[Federal Register Volume 65, Number 83 (Friday, April 28, 2000)]
[Notices]
[Pages 25088-25120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10343]



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Part III





Federal Financial Institutions Examination Council





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Community Reinvestment Act; Interagency Questions and Answers Regarding 
Community Reinvestment; Notice

Federal Register / Vol. 65, No. 83 / Friday, April 28, 2000 / 
Notices

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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL


Community Reinvestment Act; Interagency Questions and Answers 
Regarding Community Reinvestment; Notice

AGENCY: Federal Financial Institutions Examination Council.

ACTION: Notice and request for comment.

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SUMMARY: The Consumer Compliance Task Force (we) of the Federal 
Financial Institutions Examination Council (FFIEC) is supplementing, 
amending, and republishing its Interagency Questions and Answers 
Regarding Community Reinvestment. The Interagency Questions and Answers 
have been prepared by staff of the Office of the Comptroller of the 
Currency (OCC), the Board of Governors of the Federal Reserve System 
(Board), the Federal Deposit Insurance Corporation (FDIC), and the 
Office of Thrift Supervision (OTS) (collectively, the agencies) to 
answer frequently asked questions about community reinvestment. These 
Interagency Questions and Answers contain informal staff guidance for 
agency personnel, financial institutions, and the public. We invite 
public comment on the proposed question and answer, as well as any of 
the new and revised questions and answers and any other community 
reinvestment issues that are not addressed in these Interagency 
Questions and Answers.

DATES: Effective date of amended Interagency Questions and Answers on 
Community Reinvestment: April 28, 2000. Comments on the proposed 
questions and answers are requested by June 27, 2000.

ADDRESSES: Questions and comments may be sent to Keith J. Todd, 
Executive Secretary, Federal Financial Institutions Examination 
Council, 2000 K Street, NW., Suite 310, Washington, DC 20006, or by 
facsimile transmission to (202) 872-7501.

FOR FURTHER INFORMATION CONTACT:
    OCC: Malloy Harris, National Bank Examiner, Community and Consumer 
Policy Division, (202) 874-4446; or Margaret Hesse, Senior Attorney, 
Community and Consumer Law Division, (202) 874-5750, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Catherine M.J. Gates, Senior Review Examiner, (202) 452-
3946; James H. Mann, Attorney, (202) 452-2412; or Kathleen C. Ryan, 
Attorney, (202) 452-3667, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue, NW., Washington, DC 20551.
    FDIC: Robert W. Mooney, Senior Fair Lending Specialist, Division of 
Compliance and Consumer Affairs, (202) 942-3090; or A. Ann Johnson, 
Counsel, Legal Division, (202) 898-3573, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429.
    OTS: Theresa A. Stark, Project Manager, Compliance Policy, (202) 
906-7054; or Richard R. Riese, Director, Compliance Policy, (202) 906-
6134, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 
20552.

SUPPLEMENTARY INFORMATION:

Background

    In 1995, the agencies revised the Community Reinvestment Act (CRA) 
regulations by issuing a joint final rule, which was published on May 
4, 1995 (60 FR 22156). See 12 CFR parts 25, 228, 345 and 563e, 
implementing 12 U.S.C. 2901 et seq. The agencies published related 
clarifying documents on December 20, 1995 (60 FR 66048) and May 10, 
1996 (61 FR 21362).
    The revised regulations are interpreted primarily through 
``Interagency Questions and Answers Regarding Community Reinvestment,'' 
which provide informal staff guidance for use by agency personnel, 
financial institutions, and the public, and which are supplemented 
periodically. We published our most recent guidance on May 3, 1999 
(1999 Interagency Questions and Answers). 64 FR 23618. In addition to 
issuing the 1999 Interagency Questions and Answers, we proposed three 
questions and answers in the accompanying supplementary information. 
These questions and answers addressed: (1) Collection of refinanced and 
renewed small business and small farm loan data; (2) direct benefit of 
community development loans and services and qualified investments to 
an institution's assessment area; and (3) consideration as qualified 
investments of mortgage-backed securities backed by mortgages 
originated or purchased primarily by the investing institution. We 
specifically requested comment addressing the proposed questions and 
answers, as well as general comments and questions regarding the CRA 
regulations. 64 FR at 23624-26.
    We received 86 letters in response to our request for comments in 
the 1999 Interagency Questions and Answers. Comments came from 
financial institutions (55), community organizations (10), financial 
institution trade associations (8), federal entities (5), state/local 
agencies (1), as well as others (7). This document supplements, 
revises, and republishes the 1999 Interagency Questions and Answers 
based, in part, on questions and comments received from examiners, 
financial institutions, and other interested parties, and on comments 
received in response to our request for comments.
    As discussed below, this document adopts two of the questions and 
answers proposed in May 1999, along with a conforming change to another 
existing question and answer. We are also reissuing for comment the 
third question and answer proposed in May 1999 and proposing for 
comment a conforming amendment to an existing question and answer. In 
addition, we are making slight revisions to four existing questions and 
answers and adding one new question and answer.
    In this version of the Interagency Questions and Answers, we have 
deleted the ``Table of Contents,'' which appeared in previous versions. 
In lieu of the table of contents, we are adding, for the first time, an 
index 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 questions and answers addressing each keyword in 
the index is not intended to be exhaustive. We welcome suggestions for 
additional entries to the index. Further, when this new version of the 
Interagency Questions and Answers is made available on the agencies' 
and the FFIEC's World Wide Web sites, the index question and answer 
numbers will be linked by hypertext to the questions and answers in the 
document to facilitate quick reference to relevant information.
    Questions and answers are grouped by the provision of the CRA 
regulations that they discuss and are presented in the same order as 
the regulatory provisions. The Interagency Questions and Answers employ 
an abbreviated method to cite to the regulations. Because the 
regulations of the four agencies are substantially identical, 
corresponding sections of the different regulations usually bear the 
same suffix. Therefore, the Interagency Questions and Answers typically 
cite only to the suffix. 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 nonmember state banks, at 12 CFR 345.26; and for 
thrifts, at 12 CFR 563e.26. Accordingly, the citation in this document 
would be to

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Sec. ____.26. In the few instances in which the suffix in one of the 
regulations is different, the specific citation for that regulation is 
provided. In order to create a meaningful index, we found it necessary 
to devise a slightly new question numbering system. The new question 
numbering system consists of the regulatory citation (as described 
above) and a number, connected by a dash. For example, the first 
question addressing Sec. ____.21(a) would be identified as 
Sec. ____.21(a)-1.

Adopting Questions and Answers Proposed in May 1999

    We are adopting two of the three questions and answers that we 
proposed in May 1999. We are also adopting a conforming revision to an 
existing question and answer to provide consistency with a new question 
and answer.

May an Institution Receive Consideration Under the Investment Test for 
Mortgage-Backed Securities Backed by Home Mortgages That the Same 
Institution Originated or Purchased?

    In May, we proposed a new question and answer that stated that an 
institution could not receive investment test consideration for a 
mortgage-backed security that is primarily or exclusively backed by 
loans originated or purchased by the same institution.
    Twenty-seven of the 82 letters submitted to the FFIEC addressed 
this issue. In addition, four Federal Reserve Banks wrote to the Board 
with comments on this proposal. Commenters were evenly divided on this 
proposed question and answer. Twelve financial institutions, two trade 
associations and one federal entity (15 commenters) disagreed with the 
proposed question and answer, while six financial institutions, three 
community organizations, two trade associations, four federal entities 
(the Federal Reserve Banks) and one other commenter (an affiliate of a 
financial institution) (16 commenters) agreed with the proposed 
question and answer.
    The Interagency Questions and Answers currently state that 
mortgage-backed securities (MBSs) designed primarily to finance 
community development generally are qualified investments. 
(Secs. ____.12(s) & 563.12(r)-2.) This view was adopted based on 
staff's belief that, in allowing CRA consideration for MBSs backed by 
affordable housing loans, affordable housing loan originators would 
have an additional incentive to sell their affordable housing loans. As 
a result, they would be able to originate more affordable housing loans 
with the proceeds from the sale of their loans through the MBS vehicle.
    Commenters that opposed adoption of the question and answer, which 
as proposed would not have allowed an institution to receive 
consideration for MBSs that are primarily or exclusively backed by 
loans originated or purchased by the same institution, generally 
stressed that securitizing affordable housing loans had capital, 
liquidity, and credit and interest rate risk advantages. For example, 
the risk-based capital required for MBSs may be lower than for the 
corresponding loans held in portfolio. If an MBS is guaranteed by a 
government-sponsored enterprise (GSE), such as Fannie Mae or Freddie 
Mac, the risk-based capital requirement (on the guaranteed portion) is 
20 percent, compared to a risk-based capital requirement of 50 percent 
for one-to-four family mortgages held in portfolio. (On the other hand, 
if the MBS is not guaranteed by a GSE, the risk-based capital 
requirement is 50 percent, the same as the requirement for loans held 
in portfolio.) Commenters also indicated that MBSs could be used as 
collateral against other borrowings, such as from Federal Home Loan 
Banks, whereas whole loans generally cannot be used as this type of 
collateral.
    Proponents of the proposed question and answer generally argued, 
however, that if an originator of affordable housing loans securitizes 
its own loans and buys back the security, these transactions generally 
do not make available proceeds with which to originate additional 
affordable housing loans. A typical securitization of this type occurs 
as follows: An institution originates the loans and holds the loans on 
its books at cost. It then sells the loans (at market value) either to 
a trust that is established for the purpose of holding the securitized 
loans or to another entity, including Fannie Mae or Freddie Mac. (The 
originating institution could realize gain or loss on the sale due to 
the difference between cost and fair market value.) The security is 
created. The institution then purchases back either the entire issuance 
or a portion thereof. The cost of the security may be higher or lower 
than the market value of the underlying loans based upon market 
conditions.
    Because no or limited funds are made available to enable the 
institution to originate more affordable housing loans, the reasoning 
for allowing consideration for the purchase of MBSs does not apply. 
And, to the extent that any funds are made available through the 
securitization of loans and are used to originate or purchase 
additional home mortgage loans, institutions will receive consideration 
under the lending test for the additional home mortgage loans. 
Furthermore, although the purchase of the security and the origination 
of the loans are separate transactions, considering both would amount 
to double counting, in contravention of Sec. ____.23(b).
    After carefully considering both positions of the commenters, we 
have decided to adopt the question and answer as proposed as 
Sec. ____.23(b)-2.

Should Renewals and Refinancings of Small Business and Small Farm Loans 
Be Collected and Reported?

    The fifth question and answer addressing Sec. ____.42(a), 
(Sec. ____.42(a)-5), originally adopted in October 1996, provided that 
an institution should report refinancings, but not renewals, of small 
business and small farm loans. In May 1999, we published for comment 
two alternative revisions of Sec. ____.42(a)-5. ``Alternative I'' 
provided that an institution would not collect or report either 
renewals or refinancings of small business or small farm loans, unless 
the loan amount were increased. ``Alternative II'' provided that 
institutions would collect and report renewals and refinancings of 
small business and small farm loans as originations, subject to a limit 
of reporting one origination per loan per year, unless an increase in 
the loan amount is granted, in which case the amount of the increase 
would be reported as a separate origination.
    We received a total of 64 comments on the issue of reporting small 
business and small farm loans. Forty-nine of these commenters appeared 
to support Alternative II. Only five commenters clearly supported 
Alternative I. Other commenters, including some who stated that they 
preferred Alternative II, proposed other approaches to the issue of 
small business and small farm loans, including reporting these events 
separately from originations, or reporting them as originations but 
without a one-origination-per-year limit.
    Commenters in favor of Alternative II believed that this approach 
would:
    <bullet> Result in more accurate data--renewals appear to be widely 
used as a more cost-effective method for meeting the credit needs of 
small businesses and small farms;
    <bullet> Help institutions serve credit needs in their 
communities--financial institutions will be encouraged to maintain 
existing relationships with small businesses and small farms;
    <bullet> Reduce burden by eliminating the current confusion over 
the meaning of a refinancing versus a renewal;

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    <bullet> Remove the incentive for institutions to artificially 
structure small business and farm transactions as refinancings in order 
to enhance their CRA performance;
    <bullet> Prevent ``gaming'' by limiting reporting to only one 
origination per year; and
    <bullet> Allow for better comparison of data across financial 
institutions because all would be subject to the one origination per 
year limit.
    In contrast, we found that the comments in favor of Alternative I 
were not as persuasive on the issues of serving the community, reducing 
burden, and ensuring data accuracy. A few commenters maintained that 
Alternative I would have better reflected CRA performance because 
financial institutions would only report increases, or ``new money 
generated into the community.'' However, as stated, many others 
supported Alternative II because the credit needs of small businesses 
and farms are apparently well served by renewals. Although one 
commenter believed that Alternative I was simply more clear and concise 
than Alternative II, the commenter did not elaborate. Another commenter 
stated that Alternative I would provide an incentive for financial 
institutions to maintain customer relationships because it counts 
increases. However, many commenters stated that Alternative II would go 
further in providing this incentive, because it would allow 
institutions to report both renewals and refinancings one time per 
year, as well as increases.
    Based on the comments received, the agencies believe that 
Alternative II appears to better address the purpose of CRA and the 
need to minimize burden while enhancing data accuracy. Therefore, we 
are revising Sec. ____.42(a)-5 consistent with proposed Alternative II. 
Under revised Sec. ____.42(a)-5, an institution no longer needs to 
distinguish between refinancings and renewals, because it collects and 
reports both as loan originations, subject to the one-origination-per-
year limitation set forth in the revised question and answer. 
Institutions will also collect and report the amount of the increase as 
a loan origination when they increase the amount of a renewed or 
refinanced loan.
    We recognize that adopting Alternative II will require changes to 
financial institutions' data collection and reporting procedures; 
however, commenters appeared to agree that either alternative would 
entail some burden. Systems will have to be changed to identify 
renewals as loan originations because they were previously not 
collected or reported as originations. Further, systems will need to be 
programmed to identify whether a loan is made, refinanced or renewed 
more than one time per year to prevent reporting of more than one 
origination per loan (absent an increase in the loan amount). Any extra 
burden, however, should result in more accurate, useful, and consistent 
data regarding an institution's small business and small farm lending 
performance. To minimize the burden placed on institutions, the revised 
question and answer becomes effective for CRA data collected in 2001 
and reported in 2002. Until January 2001, institutions may collect 
small business and small farm loan data according to the guidance 
published most recently in May 1999.

Conforming Amendment to the Fourth Question and Answer Addressing 
Sec. ____.42 Regarding Renewals of Lines of Credit

    In Sec. ____.42-4, we previously stated that renewals of lines of 
credit are not collected and/or reported--consistent with the treatment 
of loan renewals. Because we are revising Sec. ____.42(a)-5, we are 
also amending Sec. ____.42-4 so that collection and/or reporting of 
lines of credit for small business, small farm, and consumer purposes 
is consistent with the collection and/or reporting of small business, 
small farm, and consumer loans. Accordingly, renewals of lines of 
credit for small business, small farm, and consumer purposes should be 
collected and reported, if applicable, in the same manner as renewals 
of small business or farm loans as discussed in Sec. ____.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. Revised Sec. ____.42-4 also becomes 
effective for CRA data collected in 2001 and reported in 2002. Until 
January 2001, institutions may collect data on small business, small 
farm and consumer lines of credit according to the guidance published 
in May 1999.

Proposing Again for Comment One Question and Answer That Was 
Proposed for Comment in May 1999 and One Conforming Question and 
Answer

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 Assessment Area(s)?

    The fifth question and answer addressing Secs. ____.12(i) and 
563e.12(h) (Secs. ____.12(i) & 563e.12(h)-5) addresses whether there 
must be an immediate or direct benefit to an 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 assessment area(s). This question and answer 
currently states that an institution's assessment area(s) need not 
receive an immediate or direct benefit from the institution's specific 
participation in the broader statewide or regional organization or 
activity, provided the purpose, mandate, or function of the 
organization or activity includes serving geographies or individuals 
located in the assessment area(s).
    In May 1999, we proposed revising this question and answer to 
permit consideration of support for community development organizations 
or activities serving individuals or geographies located somewhere in 
the broader statewide or regional area that includes the institution's 
assessment area. This consideration would be given even if the 
organization or activity did not have the purpose, mandate or function 
of serving geographies or individuals within the institution's 
assessment area(s). Most commenters appeared to favor the proposed 
revision, as it would provide increased flexibility in engaging in 
community development activities. However, it appeared that a number of 
commenters did not recognize the revised answer as an expansion of 
existing options for institutions to engage in community development 
activities outside an assessment area(s). Accordingly, we are re-
proposing for public comment a revised question and answer to ensure 
that the public understands that the question and answer expands the 
current guidance.
    As revised for purposes of re-proposal, the question and answer 
contains two approaches to determine

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whether 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). First, as currently stated, if an activity supports an 
organization or program that benefits the institution's assessment area 
or a broader statewide or regional area that is larger than, but 
includes, the assessment area(s), the activity will be considered if 
the purpose, mandate, or function of the organization or activity 
includes serving the assessment area(s). Second, if, in light of its 
performance context, an institution has adequately addressed the 
community development needs of its assessment area(s), examiners will 
consider community development activities that benefit low- and 
moderate-income individuals or geographies somewhere in the broader 
statewide or regional area that includes the assessment area(s) even if 
those activities do not have a purpose, mandate, or function of 
benefiting the institution's assessment area(s).
    The following example may be useful in explaining the two 
approaches. An institution is located in Chicago. Its assessment area 
is the Chicago metropolitan area. Its community development activities 
include loans, investments, and services in organizations and projects 
located in and benefiting Chicago, its assessment area. These 
activities would be considered under the first approach. The 
institution's community development activities also include loans and 
investments in several projects that benefit the entire state of 
Illinois, including Chicago. These activities also are considered under 
the first approach. In addition, the institution participated in a 
community development activity that benefits the entire Great Lakes 
region, including the Chicago metropolitan area. This activity would 
also be considered under the first approach. Assume that, after 
considering its performance context, examiners have determined that the 
institution has adequately addressed the community development needs of 
its assessment area through loans, investments or services considered 
under the first approach. Examiners then would also consider the 
institution's investment in a community development organization 
located in Decatur, IL, that will serve only the Decatur area--with no 
potential that it will ever benefit Chicago, the institution's 
assessment area. Decatur, of course, is in the statewide area 
(Illinois) that includes the institution's assessment area. The 
institution would receive consideration for this activity under the 
second approach.
    The text of the proposed question and answer follows:
    Proposed Secs. ____.12(i) & 563e.12(h)-5: Must there be some 
immediate or direct benefit to an 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)?
    Proposed A5. 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 multi-state 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).

Proposed Conforming Amendment to Secs. ____.12(i) & 563e.12(h)-6

    Consistent with expanded consideration that would be granted under 
proposed Secs. ____.12(i) & 563e.12(h)-5, we believe that 
Secs. ____.12(i) & 563e.12(h)-6 must also be modified so that, in cases 
where an institution has already adequately addressed the community 
development needs of its assessment area(s), examiner discretion does 
not unduly impede the broader choice and judgment permitted to 
institutions for performing community development activities in the 
relevant statewide or regional area. Accordingly, we are proposing to 
amend Secs. ____.12(i) & 563e.12(h)-6 as follows to explain how the 
institution's performance will be evaluated in these situations.
    Proposed Secs. ____.12(i) & 563e.12(h)-6: What is meant by the term 
``regional area''?
    Proposed A6. A ``regional area'' may be as small as a city or 
county or 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).

New Question and Answer

Consumer Income Data Collection

    The agencies have received questions from examiners and others 
about whose income should be collected and maintained in connection 
with consumer loans that are made to more than one borrower. We are 
adopting a new question and answer (Secs. ____.42(c)(1)(iv)-4) to 
clarify what income should be reported when an institution makes such a 
consumer loan. The new question and answer provides that an institution 
that chooses to have consumer loans considered must collect and 
maintain the income of all primary obligors, including co-signers, to 
the extent that the institution considered the income of the primary 
obligors when making the decision to extend

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credit. On the other hand, the institution should not collect and 
maintain the income of guarantors on consumer loans, because guarantors 
are only secondarily liable for the debt.

Revised Questions and Answers

Special Purpose Institutions

    In 1995, all of the agencies except the OTS adopted 
Sec. ____.11(c)(3) of the regulation, which addresses ``special purpose 
banks.'' More recently, the OTS added the provision to its regulation 
as Sec. 563e.11(c)(2).
    As a result of the OTS's addition of Sec. 563e.11(c)(2), we have 
made minor technical corrections to the two Qs and As addressing 
Sec. ____.11(c)(3), to substitute the term ``institution,'' rather than 
``bank.'' We have also amended the heading and question and answer 
numbers to include reference to OTS's new regulatory provision.

Business Revenue Data Collection and Reporting in Connection With Sole 
Proprietorships

    Staff have received a number of questions about what revenue 
information an institution should provide if it is collecting and 
reporting data on a sole proprietorship and has considered both the 
business's revenue and the sole proprietor's income when making the 
credit decision. We believe that because the purpose of small business 
data collection is to determine whether an institution is serving 
businesses of all sizes, an individual's--such as the sole 
proprietor's--outside income is irrelevant. Current Sec. ____.42(a)(4)-
1 addresses this issue. However, we are slightly amending that question 
and answer to clarify our position. We are amending the last sentence 
of the answer to read: ``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.''

Affordable Housing

    The question and answer, Secs. ____.12(h)(1) & 563e.12(g)(1)-1, 
finalized on May 3, 1999, discusses whether a formulaic approach is 
appropriate when determining whether a project is ``affordable housing 
for low- and moderate-income individuals,'' thereby meeting the 
definition of ``community development.'' A typical formula would only 
compare the cost of ownership, rental, or borrowing to the income 
levels in the area, regardless of whether the users, likely users, or 
beneficiaries of that affordable housing are low- or moderate-income 
individuals.
    The answer currently states: ``For projects that do not yet have 
occupants, and for which the income of the potential occupants is not 
knowable in advance, examiners will review factors such as demographic, 
economic, and market data to determine the likelihood that the housing 
will `primarily' accommodate low- or moderate-income individuals.'' It 
then sets forth a variety of these factors.
    This sentence implies that the question and answer addresses only 
unoccupied or new affordable housing projects that do not have 
occupants. However, the preamble discussion (64 FR at 23620), based on 
staff discussions at the time of drafting, states: ``Institutions and 
others have asked how to determine whether a housing development will 
provide `affordable' housing for low- and moderate-income individuals, 
particularly in a new project, or in other projects where the income of 
renters cannot be verified.''
    As indicated by the preamble discussion, we intended that 
application of these other factors should not be restricted to new 
projects. In fact, examiners have applied them to other projects during 
examinations in urban areas for multifamily dwellings where the income 
of occupants cannot be verified. Therefore, we are slightly amending 
the question and answer to more clearly reflect the preamble discussion 
and our intended interpretation. The second sentence of the answer is 
being changed to read: ``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 review factors such as 
demographic, economic and market data to determine the likelihood that 
the housing will `primarily' accommodate low- or moderate-income 
individuals.''

Community Development Loan

    In May, we added a sentence to the first question and answer 
addressing Secs. ____.12(i) and 563e.12(h) to clarify that the 
abatement of environmental hazards could be a part of rehabilitating 
affordable housing or community facilities targeted to low- and 
moderate-income individuals. We received several comments suggesting 
that we rephrase the sentence to make clear that an environmental 
hazard need only be mitigated, rather than abated entirely. We concur 
with these comments. We are rephrasing the last sentence of the answer 
to read: ``The rehabilitation or 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''.

Discussion of Other Comments Received

    As discussed previously, the FFIEC received 82 letters commenting 
on the May 1999 Interagency Questions and Answers and the Board 
received four letters from Federal Reserve Banks. Although most of the 
commenters limited their comments to issues addressed in the questions 
and answers that were proposed in May, some commenters also raised 
other issues. We are continuing to consider these other issues and, to 
the extent that we believe additional guidance is appropriate, we 
expect to address them in the next publication of the Interagency 
Questions and Answers.

General Comments

    In addition to the specific request for comments on the proposed 
questions and answers addressing Secs. ____.12(i) and 563e.12(h) and 
Sec. ____.23(a), we invite public comment on the new and revised 
questions and answers. We also invite public comment on a continuing 
basis on any issues raised by the CRA and these Interagency Questions 
and Answers. If, after reading the Interagency Questions and Answers, 
financial institutions, examiners, community organizations, or other 
interested parties have unanswered questions or comments about the 
agencies' community reinvestment regulations, they should submit them 
to the agencies or the FFIEC. We will consider addressing such 
questions in future revisions to the Interagency Questions and Answers.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    The SBREFA requires an agency, for each rule for which it prepares 
a final regulatory flexibility analysis, to publish one or more 
compliance guides to help small entities understand how to comply with 
the rule.
    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
agencies certified that their proposed CRA rule would not have a 
significant economic impact on a substantial number of small entities 
and invited public comments on that determination. See 58 FR 67478 
(Dec. 21, 1993); 59 FR 51250 (Oct. 7, 1994). In response to public 
comment, the agencies voluntarily prepared a final

[[Page 25093]]

regulatory flexibility analysis for the joint final rule, although the 
analysis was not required because it supported the agencies' earlier 
certification regarding the proposed rule. Because a regulatory 
flexibility analysis was not required, section 212 of the SBREFA does 
not apply to the final CRA rule. However, in their continuing efforts 
to provide clear, understandable regulations and to comply with the 
spirit of the SBREFA, the agencies have compiled the Interagency 
Questions and Answers. The Interagency Questions and Answers serve the 
same purpose as the compliance guide described in the SBREFA by 
providing guidance on a variety of issues of particular concern to 
small banks and thrifts.
    The text of the Interagency Questions and Answers follows:

Interagency Questions and Answers Regarding Community Reinvestment

Sec. ____.11--Authority, Purposes, and Scope

Sec. ____.11(c) Scope

    Sec. ____.11(c)(3) & 563e.11(c)(2) Certain special purpose 
institutions.
    Secs. ____.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.
    Secs. ____.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.
Sec. ____.12--Definitions

Sec. ____.12(a) Affiliate

    Sec. ____.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.

Secs. ____.12(f) & 563e.12(e) Branch

    Secs. ____.12(f) & 563e.12(e)-1: Do the definitions of ``branch,'' 
``automated teller machine (ATM),'' and ``remote service facility 
(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.''
    Secs. ____.12(f) & 563e.12(e)-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.
    Secs. ____.12(h) & 563e.12(g) Community Development
    Secs. ____.12(h) & 563e.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 community-or tribal-
based child care, educational, health, or social services targeted to 
low- or moderate-income persons, affordable housing for low- or 
moderate-income individuals, and activities that revitalize or 
stabilize low- or moderate-income areas.
    Secs. ____.12(h) & 563e.12(g)-2: Must a community development 
activity occur inside a low- or moderate-income area in order for an 
institution to receive CRA consideration for the activity?
    A2. No. Community development includes activities outside of low- 
and moderate-income areas 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 (including by creating, 
retaining, or improving jobs for low- or moderate-income persons) also 
qualify as community development, even if the activities are not 
located in these low- or moderate-income 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.
    Secs. ____.12(h) & 563e.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 middle-income 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.
    Secs. ____.12(h)(1) & 563e.12(g)(1) Affordable housing (including 
multifamily rental housing) for low- or moderate-income individuals.
    Secs. ____.12(h)(1) & 563e.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 low-

[[Page 25094]]

or 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 moderate-income 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 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 moderate-
income 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.
    Secs. ____.12(h)(3) & 563e.12(g)(3) Activities that promote 
economic development by financing businesses or farms that meet certain 
size eligibility standards.
    Secs. ____.12(h)(3) & 563e.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. To be considered as ``community development'' under 
Secs. ____.12(h)(3) and 563e.12(g)(3), a loan, investment or service, 
whether made directly or through an intermediary, must meet both a size 
test and a purpose test. An activity meets the size requirement if it 
finances 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 activity 
must promote economic development. An activity is considered to promote 
economic development if it supports 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 or SBIC promotes economic development.
    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.

Secs. ____.12(i) & 563e.12(h) Community Development Loan.

    Secs. ____.12(i) & 563e.12(h)-1: What are examples of community 
development loans?
    A1. Examples of community development loans include, but are not 
limited to, loans to:
    <bullet> Borrowers for affordable housing rehabilitation and 
construction, including construction and permanent financing of 
multifamily rental property serving low-and moderate-income persons;
    <bullet> Not-for-profit organizations serving primarily low-and 
moderate-income housing or other community development needs;
    <bullet> Borrowers to construct or rehabilitate community 
facilities that are located in low-and moderate-income areas or that 
serve primarily low-and moderate-income individuals;
    <bullet> Financial intermediaries including Community Development 
Financial Institutions (CDFIs), 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.
    <bullet> Local, state, and tribal governments for community 
development activities; and
    <bullet> 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.
    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.
    Secs. ____.12(i) & 563e.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 
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 a collecting 
and reporting institution under the CRA or the HMDA. Therefore, these 
loans will not be considered as community development loans. 
Multifamily dwelling loans, however, may be considered as community 
development loans as well as home mortgage loans. See also 
Sec. ____.42(b)(2)-2.
    Secs. ____.12(i) & 563e.12(h)-3: Do secured credit cards or other 
credit card programs targeted to low- or moderate-income individuals 
qualify as community development loans?
    A3. 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.''

[[Page 25095]]

    Secs. ____.12(i) & 563e.12(h)-4: 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?
    A4. No. Some loans may provide only indirect or short-term benefits 
to low- or moderate-income individuals in a low- or moderate-income 
geography. These loans are not considered to have a community 
development purpose. For example, a loan for upper-income housing in a 
distressed 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 
distressed 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 an underserved, 
distressed area, a loan for a pharmacy that employs, and provides 
supplies to, residents of the area promotes community development.
    Secs. ____.12(i) & 563e.12(h)-5: 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)?
    A5. No. The regulations, for example, recognize that community 
development organizations and programs are frequently efficient and 
effective ways for institutions to promote community development. These 
organizations and programs often operate on a statewide or even multi-
state 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 need not receive an immediate or direct 
benefit from the institution's specific participation in the broader 
organization or activity, provided the purpose, mandate, or function of 
the organization or activity includes serving geographies or 
individuals located within the institution's assessment area. 
Furthermore, the regulations permit a wholesale or limited purpose 
institution to consider community development loans, community 
development services, and qualified investments wherever they are 
located, as long as the institution has otherwise adequately addressed 
the credit needs within its assessment area(s).
    Secs. ____.12(i) & 563e.12(h)-6: What is meant by a ``regional 
area'' in the requirement that a community development loan must 
benefit the institution's assessment area(s) or a broader statewide or 
regional area that includes the institution's assessment area(s)?
    A6. A ``regional area'' may be as small as a city or county or as 
large as a multistate area. For example, the ``mid-Atlantic states'' 
may comprise a regional area. When examiners evaluate community 
development loans that benefit a regional area that includes the 
institution's assessment area, however, the examiners will consider the 
size of the regional area and the actual or potential benefit to the 
institution's assessment area(s). In most cases, the larger the 
regional area, the more diffuse the benefit will be to the 
institution's assessment area(s). Examiners may view loans with more 
direct benefits to an institution's assessment area(s) as more 
responsive to the credit needs of the area(s) than loans for which the 
actual benefit to the assessment area(s) is uncertain or for which the 
benefit is diffused throughout a larger area that includes the 
assessment area(s).
    Secs. ____.12(i) & 563e.12(h)-7: What is meant by the term 
``primary purpose'' as that term is used to define what constitutes a 
community development loan, a qualified investment or a community 
development service?
    A7. 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, 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 
Secs. ____.12(h) or 563e.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 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. 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 under either approach should be prepared to 
demonstrate the activities' qualifications.

Secs. ____.12(j) & 563e.12(i) Community Development Service

    Secs. ____.12(j) & 563e.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.
    Secs. ____.12(j) & 563e.12(i)-2: Are personal charitable activities 
provided by an institution's employees or

[[Page 25096]]

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.
    Secs. ____.12(j) & 563e.12(i)-3: What are examples of community 
development services?
    A3. Examples of community development services include, but are not 
limited to, the following:
    <bullet> Providing technical assistance on financial matters to 
nonprofit, tribal or government organizations serving low- and 
moderate-income housing or economic revitalization and development 
needs;
    <bullet> 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;
    <bullet> Lending employees to provide financial services for 
organizations facilitating affordable housing construction and 
rehabilitation or development of affordable housing;
    <bullet> Providing credit counseling, home-buyer and home-
maintenance counseling, financial planning or other financial services 
education to promote community development and affordable housing;
    <bullet> Establishing school savings programs and developing or 
teaching financial education curricula for low- or moderate-income 
individuals;
    <bullet> 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; and
    <bullet> Providing other financial services with the primary 
purpose of community development, such as low-cost bank accounts, 
including ``Electronic Transfer Accounts'' provided pursuant to the 
Debt Collection Improvement Act of 1996, or free government check 
cashing that increases access to financial services for low- or 
moderate-income individuals.
    Examples of technical assistance activities that might be provided 
to community development organizations include:
    <bullet> Serving on a loan review committee;
    <bullet> Developing loan application and underwriting standards;
    <bullet> Developing loan processing systems;
    <bullet> Developing secondary market vehicles or programs;
    <bullet> Assisting in marketing financial services, including 
development of advertising and promotions, publications, workshops and 
conferences;
    <bullet> Furnishing financial services training for staff and 
management;
    <bullet> Contributing accounting/bookkeeping services; and
    <bullet> Assisting in fund raising, including soliciting or 
arranging investments.

Secs. ____.12(k) & 563e.12(j) Consumer Loan

    Secs. ____.12(k) & 563e.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.
    Secs. ____.12(k) & 563e.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.
    Secs. ____.12(k) & 563e.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.

Secs. ____.12(m) & 563e.12(l) Home Mortgage Loan

    Secs. ____.12(m) & 563e.12(l)-1: Does the term ``home mortgage 
loan'' include loans other than ``home purchase loans''?
    A1. Yes. ``Home mortgage loan'' includes a ``home improvement 
loan'' as well as a ``home purchase loan,'' as both terms are defined 
in the HMDA regulation, Regulation C, 12 CFR part 203. This definition 
also includes multifamily (five-or-more families) dwelling loans, loans 
for the purchase of manufactured homes, and refinancings of home 
improvement and home purchase loans.
    Secs. ____.12(m) & 563e.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 
this 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-, middle-and upper-income geographies and 
the degree to which the services are tailored to meet the needs of 
those geographies.

[[Page 25097]]

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.

Secs. ____.12(n) & 563e.12(m) Income Level

    Secs. ____.12(n) & 563e.12(m)-1: Where do institutions find income 
level data for geographies and individuals?
    A1. The income levels for geographies, i.e., census tracts and 
block numbering areas, are derived from Census Bureau information and 
are updated every ten years. Institutions may contact their regional 
Census Bureau office or the Census Bureau's Income Statistics Office at 
(301) 763-8576 to obtain income levels for geographies. See Appendix A 
of these Interagency Questions and Answers for a list of the regional 
Census Bureau offices. The income levels for individuals are derived 
from information calculated by the Department of Housing and Urban 
Development (HUD) and updated annually. Institutions may contact HUD at 
(800) 245-2691 to request a copy of ``FY [year number, e.g., 1996] 
Median Family Incomes for States and their Metropolitan and 
Nonmetropolitan Portions.''
    Alternatively, institutions may obtain a list of the 1990 Census 
Bureau-calculated and the annually updated HUD median family incomes 
for metropolitan statistical areas (MSAs) and statewide nonmetropolitan 
areas by calling the Federal Financial Institution Examination 
Council's (FFIEC's) HMDA Help Line at (202) 452-2016. A free copy will 
be faxed to the caller through the ``fax-back'' system. Institutions 
may also call this number to have ``faxed-back'' an order form, from 
which they may order a list providing the median family income level, 
as a percentage of the appropriate MSA or nonmetropolitan median family 
income, of every census tract and block numbering area (BNA). This list 
costs $50. Institutions may also obtain the list of MSA and statewide 
nonmetropolitan area median family incomes or an order form through the 
FFIEC's home page on the Internet at `http://www.ffiec.gov/'.

Secs. ____.12(o) & 563e.12(n) Limited Purpose Institution

    Secs. ____.12(o) & 563e.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.
    Secs. ____.12(o) & 563e.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:
    <bullet> Is the other lending provided as an incident to the 
institution's wholesale lending?
    <bullet> Are the loans provided as an accommodation to the 
institution's wholesale customers?
    <bullet> Are the loans made only infrequently to the limited 
purpose institution's customers?
    <bullet> Does only an insignificant portion of the institution's 
total assets and income result from the other lending?
    <bullet> How significant a role does the institution play in 
providing that type(s) of loan(s) in the institution's assessment 
area(s)?
    <bullet> Does the institution hold itself out as offering that 
type(s) of loan(s)?
    <bullet> Does the lending test or the community development test 
present a more accurate picture of the institution's CRA performance?
    Secs. ____.12(o) & 563e.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.

Secs. ____.12(s) & 563e.12(r) Qualified Investment

    Secs. ____.12(s) & 563e.12(r)-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.
    Secs. ____.12(s) & 563e.12(r)-2: Are mortgage-backed securities or 
municipal bonds ``qualified investments''?
    A2. As a general rule, mortgage-backed 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 housing-related. 
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. Housing-related bonds or 
securities must primarily address affordable housing (including 
multifamily rental housing) needs in order to qualify. See also 
Sec. ____.23(b)-2.
    Secs. ____.12(s) & 563e.12(r)-3: Are Federal Home Loan Bank stocks 
and membership reserves with the Federal Reserve Banks ``qualified 
investments''?
    A3. No. Federal Home Loan Bank (FHLB) stock 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 for technical assistance 
they provide on behalf of applicants and recipients of funding from the 
FHLB's Affordable Housing Program. See Secs. ____.12(j) & 563e.12(i)-3.
    Secs. ____.12(s) & 563e.12(r)-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:
    <bullet> Financial intermediaries (including, Community Development 
Financial Institutions (CDFIs), Community Development Corporations 
(CDCs), minority- and women-owned financial institutions, community 
loan funds, and

[[Page 25098]]

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;
    <bullet> Organizations engaged in affordable housing rehabilitation 
and construction, including multifamily rental housing;
    <bullet> Organizations, including, for example, Small Business 
Investment Companies (SBICs) and specialized SBICs, that promote 
economic development by financing small businesses;
    <bullet> Facilities that promote community development in low- and 
moderate-income areas 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;
    <bullet> Projects eligible for low-income housing tax credits;
    <bullet> State and municipal obligations, such as revenue bonds, 
that specifically support affordable housing or other community 
development;
    <bullet> Not-for-profit organizations serving low- and moderate-
income housing or other community development needs, such as counseling 
for credit, home-ownership, home maintenance, and other financial 
services education; and
    <bullet> 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 
people to work.
    Secs. ____.12(s) & 563e.12(r)-5: Will an institution receive 
consideration for charitable 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.
    Secs. ____.12(s) & 563e.12(r)-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 innovativeness and 
complexity of the community development loan within the bounds of safe 
and sound banking practices.
    Secs. ____.12(s) & 563e.12(r)-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 in the service test 
if the activity is a community development service.

Secs. ____.12(t) & 563e.12(s) Small Institution

    Secs. ____.12(t) & 563e.12(s)-1: How are the ``total bank and 
thrift assets'' of a holding company determined?
    A1. ``Total banking and thrift assets'' of a holding company are 
determined by combining the total assets of all banks and/or thrifts 
that are majority-owned by the holding company. An institution is 
majority-owned if the holding company directly or indirectly owns more 
than 50 percent of its outstanding voting stock.
    Secs. ____.12(t) & 563e.12(s)-2: How are Federal and State branch 
assets of a foreign bank calculated for purposes of the CRA?
    A2. A Federal or State branch of a foreign bank is considered a 
small institution if the Federal or State branch has less than $250 
million in assets and the total assets of the foreign bank's or its 
holding company's U.S. bank and thrift subsidiaries that are subject to 
the CRA are less than $1 billion. This calculation includes not only 
FDIC-insured bank and thrift subsidiaries, but also the assets of any 
FDIC-insured branch of the foreign bank and the assets of any uninsured 
Federal or State branch (other than a limited branch or a Federal 
agency) of the foreign bank that results from an acquisition described 
in section 5(a)(8) of the International Banking Act of 1978 (12 U.S.C. 
Sec. 3103(a)(8)).

Secs. ____.12(u)&563e.12(t)Small Business Loan

    Secs. ____.12(u)&563e.12(t)-1: Are loans to nonprofit organiz 
ations 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 Reports'' (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.
    Secs. ____.12(u) & 563e.12(t)-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 less than $1 million.
    Secs. ____.12(u) & 563e.12(t)-3: Are loans secured by nonfarm 
residential real estate to finance small businesses ``small business 
loans''?
    A3. No. Loans secured by nonfarm residential real estate that are 
used to finance small businesses are not included as ``small business'' 
loans for Call Report and TFR purposes. The agencies recognize that 
many small businesses are financed by loans 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.''
    Secs. ____.12(u) & 563e.12(t)-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.

Secs. ____.12(w) & 563e.12(v) Wholesale Institution

    Secs. ____.12(w) & 563e.12(v)-1: What factors will the agencies 
consider in

[[Page 25099]]

determining whether an institution is in the business of extending home 
mortgage, small business, small farm, or consumer loans to retail 
customers?
    A1. The agencies will consider whether:
    <bullet> The institution holds itself out to the retail public as 
providing such loans; and
    <bullet> The institution's revenues from extending such loans are 
significant when compared to its overall operations.
    A wholesale institution may make some retail loans without losing 
its wholesale designation as described above in Secs. ____.12(o) & 
563e.12(n)-2.
Sec. ____.21--Performance Tests, Standards, and Ratings, in General

Sec. ____.21(a) Performance Tests and Standards

    Sec. ____.21(a)-1: Are all community development activities 
weighted equally by examiners?
    A1. No. Examiners will consider the responsiveness to credit and 
community development needs, as well as the innovativeness and 
complexity 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.

Sec. ____.21(b) Performance Context

    Sec. ____.21(b)-1: Is the performance context essentially the same 
as the former regulation's needs assessment? 
    A1. No. 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 much of this information prior to the examination. The 
performance context is not a formal or written assessment of community 
credit needs.
    Sec. ____.21(b)(2) Information maintained by the institution or 
obtained from community contacts.
    Sec. ____.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 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.
    Sec. ____.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 will 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 will share 
community contact information.
    Sec. ____.21(b)(4) Institutional capacity and constraints.
    Sec. ____.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.
    Sec. ____.21(b)(5) Institution's past performance and the 
performance of similarly situated lenders.
    Sec. ____.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's 
past performance may support a rating of ``substantial noncompliance'' 
if the institution has not improved performance rated as ``needs to 
improve.''
    Sec. ____.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.
Sec. ____.22--Lending Test

Sec. ____.22(a) Scope of Test

    Sec. ____.22(a)(1) Types of loans considered.
    Sec. ____.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.
    Sec. ____.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 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 or dollar volume of loans that the lending test 
evaluation would not meaningfully reflect its lending

[[Page 25100]]

performance if consumer loans were excluded.
    Sec. ____.22(a)(2) Loan originations and purchases/other loan data.
    Sec. ____.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. 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.
    Sec. ____.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.
    Sec. ____.22(a)(2)-3: May a financial institution receive 
consideration under CRA for modification, extension, and consolidation 
agreements (MECAs), in which it obtains loans from other institutions 
without actually purchasing or refinancing the loans, as those terms 
have been interpreted under CRA?
    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. An institution 
may present information about its MECA activities to examiners for 
consideration under the lending test as ``other loan data.''
    Sec. ____.22(a)(2)-4: Do institutions receive consideration for 
originating or purchasing loans that are fully guaranteed?
    A4: Yes. The lending test evaluates 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. The test does not 
take into account whether or not such loans are guaranteed.

Sec. ____.22(b) Performance Criteria

    Sec. ____.22(b)-1: How will examiners apply the performance 
criteria in the lending test?
    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.
    Sec. ____.22(b)(1) Lending activity.
    Sec. ____.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 low- and moderate-income areas and low- and 
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 moderate-income 
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.
    Sec. ____.22(b)(2) & (3) Geographic distribution and borrower 
characteristics.
    Sec. ____.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?
    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 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.
    Sec. ____.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 has met the 
specific performance tests and standards in the rule. The agencies do 
not expect that simply because a census tract or block numbering area 
is within an institution's assessment area(s) the institution must lend 
to that census tract or block numbering area. 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).
    Sec. ____.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.
    Sec. ____.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

[[Page 25101]]

institutions being evaluated under the small institution performance 
standards. Loans to low- and 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).
    Sec. ____.22(b)(2) & (3)-5: Under the lending test, how will 
examiners evaluate home mortgage loans to middle- or upper-income 
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 community-based development organization has developed a 
revitalization or stabilization plan (such as a Federal enterprise 
community or empowerment zone) that includes attracting mixed-income 
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.
    Sec. ____.22(b)(4) Community development lending.
    Sec. ____.22(b)(4)-1: When evaluating an institution's record of 
community development lending, 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 Sec. ____.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 Sec. ____.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 Sec. ____.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.
    Sec. ____.22(b)(5) Innovative or flexible lending practices.
    Sec. ____.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?
    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:
    <bullet> In connection with a community development loan program, a 
bank may establish a technical assistance program under which the bank, 
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.
    <bullet> In connection with a small business lending program in a 
low- or moderate-income area and consistent with safe and sound lending 
practices, a bank may implement a program under which, in addition to 
providing financing, the bank 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.

Sec. ____.22(c) Affiliate Lending.

    Sec. ____.22(c)(1) In general.
    Sec. ____.22(c)(1)-1: If an institution 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 loans, home equity loans, other 
secured loans, and other unsecured loans).
    Sec. ____.22(c)(2) Constraints on affiliate lending.
    Sec. ____.22(c)(2)(i) No affiliate may claim a loan origination or 
loan purchase if another institution claims the same loan origination 
or purchase.
    Sec. ____.22(c)(2)(i)-1: 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

[[Page 25102]]

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.
    Sec. ____.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.
    Sec. ____.22(c)(2)(ii)-1: How is this constraint on affiliate 
lending applied?
    A1. This constraint prohibits ``cherry-picking'' 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 one or 
more affiliates, such as a mortgage bank that makes loans in the 
institution's assessment area. If the institution elects to include the 
mortgage bank's home mortgage loans, it must include all of mortgage 
bank's home mortgage loans made in its assessment area. The institution 
cannot elect to include only those low- and moderate-income home 
mortgage loans made by the mortgage bank affiliate and not home 
mortgage loans to middle- and upper-income individuals or areas.
    Sec. ____.22(c)(2)(ii)-2: 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.

Sec. ____.22(d) Lending by a Consortium or a Third Party

    Sec. ____.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. Sec. ____.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.
    Sec. ____.22(d)-2: How will examiners evaluate loans made by 
consortia or third parties under the lending test?
    A2. Loans originated or purchased by consortia in which an 
institution participates or by third parties in which an institution 
invests will only be considered if they qualify as community 
development loans and will only be considered under the community 
development criterion of the lending test. 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 all the lending test criteria appropriate to 
them depending on the type of loan.
    Sec. ____.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 Sec. ____.22(d), may the third 
party also receive consideration for these loans?
    A3. Yes, as long as the financial institution and the third party 
are not affiliates. The regulations state, at 12 CFR 
Sec. ____.22(c)(2)(i), that two affiliates may not both claim the same 
loan origination or loan purchase. However, if the 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 Sec. ____.22(d).
Sec. ____.23-Investment Test

Sec. ____.23(a) Scope of Test

    Sec. ____.23(a)-1: May an institution 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

[[Page 25103]]

statewide or regional area(s) that includes the institution's 
assessment area(s).

Sec. ____.23(b) Exclusion

    Sec. ____.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 a 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 only receive consideration 
under the investment test for the amount of its investment multiplied 
by the percentage of the CDC's assets that meet the definition of a 
qualified investment.
    Sec. ____.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 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.
    Sec. ____.23(e) Performance criteria
    Sec. ____.23(e)-1: When applying the performance criteria of 
Sec. ____.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. Although Sec. ____.23(e)(1) speaks in terms of the dollar 
amount of qualified investments, the criterion permits an examiner to 
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 mortgage-backed security with 100 percent of 
its face value supported by affordable housing loans to low- and 
moderate-income borrowers. The examiner should describe any 
differential weighting (or other adjustment), and its basis in the 
Public Evaluation. However, no matter how a qualified investment is 
handled for purposes of Sec. ____.23(e)(1), it will also be evaluated 
with respect to the qualitative performance criteria set forth in 
Sec. ____.23(e)(2), (3) and (4) . By applying all 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, but with fewer qualitative enhancements.
    Sec. ____.23(e)-2: How do examiners evaluate an institution's 
qualified investment in a fund, the primary purpose of which is 
community development, as that is 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 long-term qualified investments, the pay-in 
schedule, and the amount of any cash call, on the capacity of the 
institution to make new investments.
Sec. ____.24--Service Test

Sec. ____.24(d) Performance Criteria--Retail Banking Services

    Sec. ____.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; therefore, an institution is not required to expand its 
branch network or operate unprofitable branches. Under

[[Page 25104]]

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 low- and 
moderate-income areas and individuals.
    Sec. ____.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 moderate-income families that are 
designed to help them accumulate savings for education or job-training, 
down-payment 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 
Sec. ____.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.

Sec. ____.24(d)(3) Availability and effectiveness of alternative 
systems for delivering retail banking services.

    Sec. ____.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 moderate-income areas and individuals. The 
list of systems in the regulation is not intended to be inclusive.
    Sec. ____.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.
Sec. ____.25  Community Development Test for Wholesale or Limited 
Purpose Institutions

Sec. ____.25(d) Indirect Activities

    Sec. ____.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 Secs. ____.22(d) 
and ____.23(b).

Sec. ____.25(e) Benefit to Assessment Area(s)

    Sec. ____.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).

Sec. ____.25(f) Community Development Performance Rating

    Sec. ____.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.
Sec. ____.26--Small Institution Performance Standards

Sec. ____.26(a) Performance Criteria

    Sec. ____.26(a)-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.
    Sec. ____.26(a)-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.
    Sec. ____.26(a)-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.
    Sec. ____.26(a)-4: Under the small institution performance 
standards, will examiners consider both loan originations and 
purchases?

[[Page 25105]]

    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.
    Sec. ____.26(a)-5: Under the small institution 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 performance standards focus on lending 
and other lending-related activities. Therefore, examiners will 
consider only lending-related qualified investments for the purposes of 
determining whether the small institution receives a satisfactory CRA 
rating.
    Sec. ____.26(a)(1) Loan-to-deposit ratio.
    Sec. ____.26(a)(1)-1: How is the loan-to-deposit ratio calculated?
    A1. A small institution's loan-to-deposit 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.
    Sec. ____.26(a)(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.
    Sec. ____.26(a)(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.
    Sec. ____.26(a)(2) Percentage of lending within assessment area(s).
    Sec. ____.26(a)(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 bank'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 
condition and business strategies, and branching network and other 
aspects of the institution's lending record.
    Sec. ____.26(a)(3) & (4) Distribution of lending within assessment 
area(s) by borrower income and geographic location.
    Sec. ____.26(a)(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 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 proxies such as loan size for 
estimating borrower characteristics, where appropriate.

Sec. ____.26(b) Performance Rating

    Sec. ____.26(b)-1: How can a small institution achieve an 
``outstanding'' performance rating?
    A1. A small institution that meets each of the standards 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 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.''
    Sec. ____.26(b)-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 
Secs. ____.12(i) & 563e.12(h)-6.
Sec. ____.27-Strategic Plan

Sec. ____.27(c) Plans in General

    Sec. ____.27(c)-1: To what extent will the agencies provide 
guidance to an

[[Page 25106]]

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.
    Sec. ____.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.

Sec. ____.27(f) Plan Content

    Sec. ____.27(f)(1) Measurable goals.
    Sec. ____.27(f)(1)-1: How should ``measurable goals'' be specified 
in a strategic plan?
    A1. 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.

Sec. ____.27(g) Plan Approval

    Sec. ____.27(g)(2) Public participation.
    Sec. ____.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.
Sec. ____.28--Assigned Ratings
    Sec. ____.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. Moreover, 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, 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.
    Sec. ____.28-2: How is performance under the quantitative and 
qualitative performance criteria weighed when examiners assign a CRA 
rating?
    A2: 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.

Sec. ____.28(a) Ratings in General

    Sec. ____.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.
    Sec. ____.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.
    Sec. ____.28(a)-3: How do the agencies weight performance under the 
lending, investment and service test for large retail institutions?
    A3. A rating of ``outstanding,'' ``high satisfactory,'' ``low 
satisfactory,'' ``needs 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

[[Page 25107]]

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 for 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.

Sec. ____.29--Effect of CRA Performance on Applications

Sec. ____.29(a) CRA Performance

    Sec. ____.29(a)-1: What weight is given to an institution's CRA 
performance examination in reviewing an application?
    A1. In cases in which CRA performance is a relevant factor, 
information from a CRA performance examination of the institution is a 
particularly important consideration in the applications process 
because it represents 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 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.
    Sec. ____.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.

Sec. ____.29(b) Interested Parties

    Sec. ____.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 
applications 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' decision. 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.
    Sec. ____.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. These agreements are not monitored or enforced by the 
agencies.
Sec. ____.41--Assessment Area Delineation

Sec. ____.41(a) In General

    Sec. ____.41(a)-1: How do the agencies evaluate ``assessment 
areas'' under the revised CRA regulations compared to how they 
evaluated ``local communities'' that institutions delineated under the 
original CRA regulations?
    A1. The revised 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 ``local community'' or 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 as they did under the original 
regulation. Rather, the agencies will only review whether the 
assessment area delineated by the institution complies with the 
limitations set forth in the regulations at Sec. ____.41(e).
    Sec. ____.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).

[[Page 25108]]

    Sec. ____.41(a)-3: Can a financial institution identify a specific 
ethnic group rather than a geographic area as its assessment area?
    A3. No, assessment areas must be based on geography.

Sec. ____.41(c) Geographic Area(s) for Institutions Other Than 
Wholesale or Limited Purpose Institutions

    Sec. ____.41(c)(1) Generally consist of one or more MSAs or one or 
more contiguous political subdivisions.
    Sec. ____.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 or block numbering areas 
(``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).
    Sec. ____.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 Sec. ____.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.

Sec. ____.41(d) Adjustments to Geographic Area(s)

    Sec. ____.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 or block numbering areas) in their assessment areas and 
generally should include entire political subdivisions. Because census 
tracts and block numbering areas 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 
moderate-income geographies or set boundaries that reflect illegal 
discrimination.

Sec. ____.41(e) Limitations on Delineation of an Assessment Area

    Sec. ____.41(e)(3) May not arbitrarily exclude low- or moderate-
income geographies.
    Sec. ____.41(e)(3)-1: How will examiners determine whether an 
institution has arbitrarily excluded low- or 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:
    <bullet> Income levels in the institution's assessment area(s) and 
surrounding geographies;
    <bullet> Locations of branches and deposit-taking ATMs;
    <bullet> Loan distribution in the institution's assessment area(s) 
and surrounding geographies;
    <bullet> The institution's size;
    <bullet> The institution's financial condition; and
    <bullet> The business strategy, corporate structure and product 
offerings of the institution.
    Sec. ____.41(e)(4) May not extend substantially beyond a CMSA 
boundary or beyond a state boundary unless located in a multistate MSA. 

    Sec. ____.41(e)(4)-1: What are the maximum limits on the size of an 
assessment area? 
    A1. An institution shall not delineate an assessment area extending 
substantially across the boundaries of a consolidated metropolitan 
statistical area (CMSA) or the boundaries of an MSA, if the MSA is not 
located in a CMSA. Similarly, an assessment area 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 a CMSA. These limitations apply to wholesale and limited purpose 
institutions as well as other institutions.
    An institution shall delineate separate assessment areas for the 
areas inside and outside a CMSA (or MSA if the MSA is not located in a 
CMSA) if the area served by the institution's branches outside the CMSA 
(or MSA) extends substantially beyond the CMSA (or MSA) boundary. 
Similarly, the institution shall 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.
    Sec. ____.41(e)(4)-2: Can 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 if the MSA is not 
located in a CMSA. 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 (so, in this example, there would be three assessment 
areas). However, if the MSA and the two counties were in the same CMSA, 
then the institution could delineate only one assessment area including 
them all.
Sec. ____.42--Data Collection, Reporting, and Disclosure
    Sec. ____.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. A small institution is a bank or 
thrift that, as of December 31 of either of the prior two calendar 
years, had total assets of less than $250 million and was independent 
or an affiliate of a holding company that, as of December 31 of either 
of the prior two calendar years, had total banking and thrift assets of 
less than $1 billion.
    For example:

[[Page 25109]]



----------------------------------------------------------------------------------------------------------------
                                                  Institution's
                      Date                       asset size (in  Data collection required for following calendar
                                                    millions)                         year?
----------------------------------------------------------------------------------------------------------------
12/31/94.......................................       $240       No.
12/31/95.......................................        260       No.
12/31/96.......................................        230       No.
12/31/97.......................................        280       No.
12/31/98.......................................        260       Yes, beginning 1/01/99.
----------------------------------------------------------------------------------------------------------------

    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. In the example, above, the institution 
would report the data collected for calendar year 1999 by March 1, 
2000.
    The Board of Governors of the Federal Reserve System is handling 
the processing of the reports for all of the primary regulators. The 
reports should be submitted in a prescribed electronic format on a 
timely basis. The mailing address for submitting these reports is: 
Attention: CRA Processing, Board of Governors of the Federal Reserve 
System, 1709 New York Avenue, N.W., 5th Floor, Washington, DC 20006.
    Sec. ____.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 must follow the precise format for the new CRA data collection 
and reporting rules. This format may be obtained by contacting the CRA 
Assistance Line at (202) 872-7584.
    Sec. ____.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.
    Sec. ____.42-4: Should renewals of lines of credit be collected 
and/or reported? 
    A4. Applicable to data collected in 2000 and reported in 2001: No. 
Similar to loan renewals, renewals of lines of credit are not 
considered loan originations and should not be collected or reported.
    A4. Applicable to data collected in 2001 and subsequent years: 
Renewals of lines of credit for small business, small farm or consumer 
purposes should be collected and reported, if applicable, in the same 
manner as renewals of small business or small farm loans. See 
Sec. ____.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.
    Sec. ____.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.
    <bullet> Two institutions are exempt from CRA collection and 
reporting requirements because of asset size. The 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 of at least $250 million or was part of a holding 
company that had year-end banking and thrift assets of at least $1 
billion.
    <bullet> 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.
    <bullet> 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.
    Sec. ____.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 send a written request to: Attn.: CRA Processing, 
Board of Governors of the Federal Reserve System, 1709 New York Ave, 
N.W., 5th Floor, Washington, DC 20006.
    They may also call the CRA Assistance Line at (202) 872-7584 or 
send Internet e-mail to <a href="/cdn-cgi/l/email-protection#88cbdac9c0cdc4d8c8cedacaa6cfc7de"><span class="__cf_email__" data-cfemail="df9c8d9e979a938f9f998d9df1989089">[email protected]</span></a>.
    Sec. ____.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 must be prepared to identify 
those loans, investments and services to be evaluated under the 
community development test.

Sec. ____.42(a) Loan Information Required To Be Collected and 
Maintained

    Sec. ____.42(a)-1: Must institutions collect and report data on all 
commercial loans under $1 million 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.
    Sec. ____.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:
    <bullet> A unique number or alpha-numeric symbol that can be used 
to identify the relevant loan file;
    <bullet> The loan amount at origination;
    <bullet> The loan location; and

[[Page 25110]]

    <bullet> 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 or 
block numbering area. 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.
    Sec. ____.42(a)-3: Will farm loans need to be segregated from 
business loans?
    A3. Yes.
    Sec. ____.42(a)-4: Should institutions collect and report data on 
all agricultural loans under $500,000 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 and TFR.
    Sec. ____.42(a)-5: Should institutions collect and report data 
about small business and small farm loans that are refinanced or 
renewed?
    A5. Applicable to data collected in 2000 and reported in 2001: An 
institution collects and reports information about refinancings but 
does not collect and report information about renewals. A refinancing 
typically involves the satisfaction of an existing obligation that is 
replaced by a new obligation undertaken by the same borrower. When an 
institution refinances a loan, it is considered a new origination, and 
loan data should be collected and reported, if otherwise required. 
Consistent with HMDA, however, if under the original loan agreement, 
the institution is unconditionally obligated to refinance the loan 
subject to conditions within the borrower's control, the institution 
should not report these events as originations.
    For purposes of CRA data collection and reporting requirements, the 
extension of the maturity of an existing loan is a renewal, and is not 
considered a loan origination. Therefore, institutions should not 
collect and report data on loan renewals.
    A5. Applicable to data collected in 2001 and subsequent years: 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 no 
longer 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.
    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.
    Sec. ____.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 revised 
regulation, capture both ``Loans to finance agricultural production and 
other loans to farmers'' and ``Loans secured by farmland.''
    Sec. ____.42(a)-7: How should an institution report a home equity 
line of credit, part of which is for home improvement purposes, but the 
predominant part of which is for small business purposes?
    A7. The institution has the option of reporting the portion of the 
home equity line that is for home improvement purposes under HMDA. That 
portion of the loan would then be considered when examiners evaluate 
home mortgage lending. 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.''
    Sec. ____.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.
    Sec. ____.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.
    Sec. ____.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 dictate that an institution know the 
location of its customers and loan collateral. 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 post office box 
numbers or 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 or post office box, the 
institution knows the

[[Page 25111]]

location (i.e., the census tract or block numbering area) of the 
borrower or loan collateral. Once the institution has this information 
available, it should assign a census tract or block numbering area to 
that location (geocode) and report that information as required under 
the regulation.
    For loans originated or purchased in 1998 or later, if the 
institution cannot determine the borrower's street address, and does 
not know the census tract or block numbering area, the institution 
should report the borrower's state, county, MSA, if applicable, and 
``NA,'' for ``not available,'' in lieu of a census tract or block 
numbering area code.
    Sec. ____.42(a)(2) Loan amount at origination.
    Sec. ____.42(a)(2)-1: When an institution purchases a small 
business or small farm loan, 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, 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.
    Sec. ____.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.
    Sec. ____.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' 
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.
    Sec. ____.42(a)(3) The loan location.
    Sec. ____.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 business headquarters or the location where the 
greatest portion of the proceeds are applied, as indicated by the 
borrower.
    Sec. ____.42(a)(4) Indicator of gross annual revenue.
    Sec. ____.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. 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.
    Sec. ____.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.
    Sec. ____.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.
    Sec. ____.42(a)(4)-4: When collecting and reporting the gross 
annual revenue of small business or farm borrowers, do institutions 
collect and report the gross annual revenue or the adjusted gross 
annual revenue of its borrowers?
    A4. Institutions collect and report the gross annual revenue, 
rather than the adjusted gross annual revenue, of their small business 
or 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 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 report 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 would not indicate on the CRA data collection software that 
the gross annual revenues of the borrower are $1 million or less. (See 
Sec. ____.42(a)(4)-2.)

Sec. ____.42(b) Loan Information Required To Be Reported

    Sec. ____.42(b)(1) Small business and small farm loan data.
    Sec. ____.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,

[[Page 25112]]

aggregated for each census tract or block numbering area in which the 
institution originated or purchased at least one small business or 
small farm loan during the prior year:
    <bullet> The number and amount of loans originated or purchased 
with original amounts of $100,000 or less;
    <bullet> 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;
    <bullet> 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
    <bullet> 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).
    Sec. ____.42(b)(2) Community development loan data.
    Sec. ____.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.
    Sec. ____.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 definitions of home 
mortgage, small business, or small farm loans only in those respective 
categories even if they also meet the definition of community 
development loans. As a practical matter, this is not a disadvantage 
for retail institutions because any affordable housing mortgage, small 
business, small farm or consumer loan that would otherwise meet the 
definition of a 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 
Sec. ____.22(b)(2) & (3)-4.
    Limited purpose and wholesale institutions also must report loans 
that meet the definitions of home mortgage, small business, or small 
farm loans in those respective categories; however, they must also 
report any loans from those categories that meet the regulatory 
definition of ``community development loans'' 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.
    Sec. ____.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. Yes. As long as the primary purpose of the loan is a community 
development purpose, the full amount of the institution's loan should 
be included in its reporting of aggregate amounts of community 
development lending. However, as noted in Sec. ____.22(b)(4)-1, 
examiners may make qualitative distinctions among community development 
loans on the basis of the extent to which the loan advances the 
community development purpose.
    Sec. ____.42(b)(3) Home mortgage loans.
    Sec. ____.42(b)(3)-1: Mustinstitutions 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.

Sec. ____.42(c) Optional Data Collection and Maintenance

    Sec. ____.42(c)(1) Consumer loans.
    Sec. ____.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:
    <bullet> A unique number or alpha-numeric symbol that can be used 
to identify the relevant loan file;
    <bullet> The loan amount at origination or purchase;
    <bullet> The loan location; and
    <bullet> 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.
    Sec. ____.42(c)(1)(iv) Income of borrower.
    Sec. ____.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.
    Sec. ____.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.
    Sec. ____.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.

[[Page 25113]]

    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.
    Secs. ____.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.
    Sec. ____.42(c)(2) Other loan data.
    Sec. ____.42(c)(2)-1: Schedule RC-C, Part II of the Call Report and 
schedule SB of the TFR do not allow financial institutions to report 
loans for commercial and industrial purposes that are secured by 
residential real estate. Loans extended to small businesses with gross 
annual revenues of $1 million or less may, however, be secured by 
residential real estate. Is there a way to collect this information on 
the software to supplement an institution's small business lending data 
at the time of examination?
    A1. Yes. If these loans promote community development, as defined 
in the regulation, the institution should collect and report 
information about these loans as community development loans. 
Otherwise, at an institution's option, it may collect and maintain data 
concerning loans, purchases, and lines of credit extended to small 
businesses and secured by residential real estate for consideration in 
the CRA evaluation of its small business lending. To facilitate this 
optional data collection, the software distributed free-of-charge by 
the FFIEC provides that an institution may collect this information to 
supplement its small business lending data by choosing loan type, 
``Other Secured Lines/Loans for Purposes of Small Business,'' in the 
individual loan data. (The title of the loan type, ``Other Secured 
Lines of Credit for Purposes of Small Business,'' which was found in 
the instructions accompanying the 1996 data collection software, is 
being changed to ``Other Secured Lines/Loans for Purposes of Small 
Business'' in order to accurately reflect that lines of credit and 
loans may be reported under this loan type.) This information should be 
maintained at the institution but should not be submitted for central 
reporting purposes.
    Sec. ____.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.
    Sec. ____.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 Sec. ____.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 Sec. ____.42(c)(2) for consideration under the lending 
test.

Sec. ____.42(d) Data on Affiliate Lending

    Sec. ____.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 
either provide examiners with 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.
Sec. ____.43--Content and Availability of Public File

Sec. ____.43(a) Information Available to the Public

    Sec. ____.43(a)(1) Public Comments.
    Sec. ____.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.
    Sec. ____.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) (Sec. ____.26(a)(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.
    Sec. ____.43(a)(1)-3: May an institution include a response to its 
CRA Performance Evaluation in its public file? 
    A3. 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 it 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. The institution must update the description on a quarterly 
basis.

Sec. ____.43(b) Additional Information Available to the Public

    Sec. ____.43(b)(1) Institutions other than small institutions.
    Sec. ____.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.

[[Page 25114]]

    Sec. ____.43(b)(1)-2: May an institution retain the compact disc 
provided by the Federal Financial Institution Examination Council that 
contains its CRA Disclosure Statement 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 from the compact 
disc (or a duplicate of the compact disc) its CRA Disclosure Statement 
for a consumer when the public file is requested. 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 bank should provide 
the CRA Disclosure Statement in a paper copy, or in another format 
acceptable to the requestor, within 5 calendar days, as required by 
Sec. ____.43(c)(2)(ii).

Sec. ____.43(c) Location of Public Information

    Sec. ____.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.
Sec. ____.44--Public Notice by Institutions
    Sec. ____.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.
Sec. ____.45--Publication of Planned Examination Schedule
    Sec. ____.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 to 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.
    Sec. ____.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____--Ratings

    Appendix A to Part____-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 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 test 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____--CRA Notice

    Appendix B to Part____-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: 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 12 CFR Sec. 4.5(a).
    OCC-, FDIC-, and Board-supervised institutions: ``Officer in 
Charge of Supervision'' is the title of the responsible official at 
the appropriate Federal Reserve Bank.

Appendix A

Regional Offices of the Bureau of the Census

    To obtain median family income levels of census tracts, MSAs, 
block numbering areas and statewide nonmetropolitan areas, contact 
the appropriate regional office of the Bureau of the Census as 
indicated below. The list shows the states covered by each regional 
office.

Atlanta

(404) 730-3833
Alabama, Florida, Georgia

Boston

(617) 424-0510
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, 
Vermont

Charlotte

(704) 344-6144
District of Columbia, Kentucky, North Carolina, South Carolina, 
Tennessee, Virginia

Chicago

(708) 562-1740
Illinois, Indiana, Wisconsin

Dallas

(214) 640-4470 or (800) 835-9752
Louisiana, Mississippi, Texas

Denver

(303) 969-7750
Arizona, Colorado, Nebraska, New Mexico, North Dakota, South Dakota, 
Utah, Wyoming

Detroit

(313) 259-1875
Michigan, Ohio, West Virginia

Kansas City

(913) 551-6711
Arkansas, Iowa, Kansas, Minnesota, Missouri, Oklahoma

Los Angeles

(818) 904-6339
California

New York

(212) 264-4730
New York, Puerto Rico

Philadelphia

(215) 597-8313 or (215) 597-8312
Delaware, Maryland, New Jersey, Pennsylvania

Seattle

(206) 728-5314
Alaska, Hawaii, Idaho, Montana, Nevada, Oregon, Washington

                                                      Index
----------------------------------------------------------------------------------------------------------------
                      Keyword                                                   Q & A
----------------------------------------------------------------------------------------------------------------
Affiliate lending.................................  Sec.  ____.22(b)(1)-1.
                                                    Sec.  ____.22(b)(2) & (3)-3.
                                                    Sec.  ____.22(c)(1)-1.
                                                    Sec.  ____.22(c)(2)(i)-1.
                                                    Sec.  ____.22(c)(2)(ii)-1.

[[Page 25115]]

 
                                                    Sec.  ____.22(c)(2)(ii)-2.
                                                    Sec.  ____.41(a)-2.
                                                    Sec.  ____.42(d)-1.
                                                    Sec.  ____.43(b)(1)-1.
Affiliates........................................  Sec.  ____.12(a)-1.
                                                    Sec.  ____.27(c)-2.
Affordable housing................................  Secs.  ____.12(h) & 563e.12(g)-1.
                                                    Secs.  ____.12(h) & 563e.12(g)-2.
                                                    Secs.  ____.12(h)(1) & 563e.12(g)(1)-1.
                                                    Sec.  ____.42(b)(2)-3.
Alternative delivery systems......................  Sec.  ____.24(d)-1.
                                                    Sec.  ____.24(d)(3)-1.
                                                    Sec.  ____.24(d)(3)-2.
Applications, corporate...........................  Sec.  ____.29(a)-1.
                                                    Sec.  ____.29(a)-2.
                                                    Sec.  ____.29(b)-1.
Assessment area...................................  Sec.  ____b)(2) & (3)-2.
                                                    Sec.  ____.22(b)(2) & (3)-3.
                                                    Sec.  ____.22(b)(2) & (3)-4.
                                                    Sec.  ____.26(a)(2)-1.
                                                    Sec.  ____.41(a)-1.
                                                    Sec.  ____.41(a)-2.
                                                    Sec.  ____.41(a)-3.
                                                    Sec.  ____.41(c)(1)-1.
                                                    Sec.  ____.41(c)(1)-2.
                                                    Sec.  ____.41(d)-1.
                                                    Sec.  ____.41(e)(3)-1.
                                                    Sec.  ____.41(e)(4)-1.
                                                    Sec.  ____.41(e)(4)-2.
Assessment area, benefit to.......................  Secs.  ____.12(i) & 563e.12(h)-5.
                                                    Secs.  ____.12(i) & 563e.12(h)-6.
                                                    Sec.  ____.25(e)-1.
                                                    Sec.  ____.26(b)-2.
Assets............................................  Secs.  ____.12(t) & 563e.12(s)-1.
                                                    Secs.  ____.12(t) & 563e.12(s)-2.
ATMs..............................................  Secs.  ____.12(f) & 563e.12(e)-1.
                                                    Sec.  ____.24(d)-1.
                                                    Sec.  ____.24(d)(3)-1.
                                                    Sec.  ____.41(e)(3)-1.
Borrower characteristics..........................  Sec.  ____.22(b)(2) & (3)-1.
                                                    Sec.  ____.22(b)(2) & (3)-5.
                                                    Sec.  ____.26(a)(3) & (4)-1.
                                                    Sec.  ____.42(c)(1)(iv)-3.
Branch............................................  Secs.  ____.12(f) & 563e.12(e)-1.
                                                    Sec.  ____.28(a)-1.
                                                    Sec.  ____.41(e)(3)-1.
Brokerage.........................................  Secs.  ____.12(m) & 563e.12(l)-2.
Charitable contributions or activities............  Secs.  ____.12(j) & 563e.12(i)-2.
                                                    Secs.  ____.12(s) & 563e.12(r)-4.
                                                    Secs.  ____.12(s) & 563e.12(r)-5.
Child care services...............................  Secs.  ____.12(h) & 563e.12(g)-1.
Commercial loans..................................  Secs.  ____.12(u) & 563e.12(t)-2.
                                                    Sec.  ____.42(a)-1.
                                                    Sec.  ____.42(c)(2)-1.
Commitments.......................................  Sec.  ____.22(a)(2)-1.
                                                    Sec.  ____.26(a)-4.
                                                    Sec.  ____.29(a)-2.
                                                    Sec.  ____.42(c)(2)-2.
Community contact interviews......................  Sec.  ____.21(b)(2)-2.
Community development.............................  Secs.  ____.12(h) & 563e.12(g)-1.
                                                    Secs.  ____.12(h) & 563e.12(g)-2.
                                                    Secs.  ____.12(h)(3) & 563e.12(g)(3)-1.
                                                    Sec.  ____.42(b)(2)-3.
Community development activities..................  Sec.  ___.21(a)-1.
Community development loan........................  Secs.  ____.12(i) & 563e.12(h)-1.
                                                    Secs.  ____.12(i) & 563e.12(h)-2.
                                                    Secs.  ____.12(i) & 563e.12(h)-3.
                                                    Secs.  ____.12(i) & 563e.12(h)-4.
                                                    Secs.  ____.12(i) & 563e.12(h)-5.
                                                    Secs.  ____.12(i) & 563e.12(h)-6.
                                                    Secs.  ____.12(i) & 563e.12(h)-7.
                                                    Secs.  ____.12(s) & 563e.12(r)-6.

[[Page 25116]]

 
                                                    Secs.  ____.12(u) & 563e.12(t)-1.
                                                    Sec.  ____.22(b)(4)-1.
                                                    Sec.  ____.22(d)-3.
                                                    Sec.  ____.23(b)-1.
                                                    Sec.  ____.25(d)-1.
                                                    Sec.  ____.26(a)-1.
                                                    Sec.  ____.26(a)-3.
                                                    Sec.  ____.26(b)-2.
                                                    Sec.  ____.42(b)(2)-1.
                                                    Sec.  ____.42(b)(2)-2.
                                                    Sec.  ____.42(b)(2)-3.
Community development service.....................  Secs.  ____.12(i) & 563e.12(h)-5.
                                                    Secs.  ____.12(i) & 563e.12(h)-7.
                                                    Secs.  ____.12(j) & 563e.12(i)-1.
                                                    Secs.  ____.12(j) & 563e.12(i)-2.
                                                    Secs.  ____.12(j) & 563e.12(i)-3.
                                                    Secs.  ____.12(s) & 563e.12(r)-7.
                                                    Sec.  ____.23(b)-1.
                                                    Sec.  ____.26(b)-2.
                                                    Sec.  ____.42(c)(2)-1.
Community development test........................  Sec.  ____.25(f)-1.
Community services................................  Secs.  ____.12(h) & 563e.12(g)-2.
                                                    Sec.  ____.25(d)-1.
Complexity........................................  Sec.  ____.22(b)(5)-1.
                                                    Sec.  ____.23(e)-2.
                                                    Sec.  ____.28-1.
Consortia.........................................  Sec.  ____.22(d)-2.
                                                    Sec.  ____.26(a)-3.
Consumer loan.....................................  Secs.  ____.12(k) & 563e.12(j)-1.
                                                    Secs.  ____.12(k) & 563e.12(j)-2.
                                                    Secs.  ____.12(k) & 563e.12(j)-3.
                                                    Sec.  ____.22(a)(1)-2.
                                                    Sec.  ____.42(c)(1)-1.
                                                    Sec.  ____.42(c)(1)(iv)-1.
                                                    Sec.  ____.42(c)(1)(iv)-2.
                                                    Secs.  ____.42(c)(1)(iv)-4.
CRA disclosure statement..........................  Sec.  ____.43(b)(1)-2.
Credit cards......................................  Secs.  ____.12(i) & 563e.12(h)-3.
                                                    Secs.  ____.12(u) & 563e.12(t)-4.
                                                    Sec.  ____.42(a)(2)-3.
Data collection...................................  Sec.  ____.42-1.
                                                    Sec.  ____.42-2.
                                                    Sec.  ____.42-5.
                                                    Sec.  ____.42-7.
                                                    Sec.  ____.42(a)-1.
                                                    Sec.  ____.42(a)-2.
                                                    Sec.  ____.42(a)-4.
                                                    Sec.  ____.42(a)-5.
                                                    Sec.  ____.42(a)-8.
                                                    Sec.  ____.42(a)-10.
                                                    Sec.  ____.42(a)(2)-1.
                                                    Sec.  ____.42(a)(2)-2.
                                                    Sec.  ____.42(a)(2)-3.
                                                    Sec.  ____.42(a)(3)-1.
                                                    Sec.  ____.42(a)(4)-2.
                                                    Sec.  ____.42(a)(4)-4.
                                                    Sec.  ____.42(b)(1)-1.
                                                    Sec.  ____.42(b)(3)-1.
                                                    Sec.  ____.42(c)(1)-1.
                                                    Sec.  ____.42(c)(1)(iv)-1.
                                                    Sec.  ____.42(c)(1)(iv)-2.
                                                    Sec.  ____.42(c)(1)(iv)-3.
                                                    Sec.  ____.42(c)(2)-1.
                                                    Sec.  ____.42(c)(2)-2.
Data reporting....................................  Sec.  ____.42-1.
                                                    Sec.  ____.42-3.
                                                    Sec.  ____.42-4.
                                                    Sec.  ____.42(a)-1.
                                                    Sec.  ____.42(a)-5.
                                                    Sec.  ____.42(a)-8.
                                                    Sec.  ____.42(a)-9.
                                                    Sec.  ____.42(a)-10.

[[Page 25117]]

 
                                                    Sec.  ____.42(a)(2)-1.
                                                    Sec.  ____.42(a)(4)-4.
                                                    Sec.  ____.42(b)(1)-1.
                                                    Sec.  ____.42(b)(2)-1.
                                                    Sec.  ____.42(b)(2)-2.
                                                    Sec.  ____.42(b)(2)-3.
Debit cards.......................................  Sec.  ____.24(d)(3)-2.
Economic development..............................  Secs.  ____.12(h) & 563e.12(g)-2.
                                                    Secs.  ____.12(h)(3) & 563e.12(g)(3)-1.
Educational services..............................  Secs.  ____.12(h) & 563e.12(g)-1.
Employees' charitable activities..................  Secs.  ____.12(j) & 563e.12(i)-2.
Employees' income.................................  Sec.  ____.42(c)(1)(iv)-2.
Examination schedule..............................  Sec.  ____.45-1.
                                                    Sec.  ____.45-2.
Federal branch....................................  Secs.  ____.12(t) & 563e.12(s)-2.
Federal Home Loan Bank............................  Secs.  ____.12(s) & 563e.12(r)-3.
Federal Reserve Bank membership reserves..........  Secs.  ____.12(s) & 563e.12(r)-3.
Financial services, provision of..................  Secs.  ____.12(j) & 563e.12(i)-1.
Fisheries.........................................  Sec.  ____.42(a)-6.
Flexibility.......................................  Sec.  ____.22(b)(5)-1.
Forestries........................................  Sec.  ____.42(a)-6.
Geographic distribution...........................  Sec.  ____.22(b)(2) & (3)-1.
                                                    Sec.  ____.22(b)(2) & (3)-2.
                                                    Sec.  ____.22(b)(2) & (3)-3.
                                                    Sec.  ____.22(b)(2) & (3)-4.
                                                    Sec.  ____.26(a)(3) & (4)-1.
Geography.........................................  Sec.  ____.41(d)-1.
Guaranteed loans..................................  Sec.  ____.22(a)(2)-4.
Guarantor.........................................  Secs.  ____.42(c)(1)(iv)-4.
Health services...................................  Secs.  ____.12(h) & 563e.12(g)-1.
High cost area....................................  Secs.  ____.12(h) & 563e.12(g)-3.
HMDA reporting....................................  Secs.  ____.12(i) & 563e.12(h)-2.
                                                    Sec.  ____.42(b)(3)-1.
Home equity line of credit........................  Secs.  ____.12(k) & 563e.12(j)-2.
                                                    Sec.  ____.42(a)-7.
Home equity loan..................................  Secs.  ____.12(k) & 563e.12(j)-1.
Home mortgage lending.............................  Sec.  ____.22(a)(1)-1.
                                                    Sec.  ____.42(d)-1
Home mortgage loan................................  Secs.  ____.12(m) & 563e.12(l)-1.
                                                    Secs.  ____.12(m) & 563e.12(l)-2.
                                                    Sec.  ____.23(b)-2.
                                                    Sec.  ____.42(b)(2)-2.
                                                    Sec.  ____.42(b)(3)-1.
Income............................................  Sec.  ____.42(c)(1)(iv)-1.
                                                    Sec.  ____.42(c)(1)(iv)-2.
                                                    Sec.  ____.42(c)(1)(iv)-3.
Income level......................................  Secs.  ____.12(n) & 563e.12(m)-1.
Indirect investments..............................  Sec.  ____.23(a)-1.
Individual development accounts (IDAs)............  Sec.  ____.24(d)-2.
Innovativeness....................................  Sec.  ____.22(b)(5)-1.
                                                    Sec.  ____.23(e)-2.
                                                    Sec.  ____.28-1.
Institutional capacity and constraints............  Sec.  ____.21(b)(4)-1.
Leases............................................  Sec.  ____.42(c)(2)-3.
Lending activity..................................  Sec.  ____.22(b)(1)-1.
Lending distribution..............................  Sec.  ____.26(a)(3) & (4)-1.
Lending within assessment area....................  Sec.  ____.22(b)(2) & (3)-3.
                                                    Sec.  ____.26(a)(2)-1.
                                                    Sec.  ____.26(a)(3) & (4)-1.
Letters of credit.................................  Sec.  ____.22(a)(2)-1.
                                                    Sec.  ____.26(a)-4.
                                                    Sec.  ____.42(c)(2)-2.
Limited purpose institution.......................  Secs.  ____.12(o) & 563e.12(n)-1.
                                                    Secs.  ____.12(o) & 563e.12(n)-2.
                                                    Secs.  ____.12(o) & 563e.12(n)-3.
                                                    Secs.  ____.42-7.
Lines of credit...................................  Sec.  ____.42-3.
                                                    Sec.  ____.42-4.
Loan amount.......................................  Sec.  ____.42(a)(2)-1.
Loan application activity.........................  Sec.  ____.22(a)(2)-2.
Loan location.....................................  Sec.  ____.42(a)-10.
                                                    Sec.  ____.42(a)(3)-1.

[[Page 25118]]

 
Loan originations, multiple.......................  Sec.  ____.42(a)(2)-2.
Loan production office (LPO)......................  Secs.  ____.12(f) & 563e.12(e)-2.
Loans, outside-assessment area....................  Sec.  ____.22(b)(2) & (3)-4.
Loan-to-deposit ratio.............................  Sec.  ____.26(a)(1)-1.
                                                    Sec.  ____.26(a)(1)-2.
                                                    Sec.  ____.26(a)(1)-3.
Main office.......................................  Sec.  ____.43(c)-1.
Measurable goals..................................  Sec.  ____.27(f)(1)-1.
MECAs.............................................  Sec.  ____.22(a)(2)-3.
Merging institutions..............................  Sec.  ____.42-5.
Mortgage-backed securities........................  Secs.  ____.12(s) & 563e.12(r)-2.
                                                    Sec.  ____.23(b)-2.
Multi-purpose loan................................  Secs.  ____.12(k) & 563e.12(j)-3.
                                                    Sec.  ____.42(a)-7.
Municipal bonds...................................  Secs.  ____.12(s) & 563e.12(r)-2.
National fund.....................................  Sec.  ____.25(e)-1.
Niche institution.................................  Secs.  ____.12(o) & 563e.12(n)-3.
Nonprofit organization............................  Secs.  ____.12(u) & 563e.12(t)-1.
Past performance..................................  Sec.  ____.21(b)(5)-1.
Performance context...............................  Sec.  ____.21(b)-1.
                                                    Sec.  ____.21(b)(2)-1.
                                                    Sec.  ____.21(b)(2)-2.
                                                    Sec.  ____.21(b)(4)-1.
                                                    Sec.  ____.21(b)(5)-1.
                                                    Sec.  ____.21(b)(5)-2.
Performance criteria..............................  Sec.  ____.22(b)-1.
                                                    Sec.  ____.23(e)-1.
                                                    Sec.  ____.23(e)-2.
                                                    Sec.  ____.26(a)-1.
                                                    Sec.  ____.26(a)-2.
                                                    Sec.  ____.28-2.
Performance evaluation............................  Sec.  ____.43(a)(1)-3.
Performance rating................................  Sec.  ____.26(a)-2.
                                                    Sec.  ____.26(a)-5.
                                                    Sec.  ____.26(b)-1.
                                                    Sec.  ____.28-1.
                                                    Sec.  ____.28-2.
                                                    Sec.  ____.28(a)-1.
                                                    Sec.  ____.28(a)-2.
                                                    Sec.  ____.28(a)-3.
                                                    Appendix A to Part ____--1.
Political subdivision.............................  Sec.  ____.41(c)(1)-1.
                                                    Sec.  ____.41(c)(1)-2.
                                                    Sec.  ____.41(d)-1.
Primary purpose...................................  Secs.  ____.12(i) & 563e.12(h)-7.
                                                    Sec.  ____.42(b)(2)-3.
Public comment....................................  Sec.  ____.27(g)(2)-1.
                                                    Sec.  ____.29(b)-1.
                                                    Sec.  ____.29(b)-2.
                                                    Sec.  ____.43(a)(1)-1.
                                                    Sec.  ____.43(a)(1)-2.
Public file.......................................  Sec.  ____.43(a)(1)-2.
                                                    Sec.  ____.43(a)(1)-3.
                                                    Sec.  ____.43(b)(1)-1.
                                                    Sec.  ____.43(b)(1)-2.
Public notice.....................................  Sec.  ____.44-1.
                                                    Appendix B to Part ____-1.
Qualified investment..............................  Secs.  ____.12(i) & 563e.12(h)-5.
                                                    Secs.  ____.12(i) & 563e.12(h)-7.
                                                    Secs.  ____.12(s) & 563e.12(r)-1.
                                                    Secs.  ____.12(s) & 563e.12(r)-2.
                                                    Secs.  ____.12(s) & 563e.12(r)-3.
                                                    Secs.  ____.12(s) & 563e.12(r)-4.
                                                    Secs.  ____.12(s) & 563e.12(r)-5.
                                                    Secs.  ____.12(s) & 563e.12(r)-6.
                                                    Secs.  ____.12(s) & 563e.12(r)-7.
                                                    Sec.  ____.23(b)-1.
                                                    Sec.  ____.23(b)-2.
                                                    Sec.  ____.23(e)-1.
                                                    Sec.  ____.23(e)-2.
                                                    Sec.  ____.25(d)-1.
                                                    Sec.  ____.26(a)-1.

[[Page 25119]]

 
                                                    Sec.  ____.26(a)-5.
                                                    Sec.  ____.26(b)-2.
Qualitative factors...............................  Sec.  ____.21(a)-1.
                                                    Sec.  ____.22(b)(4)-1.
                                                    Sec.  ____.22(b)(5)-1.
                                                    Sec.  ____.23(e)-1.
                                                    Sec.  ____.23(e)-2.
                                                    Sec.  ____.28-1.
                                                    Sec.  ____.28-2.
Ratings matrix....................................  Sec.  ____.28(a)-3.
Refinancings......................................  Sec.  ____.42(a)-5.
Regional area.....................................  Secs.  ____.12(i) & 563e.12(h)-6.
Remote service facility (RSF).....................  Secs.  ____.12(f) & 563e.12(e)-1.
Renewals..........................................  Sec.  ____.42-4.
                                                    Sec.  ____.42(a)-5.
Responsiveness....................................  Sec.  ____.23(e)-2.
Retail banking services...........................  Sec.  ____.24(d)-1.
Revenue...........................................  Sec.  ____.42(a)(4)-1.
                                                    Sec.  ____.42(a)(4)-2.
                                                    Sec.  ____.42(a)(4)-3.
                                                    Sec.  ____.42(a)(4)-4.
Revitalize or stabilize...........................  Secs.  ____.12(h) & 563e.12(g)-1.
                                                    Secs.  ____.12(h) & 563e.12(g)-2.
                                                    Secs.  ____.12(i) & 563e.12(h)-4.
SBIC or SBDC......................................  Secs.  ____.12(h)(3) & 563e.12(g)(3)-1.
Similarly situated lenders........................  Sec.  ____.21(b)(5)-2.
Small business loan...............................  Secs.  ____.12(u) & 563e.12(t)-1.
                                                    Secs.  ____.12(u) & 563e.12(t)-2.
                                                    Secs.  ____.12(u) & 563e.12(t)-3.
                                                    Secs.  ____.12(u) & 563e.12(t)-4.
                                                    Sec. ____.42(a)-2.
                                                    Sec. ____.42(a)-3.
                                                    Sec. ____.42(a)-5.
                                                    Sec. ____.42(a)-8.
                                                    Sec. ____.42(a)(2)-1.
                                                    Sec. ____.42(a)(2)-3.
                                                    Sec. ____.42(a)(3)-1.
                                                    Sec. ____.42(a)(4)-1.
                                                    Sec. ____.42(a)(4)-2.
                                                    Sec. ____.42(a)(4)-4.
                                                    Sec. ____.42(b)(1)-1.
                                                    Sec. ____.42(b)(2)-2.
                                                    Sec. ____.42(c)(2)-1.
Small farm loan...................................  Sec. ____.42(a)-3.
                                                    Sec. ____.42(a)-4.
                                                    Sec. ____.42(a)-5.
                                                    Sec. ____.42(a)-6.
                                                    Sec. ____.42(a)-8.
                                                    Sec. ____.42(a)(2)-1.
                                                    Sec. ____.42(a)(4)-2.
                                                    Sec. ____.42(a)(4)-4.
                                                    Sec. ____.42(b)(1)-1.
                                                    Sec. ____.42(b)(2)-2.
Small institution.................................  Secs. ____.12(t) & 563e.12(s)-1.
                                                    Secs. ____.12(t) & 563e.12(s)-2.
                                                    Sec. ____.42-6.
                                                    Sec. ____.42-7.
Small institution performance standards...........  Sec. ____.26(a)-1.
                                                    Sec. ____.26(a)-2.
                                                    Sec. ____.26(a)-3.
                                                    Sec. ____.26(a)-4.
                                                    Sec. ____.26(a)-5.
                                                    Sec. ____.26(a)(3) & (4)-1.
                                                    Sec. ____.26(b)-1.
                                                    Sec. ____.26(b)-2.
Social services...................................  Secs. ____.12(h) & 563e.12(g)-1.
Software for data collection and reporting........  Sec. ____.42-2.
                                                    Sec. ____.42-6.
                                                    Sec. ____.42(c)(2)-1.
Special purpose institution.......................  Secs. ____.11(c)(3) & 563e.11(c)(2)-1.
                                                    Secs. ____.11(c)(3) & 563e.11(c)(2)-2.
State branch......................................  Secs. ____.12(t) & 563e.12(s)-2.

[[Page 25120]]

 
Strategic plan....................................  Sec. ____.27(c)-1.
                                                    Sec. ____.27(c)-2.
                                                    Sec. ____.27(f)(1)-1.
                                                    Sec. ____.27(g)(2)-1.
Subsidiary........................................  Sec. ____.12(a)-1.
Third party investments...........................  Sec. ____.22(d)-1.
                                                    Sec. ____.22(d)-2.
                                                    Sec. ____.22(d)-3.
                                                    Sec. ____.25(d)-1.
                                                    Sec. ____.26(a)-3.
Wholesale institution.............................  Secs. ____.12(o) & 563e.12(n)-2.
                                                    Secs. ____.12(w) & 563e.12(v)-1.
                                                    Sec. ____.42-7.
----------------------------------------------------------------------------------------------------------------

    End of text of the Interagency Questions and Answers.

    Dated: April 20, 2000.
Keith J. Todd,
Executive Secretary, Federal Financial Institutions Examination 
Council.

[FR Doc. 00-10343 Filed 4-27-00; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P


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