D R A F T 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the Currency 

12 CFR Part 25 

[Docket No. 05-0_] 

RIN 1557-AB98 

FEDERAL RESERVE SYSTEM 

12 CFR Part 228 

[Regulation BB; Docket No. R-1225] 

FEDERAL DEPOSIT INSURANCE CORPORATION 

12 CFR Part 345 

RIN 3064-AC89 
Community Reinvestment Act Regulations 

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors 

of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC). 

ACTION: Joint final rule. 

SUMMARY: The OCC, Board, and FDIC (collectively, “federal banking agencies” or “the 

agencies”) are issuing this joint final rule that revises certain provisions of our rules 

implementing the Community Reinvestment Act (CRA). The agencies are taking this action 

after carefully considering public comments received in response to the joint notice of proposed 

rulemaking published on March 11, 2005 (the “March proposal”). The joint final rule addresses 

regulatory burden imposed on small banks with an asset size between $250 million and $1 

billion by exempting them from CRA loan collection and reporting obligations. It also exempts 

such banks from the large bank lending, investment, and service tests, and makes them eligible 

for evaluation under the small bank lending test and a flexible new community development test. 

Holding company affiliation is no longer a factor in determining which CRA evaluation 

standards apply to a bank. In addition, the joint final rule revises the term “community 

development” to include activities to revitalize and stabilize distressed or underserved rural areas 

and designated disaster areas. Finally, it adopts without change the amendments to the 

regulations to address the impact on a bank’s CRA rating of evidence of discrimination or other 

credit practices that violate an applicable law, rule, or regulation. 

EFFECTIVE DATE: This joint final rule is effective September 1, 2005. 

FOR FURTHER INFORMATION CONTACT: 

OCC: Michael Bylsma, Director, or Margaret Hesse, Special Counsel, Community and 

Consumer Law Division, (202) 874-5750; Karen Tucker, National Bank Examiner, Compliance 

Division, (202) 874-4428; or Patrick T. Tierney, Senior Attorney, Legislative and Regulatory 

Activities (202) 874-5090, Office of the Comptroller of the Currency, 250 E Street, SW., 

Washington, DC 20219. 

Board: Anjanette M. Kichline, Oversight Senior Review Examiner, (202) 785-6054; Catherine 

M.J. Gates, Oversight Team Leader, (202) 452-3946; Kathleen C. Ryan, Counsel, (202) 452-

3667; or Dan S. Sokolov, Senior Attorney, (202) 452-2412, Division of Consumer and 

Community Affairs, Board of Governors of the Federal Reserve System, 20th Street and 

Constitution Avenue, N.W., Washington, DC 20551. 

FDIC: Richard M. Schwartz, Counsel, Legal Division, (202) 898-7424; Susan van den Toorn, 

Counsel, Legal Division, (202) 898-8707; or Robert W. Mooney, Chief, CRA and Fair Lending 

Policy Section, Division of Supervision and Consumer Protection, (202) 898-3911; Federal 

Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

Background 

The CRA requires the federal banking and thrift agencies to assess the record of each 

insured depository institution of meeting the credit needs of its entire community, including lowand moderate-income neighborhoods, consistent with the safe and sound operation of the 

2
institution and to take that record into account when the agency evaluates an application by the 

institution for a deposit facility.1 

Rulemaking History 

In 1995, when the OCC, the Board, the FDIC, and the Office of Thrift Supervision (OTS) 

(collectively, “federal banking and thrift agencies” or “the four agencies”) adopted major 

amendments to regulations implementing the Community Reinvestment Act, they committed to 

reviewing the amended regulations in 2002 for their effectiveness in placing performance over 

process, promoting consistency in evaluations, and eliminating unnecessary burden. (60 FR 

22156, 22177 (May 4, 1995)). The federal banking and thrift agencies indicated that they would 

determine whether and, if so, how the regulations should be amended to better evaluate financial 

institutions’ performance under the CRA, consistent with the Act’s authority, mandate, and 

intent. 

The four agencies’ review was initiated in July 2001 with publication in the Federal 

Register of an advance notice of proposed rulemaking requesting comment on whether the 

regulations were effective in meeting the stated goals of the 1995 rulemaking and whether any 

changes should be made to the rules (66 FR 37602 (July 19, 2001)). The approximately 400 

comments reflected a consensus that certain fundamental elements of the regulations are sound, 

but demonstrated a disagreement over the need and reasons for change. 

In February 2004, the four agencies published a notice of proposed rulemaking (69 FR 

5729 (Feb. 6, 2004)). Among other things, the proposal would have increased the small bank 

asset size threshold to $500 million, without regard to holding company affiliation. Commenters 

were deeply split on this proposal, with financial institutions and their trade associations urging 

additional burden relief for more institutions and community organizations opposed to allowing 

any additional financial institutions to be evaluated as “small” institutions. On July 16, 2004, the 

OCC and the Board announced that they would not proceed with their respective February 2004 

proposals. The OCC did not formally withdraw the proposal, but did not adopt it. The Board 

formally withdrew its proposal. 

On August 18, 2004, the OTS published a final rule that expanded the category of “small 

savings associations” under the OTS’ CRA regulations to those with under $1 billion in assets, 

regardless of holding company affiliation (69 FR 51155 (Aug. 18, 2004)). Following its 

publication of a notice of proposed rulemaking in November 2004, the OTS also adopted a final 

rule that allows a thrift that is evaluated as a large retail institution to determine the weight that 

will be assigned to lending, investments, and services in its CRA evaluation. (70 FR 10023 

(Mar. 2, 2005)). 

On August 20, 2004, the FDIC issued a proposal on the CRA evaluation of banks defined 

as “small” (69 FR 51611 (Aug. 20, 2004)). The FDIC proposal would have expanded the 

category of “small banks” to those under $1 billion, regardless of any holding-company size or 

affiliation. For small banks with assets between $250 million and $1 billion, the FDIC proposal 

would have added to the five performance criteria of the current streamlined small bank test a 

new sixth criterion taking into account a bank’s record of community development lending, 

investments, or services, but also asked for comment on whether those community development 

activities should be evaluated in a separate test. The FDIC received over 11,000 comments in 

response to its proposal. Banks and their trade associations supported a change in the small bank 

dollar threshold, primarily as a way to reduce administrative burden, but expressed mixed views 

1 12 U.S.C. 2903. 

3
on whether community development activities should be evaluated as a sixth criterion in the 

small bank evaluation or as a separate test. Community organizations almost universally 

opposed any increase in the small bank threshold. However, these commenters generally 

supported the proposal to require such banks to be evaluated under a separately rated community 

development test in addition to the small bank lending test, if the small bank threshold were to be 

increased.2 

The Proposed Rule 

The OCC, the Board, and the FDIC jointly issued the proposed amendments to their CRA 

regulations, which were published in the Federal Register on March 11, 2005. The proposal was 

developed after thorough consideration of all the comments that the agencies had received in 

response to their previous proposals. The March proposal responded to community banks 

concerned about regulatory burden by extending eligibility for streamlined lending evaluations 

and the exemption from data reporting to banks under $1 billion, without regard to holding 

company assets. The new proposal also provided an adjustment of this threshold for inflation, 

based on changes to the Consumer Price Index. 

The proposal addressed the concerns of community organizations that had urged the 

federal banking and thrift agencies to continue to evaluate community development participation 

by providing that the community development records of banks between $250 million and $1 

billion, termed “intermediate small banks,” would be separately evaluated and rated, but 

provided a new, more streamlined basis than the current rule for doing so. Under the proposal, 

an intermediate small bank would not be eligible for an overall rating of “satisfactory” unless it 

received ratings of “satisfactory” on both the lending and community development tests. 

The proposal also responded to suggestions from both community banks and community 

organizations that the current definition of “community development” was too narrow by 

proposing to expand the definition of community development activities to include certain 

activities in underserved rural areas and designated disaster areas. Finally, the proposal provided 

that evidence of discrimination, or evidence of credit practices that violate an applicable law, 

rule, or regulation, could adversely affect an agency’s evaluation of a bank’s CRA performance 

and included an illustrative list of such practices. 

Together, the agencies received over 10,000 public comments, including identical 

comments sent to each agency, from consumer and community organizations, banks and bank 

trade associations, academics, federal and state government representatives, and individuals. In 

general, commenters recognized that the proposal had the potential to strike an appropriate 

balance between the need to provide meaningful regulatory relief to small banks and the need to 

preserve and encourage meaningful community development activities by those banks. 

The Final Rule 

Increase in Size Threshold for Small Banks from $250 Million to $1 Billion 

Comments on Proposed Rule 

The agencies proposed to reduce undue regulatory burden by extending eligibility for 

streamlined lending evaluations and the exemption from data reporting to banks under $1 billion 

without regard to holding company affiliation. In addition, the agencies proposed to define small 

2

 For a more detailed history of CRA rulemaking activities by the banking agencies since 2001, please refer to the 

supplementary information published in the Federal Register with the joint notice of proposed rulemaking (70 FR 

12148, 12149 (Mar. 11, 2005)). 

4
banks with assets between $250 million and $1 billion as “intermediate small banks.” The 

proposal also would annually adjust the asset size for small and intermediate small banks based 

on changes to the Consumer Price Index. 

Most community organizations opposed the proposal to raise the small bank threshold to 

$1 billion while most banks supported the increase. Community organizations expressed a 

concern that an increase in the threshold would cause banks to reduce their investments and 

services in low- and moderate-income areas. Although they preferred that the agencies not 

increase the increase, a number of community organization commenters noted that the proposed 

evaluation of intermediate small banks under a community development test and the streamlined 

lending test was a notable improvement over the previous proposals to raise the small bank 

threshold. 

Community organizations also expressed concern that an increase in the small bank 

threshold would reduce public data on small business, small farm, and community development 

loans. Community organizations objected to this result on the basis that communities would lack 

the means to evaluate the small business and small farm lending of intermediate small banks. A 

few community organizations offered specific examples of how they or others have used 

information about such lending, including, for example, a series of studies examining 

impediments to capital formation by business owners in low- and moderate-income areas. Some 

community organizations asserted that intermediate small banks make more small business, 

small farm and community development loans, as a percentage of bank assets, than larger banks. 

Thus, they believe that the loss of the intermediate small bank lending data will significantly 

affect the relevance of the remaining data, particularly in markets that include numbers of 

intermediate small banks. Some commenters also noted that the proposal would affect the Home 

Mortgage Disclosure Act (HMDA) requirements to report certain loans outside of an MSA for 

intermediate small banks. 

The vast majority of bank and bank trade association commenters noted that increasing 

the small bank threshold would provide substantial and needed regulatory burden reduction 

because intermediate small banks would be relieved of the obligation to collect and report 

information about small business, small farm, and community development loans. They also 

noted that, given the inclusion of the community development test for intermediate small banks, 

elimination of the data collection and reporting requirements was the principal regulatory relief 

component of the proposed amendments. However, a few banks stated that this relief would not 

be realized fully if banks continue to collect information about community development loans, 

investments, and services, and provide it to examiners for use in evaluating the bank’s 

performance under the proposed community development test. 

A number of banks and their trade associations commented that the small bank size 

threshold should be raised to $1 billion without creating a tier of intermediate small banks that 

would be subject to the proposed community development test. A few bank commenters 

suggested defining an intermediate small bank subject to the new community development test 

as a bank with assets between $500 million and $1 billion, and to permit institutions with less 

than $500 million in assets to be evaluated solely under the streamlined small bank lending test. 

Some community organization commenters criticized the proposal to adjust the asset 

threshold annually for small and intermediate small banks based on changes to the Consumer 

Price Index (CPI) because it could increase the number of banks that are exempt from the large 

bank evaluation standards and further decrease the availability of small business, small farm, and 

5
community development loan data. Most banks that commented on the issue supported tying the 

small and intermediate small bank thresholds to changes in the CPI. 

Provisions of Final Rule 

The joint final rule retains the proposed asset size threshold for small banks of less than 

$1 billion and the annual adjustment to the threshold based on changes to the Consumer Price 

Index. The text of the “small bank” definition describing the “intermediate small bank” category 

has been revised for clarity. The federal banking agencies believe that raising the asset size 

threshold provides important regulatory relief for community banks. As discussed below, the 

final rule also will preserve and encourage meaningful CRA activities by intermediate small 

banks by means of a new community development test. 

As a result of the rule change, data on the distribution of small business loans and small 

farm loans extended by intermediate small banks will no longer be publicly available. In 

revising the rule, the agencies have considered the adequacy of substitute sources of information. 

Call Report data, although they lack the loan-location and business-size information in the CRA 

data, provide the public with annual outstanding amounts of small business and small farm loans. 

Moreover, an intermediate small bank’s CRA performance evaluation includes, as appropriate, a 

description of its small business and small farm lending performance, as well as a description of 

any community development loans the bank has made. These sources will give the public 

information on intermediate small banks’ records of extending small business, small farm, and 

community development loans. On balance, the agencies believe the costs of the mandatory data 

collection and reporting by intermediate small banks, including the fixed costs that weigh more 

heavily on smaller banks, outweigh the benefits. 

Further, under the CRA and Home Mortgage Disclosure Act (HMDA) regulations, large 

banks generally must collect and report information about the location of property securing home 

loans located outside metropolitan statistical areas (MSAs) and metropolitan divisions in which 

the institution has a home or branch office, or outside any MSA (12 CFR 203.4(e)). But for 

small banks, collecting and reporting this location information is optional. Thus, under this joint 

final rule, intermediate small banks will no longer be required to collect and report information 

on the location of mortgage loans outside MSAs and metropolitan divisions in which the banks 

have home or branch offices. 

Summary information about where such mortgage loans were made, and detailed 

information about the applicants or borrowers, will nevertheless continue to be available. 

Mortgage loan location information is summarized in the CRA performance evaluation as part of 

the evaluation of the geographic distribution of a bank’s loans, as appropriate. Moreover, some 

newly designated intermediate small banks may opt to report loan location information as some 

small banks have done in the past. Furthermore, intermediate small banks covered by HMDA 

will continue to report borrower or applicant race, ethnicity, gender, and income even when 

property location need not be reported. The agencies believe that the additional value of 

requiring intermediate small banks to report loan location information on all of their mortgage 

loans does not justify the cost of reporting such information.3

 Although an intermediate small 

bank will no longer be required to collect and report data on small business or small farm loans 

or on the location of certain nonmetropolitan mortgage loans, the agencies will continue to 

3

 Even were the proposal not adopted, intermediate small banks would continue to be exempt from reporting loan 

location information on mortgage loans made in counties with populations of less than 30,000. 

6
evaluate such lending under the streamlined lending test if it constitutes a major product line of 

the bank. 

Community Development Test for Intermediate Small Banks 

Comments on Proposed Rule 

The March proposal would have added a new community development test that would be 

separately rated in CRA examinations for intermediate small banks. The new community 

development test would evaluate an intermediate small bank’s community development loans, 

qualified investments, and community development services, resulting in a single rating for 

community development performance. Overall CRA ratings for intermediate small banks would 

be based on ratings for this community development test and the streamlined small bank lending 

test. 

Most community organization commenters generally favored the retention of the large 

bank lending, investment, and service tests for evaluation of all banks with assets of $250 million 

or more. On the other hand, many of these commenters noted that the proposed intermediate 

small bank examination standards – the streamlined small bank lending test plus the proposed 

community development test – were significantly preferable to permitting additional banks to be 

evaluated under only the streamlined small bank lending test. In this regard, community 

organizations strongly supported the provision in the proposed rule to require an intermediate 

small bank to receive a “satisfactory” rating on both the community development and the small 

bank lending tests in order to receive an overall “satisfactory” rating. 

Many bank commenters opposed the creation of separate new standards for intermediate 

small banks. For example, many community bankers commented that all banks under $1 billion 

should be examined solely under the streamlined lending test. Some bank and bank trade 

associations urged the agencies to adopt final rules that assign greater weight to retail lending 

than to community development in the overall evaluation of an intermediate small bank’s CRA 

performance. A few commenters stated that, under the proposal, community development would 

receive greater weight in an intermediate small bank’s overall rating than it does under the large 

bank lending, investment, and service tests that currently apply to such banks. They urged the 

agencies to clarify that intermediate small banks, at their option, could continue to choose to be 

evaluated under the large bank lending, investment, and service tests. 

Regarding the activities evaluated under the proposed community development test, most 

community organizations stated that an institution should be required to engage in all three 

activities – community development loans, qualified investments, and community development 

services – in order to earn a “satisfactory” rating on the community development test. Although 

community organizations believed that an institution’s rating on the community development test 

should take account of bank capacity and community opportunities for community development, 

they asserted that the primary consideration should be the institution’s responsiveness to 

community needs. Moreover, many community organizations requested that the community 

development test also evaluate an intermediate small bank’s provision of community 

development services through branches located in low- and moderate-income areas. 

Many banks and bank trade associations commented favorably on the flexibility that the 

community development test offered. Some large banks requested that the proposed community 

development test be made available to banks with assets of $1 billion or more as a substitute for 

the existing investment and service tests. 

7
Provisions of Final Rule 

The final rule adopts the proposed community development test for intermediate small 

banks without change. The number and amount of community development loans, the number 

and amount of qualified investments, and the provision of community development services, by 

an intermediate small bank, and the bank’s responsiveness through such activities to community 

development lending, investment, and services needs, will be evaluated in the context of the 

bank’s capacities, business strategy, the needs of the relevant community, and the number and 

types of opportunities for community development activities. The agencies believe that, given 

these performance context factors, the community development test will provide a better 

framework for assessing community development performance by intermediate small banks than 

the separate lending, investment, and service tests. As noted in the preamble to the proposed 

rule, the community development test will be applied flexibly to permit a bank to apply its 

resources strategically to the types of community development activities (loans, investments, and 

services) that are most responsive to helping to meet community needs, even when those 

activities are not necessarily innovative, complex, or new. (“Innovativeness” and “complexity,” 

factors examiners consider when evaluating a large bank under the lending, investment, and 

service tests, are not factors in the intermediate small banks’ community development test.) The 

agencies will incorporate these considerations as appropriate into examination guidance and 

procedures to ensure flexible application of the standards. 

In providing this flexibility for intermediate small banks, the federal banking agencies do 

not intend to suggest that a bank may simply ignore one or more categories of community 

development or arbitrarily decrease the level of such activities. Nor does the joint final rule 

prescribe any required threshold level or allocation of community development loans, qualified 

investments, and community development services for these banks. Instead, the OCC, the FDIC, 

and the Board expect that a bank will appropriately assess the needs in its community, engage in 

different types of community development activities based on those needs and the bank’s 

capacities, and that it will take reasonable steps to apply its community development resources 

strategically to meet those needs.4 As the agencies indicated on adoption of the 1995 regulation, 

the agencies will expect a bank to make an assessment using information normally used to 

develop a business plan or identify potential markets and customers.5 Examiners will consider 

the bank’s assessment of community needs along with information from community, 

government, civic, and other sources to gain a working knowledge of community needs.6 The 

flexibility inherent in the community development test will allow intermediate small banks to 

focus on meeting the substance of community needs through these means, without undue 

regulatory consequences from the form of the response. 

Under the joint final rule, retail banking services provided by intermediate small banks 

will no longer be evaluated in a separate service test. Instead, the extent to which such banks 

provide community development services to low- and moderate-income people will be taken into 

account in the community development test. Thus, the federal banking agencies will consider 

not only the types of services provided to benefit low- and moderate-income people, such as lowcost bank checking accounts and low-cost remittance services, but also the provision and 

4

 As discussed in the supplementary information published with the proposed rule, the agencies anticipate that 

examiners will exercise their discretion, using performance context, to assign appropriate weight in a bank’s current

period rating to prior-period outstanding investments that reflect a substantial financial commitment or outlay by the

bank designed to have a multi-year impact, in addition to investments made during the current examination cycle. 5

 60 FR 22156, 22163 (May 4, 1995). 6

 Id.

8
availability of services to low- and moderate-income people, including through branches and 

other facilities located in low- and moderate-income areas. 

The federal banking agencies believe that providing flexibility to intermediate small 

banks in how they apply their community development resources to respond to community needs 

through the strategic use of loans, investments, and services will reduce burden on these banks 

while making the evaluation of their community development records more effective.7 

The agencies are not revising the provision in the existing regulations that permits any 

small bank, including an intermediate small bank, to choose to be evaluated under the large bank 

lending, investment, and service tests at its option. Any small bank that opts to be evaluated 

under the lending, investment, and service tests will be required to collect and report small 

business, small farm, and community development loan data.8 

Community Development Definition 

Comments on Proposed Rule 

The regulations’ present definition of “community development” covers four categories 

of activity. Three categories (affordable housing, community services, and economic 

development) are defined in terms of the activity’s targeting of specific persons (low- or 

moderate-income people in the first two categories, small farms or businesses in the third). A 

fourth category (revitalization or stabilization activities) is defined in terms of the activity’s 

targeting of specific areas, namely, low- or moderate-income census tracts. 

The OCC, the FDIC, and the Board proposed to amend two of the categories – activities 

that revitalize or stabilize an area, and affordable housing. Under one proposed amendment, a 

bank’s support for activities that revitalize or stabilize an area would receive consideration not 

only in low- or moderate-income census tracts (referred to as “geographies” in the regulations), 

but also in “underserved rural areas.”9 The proposal would thus expand the number and kinds of 

rural areas in which bank activities that revitalize or stabilize communities are eligible for 

community development consideration (referred to herein as “eligible rural tracts”). The 

proposal responded to the scarcity of eligible rural tracts, which appeared to limit the 

effectiveness of the regulations in encouraging rural community development.10 The proposed 

amendment would also give consideration to bank activities that revitalize or stabilize designated 

disaster areas. 

The agencies sought comment on three general alternatives for increasing the number and 

kinds of rural tracts in which bank activities are eligible for community development 

7

 A few commenters requested that the community development test be available to banks with assets of more than 

$1 billion, for the sake of increasing flexibility for those banks, too. The agencies have not made this change. 

However, a large bank seeking more flexibility than it finds in the present three-part test can consider a strategic 

plan. See 12 CFR 25.27, 228.27, & 345.27. 8

 See 12 CFR 25.21(a)(3), 228.21(a)(3), & 345.21(a)(3). 9

 Staff interpretations of activities that “revitalize or stabilize” an area can be found in Interagency Questions and 

Answers Regarding Community Reinvestment, (66 FR 36620, 36625-26, July 12, 2001) (Q&A _.12(h)(4)-1 and 

.12(i)-4. 10 The scarcity is both absolute and relative. Only 15 percent of nonmetropolitan tracts are now classified as “lowor moderate-income,” and 59 percent of nonmetropolitan counties lack a single low- or moderate-income tract. In 

comparison, 31 percent of metropolitan tracts are classified as “low- or moderate-income” and only 18 percent of 

metropolitan counties lack a single low- or moderate-income tract. See Robert B. Avery, Glenn B. Canner, et al., 

“Community Banks and Rural Development: Research Relating to Proposals to Revise the Regulations That 

Implement the Community Reinvestment Act,” Federal Reserve Bulletin, Spring 2005, Table 14. 

9
consideration. The first alternative was to expand the definition of “low- or moderate-income” 

tracts in rural areas. Two specific options were raised: increasing the threshold for a low- or 

moderate-income tract from a median income of 80 percent of the state nonmetropolitan median 

income to 90 percent, or changing the baseline against which a nonmetropolitan tract’s median 

income is compared to the median income of the entire state (not just its nonmetropolitan parts). 

The second alternative was to retain the present definition of a tract’s income status, but identify 

a set of rural tracts that, while not low- or moderate-income, were nonetheless shown by other 

relevant indicators to be “underserved” or otherwise in need of bank support to revitalize or 

stabilize. Specific indicators on which the agencies sought comment were rates of poverty, 

unemployment, and population loss used as “distress” indicators by the Community 

Development Financial Institutions (CDFI) Fund, United States Department of the Treasury. 

The third alternative was to consider eligible any rural area that had been designated by a federal, 

state, tribal, or local government as in need of revitalization or stabilization. 

Under another proposed amendment, bank support for affordable housing would receive 

consideration in “underserved rural areas” or designated disaster areas even if the housing 

benefited individuals not defined as “low- or moderate-income.”11 The agencies indicated that 

the proposal’s premise was that affordable housing – in addition to other activities that revitalize 

and stabilize underserved rural areas – may meet a critical need of individuals in certain 

underserved rural areas, even if those individuals may not meet the technical requirements of the 

definition of “low- or moderate-income” in the regulation. 

Banks and community organizations alike generally supported expanding the definition 

of “community development” to make bank activities eligible for community development 

consideration in a larger number of rural areas. Banks argued that having few or no eligible 

tracts in their assessment areas meant they felt pressure to make community development 

investments outside of their assessment areas merely for the sake of their CRA evaluations. 

Bank commenters suggested that “rural” be defined using existing government 

definitions. Some commenters suggested using the Office of Management and Budget’s concept 

of nonmetropolitan areas (areas outside Metropolitan Statistical Areas, or MSAs), though a few 

requested flexibility to treat certain parts of MSAs as rural, too. Others suggested the Census 

Bureau’s definition of “rural.” Some suggested using several criteria, including population 

density. 

Banks asked that any rule distinguishing “underserved” rural areas be simple. Some 

expressed concern that using the CDFI Fund distress criteria would be complicated and cause 

uncertainty; but some indicated the criteria were appropriate. Many banks suggested that an area 

be eligible regardless of its income if targeted by a government agency for redevelopment. 

Community banks expressed a strong preference that a bank’s support for meeting community 

needs such as education, infrastructure, and healthcare be considered as “community 

development” in rural communities of all kinds, not just “underserved” or low- or moderateincome communities. 

Community organizations disagreed that all rural areas should be eligible, but agreed that 

more rural areas should be eligible than are now. Many requested that the agencies consider 

both expanding the standard for classifying rural tracts as “low- or moderate-income” and 

adopting criteria such as the distress criteria of the CDFI Fund to identify additional eligible 

11 Staff interpretations of “affordable housing” can be found in the Interagency Questions and Answers Regarding 

Community Development, 66 Fed.Reg. 36620 (July 12, 2001) (“Q&A”), Q&A _.12(h)(1)-1. 

10
tracts.12 At the same time, community organizations generally sought to keep the proportion of 

eligible rural tracts in rough parity with the proportion of eligible urban tracts. 

Like bank commenters, community organizations offered a variety of suggestions for 

defining “rural.” For example, some suggested including any area with a population of less than 

10,000, while others suggested using several criteria, including population, household income, 

the area’s economic base, and distance from a metropolitan area. Some cautioned against 

treating exurbs of large MSAs as “rural.” 

As noted above, banks and community organizations alike generally supported expanding 

the “community development” definition to include activities that benefit underserved rural 

areas. Few comments distinguished between the proposal to amend the “revitalize or stabilize” 

category and the proposal to amend the “affordable housing” category but, among those that did 

comment specifically on a category, more commented specifically in favor of expanding the 

“revitalize or stabilize” category. 

Banks favored revising the definition of “community development” to include activities 

in a designated disaster area. They noted that such areas are easily identified and have special 

redevelopment needs. Some, but not all, community organizations opposed the revision. 

Organizations that opposed and those that did not oppose the revision shared the view that the 

regulation should not give consideration to bank responses to disasters that do not meet the needs 

of affected low- or moderate-income people. 

Provisions of Final Rule 

The agencies are revising the definition of “community development” to increase the 

number and kinds of rural tracts in which bank activities are eligible for community development 

consideration. In doing so, the agencies are revising the “revitalize or stabilize” category of the 

definition of “community development,” to provide that activities that revitalize or stabilize areas 

designated by the agencies as “distressed or underserved nonmetropolitan middle-income 

geographies” will qualify as community development activities. 

The final rule uses the term “nonmetropolitan,” which means an area outside of an MSA, 

to refer to rural areas. The final rule also describes qualifying rural geographies as “distressed or 

underserved,” while the proposal used only the term “underserved.” The agencies believe that 

the phrase “distressed or underserved” better describes the eligible geographies that will be 

designated using the factors discussed more fully below. 

Eligible rural tracts will continue to include tracts currently defined as “low-income” or 

as “moderate-income,” and the agencies have not revised the definitions of those terms. Eligible 

rural tracts will also include middle-income, nonmetropolitan tracts designated by the agencies 

as distressed or underserved based on either or both of two sets of criteria: criteria indicating a 

community is in distress (rates of poverty, unemployment, and population loss), and criteria 

indicating a community may have difficulty meeting essential community needs (population size, 

density, and dispersion). 

12 On the whole, community organizations did not express a strong preference between raising the threshold income 

for a moderate-income tract to 90% of nonmetropolitan state median income and changing the baseline against 

which a tract’s income is measured to the state median income. They generally opposed, however, a threshold of 

100 percent of nonmetropolitan state median income. Some organizations that favored using the CDFI Fund distress 

criteria suggested that additional criteria also be considered. 

11
The agencies believe that using these criteria to identify eligible areas has advantages 

over simply expanding the definition of “low- or moderate-income” tracts for rural areas. The 

distress criteria permit a more careful targeting of the middle-income tracts that are most in need 

of revitalization or stabilization. Simply changing the definition of “moderate-income” to 

include some presently middle-income tracts would (a) fail to cover many rural middle-income 

tracts in distress and (b) cover many tracts not necessarily in distress, or in less distress than 

other rural tracts that would not be covered. In addition, some rural communities, albeit middleincome and not necessarily in distress, have such small and thinly distributed populations that 

they have difficulty financing the fixed costs of essential community needs such as essential 

infrastructure and community facilities; moreover, residents may have to travel long distances to 

reach certain facilities, such as hospitals. The challenges facing such communities are reflected 

in several comments suggesting the agencies use factors such as population size, density, and 

distance from a population center to identify eligible areas. Simply changing the definition of 

“moderate-income” to include some presently middle-income tracts would not effectively 

identify those communities, either. Finally, changing the definition of “low- or moderate-income 

tract” for one purpose (evaluating community development activities) but not for other purposes 

(evaluating retail lending and service activities) could create confusion and the appearance of 

inconsistency. 

To facilitate planning, the agencies will publish a list of eligible rural tracts that are 

distressed or underserved on the web site of the Federal Financial Institutions Examination 

Council.13 Year-to-year changes in the tracts designated based on the distress criteria are 

expected to be minimal; to account for such changes the agencies will specify a uniform lag 

period -- of at least one year -- for removal from the list of any tract designated based on those 

criteria. The lag will help promote investments that take an extended period to arrange. A 

qualifying loan, investment, or service in the area will count so long as the bank made, or entered 

a binding commitment to make, the loan or investment or provided, or entered a binding 

commitment to provide, the service while the area was designated or during the lag period. 

The “distressed or underserved” designations will be based on objective criteria. A 

middle-income, nonmetropolitan tract will be designated if it is in a county that meets one or 

more of the following triggers that the CDFI Fund employs as “distress criteria”: (1) an 

unemployment rate of at least 1.5 times the national average, (2) a poverty rate of 20 percent or 

more, or (3) a population loss of 10 percent or more between the previous and most recent 

decennial census or a net migration loss of 5 percent or more over the five-year period preceding 

the most recent census.14 Activities qualify for “revitalize or stabilize” community development 

consideration in these tracts, like in low- or moderate-income tracts, based on the regulation and 

applicable interagency guidance. 

 A middle-income, nonmetropolitan tract will also be designated if it meets criteria for 

population size, density, and dispersion that indicate the area’s population is sufficiently small, 

thin, and distant from a population center that the tract is likely to have difficulty financing the 

fixed costs of meeting essential community needs. The agencies will use as the basis for the 

designations the “urban influence codes” maintained by the Economic Research Service of the 

13 The Website address is: www.ffiec.gov. 14 12 CFR 1805.201(b)(3). The CDFI Fund uses other criteria, as well, including an income trigger different from

the definition of “low- or moderate-income” under the CRA regulations. The other criteria, however, will not be

used in the CRA regulation’s definition of “community development.” 

12
United States Department of Agriculture.15 In areas so designated, bank financing for 

construction, expansion, improvement, maintenance, or operation of essential infrastructure or 

facilities for health services, education, public safety, public services, industrial parks, or 

affordable housing generally will be considered to meet essential community needs, so long as 

the infrastructure or facility serves low- and moderate-income individuals. Other bank activities 

in such areas generally will not qualify for revitalization or stabilization consideration, unless the 

area meets the distress criteria. In these cases, the agencies will continue to decide on a case-bycase basis whether a particular activity qualifies for such consideration based on the regulation 

and applicable interagency guidance. 

The agencies are also revising the definition of “community development” to make bank 

activities to revitalize or stabilize designated disaster areas eligible for CRA consideration. 

Disaster areas may be designated by federal or state government. Such designations include, for 

example, Major Disaster Declarations administered by the Federal Emergency Management 

Agency. A designation will expire for purposes of CRA when it expires according to the 

applicable law under which it was declared. As the agencies indicated with the proposal, 

examiners will give significant weight to the extent to which a bank’s revitalization activities in a 

disaster area benefit low- or moderate-income individuals. 

The final rule does not incorporate the specific proposal to amend the “affordable 

housing” category of the community development definition. The proposal would have included 

affordable housing that benefits individuals who reside in underserved rural areas or designated 

disaster areas, even if the individuals are not technically “low- or moderate-income.” The 

agencies believe it is appropriate to maintain the focus of the separate “affordable housing” 

category on characteristics of the residents of the housing, and not to expand this category to 

consider characteristics of the residents’ communities without regard to the residents’ income 

level characteristics.16 Thus, under the regulation, a bank activity that has a primary purpose of 

providing housing affordable to low- or moderate-income individuals continues to qualify as 

“community development” regardless of the location of the housing.17 In addition, such an 

activity may receive additional weight in the evaluation if the examiner determines that the 

activity helps to revitalize or stabilize a low- or moderate-income census tract, a distressed or 

underserved rural area, or a designated disaster area. However, as described previously, a bank 

activity that provides affordable housing, but not necessarily for low- or moderate-income 

individuals, may qualify as an activity that revitalizes or stabilizes an eligible nonmetropolitan 

area. For example, a bank activity that provides housing for middle- or upper-income 

individuals in an eligible rural area qualifies as “community development” when part of a bona 

fide plan to revitalize or stabilize the community by attracting a major new employer that will 

15 The codes can be found at http://www.ers.usda.gov/Briefing/Rurality/urbaninf/. The agencies are considering 

designating middle-income tracts in the counties coded “7,” “10,” “11,” or “12.” The counties coded “11” or “12” 

have population densities under five people per square mile, are not adjacent to either a metropolitan or micropolitan 

area, and do not have a town with a population greater than 10,000. The counties coded “7” or “10” have 

population densities between five and seven people per square mile and do not have a town with a population greater 

than 2,500, though they border a micropolitan or small metropolitan area. These counties are concentrated in the 

Great Plains, but appear elsewhere, too. A map at the web site shows where these counties are located. 16 In contrast to the lack of census tracts in rural areas that meet the regulation’s definition of “low- or moderateincome geography,” there is not a comparable lack of individuals residing in rural areas who meet the regulation’s 

definition of “low- or moderate-income individual.” Under the regulation’s definition of a “low- or moderateincome individual,” the average nonmetropolitan middle-income tract has a low- and moderate-income population 

of 38 percent. 17 For guidance on application of the “primary purpose” standard, see Q&A _.12(i)-7. 

13
offer significant long-term employment opportunities to low- and moderate-income members of 

the community. 

Effect of Certain Credit Practices on CRA Evaluations 

Comments on Proposed Rule 

The OCC, the FDIC, and the Board proposed to revise the regulations to address the 

impact on a bank’s CRA rating of evidence of discrimination or other illegal credit practices. 

The agencies proposed that evidence of discrimination, or evidence of credit practices that 

violate an applicable law, rule, or regulation, would adversely affect an agency’s evaluation of a 

bank’s CRA performance. The agencies also proposed to revise the regulations to include an 

illustrative list of such practices. This list includes evidence of discrimination against applicants 

on a prohibited basis in violation of, for example, the Equal Credit Opportunity (15 U.S.C. 1691 

et seq.) or Fair Housing Acts (42 U.S.C. 3601 et seq.); evidence of illegal referral practices in 

violation of section 8 of the Real Estate Settlement Procedures Act (12 U.S.C. 2607); evidence of 

violations of the Truth in Lending Act (12 U.S.C. 1601 et seq.) concerning a consumer’s right to 

rescind a credit transaction secured by a principal residence; evidence of violations of the Home 

Ownership and Equity Protection Act (15 U.S.C. 1639); and evidence of unfair or deceptive 

credit practices in violation of section 5 of the Federal Trade Commission Act (15 U.S.C. 

45(a)(1)).18 

Further, the March proposal clarified that a bank’s evaluation could be adversely affected 

by such practices regardless of whether the practices involve loans in the bank’s assessment 

area(s) or in any other location or geography. In addition, as proposed, a bank’s CRA evaluation 

also could be adversely affected by evidence of such practices by any affiliate in connection with 

loans in the bank’s assessment area(s), if any loans of that affiliate have been considered in the 

bank’s CRA evaluation. 

Most community organizations strongly supported the proposal. Many of these 

commenters recommended that the provision should be expanded to include evidence of 

discriminatory or other illegal credit practices by any affiliate of a bank, whether or not such 

affiliate’s loans were included in the bank’s CRA evaluation. Some bank and bank trade 

association commenters opposed the standard as unnecessary, because other legal remedies are 

available to address discriminatory or other illegal credit practices. Many of these commenters 

also opposed extending the “illegal credit practices” standard to loans by an affiliate that are 

considered in a bank’s lending performance. Furthermore, a few large banks were concerned 

that their CRA performance will be adversely affected by “technical” violations of law. 

Provisions of Final Rule 

The joint final rule adopts without change the proposed amendments to the agencies’ 

regulations that address the impact on a bank’s CRA rating of evidence of discrimination or 

other illegal credit practices. The final rule states that evidence of discrimination, or evidence of 

credit practices that violate an applicable law, rule, or regulation, adversely affects an agency’s 

evaluation of a bank’s CRA performance. The rule includes an illustrative, but not 

comprehensive, list of such practices. It also provides that a bank’s evaluation is adversely 

affected by such practices by the bank regardless of whether the practices involve loans in the 

bank’s assessment area(s) or in any other location or geography. The rule also provides that a 

18 Evidence of credit practices that violate other laws, rules or regulations, including a federal banking agency 

regulation or a state law, if applicable, also may adversely affect a bank’s CRA evaluation. 

14
bank’s CRA evaluation is also adversely affected by evidence of discrimination or other illegal 

credit practices by any affiliate in connection with loans inside the bank’s assessment area(s), if 

any loans of that affiliate have been considered in the bank’s CRA evaluation. The adverse 

effect on the bank’s CRA rating of illegal credit practices by an affiliate is limited to affiliate 

loans within the bank’s assessment area(s) because, under the regulations, a bank may not elect 

to include as part of its CRA evaluation affiliate loans outside the bank’s assessment area(s). 

The agencies believe that providing in the CRA regulations examples of violations that 

give rise to adverse CRA consequences, rather than having such examples solely in interagency 

guidance on the regulations,19 will improve the usefulness of the regulations and provide critical 

information in primary compliance source material. Further, because affiliate loans may be 

included by a bank in it’s lending evaluation for favorable consideration, evidence of 

discrimination or other illegal credit practices in an affiliate’s loans in an assessment area of the 

bank can adversely affect the bank’s CRA rating, if loans by that affiliate have been considered 

in the bank’s CRA evaluation. The agencies believe that, in general, the same CRA standards 

generally should apply to loans included in the bank’s CRA lending record that are made by an 

affiliate in the bank’s assessment area and those that are made by the bank in any geography. 

Interagency Guidance 

The agencies intend to issue interagency CRA guidance for comment in the near future. 

The guidance will address new provisions adopted in this joint final rule and related issues (for 

example, the appropriate lag period for removal of a census tract from the list of designated 

distressed or underserved nonmetropolitan middle-income geographies). The guidance will also 

conform existing interagency questions and answers to the regulatory revisions, where needed. 

Effective Date 

The joint final rule becomes effective September 1, 2005. The agencies will issue interim 

interagency examination procedures for the community development test applicable to 

intermediate small banks in advance of the effective date of the regulation. 

Section 302 of the Riegle Community Development and Regulatory Improvement Act of 

1994 (CDRI), Pub. L. 103-325, authorizes a banking agency to issue a rule that contains 

additional reporting, disclosure, or other requirements to be effective before the first day of the 

calendar quarter that begins on or after the date on which the regulations are published in final 

form if the agency finds good cause for an earlier effective date. 12 U.S.C. 4802(b)(1). This 

joint final rule takes effect September 1, 2005. As discussed earlier in this “Supplementary 

Information,” the changes adopted by this joint final rule reduce regulatory burden by extending 

eligibility for streamlined lending evaluations and the exemption from data reporting to banks 

under $1 billion without regard to holding company affiliation. Because this joint final rule 

eliminates data collection and reporting burden for banks with assets between $250 million and 

$1 billion and banks with assets below $250 million that are affiliated with a holding company 

with bank and thrift assets of $1 billion or above, and will provide greater flexibility in the CRA 

evaluations of such institutions, the agencies find good cause for the September 1, 2005, 

effective date. 

Regulatory Flexibility Act 

OCC and FDIC: Under section 605(b) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 

605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not 

19 See Q&A_.28(c)-1. 

15
required if an agency certifies, along with a statement providing the factual basis for such 

certification, that the rule will not have a significant economic impact on a substantial number of 

small entities. The OCC and the FDIC have reviewed the impact of this joint final rule on small 

banks and certify that the joint final rule will not have a significant economic impact on a 

substantial number of small entities. 

The Small Business Administration (SBA) has defined “small entities” for banking 

purposes as a bank or savings institution with less than $150 million in assets. See 13 CFR 

212.01. This joint final rule primarily affects banks with assets of at least $250 million and 

under $1 billion. The amendments decrease the regulatory burden for banks within that asset 

range by relieving them of certain reporting and recordkeeping requirements applicable to larger 

institutions. 

The elimination of the $1 billion holding company threshold as a factor in determining 

whether banks will be subject to the streamlined CRA examination or the more in-depth CRA 

examination applicable to larger institutions will affect a limited number of small banks, which 

are affiliated with holding companies with assets over $1 billion. The FDIC estimates that only 

110 of approximately 5,300 FDIC-regulated banks had assets of under $150 million and were 

affiliated with a holding company with over $1 billion in assets. The OCC estimates that only 36 

of approximately 2,000 OCC-regulated banks met these criteria. Because so few small banks 

will be affected by the revisions to Parts 25 and 345, a regulatory flexibility analysis is not 

required. Furthermore, the OCC and the FDIC did not receive any comments regarding the 

March proposal’s economic impact on small banks with assets of under $150 million. 

Board: The Board has prepared a final regulatory flexibility analysis as required by the 

Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 

1. Statement of the need for and objectives of the final rule. 

As described in the Supplementary Information section, the Board, together with the 

Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, seeks 

to improve the effectiveness of the CRA regulations in placing performance over process, 

promoting consistency in evaluations, and eliminating unnecessary burden. The final rule is 

intended to reduce unnecessary burden while maintaining or improving CRA’s effectiveness in 

evaluating performance. 

2. Summary of issues raised by comments in response to the initial regulatory flexibility 

analysis. 

The Board received several comments on matters raised in its initial regulatory flexibility 

analysis. As described more fully in the Supplementary Information section, a number of 

commenters supported expansion of the number and kinds of rural census tracts eligible for 

community development consideration. Several banks expressed concern that definitions of 

eligible rural census tracts would impose burden on them to document an activity’s qualification, 

and urged the use of simple, objective definitions, including if possible the use of definitions 

from existing federal programs. In response, the final rule defines “distressed or underserved” 

rural areas with reference to objective criteria set forth by the Department of the Treasury (CDFI 

Fund) and the Department of Agriculture; and it defines “rural” with reference to objective 

criteria set forth by the Office of Management and Budget. The agencies have also have agreed 

that the Federal Financial Institutions Examination Council will publish and update an annual list 

of eligible rural census tracts, and will allow for a lag time before a tract loses its designation. 

16
As is also described in the Supplementary Information section, the agencies received a 

number of comments on provisions regarding the effect of evidence of illegal credit practices on 

CRA evaluations. Several commenters asserted that the proposal amounted to superimposing 

consumer credit laws onto CRA examinations and ratings. The Board notes that the final rule 

would not subject banks any size to consumer credit laws to which they are not already subject; 

the rule would not place new compliance, reporting, or recordkeeping requirements on small 

institutions. 

3. Description of small entities affected by the final rule. 

The final rule applies to all state-chartered banks that are members of the Federal Reserve 

System; there are approximately 922 such banks. The RFA requires the Board to consider the 

effect of the final rule on small entities, which are defined for RFA purposes as all banks with 

assets of less than $150 million. There are 419 state member banks with assets of less than $150 

million. All but about 12 state member banks with assets of less than $150 million are already 

subject to a streamlined CRA evaluation that is not affected by this final rule. The rule 

eliminates data reporting requirements for these 12 state member banks by eliminating holdingcompany affiliation as a disqualification for treatment as a “small bank” under the CRA 

regulations. 

4. Reporting, Recordkeeping and Other Compliance Requirements. 

The final rule does not impose any new reporting or recordkeeping requirements, as 

defined in section 603 of the RFA. As noted, the rule eliminates holding-company affiliation as 

a disqualification for treatment as a “small bank” under the CRA regulations. Accordingly, the 

rule eliminates data reporting requirements for about 12 state member banks with assets of less 

than $150 million. As noted above, all other state member banks with assets of less than $150 

million are already exempt from this reporting requirement. 

As is described in section 2 of this regulatory flexibility analysis, the Board believes that 

the revisions to the definition of “community development” do not place additional compliance 

costs or burdens on small institutions. The Board believes the same of the provisions regarding 

the effect of evidence of illegal credit practices on CRA evaluations. 

5. Steps taken to minimize the economic impact on small entities. 

The final rule maintains the approach of the existing CRA regulations in exempting small 

entities from reporting requirements and providing for streamlined lending evaluations for small 

entities. A complete exemption of small entities from all of the CRA’s requirements would be 

impermissible under the CRA statute. As noted, of 419 state member banks with assets of less 

than $150 million, all but 12 already were subject to a streamlined CRA process. The final rule 

minimizes the economic impact on small entities by making these 12 state member banks 

eligible for the streamlined CRA process. 

Executive Order 12866 

The OCC has determined that this joint final rule is not a significant regulatory action 

under Executive Order 12866. 

Unfunded Mandates Reform Act of 1995 

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4 (2 U.S.C. 

1532) (Unfunded Mandates Act), requires that an agency prepare a budgetary impact statement 

before promulgating any rule likely to result in a Federal mandate that may result in the 

17
expenditure by State, local, and tribal governments, in the aggregate, or by the private sector of 

$100 million or more in any one year. If a budgetary impact statement is required, section 205 of 

the Unfunded Mandates Act also requires an agency to identify and consider a reasonable 

number of regulatory alternatives before promulgating a rule. The OCC has determined that the 

joint final rule will not result in expenditures by State, local, and tribal governments, or by the 

private sector, of $100 million or more in any one year. Accordingly, the joint final rule is not 

subject to section 202 of the Unfunded Mandates Act. 

Paperwork Reduction Act 

In accordance with the requirements of the Paperwork Reduction Act of 1995, the 

agencies may not conduct or sponsor, and the respondent is not required to respond to, an 

information collection unless it displays a currently valid Office of Management and Budget 

(OMB) control number (OCC, 1557-0160; Board, 7100-0197; and FDIC, 3064-0092). 

The OCC and the FDIC submitted their documentation to OMB for review and approval 

and the information collections have been approved. The Board has approved this revised 

information collection under its delegated authority from OMB. 

Title of Information Collection: 

OCC: Community Reinvestment Act Regulation--12 CFR 25. 

Board: Recordkeeping, Reporting, and Disclosure Requirements in Connection with 

Regulation BB (Community Reinvestment Act). 

FDIC: Community Reinvestment--12 CFR 345. 

Frequency of Response: Annual. 

Affected Public: 

OCC: National banks. 

Board: State member banks. 

FDIC: State nonmember banks. 

Abstract: This Paperwork Reduction Act section estimates the burden that will be associated 

with the regulations due to the changes to the definition of “small bank” to increase the asset 

threshold from $250 million to $1 billion and eliminate any consideration of holding-company 

size. Under the two changes, approximately 1,500 banks would be evaluated as small or 

intermediate small banks. That estimate is based on data for all FDIC-insured institutions that 

filed Call Reports for year-end 2004. Those data also underlie the estimated paperwork burden 

that is associated with the regulations. The change to adopt a separate community development 

test in the performance standards for intermediate small banks will have no impact on paperwork 

burden because the evaluation is based on information prepared by examiners. 

Estimated Paperwork Burden under the Proposal: 

OCC: 

Number of Respondents: 1,853. 

Estimated Time per Response: Small business and small farm loan register, 219 hours; 

consumer loan data, 326 hours; other loan data, 25 hours; assessment area delineation, 2 hours; 

small business and small farm loan data, 8 hours; community development loan data, 13 hours; 

HMDA out-of-MSA loan data, 253 hours; data on lending by a consortium or third party, 17 

18
hours; affiliated lending data, 38 hours; request for designation as a wholesale or limited purpose 

bank, 4 hours; strategic Plan, 275 hours; and public file, 10 hours. 

Total Estimated Annual Burden: 160,542 hours. 

Board: 

Number of Respondents: 914. 

Estimated Time per Response: Small business and small farm loan register, 219 hours; 

consumer loan data, 326 hours; other loan data, 25 hours; assessment area delineation, 2 hours; 

small business and small farm loan data, 8 hours; community development loan data, 13 hours; 

HMDA out-of-MSA loan data, 253 hours; data on lending by a consortium or third party, 17 

hours; affiliated lending data, 38 hours; request for designation as a wholesale or limited purpose 

bank, 4 hours; and public file, 10 hours. 

Total Estimated Annual Burden: 97,017 hours. 

FDIC: 

Number of Respondents: 5,264. 

Estimated Time per Response: Small business and small farm loan register, 219 hours; 

consumer loan data, 326 hours; other loan data, 25 hours; assessment area delineation, 2 hours; 

small business and small farm loan data, 8 hours; community development loan data, 13 hours; 

HMDA out-of-MSA loan data, 253 hours; data on lending by a consortium or third party, 17 

hours; affiliated lending data, 38 hours; request for designation as a wholesale or limited purpose 

bank, 4 hours; and public file, 10 hours. 

Total Estimated Annual Burden: 203,589 hours. 

Comment Request: 

Comments continue to be invited on: 

(a) Whether the collection of information is necessary for the proper performance of the 

agencies’ functions, including whether the information has practical utility; 

(b) The accuracy of the estimates of the burden of the information collection, including 

the validity of the methodology and assumptions used; 

(c) Ways to enhance the quality, utility, and clarity of the information to be collected; 

(d) Ways to minimize the burden of the information collection on respondents, including 

through the use of automated collection techniques or other forms of information technology; 

and 

(e) Estimates of capital or start up costs and costs of operation, maintenance, and 

purchase of services to provide information. 

Comments should be addressed to: 

OCC: Mary H. Gottlieb or Camille Dixon, Office of the Comptroller of the Currency, 

Legislative and Regulatory Activities Division, Attention: Docket No. 05-04, 250 E Street, S.W., 

Mailstop 8-4, Washington, DC 20219. Due to delays in paper mail in the Washington area, 

commenters are encouraged to submit their comments by fax to (202) 874-4889 or by e-mail to 

camille.dixon@occ.treas.gov. 

19
 Board: Comments should refer to Docket No. R-1225 and may be mailed to Jennifer J. 

Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and 

Constitution Avenue, N.W., Washington, DC 20551. Please consider submitting your comments 

through the Board's Web site at 

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm, by e-mail to 

regs.comments@federalreserve.gov, or by fax to the Office of the Secretary at (202) 452-3819 or 

(202) 452-3102. Rules proposed by the Board and other federal agencies may also be viewed and 

commented on at http://www.regulations.gov. All public comments are available from the 

Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 

submitted, except as necessary for technical reasons. Accordingly, your comments will not be 

edited to remove any identifying or contact information. Public comments may also be viewed 

electronically or in paper in Room MP-500 of the Board's Martin Building (C and 20th 

Streets, N.W.) between 9 a.m. and 5 p.m. on weekdays. 

FDIC: Leneta G. Gregorie, Legal Division, Room MB-3082, Federal Deposit Insurance 

Corporation, 550 17th Street, N.W., Washington, DC 20429. All comments should refer to the 

title of the proposed collection. In the alternative, comments may be hand-delivered to the guard 

station at the rear of the 17th Street Building (located on F Street), on business days between 7 

a.m. and 5 p.m.; submitted via the Agency Web site: 

http://www.FDIC.gov/regulations/laws/federal/propose.html; or submitted by e-mail: 

comments@FDIC.gov. Comments received will be posted without change to 

http://www.FDIC.gov/regulations/laws/federal/propose.html, including any personal information 

provided. Comments may also be inspected and photocopied in the FDIC Public Information 

Center, Room 100, 801 17th Street, N.W., Washington, DC, between 9:00 a.m. and 4:30 p.m. on 

business days. 

Comments should also be sent to Mark D. Menchik, Desk Officer, Office of Information 

and Regulatory Affairs, Office of Management and Budget, Room 10235, 725 17th Street, N.W., 

Washington, DC 20503. Comments may also be sent by e-mail to 

Mark_D._Menchik@omb.eop.gov. 

Executive Order 13132 

The OCC has determined that this joint final rule does not have any Federalism 

implications, as required by Executive Order 13132. 

List of Subjects 

12 CFR Part 25 

Community development, Credit, Investments, National banks, Reporting and 

recordkeeping requirements. 

12 CFR Part 228 

Banks, Banking, Community development, Credit, Investments, Reporting and 

recordkeeping requirements. 

12 CFR Part 345 

Banks, Banking, Community development, Credit, Investments, Reporting and 

recordkeeping requirements. 

20
DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the Currency 

12 CFR CHAPTER I 

Authority and Issuance 

For the reasons discussed in the joint preamble, part 25 of chapter I of title 12 of the Code 

of Federal Regulations is amended as follows: 

PART 25 – COMMUNITY REINVESTMENT ACT AND INTERSTATE 

DEPOSIT PRODUCTION REGULATIONS 

1. The authority citation for part 25 continues to read as follows: 

Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 215a, 481, 1814, 1816, 

1828(c), 1835a, 2901 through 2907, and 3101 through 3111. 

2. In § 25.12, revise paragraphs (g)(4) and (u) to read as follows: 

§ 25.12 Definitions. 

* * * * * 

(g) Community development means: 

* * * * * 

(4) Activities that revitalize or stabilize— 

(i) Low- or moderate-income geographies; 

(ii) Designated disaster areas; or 

(iii)Distressed or underserved nonmetropolitan middle-income geographies designated by 

the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, 

and OCC, based on— 

(A)Rates of poverty, unemployment, and population loss; or 

(B) Population size, density, and dispersion. Activities revitalize and stabilize 

geographies designated based on population size, density, and dispersion if they help to meet 

essential community needs, including needs of low- and moderate-income individuals. 

* * * * * 

(u) Small bank—(1) Definition. Small bank means a bank that, as of December 31 of 

either of the prior two calendar years, had assets of less than $1 billion. Intermediate small 

bank means a small bank with assets of at least $250 million as of December 31 of both of the 

prior two calendar years and less than $1 billion as of December 31 of either of the prior two 

calendar years. 

(2) Adjustment. The dollar figures in paragraph (u)(1) of this section shall be adjusted 

annually and published by the OCC, based on the year-to-year change in the average of the 

Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, 

for each twelve-month period ending in November, with rounding to the nearest million. 

* * * * * 

3. Revise § 25.26 to read as follows: 

21
§ 25.26 Small bank performance standards. 

(a) Performance criteria—(1) Small banks with assets of less than $250 million. The 

OCC evaluates the record of a small bank that is not, or that was not during the prior calendar 

year, an intermediate small bank, of helping to meet the credit needs of its assessment area(s) 

pursuant to the criteria set forth in paragraph (b) of this section. 

(2) Intermediate small banks. The OCC evaluates the record of a small bank that is, or 

that was during the prior calendar year, an intermediate small bank, of helping to meet the credit 

needs of its assessment area(s) pursuant to the criteria set forth in paragraphs (b) and (c) of this 

section. 

(b) Lending test. A small bank’s lending performance is evaluated pursuant to the 

following criteria: 

(1) The bank’s loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, 

other lending-related activities, such as loan originations for sale to the secondary markets, 

community development loans, or qualified investments; 

(2) The percentage of loans and, as appropriate, other lending-related activities located in 

the bank’s assessment area(s); 

(3) The bank’s record of lending to and, as appropriate, engaging in other lending-related 

activities for borrowers of different income levels and businesses and farms of different sizes; 

(4) The geographic distribution of the bank’s loans; and 

(5) The bank’s record of taking action, if warranted, in response to written complaints 

about its performance in helping to meet credit needs in its assessment area(s). 

(c) Community development test. An intermediate small bank’s community development 

performance also is evaluated pursuant to the following criteria: 

(1) The number and amount of community development loans; 

(2) The number and amount of qualified investments; 

(3) The extent to which the bank provides community development services; and 

(4) The bank’s responsiveness through such activities to community development 

lending, investment, and services needs. 

3. Revise § 25.28, paragraph (c) to read as follows: 

§ 25.28 Assigned ratings. 

* * * * * 

(c) Effect of evidence of discriminatory or other illegal credit practices. 

(1) The OCC’s evaluation of a bank’s CRA performance is adversely affected by 

evidence of discriminatory or other illegal credit practices in any geography by the bank or in 

any assessment area by any affiliate whose loans have been considered as part of the bank’s 

lending performance. In connection with any type of lending activity described in § 25.22(a), 

evidence of discriminatory or other credit practices that violate an applicable law, rule, or 

regulation includes, but is not limited to: 

(i) Discrimination against applicants on a prohibited basis in violation, for example, of 

the Equal Credit Opportunity Act or the Fair Housing Act; 

22
(ii) Violations of the Home Ownership and Equity Protection Act; 

(iii) Violations of section 5 of the Federal Trade Commission Act; 

(iv) Violations of section 8 of the Real Estate Settlement Procedures Act; and 

(v) Violations of the Truth in Lending Act provisions regarding a consumer’s right of 

rescission. 

(2) In determining the effect of evidence of practices described in paragraph (c)(1) of this 

section on the bank’s assigned rating, the OCC considers the nature, extent, and strength of the 

evidence of the practices; the policies and procedures that the bank (or affiliate, as applicable) 

has in place to prevent the practices; any corrective action that the bank (or affiliate, as 

applicable) has taken or has committed to take, including voluntary corrective action resulting 

from self-assessment; and any other relevant information. 

4. In Appendix A to part 25, revise paragraph (d) to read as follows: 

Appendix A to Part 25—Ratings 

* * * * * 

(d) Banks evaluated under the small bank performance standards. (1) Lending test 

ratings. (i) Eligibility for a satisfactory lending test rating. The OCC rates a small bank’s lending 

performance “satisfactory” if, in general, the bank demonstrates: 

(A) A reasonable loan-to-deposit ratio (considering seasonal variations) given the bank’s 

size, financial condition, the credit needs of its assessment area(s), and taking into account, as 

appropriate, other lending-related activities such as loan originations for sale to the secondary 

markets and community development loans and qualified investments; 

(B) A majority of its loans and, as appropriate, other lending-related activities, are in its 

assessment area; 

(C) A distribution of loans to and, as appropriate, other lending-related activities for 

individuals of different income levels (including low- and moderate-income individuals) and 

businesses and farms of different sizes that is reasonable given the demographics of the bank’s 

assessment area(s); 

(D) A record of taking appropriate action, when warranted, in response to written complaints, 

if any, about the bank’s performance in helping to meet the credit needs of its assessment area(s); 

and 

(E) A reasonable geographic distribution of loans given the bank’s assessment area(s). 

(ii) Eligibility for an “outstanding” lending test rating. A small bank that meets each of the 

standards for a “satisfactory” rating under this paragraph and exceeds some or all of those 

standards may warrant consideration for a lending test rating of “outstanding.” 

(iii) Needs to improve or substantial noncompliance ratings. A small bank may also receive 

a lending test rating of “needs to improve” or “substantial noncompliance” depending on the 

degree to which its performance has failed to meet the standard for a “satisfactory” rating. 

23
(2) Community development test ratings for intermediate small banks—(i) Eligibility for a 

satisfactory community development test rating. The OCC rates an intermediate small bank’s 

community development performance “satisfactory” if the bank demonstrates adequate 

responsiveness to the community development needs of its assessment area(s) or a broader 

statewide or regional area that includes the bank’s assessment area(s) through community 

development loans, qualified investments, and community development services. The adequacy 

of the bank's response will depend on its capacity for such community development activities, its 

assessment area’s need for such community development activities, and the availability of such 

opportunities for community development in the bank’s assessment area(s). 

(ii) Eligibility for an outstanding community development test rating. The OCC rates an 

intermediate small bank’s community development performance “outstanding” if the bank 

demonstrates excellent responsiveness to community development needs in its assessment 

area(s) through community development loans, qualified investments, and community 

development services, as appropriate, considering the bank’s capacity and the need and 

availability of such opportunities for community development in the bank’s assessment area(s). 

(iii) Needs to improve or substantial noncompliance ratings. An intermediate small bank 

may also receive a community development test rating of “needs to improve” or “substantial 

noncompliance” depending on the degree to which its performance has failed to meet the 

standards for a “satisfactory” rating. 

(3) Overall rating—(i) Eligibility for a satisfactory overall rating. No intermediate small 

bank may receive an assigned overall rating of “satisfactory” unless it receives a rating of at least 

“satisfactory” on both the lending test and the community development test. 

(ii) Eligibility for an outstanding overall rating. (A) An intermediate small bank that receives 

an “outstanding” rating on one test and at least “satisfactory” on the other test may receive an 

assigned overall rating of “outstanding.” 

(B) A small bank that is not an intermediate small bank that meets each of the standards for a 

“satisfactory” rating under the lending test and exceeds some or all of those standards may 

warrant consideration for an overall rating of “outstanding.” In assessing whether a bank’s 

performance is “outstanding,” the OCC considers the extent to which the bank exceeds each of 

the performance standards for a “satisfactory” rating and its 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). 

(iii) Needs to improve or substantial noncompliance overall ratings. A small bank may also 

receive a rating of “needs to improve” or “substantial noncompliance” depending on the degree 

to which its performance has failed to meet the standards for a “satisfactory” rating. 

* * * * * 

FEDERAL RESERVE SYSTEM 

12 CFR Chapter II 

Authority and Issuance 

For the reasons set forth in the joint preamble, the Board of Governors of the Federal 

Reserve System amends part 228 of chapter II of title 12 of the Code of Federal Regulations as 

follows: 

PART 228—COMMUNITY REINVESTMENT (REGULATION BB) 

24
1. The authority citation for part 228 continues to read as follows: 

Authority: 12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and 2901 et seq. 

2. In § 228.12, revise paragraphs (g)(4) and (u) to read as follows: 

§ 228.12 Definitions. 

* * * * * 

(g) Community development means: 

* * * * * 

(4) Activities that revitalize or stabilize— 

(i) Low- or moderate-income geographies; 

(ii) Designated disaster areas; or 

(iii)Distressed or underserved nonmetropolitan middle-income geographies designated by 

the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the 

Currency, based on— 

(A)Rates of poverty, unemployment, and population loss; or 

(B) Population size, density, and dispersion. Activities revitalize and stabilize 

geographies designated based on population size, density, and dispersion if they help to meet 

essential community needs, including needs of low- and moderate-income individuals. 

* * * * * 

(u) Small bank—(1) Definition. Small bank means a bank that, as of December 31 of 

either of the prior two calendar years, had assets of less than $1 billion. Intermediate small 

bank means a small bank with assets of at least $250 million as of December 31 of both of the 

prior two calendar years and less than $1 billion as of December 31 of either of the prior two 

calendar years. 

(2) Adjustment. The dollar figures in paragraph (u)(1) of this section shall be adjusted 

annually and published by the Board, based on the year-to-year change in the average of the 

Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, 

for each twelve-month period ending in November, with rounding to the nearest million. 

* * * * * 

3. Revise § 228.26 to read as follows: 

§ 228.26 Small bank performance standards. 

(a) Performance criteria—(1) Small banks with assets of less than $250 million. The 

Board evaluates the record of a small bank that is not, or that was not during the prior calendar 

year, an intermediate small bank, of helping to meet the credit needs of its assessment area(s) 

pursuant to the criteria set forth in paragraph (b) of this section. 

(2) Intermediate small banks. The Board evaluates the record of a small bank that is, or 

that was during the prior calendar year, an intermediate small bank, of helping to meet the 

credit needs of its assessment area(s) pursuant to the criteria set forth in paragraphs (b) and (c) 

of this section. 

25
(b) Lending test. A small bank’s lending performance is evaluated pursuant to the 

following criteria: 

(1) The bank’s loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, 

other lending-related activities, such as loan originations for sale to the secondary markets, 

community development loans, or qualified investments; 

(2) The percentage of loans and, as appropriate, other lending-related activities located in 

the bank’s assessment area(s); 

(3) The bank’s record of lending to and, as appropriate, engaging in other lending-related 

activities for borrowers of different income levels and businesses and farms of different sizes; 

(4) The geographic distribution of the bank’s loans; and 

(5) The bank’s record of taking action, if warranted, in response to written complaints 

about its performance in helping to meet credit needs in its assessment area(s). 

(c) Community development test. An intermediate small bank’s community development 

performance also is evaluated pursuant to the following criteria: 

(1) The number and amount of community development loans; 

(2) The number and amount of qualified investments; 

(3) The extent to which the bank provides community development services; and 

(4) The bank’s responsiveness through such activities to community development 

lending, investment, and services needs. 

3. Revise § 228.28(c) to read as follows: 

§ 228.28 Assigned ratings. 

* * * * * 

(c) Effect of evidence of discriminatory or other illegal credit practices. (1) The Board’s 

evaluation of a bank’s CRA performance is adversely affected by evidence of discriminatory or 

other illegal credit practices in any geography by the bank or in any assessment area by any 

affiliate whose loans have been considered as part of the bank’s lending performance. In 

connection with any type of lending activity described in § 228.22(a), evidence of discriminatory 

or other credit practices that violate an applicable law, rule, or regulation includes, but is not 

limited to: 

(i) Discrimination against applicants on a prohibited basis in violation, for example, of 

the Equal Credit Opportunity Act or the Fair Housing Act; 

(ii) Violations of the Home Ownership and Equity Protection Act; 

(iii) Violations of section 5 of the Federal Trade Commission Act; 

(iv) Violations of section 8 of the Real Estate Settlement Procedures Act; and 

(v) Violations of the Truth in Lending Act provisions regarding a consumer’s right of 

rescission. 

(2) In determining the effect of evidence of practices described in paragraph (c)(1) of this 

section on the bank’s assigned rating, the Board considers the nature, extent, and strength of the 

evidence of the practices; the policies and procedures that the bank (or affiliate, as applicable) 

26
has in place to prevent the practices; any corrective action that the bank (or affiliate, as 

applicable) has taken or has committed to take, including voluntary corrective action resulting 

from self-assessment; and any other relevant information. 

4. In Appendix A to part 228, revise paragraph (d) to read as follows: 

Appendix A to Part 228—Ratings 

* * * * * 

(d) Banks evaluated under the small bank performance standards. (1) Lending test 

ratings. (i) Eligibility for a satisfactory lending test rating. The Board rates a small bank’s 

lending performance “satisfactory” if, in general, the bank demonstrates: 

(A) A reasonable loan-to-deposit ratio (considering seasonal variations) given the bank’s 

size, financial condition, the credit needs of its assessment area(s), and taking into account, as 

appropriate, other lending-related activities such as loan originations for sale to the secondary 

markets and community development loans and qualified investments; 

(B) A majority of its loans and, as appropriate, other lending-related activities, are in its 

assessment area; 

(C) A distribution of loans to and, as appropriate, other lending-related activities for 

individuals of different income levels (including low- and moderate-income individuals) and 

businesses and farms of different sizes that is reasonable given the demographics of the bank’s 

assessment area(s); 

(D) A record of taking appropriate action, when warranted, in response to written 

complaints, if any, about the bank’s performance in helping to meet the credit needs of its 

assessment area(s); and 

(E) A reasonable geographic distribution of loans given the bank’s assessment area(s). 

(ii) Eligibility for an “outstanding” lending test rating. A small bank that meets each of 

the standards for a “satisfactory” rating under this paragraph and exceeds some or all of those 

standards may warrant consideration for a lending test rating of “outstanding.” 

(iii) Needs to improve or substantial noncompliance ratings. A small bank may also 

receive a lending test rating of “needs to improve” or “substantial noncompliance” depending on 

the degree to which its performance has failed to meet the standard for a “satisfactory” rating. 

(2) Community development test ratings for intermediate small banks—(i) Eligibility for 

a satisfactory community development test rating. The Board rates an intermediate small bank’s 

community development performance “satisfactory” if the bank demonstrates adequate 

responsiveness to the community development needs of its assessment area(s) or a broader 

statewide or regional area that includes the bank’s assessment area(s) through community 

development loans, qualified investments, and community development services. The adequacy 

of the bank's response will depend on its capacity for such community development activities, its 

assessment area’s need for such community development activities, and the availability of such 

opportunities for community development in the bank’s assessment area(s). 

27
(ii) Eligibility for an outstanding community development test rating. The Board rates an 

intermediate small bank’s community development performance “outstanding” if the bank 

demonstrates excellent responsiveness to community development needs in its assessment 

area(s) through community development loans, qualified investments, and community 

development services, as appropriate, considering the bank’s capacity and the need and 

availability of such opportunities for community development in the bank’s assessment area(s). 

(iii) Needs to improve or substantial noncompliance ratings. An intermediate small bank 

may also receive a community development test rating of “needs to improve” or “substantial 

noncompliance” depending on the degree to which its performance has failed to meet the 

standards for a “satisfactory” rating. 

(3) Overall rating—(i) Eligibility for a satisfactory overall rating. No intermediate small 

bank may receive an assigned overall rating of “satisfactory” unless it receives a rating of at least 

“satisfactory” on both the lending test and the community development test. 

(ii) Eligibility for an outstanding overall rating. (A) An intermediate small bank that 

receives an “outstanding” rating on one test and at least “satisfactory” on the other test may 

receive an assigned overall rating of “outstanding.” 

(B) A small bank that is not an intermediate small bank that meets each of the standards 

for a “satisfactory” rating under the lending test and exceeds some or all of those standards may 

warrant consideration for an overall rating of “outstanding.” In assessing whether a bank’s 

performance is “outstanding,” the Board considers the extent to which the bank exceeds each of 

the performance standards for a “satisfactory” rating and its 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). 

(iii) Needs to improve or substantial noncompliance overall ratings. A small bank may 

also receive a rating of “needs to improve” or “substantial noncompliance” depending on the 

degree to which its performance has failed to meet the standards for a “satisfactory” rating. 

* * * * * 

FEDERAL DEPOSIT INSURANCE CORPORATION 

12 CFR Chapter III 

Authority and Issuance 

For the reasons set forth in the joint preamble, the Board of Directors of the Federal 

Deposit Insurance Corporation amends part 345 of chapter III of title 12 of the Code of Federal 

Regulations to read as follows: 

PART 345—COMMUNITY REINVESTMENT 

1. The authority citation for part 345 continues to read as follows: 

Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-2907, 3103-3104, 

and 3108(a). 

2. In § 345.12, revise paragraphs (g)(4) and (u) to read as follows: 

§ 345.12 Definitions. 

* * * * * 

(g) Community development means: 

28
* * * * * 

(4) Activities that revitalize or stabilize— 

(i) Low- or moderate-income geographies; 

(ii) Designated disaster areas; or 

(iii)Distressed or underserved nonmetropolitan middle-income geographies designated by 

the Board of Governors of the Federal Reserve System, FDIC, and Office of the Comptroller of 

the Currency, based on— 

(A)Rates of poverty, unemployment, and population loss; or 

(B) Population size, density, and dispersion. Activities revitalize and stabilize 

geographies designated based on population size, density, and dispersion if they help to meet 

essential community needs, including needs of low- and moderate-income individuals. 

* * * * * 

(u) Small bank—(1) Definition. Small bank means a bank that, as of December 31 of 

either of the prior two calendar years, had assets of less than $1 billion. Intermediate small 

bank means a small bank with assets of at least $250 million as of December 31 of both of the 

prior two calendar years and less than $1 billion as of December 31 of either of the prior two 

calendar years. 

(2) Adjustment. The dollar figures in paragraph (u)(1) of this section shall be adjusted 

annually and published by the FDIC, based on the year-to-year change in the average of the 

Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, 

for each twelve-month period ending in November, with rounding to the nearest million. 

* * * * * 

3. Revise § 345.26 to read as follows: 

§ 345.26 Small bank performance standards. 

(a) Performance criteria—(1) Small banks with assets of less than $250 million. The 

FDIC evaluates the record of a small bank that is not, or that was not during the prior calendar 

year, an intermediate small bank, of helping to meet the credit needs of its assessment area(s) 

pursuant to the criteria set forth in paragraph (b) of this section. 

(2) Intermediate small banks. The FDIC evaluates the record of a small bank that is, or 

that was during the prior calendar year, an intermediate small bank, of helping to meet the credit 

needs of its assessment area(s) pursuant to the criteria set forth in paragraphs (b) and (c) of this 

section. 

(b) Lending test. A small bank’s lending performance is evaluated pursuant to the 

following criteria: 

(1) The bank’s loan-to-deposit ratio, adjusted for seasonal variation, and, as appropriate, 

other lending-related activities, such as loan originations for sale to the secondary markets, 

community development loans, or qualified investments; 

(2) The percentage of loans and, as appropriate, other lending-related activities located in 

the bank’s assessment area(s); 

29
(3) The bank’s record of lending to and, as appropriate, engaging in other lending-related 

activities for borrowers of different income levels and businesses and farms of different sizes; 

(4) The geographic distribution of the bank’s loans; and 

(5) The bank’s record of taking action, if warranted, in response to written complaints 

about its performance in helping to meet credit needs in its assessment area(s). 

(c) Community development test. An intermediate small bank’s community development 

performance also is evaluated pursuant to the following criteria: 

(1) The number and amount of community development loans; 

(2) The number and amount of qualified investments; 

(3) The extent to which the bank provides community development services; and 

(4) The bank’s responsiveness through such activities to community development 

lending, investment, and services needs. 

3. Revise § 345.28(c) to read as follows: 

§ 345.28 Assigned ratings. 

* * * * * 

(c) Effect of evidence of discriminatory or other illegal credit practices. (1) The FDIC’s 

evaluation of a bank’s CRA performance is adversely affected by evidence of discriminatory or 

other illegal credit practices in any geography by the bank or in any assessment area by any 

affiliate whose loans have been considered as part of the bank’s lending performance. In 

connection with any type of lending activity described in §345.22(a), evidence of discriminatory 

or other credit practices that violate an applicable law, rule, or regulation includes, but is not 

limited to: 

(i) Discrimination against applicants on a prohibited basis in violation, for example, of 

the Equal Credit Opportunity Act or the Fair Housing Act; 

(ii) Violations of the Home Ownership and Equity Protection Act; 

(iii) Violations of section 5 of the Federal Trade Commission Act; 

(iv) Violations of section 8 of the Real Estate Settlement Procedures Act; and 

(v) Violations of the Truth in Lending Act provisions regarding a consumer’s right of 

rescission. 

(2) In determining the effect of evidence of practices described in paragraph (c)(1) of 

this section on the bank’s assigned rating, the FDIC considers the nature, extent, and strength of 

the evidence of the practices; the policies and procedures that the bank (or affiliate, as 

applicable) has in place to prevent the practices; any corrective action that the bank (or affiliate, 

as applicable) has taken or has committed to take, including voluntary corrective action resulting 

from self-assessment; and any other relevant information. 

4. In Appendix A to part 345, revise paragraph (d) to read as follows: 

Appendix A to Part 345—Ratings 

30
* * * * * 

(d) Banks evaluated under the small bank performance standards—(1) Lending test ratings. 

(i) Eligibility for a satisfactory lending test rating. The FDIC rates a small bank’s lending 

performance “satisfactory” if, in general, the bank demonstrates: 

(A) A reasonable loan-to-deposit ratio (considering seasonal variations) given the bank’s 

size, financial condition, the credit needs of its assessment area(s), and taking into account, as 

appropriate, other lending-related activities such as loan originations for sale to the secondary 

markets and community development loans and qualified investments; 

(B) A majority of its loans and, as appropriate, other lending-related activities, are in its 

assessment area; 

(C) A distribution of loans to and, as appropriate, other lending-related activities for 

individuals of different income levels (including low- and moderate-income individuals) and 

businesses and farms of different sizes that is reasonable given the demographics of the bank’s 

assessment area(s); 

(D) A record of taking appropriate action, when warranted, in response to written complaints, 

if any, about the bank’s performance in helping to meet the credit needs of its assessment area(s); 

and 

(E) A reasonable geographic distribution of loans given the bank’s assessment area(s). 

(ii) Eligibility for an “outstanding” lending test rating. A small bank that meets each of the 

standards for a “satisfactory” rating under this paragraph and exceeds some or all of those 

standards may warrant consideration for a lending test rating of “outstanding.” 

(iii) Needs to improve or substantial noncompliance ratings. A small bank may also receive 

a lending test rating of “needs to improve” or “substantial noncompliance” depending on the 

degree to which its performance has failed to meet the standard for a “satisfactory” rating. 

(2) Community development test ratings for intermediate small banks—(i) Eligibility for a 

satisfactory community development test rating. The FDIC rates an intermediate small bank’s 

community development performance “satisfactory” if the bank demonstrates adequate 

responsiveness to the community development needs of its assessment area(s) or a broader 

statewide or regional area that includes the bank’s assessment area(s) through community 

development loans, qualified investments, and community development services. The adequacy 

of the bank's response will depend on its capacity for such community development activities, its 

assessment area’s need for such community development activities, and the availability of such 

opportunities for community development in the bank’s assessment area(s). 

(ii) Eligibility for an outstanding community development test rating. The FDIC rates an 

intermediate small bank’s community development performance “outstanding” if the bank 

demonstrates excellent responsiveness to community development needs in its assessment 

area(s) through community development loans, qualified investments, and community 

development services, as appropriate, considering the bank’s capacity and the need and 

availability of such opportunities for community development in the bank’s assessment area(s). 

(iii) Needs to improve or substantial noncompliance ratings. An intermediate small bank 

may also receive a community development test rating of “needs to improve” or “substantial 

31
noncompliance” depending on the degree to which its performance has failed to meet the 

standards for a “satisfactory” rating. 

(3) Overall rating—(i) Eligibility for a satisfactory overall rating. No intermediate small 

bank may receive an assigned overall rating of “satisfactory” unless it receives a rating of at least 

“satisfactory” on both the lending test and the community development test. 

(ii) Eligibility for an outstanding overall rating. (A) An intermediate small bank that receives 

an “outstanding” rating on one test and at least “satisfactory” on the other test may receive an 

assigned overall rating of “outstanding.” 

(B) A small bank that is not an intermediate small bank that meets each of the standards for a 

“satisfactory” rating under the lending test and exceeds some or all of those standards may 

warrant consideration for an overall rating of “outstanding.” In assessing whether a bank’s 

performance is “outstanding,” the FDIC considers the extent to which the bank exceeds each of 

the performance standards for a “satisfactory” rating and its 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). 

(iii) Needs to improve or substantial noncompliance overall ratings. A small bank may also 

receive a rating of “needs to improve” or “substantial noncompliance” depending on the degree 

to which its performance has failed to meet the standards for a “satisfactory” rating. 

* * * * * 

32