b)—1 

Assessment areas ............................................................................................................................................. §ll.22(b)(2) & (3)—2 

§ll.22(b)(2) & (3)—3 

§ll.41(a)—1 

§ll.41(a)—2 

§ll.41(a)—3 

§ll.41(c)(1)—1 


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INDEX—Continued 

Keyword Q&A 

§ll.41(c)(1)—2 

§ll.41(d)—1 

§ll.41(e)(3)—1 

§ll.41(e)(4)—1 

§ll.41(e)(4)—2 

Assessment area, benefit to ............................................................................................................................. §ll.12(g)—4 

§ll.12(h)—6 

Assets ................................................................................................................................................................ §ll.12(u)—1 

§ll.12(u)(2)—1 

ATMs ................................................................................................................................................................. §ll.12(f)—1 

§ll.24(d)—1 

§ll.24(d)(3)—1 

Borrower characteristics .................................................................................................................................... §ll.22(b)(2) & (3)—1 

Branch ............................................................................................................................................................... §ll.12(f)—1 

§ll.12(f)—2 

§ll.28(a)—1 

Brokerage .......................................................................................................................................................... §ll.12(l)—2 

Capital investments ........................................................................................................................................... §ll.12(g)—4 

CEBA credit card banks .................................................................................................................................... §ll.25(a)—1 

Charitable contributions or activities ................................................................................................................. §ll.12(i)—2 

§ll.12(t)—5 

Child care services ............................................................................................................................................ §ll.12(g)—1 

Commercial loans ............................................................................................................................................. §ll.12(v)—2 

§ll.42(a)—1 

Commitments .................................................................................................................................................... §ll.22(a)(2)—1 

§ll.22(a)(2)—4 

§ll.29(a)—2 

§ll.42(c)(2)—2 

Community contact interviews .......................................................................................................................... §ll.21(b)(2)—2 

Community development .................................................................................................................................. §ll.12(g)—1 

§ll.12(g)(1)—1 

§ll.12(g)(3)—1 

§ll.12(g)(4)—1 

§ll.12(h)—5 

§ll.12(h)—8 

§ll.12(t)—5 

Community development activities ................................................................................................................... §ll.12(g)—2 

§ll.12(g)(4)—2 

§ll.21(a)—2 

Community development loan .......................................................................................................................... §ll.12(h)—1 

§ll.12(h)—2 

§ll.12(h)—3 

§ll.12(h)—4 

§ll.12(h)—5 

§ll.12(h)—6 

§ll.12(h)—7 

§ll.12(h)—8 

§ll.12(t)—6 

§ll.12(v)—1 

§ll.22(b)(4)—1 

§ll.22(d)—2 

§ll.23(b)—1 

§ll.26—1 

§ll.26(b)—3 

§ll.26(c)—1 

§ll.26(d)—2 

§ll.42(b)(2)—1 

§ll.42(b)(2)—2 

§ll.42(b)(2)—3 

§ll.42(b)(2)—4 

§ll.42(b)(2)—5 

§ll.42(c)(2)—1 

Community development service ...................................................................................................................... §ll.12(h)—6 

§ll.12(h)—7 

§ll.12(h)—8 

§ll.12(i)—1 

§ll.12(i)—2 

§ll.12(i)—3 

§ll.12(l)—2 

§ll.12(t)—7 

§ll.12(v)—3 

§ll.23(b)—1 


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INDEX—Continued 

Keyword Q&A 

§ll.24(e)—1 

§ll.26—1 

§ll.26(c)—1 

§ll.26(c)(3)—1 

§ll.26(d)—2 

Community development test for intermediate small institutions ..................................................................... §ll.26(b)—1 

§ll.26(c)—1 

§ll.26(c)(3)—1 

§ll.26(c)(4)—1 

§ll.28—1 

Community development test for wholesale and limited purpose institutions .................................................. §ll.25(d)—1 

§ll.25(f)—1 

Community services .......................................................................................................................................... §ll.12(g)—2 

§ll.12(g)(2)—1 

§ll.12(t)—4 

Complexity ......................................................................................................................................................... §ll.21(a)—2 

§ll.22(b)(5)—1 

§ll.23(e)—2 

§ll.28—1 

Consortia ........................................................................................................................................................... §ll.22(d)—2 

§ll.26(b)—3 

Consumer loan .................................................................................................................................................. §ll.12(h)—2 

§ll.12(j)—1 

§ll.12(j)—2 

§ll.12(x)—1 

§ll.22(a)(1)—2 

§ll.42(c)(1)—1 

§ll.42(c)(1)(iv)—1 

§ll.42(c)(1)(iv)—2 

§ll.42(c)(1)(iv)—3 

§ll.42(c)(1)(iv)—4 

CRA disclosure statement ................................................................................................................................ §ll.43(b)(1)—2 

Credit cards ....................................................................................................................................................... §ll.12(h)—4 

§ll.12(v)—4 

§ll.42(a)(2)—3 

Credit union, low-income .................................................................................................................................. §ll.12(g)—4 

§ll.12(t)—4 

Data collection ................................................................................................................................................... §ll.42—1 

§ll.42—2 

§ll.42—4 

§ll.42—5 

§ll.42—6 

§ll.42—7 

§ll.42(a)—1 

§ll.42(a)—2 

§ll.42(a)—4 

§ll.42(a)—5 

§ll.42(a)—8 

§ll.42(a)—10 

§ll.42(a)(2)—1 

§ll.42(a)(2)—2 

§ll.42(a)(2)—3 

§ll.42(a)(4)—2 

§ll.42(a)(4)—4 

§ll.42(b)(2)—5 

§ll.42(b)(3)—1 

§ll.42(c)(1)—1 

§ll.42(c)(1)(iv)—1 

§ll.42(c)(1)(iv)—2 

§ll.42(c)(1)(iv)—3 

§ll.42(c)(1)(iv)—4 

§ll.42(c)(2)—1 

Data reporting ................................................................................................................................................... §ll.42—1 

§ll.42—3 

§ll.42—4 

§ll.42(a)—1 

§ll.42(a)—4 

§ll.42(a)—5 

§ll.42(a)—8 

§ll.42(a)—9 

§ll.42(a)—10 

§ll.42(a)(2)—1 


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INDEX—Continued 

Keyword Q&A 

§ll.42(b)(1)—1 

§ll.42(b)(2)—1 

§ll.42(b)(2)—2 

§ll.42(b)(2)—3 

§ll.42(b)(2)—4 

§ll.42(b)(2)—5 

Debit cards ........................................................................................................................................................ §ll.24(d)(3)—2 

Designated disaster area .................................................................................................................................. §ll.12(g)(4)—2 

§ll.12(g)(4)(ii)—1 

§ll.12(g)(4)(ii)—2 

Distressed nonmetropolitan middle-income geography .................................................................................... §ll.12(g)(4)—2 

§ll.12(g)(4)(iii)—1 

§ll.12(g)(4)(iii)—2 

§ll.12(g)(4)(iii)—3 

Economic development ..................................................................................................................................... §ll.12(g)—1 

§ll.12(g)—2 

§ll.12(g)(3)—1 

Education, financial literacy .............................................................................................................................. §ll.12(i)—3 

§ll.22(a)—1 

Educational services ......................................................................................................................................... §ll.12(g)—1 

Employees’ charitable activities ........................................................................................................................ §ll.12(i)—2 

Employees’ income ........................................................................................................................................... §ll.42(c)(1)(iv)—2 

Environmental hazards ..................................................................................................................................... §ll.12(h)—1 

Examination schedule ....................................................................................................................................... §ll.45—1 

§ll.45—2 

Federal branch .................................................................................................................................................. §ll.12(u)—1 

Federal Home Loan Bank ................................................................................................................................. §ll.12(t)—3 

Federal Reserve Bank membership reserves .................................................................................................. §ll.12(t)—3 

Financial services, provision of ......................................................................................................................... §ll.12(i)—1 

Fisheries ............................................................................................................................................................ §ll.42(a)—6 

Flexibility ............................................................................................................................................................ §ll.12(g)—3 

§ll.22(b)(5)—1 

Foreclosure prevention program ....................................................................................................................... §ll.12(g)(4)(i)—1 

§ll.12(i)—3 

§ll.22(a)—1 

Forestries .......................................................................................................................................................... §ll.42(a)—6 

Geographic distribution ..................................................................................................................................... §ll.22(b)(2) & (3)—1 

Geography ......................................................................................................................................................... §ll.12(g)(4)(iii)—1 

§ll.41(d)—1 

§ll.41(e)(3)—1 

Guaranteed loans .............................................................................................................................................. §ll.22(a)(2)—5 

Guarantor .......................................................................................................................................................... §ll.42(c)(1)(iv)—4 

Health services .................................................................................................................................................. §ll.12(g)—1 

High cost area ................................................................................................................................................... §ll.12(g)—3 

HMDA reporting ................................................................................................................................................ §ll.12(j)—2 

§ll.12(l)—2 

§ll.22(a)(1)—1 

§ll.22(a)(2)—7 

§ll.42(a)—7 

§ll.42(b)(3)—1 

Home equity line of credit ................................................................................................................................. §ll.12(j)—2 

§ll.42(a)—7 

Home equity loan .............................................................................................................................................. §ll.12(j)—1 

Home mortgage lending .................................................................................................................................... §ll.22(a)(1)—1 

§ll.42(d)—1 

Home mortgage loan ........................................................................................................................................ §ll.12(h)—2 

§ll.12(h)—3 

§ll.12(j)—2 

§ll.12(l)—1 

§ll.12(l)—2 

§ll.12(x)—1 

§ll.22(b)(2) & (3)—5 

§ll.23(b)—2 

§ll.42(b)(2)—2 

§ll.42(b)(3)—1 

Illegal credit practices ....................................................................................................................................... §ll.28(c)—1 

Income ............................................................................................................................................................... §ll.42(c)(1)(iv)—1 

§ll.42(c)(1)(iv)—2 

§ll.42(c)(1)(iv)—3 

§ll.42(c)(1)(iv)—4 

Income level ...................................................................................................................................................... §ll.12(m)—1 

Indirect investments .......................................................................................................................................... §ll.23(a)—1 


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INDEX—Continued 

Keyword Q&A 

Individual development accounts (IDAs) .......................................................................................................... §ll.12(i)—3 

§ll.24(d)—2 

Innovativeness .................................................................................................................................................. §ll.21(a)—2 

§ll.22(b)(5)—1 

§ll.23(e)—2 

§ll.28—1 

Institutional capacity and constraints ................................................................................................................ §ll.21(b)(4)—1 

Intermediate small institution ............................................................................................................................ §ll.12(h)—3 

§ll.12(u)(2)—1 

§ll.26(a)(2)—1 

Internet/intranet ................................................................................................................................................. §ll.43(b)(1)—2 

§ll.43(c)—2 

Investment authority .......................................................................................................................................... §ll.12(t)—1 

Leases ............................................................................................................................................................... §ll.22(a)(2)—4 

§ll.42(c)(2)—3 

Lending activity ................................................................................................................................................. §ll.22(b)(1)—1 

Lending distribution ........................................................................................................................................... §ll.22(b)(2) & (3)—1 

§ll.22(b)(2) & (3)—2 

§ll.22(b)(2) & (3)—3 

§ll.26(b)(3) & (4)—1 

Lending within assessment area ...................................................................................................................... §ll.26(b)(2)—1 

Letters of credit ................................................................................................................................................. §ll.22(a)(2)—1 

§ll.22(a)(2)—4 

§ll.42(c)(2)—2 

Limited purpose institution ................................................................................................................................ §ll.12(n)—1 

§ll.12(n)—2 

§ll.12(n)—3 

§ll.42—7 

§ll.42(b)(2)—2 

Lines of credit .................................................................................................................................................... §ll.42—3 

§ll.42—4 

Loan amount ..................................................................................................................................................... §ll.42(a)—2 

§ll.42(a)(2)—1 

Loan application activity .................................................................................................................................... §ll.22(a)(2)—2 

Loan location ..................................................................................................................................................... §ll.42(a)—2 

§ll.42(a)—10 

§ll.42(a)(3)—1 

Loan originations, multiple ................................................................................................................................ §ll.42(a)(2)—2 

Loan participations ............................................................................................................................................ §ll.12(g)—4 

§ll.22(a)(2)—6 

§ll.42(b)(2)—4 

Loan production office (LPO) ............................................................................................................................ §ll.12(f)—2 

Loans, outside-assessment area ...................................................................................................................... §ll.22(b)(2) & (3)—4 

Loan-to-deposit ratio ......................................................................................................................................... §ll.26(b)(1)—1 

§ll.26(b)(1)—2 

§ll.26(b)(1)—3 

Main office ......................................................................................................................................................... §ll.43(c)—1 

Measurable goals .............................................................................................................................................. §ll.27(f)(1)—1 

MECAs .............................................................................................................................................................. §ll.22(a)(2)—3 

§ll.22(a)(2)—4 

Merging institutions ........................................................................................................................................... §ll.42—5 

Minority-owned financial institution ................................................................................................................... §ll.12(g)—4 

§ll.12(t)—4 

Mixed-income housing ...................................................................................................................................... §ll.12(h)—8 

§ll.42(b)(2)—3 

Mobile branch .................................................................................................................................................... §ll.12(f)—1 

Mortgage-backed securities .............................................................................................................................. §ll.12(t)—2 

§ll.23(b)—2 

Multi-purpose loan ............................................................................................................................................. §ll.12(j)—3 

Municipal bonds ................................................................................................................................................ §ll.12(t)—2 

Nationwide fund ................................................................................................................................................ §ll.23(a)—2 

§ll.25(e)—1 

New Markets Tax Credit Community Development Entity ............................................................................... §ll.12(g)(3)—1 

§ll.12(h)—1 

§ll.12(t)—4 

New Markets Venture Capital Company .......................................................................................................... §ll.12(g)(3)—1 

Niche institution ................................................................................................................................................. §ll.12(n)—3 

Nonprofit organization ....................................................................................................................................... §ll.12(v)—1 

Other loan data ................................................................................................................................................. §ll.22(a)(2)—4 

§ll.42(c)(2)—1 

Past performance .............................................................................................................................................. §ll.21(b)(5)—1 

Performance context ......................................................................................................................................... §ll.21(b)—1 


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INDEX—Continued 

Keyword Q&A 

§ll.21(b)(2)—1 

§ll.21(b)(2)—2 

§ll.21(b)(4)—1 

§ll.21(b)(5)—1 

§ll.21(b)(5)—2 

§ll.22(a)(2)—2 

§ll.23(e)—2 

§ll.26(c)(4)—1 

Performance criteria .......................................................................................................................................... §ll.21(a)—1 

§ll.23(e)—1 

§ll.23(e)—2 

§ll.28(b)—1 

Performance evaluation .................................................................................................................................... §ll.43(a)(2)—1 

Performance rating ............................................................................................................................................ §ll.26(d) ¥1 

§ll.28—1 

§ll.28(a)—1 

§ll.28(a)—2 

§ll.28(a)—3 

§ll.28(b)—1 

§ll.28(c)—1 

APPENDIX A to Part ll—1 

Political subdivision ........................................................................................................................................... §ll.41(c)(1)—1 

§ll.41(c)(1)—2 

§ll.41(d)—1 

Primary purpose ................................................................................................................................................ §ll.12(g)—3 

§ll.12(h)—8 

§ll.12(t)—5 

Public comment ................................................................................................................................................. §ll.27(g)(2)—1 

§ll.29(b)—1 

§ll.43(a)(1)—1 

§ll.43(a)(1)—2 

Public file ........................................................................................................................................................... §ll.43(a)(1)—2 

§ll.43(a)(2)—1 

§ll.43(b)(1)—1 

§ll.43(b)(1)—2 

§ll.43(c)—2 

Public notice ...................................................................................................................................................... §ll.27(g)(2)—1 

§ll.44—1 

APPENDIX B to Part ll—1 

Qualified investment .......................................................................................................................................... §ll.12(h)—6 

§ll.12(h)—7 

§ll.12(h)—8 

§ll.12(t)—2 

§ll.12(t)—3 

§ll.12(t)—4 

§ll.12(t)—5 

§ll.12(t)—6 

§ll.12(t)—7 

§ll.12(t)—8 

§ll.23(a)—1 

§ll.23(b)—1 

§ll.23(b)—2 

§ll.23(a)—2 

§ll.23(e)—1 

§ll.23(e)—2 

§ll.26—1 

§ll.26(b)—5 

§ll.26(c)—1 

§ll.26(d)—2 

Qualitative factors ............................................................................................................................................. §ll.12(g)(3)—1 

§ll.12(t)—8 

§ll.21(a)—2 

§ll.22(b)(4)—1 

§ll.22(b)(5)—1 

§ll.23(e)—1 

§ll.23(e)—2 

§ll.26(c)(4)—1 

§ll.28(b)—1 

Ratings matrix ................................................................................................................................................... §ll.28(a)—3 

Refinancings ...................................................................................................................................................... §ll.22(a)(2)—7 

§ll.42(a)—5 

§ll.42(b)(2)—5 


jlentini on DSKJ8SOYB1PROD with NOTICES2
Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Notices 11679 

INDEX—Continued 

Keyword Q&A 

Regional area .................................................................................................................................................... §ll.12(h)—7 

Remote service facility (RSF) ........................................................................................................................... §ll.12(f)—1 

Renewals ........................................................................................................................................................... §ll.42—4 

§ll.42(a)—5 

§ll.42(b)(2)—5 

Responsiveness ................................................................................................................................................ §ll.21(a)—2 

§ll.22(a)—1 

§ll.23(e)—2 

§ll.26(c)(4)—1 

§ll.28—1 

Retail banking services ..................................................................................................................................... §ll.12(l)—2 

§ll.24(d)—1 

Revenue ............................................................................................................................................................ §ll.42(a)(4)—1 

§ll.42(a)(4)—2 

§ll.42(a)(4)—3 

§ll.42(a)(4)—4 

Revitalize or stabilize ........................................................................................................................................ §ll.12(g)—1 

§ll.12(g)—2 

§ll.12(g)(4)—2 

§ll.12(g)(4)(i)—1 

§ll.12(g)(4)(ii)—2 

§ll.12(g)(4)(iii)—3 

§ll.12(g)(4)(iii)—4 

§ll.12(h)—5 

SBA 504 Certified Development Company program ........................................................................................ §ll.12(h)—1 

SBIC or SBDC .................................................................................................................................................. §ll.12(g)(3)—1 

§ll.12(t)—4 

Similarly situated lenders .................................................................................................................................. §ll.21(b)(5)—2 

Small business loan .......................................................................................................................................... §ll.12(h)—2 

§ll.12(v)—1 

§ll.12(v)—2 

§ll.12(v)—3 

§ll.12(v)—4 

§ll.12(x)—1 

§ll.22(a)(2)—7 

§ll.42(a)—2 

§ll.42(a)—3 

§ll.42(a)—5 

§ll.42(a)—8 

§ll.42(a)—10 

§ll.42(a)(2)—1 

§ll.42(a)(2)—3 

§ll.42(a)(3)—1 

§ll.42(a)(4)—1 

§ll.42(a)(4)—2 

§ll.42(b)(2)—2 

§ll.42(c)(2)—1 

Small farm loan ................................................................................................................................................. §ll.12(h)—2 

§ll.12(v)—1 

§ll.12(x)—1 

§ll.42(a)—2 

§ll.42(a)—3 

§ll.42(a)—4 

§ll.42(a)—5 

§ll.42(a)—6 

§ll.42(a)—8 

§ll.42(a)—10 

§ll.42(a)(2)—1 

§ll.42(a)(4)—2 

§ll.42(b)(2)—2 

Small institution ................................................................................................................................................. §ll.12(u)—1 

§ll.12(u)(2)—1 

§ll.26(b)—1 

§ll.42—1 

§ll.42—6 

§ll.42—7 

Small institution performance standards ........................................................................................................... §ll.26—1 

§ll.26(b)—1 

§ll.26(b)—2 

§ll.26(b)—3 

§ll.26(b)—4 

§ll.26(b)—5 


jlentini on DSKJ8SOYB1PROD with NOTICES2
11680 Federal Register / Vol. 75, No. 47 / Thursday, March 11, 2010 / Notices 

INDEX—Continued 

Keyword Q&A 

§ll.26(b)(3) & (4)—1 

§ll.26(d)¥1 

§ll.26(d)—2 

Social services .................................................................................................................................................. §ll.12(g)—1 

Software for data collection and reporting ........................................................................................................ §ll.42—2 

§ll.42—6 

Special purpose institution ................................................................................................................................ §§ll.11(c)(3) & 563e.11(c)(2)—1 

§§ll.11(c)(3) & 563e.11(c)(2)—2 

State branch ...................................................................................................................................................... §ll.12(u)—1 

Strategic plan .................................................................................................................................................... §ll.27(c)—1 

§ll.27(c)—2 

§ll.27(f)(1)—1 

§ll.27(g)(2)—1 

Subsidiary .......................................................................................................................................................... §ll.12(a)—1 

Third-party investments ..................................................................................................................................... §ll.22(d)—1 

§ll.22(d)—2 

§ll.22(d)—3 

§ll.25(d)—1 

§ll.26(b)—3 

Underserved nonmetropolitan middle-income geography ................................................................................ §ll.12(g)(4)—2 

§ll.12(g)(4)(iii)—1 

§ll.12(g)(4)(iii)—2 

§ll.12(g)(4)(iii)—4 

Wholesale institution ......................................................................................................................................... §ll.12(n)—2 

§ll.12(n)—3 

§ll.12(x)—1 

§ll.42—7 

§ll.42(b)(2)—2 

Women-owned financial institutions .................................................................................................................. §ll.12(g)—4 

§ll.12(t)—4 

End of text of the Interagency 

Questions and Answers 

Dated: January 27, 2010. 

John C. Dugan, 

Comptroller of the Currency. 

By order of the Board of Governors of the 

Federal Reserve System, March 2, 2010. 

Jennifer J. Johnson, 

Secretary of the Board. 

Dated at Washington, DC, this 18th day of 

February, 2010. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Dated: February 12, 2010. 

By the Office of Thrift Supervision. 

John E. Bowman, 

Acting Director. 

[FR Doc. 2010–4903 Filed 3–10–10; 8:45 am] 

BILLING CODE 4810–33–P, 6210–01–P, 6714–01–P, 

6720–01–P 


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