§ 25.27 Strategic plan. ( a ) *Alternative election.* Pursuant to § 25.21, the appropriate Federal banking agency evaluates a bank's or savings association's record of helping to meet the credit needs of its entire community under a strategic plan, if: ( 1 ) The appropriate Federal banking agency has approved the plan pursuant to this section;
( 2 ) The plan is in effect; and
( 3 ) The bank or savings association has been operating under an approved plan for at least one year.
( b ) *Data requirements.* The appropriate Federal banking agency's approval of a plan does not affect the bank's or savings association's obligation, if any, to collect, maintain, and report data as required by § 25.42.
( c ) *Plans in general* — ( 1 ) *Term.* A plan may have a term of not more than five years.
( 2 ) *Performance tests in plan.* ( i ) A bank's or savings association's plan must include the same performance tests that would apply in the absence of an approved plan, except as provided in paragraph (g)(1) of this section.
( ii ) Consistent with paragraph (g) of this section, a bank's or savings association's plan may include optional evaluation components or eligible modifications and additions to the performance tests that would apply in the absence of an approved plan.
( 3 ) *Assessment areas and other geographic areas* — ( i ) *Multiple geographic areas.* A bank or savings association may prepare a single plan or separate plans for its facility-based assessment areas, retail lending assessment areas, outside retail lending area, or other geographic areas that would be evaluated in the absence of an approved plan.
( ii ) *Geographic areas not included in a plan.* Any facility-based assessment area, retail lending assessment area, outside retail lending area, or other geographic area that would be evaluated in the absence of an approved plan, but is not included in an approved plan, will be evaluated pursuant to the performance tests that would apply in the absence of an approved plan.
( 4 ) *Operating subsidiaries and affiliates* — ( i ) *Operating subsidiaries.* The loans, investments, services, and products of a bank's or savings association's operating subsidiary must be included in the bank's or savings association's plan, unless the operating subsidiary is independently subject to CRA requirements.
( ii ) *Affiliates* — ( A ) *Optional inclusion of other affiliates' loans, investments, services, and products.* Consistent with § 25.21(b)(3), a bank or savings association may include loans, investments, services, and products of affiliates of a bank or savings association that are not operating subsidiaries in a plan, if those loans, investments, services, and products are not included in the CRA performance evaluation of any other depository institution.
( B ) *Joint plans.* Affiliated depository institutions supervised by the same Federal financial supervisory agency may prepare a joint plan, provided that the plan includes, for each bank or savings association, the applicable performance tests that would apply in the absence of an approved plan. The joint plan may include optional evaluation components or eligible modifications and additions to the performance tests that would apply in the absence of an approved plan.
( C ) *Allocation.* The inclusion of an affiliate's loans, investments, services, and products in a bank's or savings association's plan, or in a joint plan of affiliated depository institutions, is subject to the following: ( 1 ) The loans, investments, services, and products may not be included in the CRA performance evaluation of another depository institution; and
( 2 ) The allocation of loans, investments, services, and products to a bank or savings association, or among affiliated banks or savings associations, must reflect a reasonable basis for the allocation and may not be for the sole or primary purpose of inappropriately enhancing any bank's or savings association's CRA evaluation.
( d ) *Justification and appropriateness of plan election* — ( 1 ) *Justification requirements.* A bank's or savings association's plan must provide a justification that demonstrates the need for the following aspects of a plan due to the bank's or savings association's business model (*e.g.,* its retail banking services and retail banking products): ( i ) Optional evaluation components pursuant to paragraph (g)(1) of this section;
( ii ) Eligible modifications or additions to the applicable performance tests pursuant to paragraph (g)(2) of this section;
( iii ) Additional geographic areas pursuant to paragraph (g)(3) of this section; and
( iv ) The conclusions and ratings methodology pursuant to paragraph (g)(6) of this section.
( 2 ) *Justification elements.* Each justification must specify the following: ( i ) Why the bank's or savings association's business model is outside the scope of, or inconsistent with, one or more aspects of the performance tests that would apply in the absence of an approved plan;
( ii ) Why an evaluation of the bank or savings association pursuant to any aspect of a plan in paragraph (d)(1) of this section would more meaningfully reflect a bank's or savings association's record of helping to meet the credit needs of its community than if it were evaluated under the performance tests that would apply in the absence of an approved plan; and
( iii ) Why the optional performance components and eligible modifications or additions meet the standards of paragraphs (g)(1) and (2) of this section, as applicable.
( e ) *Public participation in initial draft plan development* — ( 1 ) *In general.* Before submitting a draft plan to the appropriate Federal banking agency for approval pursuant to paragraph (h) of this section, a bank or savings association must: ( i ) Informally seek suggestions from members of the public while developing the plan;
( ii ) Once the bank or savings association has developed its initial draft plan, formally solicit public comment on the initial draft plan for at least 60 days by: ( A ) Submitting the initial draft plan for publication on the appropriate Federal banking agency's website and by publishing the initial draft plan on the bank's or savings association's website, if the bank or savings association maintains one; and
( B ) ( 1 ) Except as provided in paragraph (e)(1)(ii)(B)( 2 ) of this section, publishing notice in at least one print newspaper of general circulation (if available, otherwise a digital publication) in each facility-based assessment area covered by the plan; and
( 2 ) For a military bank or savings association, publishing notice in at least one print newspaper of general circulation targeted to members of the military (if available, otherwise a digital publication targeted to members of the military); and
( iii ) Include in the notice required under paragraph (e)(1)(ii) of this section a means by which members of the public can electronically submit and mail comments to the bank or savings association on its initial draft plan.
( 2 ) *Availability of initial draft plan.* During the period when the bank or savings association is formally soliciting public comment on its initial draft plan, the bank or savings association must make copies of the initial draft plan available for review at no cost at all offices of the bank or savings association in any facility-based assessment area covered by the plan and provide copies of the initial draft plan upon request for a reasonable fee to cover copying and mailing, if applicable.
( f ) *Submission of a draft plan.* The bank or savings association must submit its draft plan to the appropriate Federal banking agency at least 90 days prior to the proposed effective date of the plan. The bank or savings association must also submit with its draft plan: ( 1 ) Proof of notice publication and a description of its efforts to seek input from members of the public, including individuals and organizations the bank or savings association contacted and how the bank or savings association gathered information;
( 2 ) Any written comments or other public input received;
( 3 ) If the bank or savings association revised the initial draft plan in response to the public input received, the initial draft plan as released for public comment with an explanation of the relevant changes; and
( 4 ) If the bank or savings association did not revise the initial draft plan in response to suggestions or concerns from public input received, an explanation for why any suggestion or concern was not addressed in the draft plan.
( g ) *Plan content.* In addition to meeting the requirements in paragraphs (c) and (d) of this section, the plan must meet the following requirements: ( 1 ) *Applicable performance tests and optional evaluation components.* A bank or savings association must include in its plan a focus on the credit needs of its entire community, including low- and moderate-income individuals, families, or households, low- and moderate-income census tracts, and small businesses and small farms. The bank or savings association must describe how its plan is responsive to the characteristics and credit needs of its facility-based assessment areas, retail lending assessment areas, outside retail lending area, or other geographic areas served by the bank or savings association, considering public comment and the bank's or savings association's capacity and constraints, product offerings, and business strategy. As applicable, a bank or savings association must specify components in its plan for helping to meet: ( i ) The retail lending needs of its facility-based assessment areas, retail lending assessment areas, and outside retail lending area that are covered by the plan. A bank or savings association that originates or purchases loans in a product line evaluated pursuant to the Retail Lending Test in § 25.22 or originates or purchases loans evaluated pursuant to the Small Bank and Savings Association Lending Test in § 25.29(a)(2) must include the applicable test in its plan, subject to eligible modifications or additions specified in paragraph (g)(2) of this section.
( ii ) The retail banking services and retail banking products needs of its facility-based assessment areas and at the institution level that are covered by the plan. ( A ) A large bank or savings association that maintains delivery systems evaluated pursuant to the Retail Services and Products Test in § 25.23(b) must include this component of the test in its plan, subject to eligible modifications or additions specified in paragraph (g)(2) of this section.
( B ) A large bank or savings association that does not maintain delivery systems evaluated pursuant to the Retail Services and Products Test in § 25.23(b) may include retail banking products components in § 25.23(c) and accompanying annual measurable goals in its plan.
( C ) A bank or savings association other than a large bank or savings association may include components of retail banking services or retail banking products and accompanying annual measurable goals in its plan.
( iii ) The community development loan and community development investment needs of its facility-based assessment areas, States, or multistate MSAs, as applicable, and the nationwide area that are covered by the plan. Subject to eligible modifications or additions as provided in paragraph (g)(2) of this section: ( A ) A large bank or savings association must include the Community Development Financing Test in § 25.24 in its plan.
( B ) An intermediate bank or savings association must include either the Community Development Financing Test in § 25.24 or the Intermediate Bank and Savings Association Community Development Test in § 25.30(a)(2) in its plan.
( C ) A limited purpose bank or savings association must include the Community Development Financing Test for Limited Purpose Banks and Savings Associations in § 25.26 in its plan.
( D ) A small bank or savings association may include a community development loan or community development investment component and accompanying annual measurable goals in its plan.
( iv ) The community development services needs of its facility-based assessment areas served by the bank or savings association that are covered by the plan. ( A ) A large bank or savings association must include the Community Development Services Test in § 25.25 in its plan, subject to eligible modifications or additions as provided in paragraph (g)(2) of this section, for each facility-based assessment area where the bank or savings association has employees.
( B ) A bank or savings association other than a large bank or savings association may include a community development services component and accompanying annual measurable goals in its plan.
( 2 ) *Eligible modifications or additions to applicable performance tests* — ( i ) *Retail lending.* ( A ) For a bank or savings association that the appropriate Federal banking agency would otherwise evaluate pursuant to the Small Bank and Savings Association Lending Test in § 25.29(a)(2): ( 1 ) A bank or savings association may omit, as applicable, the evaluation of performance criteria related to the loan-to-deposit ratio or the percentage of loans located in the bank's or savings association's facility-based assessment area(s).
( 2 ) A bank or savings association may add annual measurable goals for any aspect of the bank's or savings association's retail lending.
( B ) For a bank or savings association the appropriate Federal banking agency would otherwise evaluate pursuant to the Retail Lending Test in § 25.22: ( 1 ) A bank or savings association may add additional loan products, such as non-automobile consumer loans or open-end home mortgage loans, or additional goals for major product lines, such as closed-end home mortgage loans to first-time homebuyers, with accompanying annual measurable goals.
( 2 ) Where annual measurable goals for additional loan products or additional goals for major product lines have been added pursuant to paragraph (g)(2)(i)(B)( 1 ) of this section, a bank or savings association may provide different weights for averaging together the performance across these loan products and may include those loan products in the numerator of the Bank Volume Metric.
( 3 ) A bank or savings association may use alternative weights for combining the borrower and geographic distribution analyses for major product line(s) or other loan products.
( ii ) *Retail banking services and retail banking products.* ( A ) A large bank or savings association may add annual measurable goals for any component of the Retail Services and Products Test in § 25.23.
( B ) A large bank or savings association may modify the Retail Services and Products Test by removing a component of the test.
( C ) A large bank or savings association may assign specific weights to applicable components in paragraph (g)(2)(ii)(A) of this section in reaching a Retail Services and Products Test conclusion.
( D ) A bank or savings association other than a large bank or savings association may include retail banking services or retail banking products component(s) and accompanying annual measurable goals in its plan.
( iii ) *Community development loans and community development investments.* ( A ) A bank or savings association may specify annual measurable goals for community development loans, community development investments, or both. The bank or savings association must base any annual measurable goals as a percentage or ratio of the bank's or savings association's community development loans and community development investments for all or certain types of community development described in § 25.13(b) through (l), presented either on a combined or separate basis, relative to the bank's or savings association's capacity and should account for community development needs and opportunities.
( B ) A bank or savings association may specify using assets as an alternative denominator for a community development financing metric if it better measures a bank's or savings association's capacity.
( C ) A bank or savings association may specify additional benchmarks to evaluate a community development financing metric.
( D ) A small bank or savings association may include community development loans, community development investments, or both, and accompanying annual measurable goals in its plan.
( iv ) *Community development services.* ( A ) A bank or savings association may specify annual measurable goals for community development services activity, by number of activity hours, number of hours per full-time equivalent employee, or some other measure.
( B ) A bank or savings association other than a large bank or savings association may include a community development services component and accompanying annual measurable goals in its plan.
( v ) *Weights for assessing performance across geographic areas.* A bank or savings association may specify alternative weights for averaging test performance across assessment areas or other geographic areas. These alternative weights must be based on the bank's or savings association's capacity and community needs and opportunities in specific geographic areas.
( vi ) *Test weights.* For ratings at the State, multistate MSA, and institution levels pursuant to § 25.28(b) and paragraph g.2 of appendix D to this part, as applicable: ( A ) A bank or savings association may request an alternate weighting method for combining performance under the applicable performance tests and optional evaluation components. In specifying alternative test weights for each applicable test, a bank or savings association must emphasize retail lending, community development financing, or both. Alternative weights must be responsive to the characteristics and credit needs of a bank's or savings association's assessment areas and public comments and must be based on the bank's or savings association's capacity and constraints, product offerings, and business strategy.
( B ) A bank or savings association that requests an alternate weighting method pursuant to paragraph (g)(2)(vi)(A) of this section must compensate for decreasing the weight under one test by committing to enhance its efforts to help meet the credit needs of its community under another performance test.
( 3 ) *Geographic coverage of plan.* ( i ) A bank or savings association may incorporate performance evaluation components and accompanying annual measurable goals for additional geographic areas but may not eliminate the evaluation of its performance in any geographic area that would be included in its performance evaluation in the absence of an approved plan.
( ii ) If a large bank or savings association is no longer required to delineate a retail lending assessment area previously identified in the plan as a result of not meeting the required retail lending assessment area thresholds pursuant to § 25.17, the appropriate Federal banking agency will not evaluate the bank or savings association for its performance in that area for the applicable years of the plan in which the area is no longer a retail lending assessment area.
( iii ) A bank or savings association that includes additional performance evaluation components with accompanying annual measurable goals in its plan must specify the geographic areas where those components and goals apply.
( 4 ) *Confidential information.* A bank or savings association may submit additional information to the appropriate Federal banking agency on a confidential basis, but the goals stated in the plan must be sufficiently specific to enable the public and the appropriate Federal banking agency to judge the merits of the plan.
( 5 ) *“Satisfactory” and “Outstanding” performance goals.* A bank or savings association that includes modified or additional performance evaluation components with accompanying annual measurable goals in its plan must specify in its plan annual measurable goals that constitute “Satisfactory” performance and may specify annual measurable goals that constitute “Outstanding” performance.
( 6 ) *Conclusions and rating methodology.* A bank or savings association must specify in its plan how all elements of a plan covered in paragraphs (g)(1) through (5) of this section, in conjunction with any other applicable performance tests not included in an approved strategic plan, should be considered to assign: ( i ) *Conclusions.* Pursuant to § 25.28 and appendix C to this part, the appropriate Federal banking agency assigns conclusions for each facility-based assessment area, retail lending assessment area, outside retail lending area, State, and multistate MSA, as applicable, and the institution. In assigning conclusions under a strategic plan, the appropriate Federal banking agency may consider performance context information as provided in § 25.21(d).
( ii ) *Ratings.* Pursuant to § 25.28 and paragraph f of appendix D to this part, the appropriate Federal banking agency incorporates the conclusions of a bank or savings association evaluated under an approved plan into its State or multistate MSA ratings, as applicable, and its institution rating, accounting for paragraph g.2 of appendix D to this part, as applicable.
( h ) *Draft plan evaluation* — ( 1 ) *Timing.* The appropriate Federal banking agency seeks to act upon a draft plan within 90 calendar days after the appropriate Federal banking agency receives the complete draft plan and other materials required pursuant to paragraph (f) of this section. If the appropriate Federal banking agency does not act within this time period, the appropriate Federal banking agency will communicate to the bank or savings association the rationale for the delay and an expected timeframe for a decision on the draft plan.
( 2 ) *Public participation.* In evaluating the draft plan, the appropriate Federal banking agency considers: ( i ) The public's involvement in formulating the draft plan, including specific information regarding the members of the public and organizations the bank or savings association contacted and how the bank or savings association collected information relevant to the draft plan;
( ii ) Written public comments and other public input on the draft plan;
( iii ) Any response by the bank or savings association to public input on the draft plan; and
( iv ) Whether to solicit additional public input or require the bank or savings association to provide any additional response to public input already received.
( 3 ) *Criteria for evaluating plan for approval.* ( i ) The appropriate Federal banking agency evaluates all plans using the following criteria: ( A ) The extent to which the plan meets the standards set forth in this section; and
( B ) The extent to which the plan has adequately justified the need for a plan and each aspect of the plan as required in paragraph (d) of this section.
( ii ) The appropriate Federal banking agency evaluates a plan under the following criteria, as applicable, considering performance context information pursuant to § 25.21(d): ( A ) The extent and breadth of retail lending or retail lending-related activities to address credit needs, including the distribution of loans among census tracts of different income levels, businesses and farms of different sizes, and individuals of different income levels, pursuant to §§ 25.22, and 25.29, as applicable;
( B ) The effectiveness of the bank's or savings association's systems for delivering retail banking services and the availability and responsiveness of the bank's or savings association's retail banking products, pursuant to § 25.23, as applicable;
( C ) The extent, breadth, impact, and responsiveness of the bank's or savings association's community development loans and community development investments, pursuant to §§ 25.24, 25.26, and 25.30, as applicable; and
( D ) The number, hours, and types of community development services performed and the extent to which the bank's or savings association's community development services are impactful and responsive, pursuant to §§ 25.25 and 25.30, as applicable.
( 4 ) *Plan decisions* — ( i ) *Approval.* The appropriate Federal banking agency may approve a plan after considering the criteria in paragraph (h)(3) of this section and if it determines that the bank or savings association has provided adequate justification for the plan and each aspect of the plan as required in paragraph (d) of this section.
( ii ) *Denial.* The appropriate Federal banking agency may deny a bank's or savings association's request to be evaluated under a plan for any of the following reasons: ( A ) The Agency determines that the bank or savings association has not provided adequate justification for the plan and each aspect of the plan as required pursuant to paragraph (d) of this section;
( B ) The appropriate Federal banking agency determines that evaluation under the plan would not provide a more meaningful reflection of the bank's or savings association's record of helping to meet the credit needs of the bank's or savings association's community;
( C ) The plan is not responsive to public comment received pursuant to paragraph (e) of this section;
( D ) The appropriate Federal banking agency determines that the plan otherwise fails to meet the requirements of this section; or
( E ) The bank or savings association fails to provide information requested by the appropriate Federal banking agency that is necessary for the appropriate Federal banking agency to make an informed decision.
( 5 ) *Publication of approved plan.* The appropriate Federal banking agency will publish an approved plan on the appropriate Federal banking agency's website.
( i ) *Plan amendment* — ( 1 ) *Mandatory plan amendment.* During the term of a plan, a bank or savings association must submit to the appropriate Federal banking agency for approval an amendment to its plan if a material change in circumstances: ( i ) Impedes its ability to perform at a satisfactory level under the plan, such as financial constraints caused by significant events that impact the local or national economy; or
( ii ) Significantly increases its financial capacity and ability to engage in retail lending, retail banking services, retail banking products, community development loans, community development investments, or community development services referenced in an approved plan, such as a merger or consolidation.
( 2 ) *Elective plan amendment.* During the term of a plan, a bank or savings association may request the appropriate Federal banking agency to approve an amendment to the plan in the absence of a material change in circumstances.
( 3 ) *Requirements for plan amendments* — ( i ) *Amendment explanation.* When submitting a plan amendment for approval, a bank or savings association must explain: ( A ) The material change in circumstances necessitating the amendment; or
( B ) Why it is necessary and appropriate to amend its plan in the absence of a material change in circumstances.
( ii ) *Compliance requirement.* An amendment to a plan must comply with all relevant requirements of this section, unless the appropriate Federal banking agency waives a requirement as not applicable.
( j ) *Performance evaluation under a plan* — ( 1 ) *In general.* The appropriate Federal banking agency evaluates a bank's or savings association's performance under an approved plan based on the performance tests that would apply in the absence of an approved plan and any optional evaluation components or eligible modifications and additions to the applicable performance tests set forth in the bank's or savings association's approved plan.
( 2 ) *Goal considerations.* If a bank or savings association established annual measurable goals and does not meet one or more of its satisfactory goals, the appropriate Federal banking agency will consider the following factors to determine the effect on a bank's or savings association's CRA performance evaluation: ( i ) The degree to which the goal was not met;
( ii ) The importance of the unmet goals to the plan as a whole; and
( iii ) Any circumstances beyond the control of the bank or savings association, such as economic conditions or other market factors or events, that have adversely impacted the bank's or savings association's ability to perform.
( 3 ) *Ratings.* The appropriate Federal banking agency rates the performance of a bank or savings association under this section pursuant to appendix D to this part.
[89 FR 7165, Feb. 1, 2024, as amended by 89 FR 22067, Mar. 29, 2024]