22156 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 25

[Docket No. 95–07]

RIN 1557–AB32

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R–0822]

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 345

RIN 3064–AB27

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563e

[Docket No. 95–72]

RIN 1550–AA69

FEDERAL RESERVE SYSTEM

12 CFR Part 203

Community Reinvestment Act

Regulations

AGENCIES: Office of the Comptroller of

the Currency, Treasury (OCC); Board of

Governors of the Federal Reserve

System (Board); Federal Deposit

Insurance Corporation (FDIC); Office of

Thrift Supervision, Treasury (OTS).

ACTION: Joint final rule.

SUMMARY: The OCC, Board, FDIC, and

OTS, (collectively, the Federal financial

supervisory agencies or agencies) are

amending their regulations concerning

the Community Reinvestment Act

(CRA). The agencies published a joint

notice of proposed rulemaking on this

issue on December 21, 1993 (1993

proposal) and again on October 7, 1994

(1994 proposal). This final rule reflects

comments received on both proposals

and the agencies’ further internal

considerations.

The purpose of the CRA regulations is

to establish the framework and criteria

by which the agencies assess an

institution’s record of helping to meet

the credit needs of its community,

including low- and moderate-income

neighborhoods, consistent with safe and

sound operations, and to provide that

the agencies’ assessment shall be taken

into account in reviewing certain

applications.

The final rule seeks to emphasize

performance rather than process, to

promote consistency in evaluations, and

to eliminate unnecessary burden. As

compared to the 1993 and 1994

proposals, the final rule reduces

recordkeeping and reporting

requirements and makes other

modifications and clarifications.

EFFECTIVE DATES: This joint rule is

effective July 1, 1995, except 12 CFR

25.3 through 25.7 and 25.51, 12 CFR

228.3 through 228.7 and 228.51, 12 CFR

345.3 through 345.7 and 345.51, and 12

CFR 563e.3 through 563e.7 and 563e.51

are removed effective July 1, 1997.

FOR FURTHER INFORMATION CONTACT:

OCC: Stephen M. Cross, Deputy

Comptroller for Compliance, (202) 874–

5216; or Matthew Roberts, Director,

Community and Consumer Law

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

Comptroller of the Currency, 250 E

Street, SW., Washington, DC 20219.

Board: Glenn E. Loney, Associate

Director, Division of Consumer and

Community Affairs, (202) 452–3585;

Robert deV. Frierson, Assistant General

Counsel, Legal Division, (202) 452–

3711; or Leonard N. Chanin, Managing

Counsel, Division of Consumer and

Community Affairs, (202) 452–3667,

Board of Governors of the Federal

Reserve System, 20th Street and

Constitution Avenue, NW., Washington,

DC 20551.

FDIC: Bobbie Jean Norris, Chief, Fair

Lending Section, Division of

Compliance and Consumer Affairs,

(202) 942–3090; Robert W. Mooney, Fair

Lending Specialist, Division of

Compliance and Consumer Affairs,

(202) 942–3092; or Ann Hume Loikow,

Counsel, Regulation and Legislation

Section, Legal Division, (202) 898–3796,

Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC

20429.

OTS: Timothy R. Burniston, Assistant

Director for Compliance Policy, (202)

906–5629; Theresa A. Stark, Program

Analyst, Compliance Policy, (202) 906–

7054; or Lewis A. Segall, Senior

Attorney, Regulations and Legislation

Division, Chief Counsel’s Office, (202)

906–6648, Office of Thrift Supervision,

1700 G Street, NW., Washington, DC

20552.

SUPPLEMENTARY INFORMATION:

Introduction

The Federal financial supervisory

agencies jointly are amending their

regulations implementing the CRA (12

U.S.C. 2901 et seq.). The amended

regulations will, when fully effective,

replace the existing regulations in their

entirety.

The CRA is designed to encourage

regulated financial institutions to help

meet the credit needs of their entire

communities, including low- and

moderate-income neighborhoods,

consistent with safe and sound

operations. Despite the CRA’s notable

successes in improving access to credit,

banks and savings and loan institutions,

as well as community and consumer

groups, maintain that its full potential

has not been realized, in large part

because regulatory compliance efforts

have focused on process rather than

performance.

In accordance with a request from the

President, the Federal financial

supervisory agencies have undertaken a

comprehensive effort to reform their

standards for evaluating compliance

with CRA requirements. The final rule

implements this reform effort by

substituting a new system that evaluates

institutions based on their actual

performance in helping to meet their

communities’ credit needs.

Background

In 1977, the Congress enacted the

CRA to encourage banks and thrifts to

help meet the credit needs of their

entire communities, including low- and

moderate-income neighborhoods,

consistent with safe and sound lending

practices. In the CRA, the Congress

found that:

‘‘(1) regulated financial institutions

are required by law to demonstrate that

their deposit facilities serve the

convenience and needs of the

communities in which they are

chartered to do business;

(2) the convenience and needs of

communities include the need for credit

as well as deposit services; and

(3) regulated financial institutions

have continuing and affirmative

obligation[s] to help meet the credit

needs of the local communities in

which they are chartered.’’

(12 U.S.C. 2901(a))

The CRA has come to play an

increasingly important role in

improving access to credit in

communities—both rural and urban—

across the country. Under the impetus

of the CRA, many banks and thrifts

opened new branches, provided

expanded services, and made

substantial commitments to increase

lending to all segments of society.

Despite these successes, the CRA

examination system has been criticized.

Financial institutions have indicated

that policy guidance from the agencies

on the CRA is unclear and that

examination standards are applied

inconsistently. Financial institutions
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22157

have also stated that the CRA

examination process encourages them to

generate excessive paperwork at the

expense of providing loans, services,

and investments to their communities.

Community, consumer, and other

groups have agreed with the industry

that there are inconsistencies in CRA

evaluations and that current

examinations overemphasize process

and underemphasize performance.

Community and consumer groups also

have criticized the agencies for failing

aggressively to penalize banks and

thrifts for poor performance.

Noting that the CRA examination

process could be improved, President

Clinton requested in July 1993 that the

Federal financial supervisory agencies

reform the CRA regulatory system. The

President asked the agencies to consult

with the banking and thrift industries,

Congressional leaders, and leaders of

community-based organizations across

the country to develop new CRA

regulations and examination procedures

that ‘‘replace paperwork and

uncertainty with greater performance,

clarity, and objectivity.’’

Specifically, the President asked the

agencies to refocus the CRA

examination system on more objective,

performance-based assessment

standards that minimize compliance

burden while stimulating improved

performance. He also asked the agencies

to develop a well-trained corps of

examiners who would specialize in CRA

examinations. The President requested

that the agencies promote consistency

and even-handedness, improve CRA

performance evaluations, and institute

more effective sanctions against

institutions with consistently poor

performance.

To implement the President’s

initiative, the four agencies held a series

of seven public hearings across the

country in 1993. At those hearings, the

agencies heard from over 250 witnesses.

Nearly 50 others submitted written

statements. The preamble to the 1993

proposal reviewed the results of those

hearings.

The 1993 Proposal

The agencies published proposed

revisions to their CRA regulations on

December 21, 1993. The 1993 proposal

(58 FR 67466) would have eliminated

the twelve assessment factors in the

present CRA regulations and substituted

a more performance-based evaluation

system. Under the 1993 proposal, the

agencies would have evaluated

institutions based on their actual

lending, service, and investment

performance rather than on how well

they conducted their needs assessments,

documented their community outreach,

and implemented other procedural

requirements of the existing regulations.

Generally, large retail institutions

would have been evaluated based on

some combination of lending, service,

and investment tests. Institutions would

have been required to report data on the

basis of the geographic distribution of

applications, denials, originations, and

purchases of loans. Small banks and

thrifts could have elected to be

evaluated under a streamlined method

that would not have required them to

report this data. Every institution also

could have elected to have its

performance evaluated on the basis of a

pre-approved strategic plan.

All banks and thrifts would have been

assigned one of four statutorily

mandated CRA ratings (12 U.S.C.

2906(b)(2)). However, five ratings would

have been used for the lending, service,

and investment tests, with the

satisfactory category split into low

satisfactory and high satisfactory.

Collectively, the agencies received

over 6,700 comment letters on the 1993

proposal. As a general matter, the vast

majority of commenters expressed

support for the agencies’ goal of

developing more objective,

performance-based assessment

standards that minimize burden while

stimulating improved performance.

However, many expressed concern over

aspects of the 1993 proposal that they

viewed as allocating credit to particular

kinds of borrowers. After considering

the comments, the agencies published a

second proposal on October 7, 1994,

which responded to many of the

suggestions in the comments on the

1993 proposal, including concerns

about credit allocation, while preserving

the 1993 proposal’s goal of emphasizing

performance over process.

The 1994 Proposal

The 1994 proposal (59 FR 51232)

retained the principles and structure

underlying the 1993 proposal but made

significant changes to the details in

order to respond to many of the specific

concerns raised in the comment letters.

As in the 1993 proposal, the 1994

proposal would have replaced the

existing regulations’ twelve assessment

factors with a performance-based

evaluation system. The 1994 proposal

retained, but modified, the lending,

investment, and service tests for large

retail institutions; the streamlined

evaluation for small institutions; an

alternative evaluation for limited

purpose and wholesale institutions; and

the pre-approved strategic plan option

available to all institutions.

The 1993 proposal had been criticized

because of certain objective criteria in

the proposal (including market share, a

presumptively reasonable loan to

deposit ratio, loan mix, investment to

capital ratios, and the number of

branches readily accessible to low- and

moderate-income geographies) which

were intended to respond to concerns

about the need for more objective

standards for evaluating compliance

with CRA requirements. Many

commenters viewed these criteria as

calling for credit allocation, although

the agencies did not intend this result.

The 1994 proposal removed these

criteria from the regulatory language

and substituted a broader range of

qualitative and quantitative criteria. A

system for evaluating compliance with

CRA should not eliminate examiner

judgment, even if completely objective

criteria consistently applied were

achievable. Preservation of examiner

judgment to take into account the

unique characteristics and needs of an

institution’s community and the

institution’s own capacity and relevant

constraints are essential for a workable

rule.

At the same time, consistency in

evaluations, reduction in the burden of

compliance, and emphasis on

performance are fully consistent with

assuring a measure of examiner

judgment. The 1994 proposal would

have provided a balance between

objective analysis and subjective

judgment through a series of examiner

decisions relying on detailed data

measuring an institution’s actual

lending, service and investment

performance. In order to minimize

unnecessary subjectivity, the agencies

provided guidance as to the standards

that examiners would have applied in

making the required judgments.

Compared to the 1993 proposal, the

1994 proposal would have reduced data

reporting burdens by streamlining

reporting requirements. The one

significant new reporting requirement

was the collection and reporting of

information on the race and gender of

small business and farm borrowers. The

agencies proposed this provision to

respond to concerns that the 1993

proposal did not give enough weight to

the fair lending aspect of an institution’s

CRA performance.

In order to take into account

community characteristics and needs,

the 1994 proposal would have made

explicit the context in which the tests

and standards would have been applied

to individual institutions. In a specific

effort to reduce burden, the preamble

indicated that the agencies, rather than

institutions, would have collected and
22158 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

developed the information needed to

provide this ‘‘assessment context.’’

The 1994 proposal also modified the

rating process from the 1993 proposal.

For large retail institutions, in

calculating the assigned rating, the

revised proposal would have given

primacy to lending performance, but an

institution’s performance on the service

and investment tests also would have

been reflected in the assigned rating.

The rating process for small institutions

similarly would have given primacy to

lending performance, and would have

provided guidance on how the agencies

would have considered service and

investment performance. For all

institutions, evidence of discriminatory

or other illegal credit practices would

have adversely affected the evaluation

of an institution’s performance. In

addition, an appendix to the 1994

proposal included rating profiles to

guide the assessments.

The 1994 proposal revised and

clarified other important features of the

1993 proposal. It provided more detail

as to how the proposed strategic plan

option would operate in practice.

Wholesale and limited purpose

institutions were made subject to a

community development test, which

would have incorporated both

community development lending and

community development services in

addition to qualified investments. Also,

the agencies revised the definition of

service area to include the local areas

around an institution’s deposit facilities

in which it has significant lending

activity and all other areas equally

distant from such facilities.

Overview of Comments on the 1994

Proposal

Collectively, the agencies received

over 7,200 comment letters on the 1994

proposal. The agencies received

comment letters from individuals,

representatives of bank and thrift

institutions, consumer and community

groups, members of Congress, state,

local, and tribal governments, and

others, as shown in the following table.

TABLE OF COMMENTS RECEIVED

Agency

Letters from

banks, thrifts

and their trade

associations

Letters from

consumer and

community

groups

Letters from

government

entities

Letters from

others Total

OCC ...................................................................................... 669 839 39 672 2,219

Board .................................................................................... 607 832 12 482 1,933

FDIC ..................................................................................... 1,007 788 32 237 2,064

OTS ...................................................................................... 261 623 24 173 1,081

The agencies reviewed and

considered all of these comments in

writing the final rule. The section-bysection analysis of the final rule

discusses these comments in greater

detail. As a general matter, the vast

majority of commenters expressed

support for the agencies’ goal of

developing more objective,

performance-based assessment

standards that minimize burden while

stimulating improved performance.

Many commenters believed that, under

the existing CRA regulations, the

agencies focus too closely on

documentation of CRA performance and

too little on actual performance. Some

commenters felt the present

documentation requirements are overly

burdensome. Many commenters also

supported the agencies’ goal of ensuring

consistency and evenhandedness among

the agencies in CRA evaluations,

without including specific criteria that

might be viewed as allocating credit to

specific borrowers. Commenters

supported enhanced CRA examiner

training to increase consistency.

Although most commenters generally

supported the agencies’ goals in

amending their CRA regulations, many

expressed concern over certain aspects

of the 1994 proposal.

The Final Rule

Review of Comments on the 1994

Proposal and Responses

The final rule retains, to a significant

extent, the principles and structure

underlying the 1993 and 1994

proposals, but makes important changes

to some details in order to respond to

concerns raised in the comment letters

and further agency consideration. The

following discussion describes by topic

the ways in which the agencies

addressed commenters’ concerns. The

discussion also describes important

technical modifications included in the

final rule.

Enforcement Authority

The agencies have removed two

provisions found in both the 1993 and

1994 proposals that engendered

considerable comment. These

provisions were the community

reinvestment obligation, which stated

that banks and thrifts have a specific

affirmative obligation to help meet the

credit needs of their communities, and

the enforcement provision, which

provided for penalties against banks and

thrifts with ‘‘substantial

noncompliance’’ ratings using the

agencies’ general enforcement powers

under 12 U.S.C. 1818. Substantial

comment was received both in favor of,

and in opposition to, these provisions.

Based on further analysis of their

statutory authority, the agencies have

removed these provisions.

Consistent with the statute, the final

rule provides that an institution’s CRA

rating reflects its record of helping to

meet the credit needs of its entire

community. The agencies will take into

account an institution’s record when

evaluating various types of applications,

such as applications for branches, office

relocations, mergers, consolidations,

and purchase and assumption

transactions, and may deny or condition

an application on the basis of the

institution’s record.

Scope

The scope of the final rule does not

differ appreciably from the scope of the

current CRA regulations or the 1993 and

1994 proposals. The agencies

historically have excluded from CRA

coverage certain special purpose

institutions, such as banker’s banks, that

are not organized to grant credit to the

public in the ordinary course of

business. These institutions continue to

be treated as special purpose banks in

the final rule and are excluded from

coverage. Several commenters were

concerned that the definition of banker’s

bank in the 1994 proposal may not have

conformed with that found in 12 U.S.C.

24 (Seventh), as modified by the

Interstate Banking Efficiency Act of

1994 (IBEA). Therefore, the final rule

references the definition of ‘‘banker’s
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22159

bank’’ found in 12 U.S.C. 24 (Seventh).

The rule also specifies that institutions

that provide only cash management

controlled disbursement services are

excluded from CRA coverage. In

addition, the final rule provides for the

CRA’s applicability to foreign

institutions consistent with the IBEA

and prior agency interpretations.

Definitions

Many of the definitions in the 1994

proposal remain the same in the final

rule or have been adjusted only for

purposes of clarity, with no change in

substance. The agencies did, however,

change some definitions substantively.

Assessment area. The agencies

replaced the term ‘‘service area’’ in the

1994 proposal with ‘‘assessment area’’

in the final rule for the reasons

explained in the discussion of

assessment area.

ATM and branch. The agencies

changed the definitions of ATM and

branch to eliminate the requirement that

an ATM or a branch be at a fixed site.

This change means that staffed mobile

offices that are licensed as branches will

be considered ‘‘branches’’ under the

final rule and that mobile ATMs will be

considered ‘‘ATMs.’’ This change may

affect the delineation of an institution’s

assessment area(s) because the

assessment area(s) must include the

geographies in which the institution has

its main office, branches and deposittaking ATMs. Including mobile

branches and ATMs in defining an

assessment area ensures that an

institution that uses these means in an

area not otherwise served by the

institution will be evaluated on its

success in helping to meet the credit

needs of the area. Including mobile

branches in the definition of ‘‘branch’’

will also affect evaluation of an

institution’s service to its community

because the ‘‘service test’’ evaluates the

distribution of an institution’s branches

and the institution’s history of opening

and closing branches. In the revised Part

345, the FDIC uses the term ‘‘remote

service facility’’ instead of ‘‘ATM’’ to

conform with the terminology used in

its regulations.

Community development. The 1994

proposal did not provide a separate

definition of ‘‘community

development,’’ although the term was

used in defining community

development loans and services and

qualified investments. Several

commenters requested further guidance

on the scope of activities that would

qualify. Some commenters were

concerned that, without further

specification, the regulation might

permit an overly broad range of

activities to be considered favorably as

supporting community development.

Others were concerned that the

definition might be too narrow.

The final rule separately defines

community development to mean: (1)

Affordable housing (including

multifamily rental housing) for low- or

moderate-income individuals; (2)

community services targeted to low- or

moderate-income individuals; (3)

activities that promote economic

development by financing businesses or

farms that meet the size eligibility

standards of 13 CFR 121.802(a)(2) or

have gross annual revenues of $1

million or less; or (4) activities that

revitalize or stabilize low- or moderateincome geographies.

The definition of community

development restricts qualifying

activities to those that promote

community welfare, while recognizing

that community welfare can be

promoted in diverse ways. For example,

a number of commenters, representing

both the industry and community and

consumer groups, stated that the

requirement in the 1994 proposal that

community development loans and

services and qualified investments meet

‘‘community economic development

needs’’ inappropriately limited

community development to efforts that

meet ‘‘economic’’ needs. The final rule

does not contain this limitation, and

community development includes

community- or tribal-based child care,

educational, health, or social services

targeted to low- or moderate-income

persons or services that revitalize or

stabilize low- or moderate-income

geographies.

In response to comments, the

definition clarifies the small businesses

and farms that the agencies intend to

cover. The section of the definition that

discusses activities that promote

economic development by financing

small businesses and farms refers to 13

CFR 121.802(a)(2), the size limitations

for the Small Business Administration’s

Small Business Investment Company

and Development Company programs,

as well as the $1 million gross annual

revenues threshold used for lending test

analysis.

Several commenters stated that

community development should require

benefit to low- and moderate-income

areas. However, narrowing the focus to

only these areas would ignore some of

the beneficial purposes of community

development lending for low- and

moderate-income individuals. Under

the rule, community development

includes activities outside of low- and

moderate-income areas if the activities

provide affordable housing for, or

community services targeted to, low- or

moderate-income individuals or if they

promote economic development by

financing small businesses and farms.

Activities that create, retain, or improve

jobs for low- or moderate-income

persons to stabilize or revitalize low- or

moderate-income areas also qualify as

community development, even if the

activities are not located in low- or

moderate-income areas.

The final rule also requires that, in

order to be community development

loans or services or qualified

investments, activities must have

community development as their

primary purpose. Activities not

designed for the express purpose of

revitalizing or stabilizing low- or

moderate-income areas, providing

affordable housing for, or community

services targeted to, low- or moderateincome persons, or promoting economic

development by financing small

businesses and farms are not eligible.

The fact that an activity provides

indirect or short-term benefits to low- or

moderate-income persons does not

make the activity community

development. Thus, a loan for upperincome housing in a distressed area

would not qualify simply on the basis

of the indirect benefit to low- or

moderate-income persons from

construction jobs or the increase in the

local tax base that supports enhanced

services to low- and moderate-income

area residents.

The final rule removes the

requirement in the 1994 proposal that

community development loans and

services and qualified investments

primarily benefit low- or moderateincome persons or small businesses or

farms. This requirement is unnecessary

because the definitions of community

development loan and service and

qualified investment in the final rule

require that community development be

the primary purpose of the activities.

Community development loan. The

agencies have amended the definition of

‘‘community development loan’’ as

described in the discussion of

‘‘community development’’ and in

several other ways to respond to

commenters’ concerns.

First, many commenters objected to

the requirement in the 1994 proposal

that community development loans

meet needs ‘‘not being met by the

private market.’’ Some commenters

pointed out that financial institutions

are part of the private market so, if

financial institutions make the loans,

the needs addressed by the loans will,

as a matter of course, be met by the

private market. To respond to these

comments, the agencies removed this
22160 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

1Examples of community development loans

include, but are not limited to, loans to: borrowers

for affordable housing rehabilitation and

construction, including construction and

permanent financing of multifamily rental property

serving low- and moderate-income persons; not-forprofit organizations serving primarily low- and

moderate-income housing or other community

development needs; borrowers in support of

community facilities in low- and moderate-income

areas or that are targeted to low- and moderateincome individuals; and financial intermediaries

including, but not limited to, Community

Development Financial Institutions (CDFIs),

Community Development Corporations (CDCs),

minority- and women-owned financial institutions,

and low-income or community development credit

unions that primarily lend or facilitate lending in

low- and moderate-income areas or to low- and

moderate-income individuals in order to promote

community development. Other examples include

loans to: local, state, and tribal governments for

community development activities; and loans to

finance environmental clean-up or redevelopment

of an industrial site as part of an effort to revitalize

the low- or moderate-income community in which

the property is located.

2Examples of community development services

include, among other things: providing technical

expertise for not-for-profit, tribal or government

organizations serving low- and moderate-income

housing needs or economic revitalization and

development; lending executives to organizations

facilitating affordable housing construction and

rehabilitation or development of affordable housing;

providing credit counseling, home buyers

counseling, home maintenance counseling, and/or

financial planning to promote community

development and affordable housing; school

savings programs; and other financial services the

primary purpose of which is community

development, such as low-cost or free government

check cashing.

qualifier from the definition of a

community development loan.

Second, some commenters expressed

confusion about the extent to which the

definition of ‘‘community development

loan’’ in the 1994 proposal would have

differed for wholesale and limited

purpose institutions. The agencies

amended the definition of ‘‘community

development loan’’ in the final rule to

clarify the two ways in which a

‘‘community development loan’’ differs

for wholesale and limited purpose

institutions. First, wholesale and

limited purpose institutions may

consider loans as community

development loans wherever they are

located, if the institutions have

otherwise adequately addressed the

credit needs in their assessment area(s).

This different treatment accounts for the

fact that wholesale and limited purpose

institutions typically draw their

resources from, and serve areas well

beyond, their immediate communities.

Second, a wholesale or limited purpose

institution may consider loans reported

as home mortgage, small business, small

farm or consumer loans to be

community development loans.

Institutions subject to the lending test

may not consider loans reported in

those categories to be community

development loans, unless the loans are

multifamily dwelling loans. This

different treatment recognizes that the

rule does not separately assess

wholesale and limited purpose

institutions on these reported loans.

Some commenters also urged that the

agencies permit wholesale and limited

purpose institutions to include as a

community development loan any loan

that primarily benefits low- or

moderate-income individuals regardless

of the loan’s effect on community

development. The lending test evaluates

an institution’s performance in making

home mortgage, small business, small

farm, and consumer loans based on the

geographic distribution of loans to

borrowers of different incomes, not on

the basis of the total number and dollar

amount of loans to low- and moderateincome borrowers. Because the

community development test does not

consider borrower distribution, but only

loan amount and volume, crediting any

loan that benefits low- and moderateincome individuals could significantly

inflate performance under this test.

Therefore, the final rule does not

incorporate the suggested change.

Other commenters urged that

institutions that are not wholesale or

limited purpose institutions have the

option of treating a home mortgage,

small business, or small farm loan as a

community development loan if it

would otherwise qualify. The agencies

have not done so. For retail institutions,

the community development loan

category permits consideration of loans

that do not meet the definitions of home

mortgage, small business or small farm

loans but deserve favorable

consideration in a CRA assessment.

Loans that do meet the definitions of

home mortgage, small business and

small farm loans are more appropriately

evaluated based on the criteria provided

for these loans in the lending test.

Some commenters requested that

retail institutions receive favorable

consideration for community

development loans outside their

assessment areas. Under the final rule,

an institution that is not a wholesale or

limited purpose institution may receive

favorable consideration for a community

development loan that benefits a

broader statewide or regional area that

includes the institution’s assessment

area(s). This approach maintains a

balance between the broader purposes

of community development lending and

the focus of CRA on meeting the credit

needs of an institution’s local

community. As previously noted,

because of their different operational

focus, wholesale and limited purpose

institutions receive consideration for

community development loans made

outside this broader area if they have

adequately addressed credit needs

within the area.1

Community development service. The

definition of ‘‘community development

service’’ has been moved to the

definition section of the rule for clarity.

The definition has been conformed to

the definitions of ‘‘community

development loan’’ and ‘‘qualified

investment’’ by removing the reference

to ‘‘needs not being met by the private

market’’ for the reasons described in the

discussion of ‘‘community development

loan.’’ In addition, community

development services are required to be

related to the provision of financial

services. For example, service on the

board of directors of an organization

that promotes credit availability or

affordable housing meets this

requirement. Providing technical

assistance in the financial services field

to community-based groups, local, or

tribal government agencies, or

intermediaries that help to meet the

credit needs of low- and moderateincome individuals or small businesses

and farms is also related to the

provision of financial services. By

contrast, general participation by bank

or thrift employees in community

activities that do not take advantage of

the employee’s technical or financial

expertise would not qualify. Although

an admirable civic contribution, such

employee participation is not

sufficiently related to the provision of

financial services to meet the purposes

of CRA. As mentioned in the preamble

to the 1994 proposal, electronic benefits

transfer and point-of-sale terminal

systems that are designed to improve

access, such as by decreasing costs, for

low- or moderate-income individuals

would receive favorable consideration.2

Consumer loan. The definition of

‘‘consumer loan’’ remains substantially

the same as in the 1994 proposal. As in

the 1994 proposal, a consumer loan

must be extended to one or more

individuals for household, family, or

other personal expenditures. However,

as proposed in 1994, the definition

would have mirrored the definition of

consumer loan in the Consolidated

Report of Condition and Income (Call

Report) or Thrift Financial Report (TFR)

in an effort to reduce potential

regulatory burden. The Call Report and

TFR definitions exclude loans secured

by real estate and loans used to

purchase or carry securities. Many

industry commenters objected to these

exclusions. Commenters were

particularly concerned that home equity

loans that do not fall within the
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22161

definition of home improvement loans

reportable under HMDA would not have

been considered consumer loans under

the proposed rule. The definition of

consumer loan in the final rule no

longer uses the definition in the Call

Report or TFR. As a result, home equity

loans that are not reportable under

HMDA are consumer loans if they

otherwise meet the definition. However,

the agencies have clarified in the final

rule that consumer loans do not include

home mortgage, small business, or small

farm loans. These loans are considered

separately under the lending test so

treating them also as consumer loans

would result in double-counting.

The final rule contains definitions for

five categories of consumer loans: motor

vehicle loans, credit card loans, home

equity loans, other secured consumer

loans, and other unsecured consumer

loans. These definitions reflect the fact

that the final rule permits an institution

to elect evaluation of its consumer

lending on a product-by-product basis.

Home mortgage loan. In the 1994

proposal’s definition of ‘‘home mortgage

loan,’’ the agencies referred to the

HMDA and its implementing

regulations. Some commenters pointed

out that the Board has refined the

definition of home mortgage loan in its

HMDA regulations (12 CFR Part 203).

These commenters indicated it would

be preferable and, perhaps, less

confusing if the agencies referred only

to the Board’s HMDA regulations, rather

than to both the HMDA and the

regulations. The agencies have amended

the definition of ‘‘home mortgage loan’’

in the final rule accordingly. Under the

final rule, a home mortgage loan means

a ‘‘home improvement loan’’ or a ‘‘home

purchase loan’’ as these terms are

defined in 12 CFR Part 203. This

definition includes multifamily

dwelling loans and refinancings of

home improvement and home purchase

loans.

Income level. The income level

definitions under the 1994 proposal

would have included adjustments to

reflect high-cost areas and family size. A

number of commenters suggested that,

although these adjustments would make

the income definitions more accurate,

the value of the increased accuracy

would be outweighed by the

complication and burden associated

with the use of adjusted figures. Other

commenters pointed out that HMDA

disclosure statements, which are used,

in part, to evaluate CRA performance,

do not employ the adjustments. Some

commenters strongly supported the use

of adjusted area median income,

especially in high-cost communities.

However, the flexibility of the

performance standards allows

examiners to account in their

evaluations under the tests for

conditions in high-cost communities,

such as a shortage of credit for

moderate-income persons or areas. In

addition, the flexibility in the

requirement that community

development loans, community

development services, and qualified

investments have as their ‘‘primary’’

purpose community development

allows examiners to account for

conditions in high-cost areas. Therefore,

the definitions of income level in the

final rule are based upon area median

income without adjustments. In

addition, the definition of ‘‘area median

income’’ for rural areas has been

simplified and uses only the statewide

non-metropolitan median rather than

the higher of county median or the

statewide figure.

Limited purpose institution and

wholesale institution. A number of

industry commenters suggested that

‘‘nonbank banks’’ permitted under the

Competitive Equality Banking Act (12

U.S.C. 1843(f)) (CEBA banks) should

automatically be considered limited

purpose institutions. These institutions

operate under a variety of different

business plans and legal constraints and

include retail and wholesale banks,

credit card banks, and industrial loan

companies. CEBA banks may legally

engage in different activities, depending

on which activities a particular bank

engaged in as of March 1, 1987. A

uniform treatment of these institutions

is therefore not practicable. The final

rule provides the necessary flexibility to

assess the CRA performance of these

institutions and does not require any

institution to engage in proscribed

activities. Some of these institutions

could be designated as wholesale or

limited purpose institutions on a caseby-case basis. Further, the final rule

permits the agencies to take into

account any legal constraints placed on

an institution in assessing performance.

As in the case of thrifts, adjustments can

be made in the ratings profiles to reflect

the legal constraints imposed on the

activities of CEBA banks.

Other commenters requested more

guidance on incidental lending

activities that wholesale and limited

purpose institutions could engage in

without losing their special designation.

Wholesale institutions may engage in

some retail lending without losing their

designation if this activity is incidental

and done on an accommodation basis.

Similarly, a limited purpose institution

continues to meet the narrow product

line requirement if it provides other

types of loans on an infrequent basis.

Qualified investment. The definition

of ‘‘qualified investment’’ has been

moved to the definition section for

clarity and changed to reflect the new

definition of ‘‘community development’’

and to respond to comments. The

agencies have removed the requirement

that a qualified investment must address

community development needs ‘‘not

being met by the private market.’’

Instead, in evaluating performance, the

agencies will give greater weight to

qualified investments that are not

routinely provided by private investors.

The 1994 proposal clearly permitted

consideration of investments in

organizations that make qualified

investments, and the final rule is

unmodified in this respect. Some

commenters asked that qualified

investments be required to benefit lowor moderate-income areas or required to

benefit either low- or moderate-income

people or areas. The agencies rejected

these suggestions for the reasons noted

in the discussion of ‘‘community

development.’’

The final rule clarifies specific aspects

of qualified investments proposed in the

1994 proposal that raised issues in the

comments. For example, the explicit

reference to investments in credit

unions has been removed to clarify that

no special treatment for these

institutions was intended under the

investment test. Deposits and

membership shares in any financial

institution that otherwise meet the

criteria discussed earlier for treatment

as a qualified investment qualify under

the investment test. In addition,

although some comments suggested

otherwise, Federal Home Loan Bank

stock does not have a sufficient

connection to community development

to be considered a qualified investment.

The use of the term ‘‘standard’’

mortgage backed securities in the

preamble to the 1994 proposal was

ambiguous and should be clarified to

mean ‘‘untargeted’’ mortgage backed

securities. Untargeted mortgage backed

securities and untargeted municipal

bonds are not qualified investments

because their primary purpose is not

community development. Investments

in municipal bonds designed primarily

to finance community development

generally are qualified investments and

need not be housing-related. Housingrelated municipal bonds must primarily

address affordable housing (including

multifamily rental housing) needs in

order to qualify.

The term ‘‘grants’’ in the final rule

includes in-kind contributions of

property to community development

organizations. Grants do not

automatically have less weight than
22162 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

3Examples of qualified investments include, but

are not limited to, investments, grants, deposits or

shares: in or to financial intermediaries (including,

but not limited to CDFIs, CDCs, minority- and

women-owned financial institutions, and lowincome or community development credit unions)

that primarily lend or facilitate lending in low- and

moderate-income areas or to low- and moderateincome individuals in order to promote community

development, such as a CDFI that promotes

economic development on an Indian reservation; in

support of organizations engaged in affordable

housing rehabilitation and construction, including

multifamily rental housing; in support of

organizations promoting economic development by

financing small businesses, including Small

Business Investment Companies (SBICs) and

specialized SBICs; to support or develop facilities

that promote community development in low- and

moderate-income areas for low- and moderateincome individuals, such as day care facilities; in

projects eligible for low-income housing tax credits;

in state and municipal obligations that specifically

support affordable housing or other community

development; to not-for-profit organizations serving

low- and moderate-income housing or other

community development needs, such as homeownership counseling, home maintenance

counseling, credit counseling, and other financial

services education; and in or to organizations

supporting activities essential to the capacity of

low- and moderate-income individuals or

geographies to utilize credit or to sustain economic

development.

investments, but the weight accorded a

grant is determined under the

performance criteria in the investment

test.3

Small institution. Under the 1994

proposal, institutions would have been

considered small institutions if they had

total assets of less than $250 million and

were either independent institutions or

affiliates of holding companies with less

than $250 million in total assets. This

definition of ‘‘small institution’’

received numerous comments. Industry

commenters generally believed that the

asset level for holding companies

should be raised or eliminated entirely,

although some indicated that the $250

million asset level for small institutions

would be satisfactory. Some

commenters representing institutions

with assets below $250 million affiliated

with a larger holding company

indicated that their institutions

typically operated independently from

the holding company in complying with

CRA obligations. They stated that it

would be unfair for them to be

evaluated under the assessment tests for

a larger institution merely because of

their ownership structure. On the other

hand, community and consumer groups

often commented that small institutions

should not be treated differently, or that

only institutions with fewer than $50

million in assets should be considered

small institutions for purposes of the

CRA rule.

The final rule modifies the definition

of ‘‘small institution’’ in light of these

comments. In the final rule, for any

independent institution to be

considered a small institution, it must

have total assets of less than $250

million. Moreover, an institution with

total assets of less than $250 million

that is owned by a holding company

would be considered a small institution

if the total bank and thrift assets of its

holding company are less than $1

billion. The agencies were persuaded

that some smaller holding companies

may be unable to provide support to

their subsidiary banks and thrifts for

CRA compliance. Larger holding

companies have the ability to provide

support to their subsidiary banks and

thrifts, so small institutions owned by

these holding companies will not be

unfairly burdened by evaluation under

the lending, investment, and service

tests used in the assessments of larger

institutions. The choice of the $1 billion

level reflects the weight of the

comments that suggested raising the

asset level and the agencies’ judgment

regarding the size at which a holding

company should be expected to support

the compliance activities of its bank and

thrift subsidiaries. The agencies

estimate that this change will add only

a limited number of institutions, with

average assets of about $100 million, to

those eligible under the small bank

performance standards.

Many commenters also asked the

agencies to clarify the date on which the

determination will be made whether an

institution is a small institution. The

agencies have amended the definition of

‘‘small institution’’ to clarify that an

institution will be considered a small

institution throughout any calendar year

if, as of December 31 of either of the

prior two calendar years, the total assets

of the institution (and, if applicable, its

holding company) fell below the asset

limits set out earlier for a small

institution. This definition ensures

some stability in whether an institution

is classified as a small institution and

minimizes the chance that an

institution’s status will change

repeatedly from year to year. The

definition also ensures that institutions

that exceed the asset limits have

adequate time to prepare to meet the

requirements applicable to larger

institutions.

Small business loan and small farm

loan. The agencies made no substantive

changes to the definitions of ‘‘small

business loan’’ and ‘‘small farm loan.’’

The final rule cross-references the Call

Reports and TFR definitions rather than

restating the substance of the definitions

as the 1994 proposal would have done.

The definitions are based on the size of

the loans. Some commenters urged that

the definitions be based on the asset size

of the business or the farm, as was

originally proposed in 1993. The

agencies have concluded that, although

defining small business and small farm

loans by the size of the loan may not be

as precise as definitions based on

business or farm asset size, following

the approach used in the Call Report

and TFR will appreciably reduce the

burden of compliance for institutions

and their borrowers. Also, the Call

Report and TFR definitions minimize

the need for institutions to collect

additional information. The danger of

inaccuracy is limited, because loan size

roughly correlates with the size of a

business or farm borrower. Furthermore,

the agencies have retained the proposed

requirement that institutions indicate

whether a small business or small farm

loan is to a business or farm with gross

annual revenues of $1 million or less.

This requirement will provide

additional information to identify loans

to small entities.

Several commenters requested that

the agencies clarify whether the

definitions of small business and small

farm loans include loans made to

nonprofit organizations as described in

the Internal Revenue Code at 26 U.S.C.

501(c)(3). Loans made to nonprofit

organizations are included to the same

extent they are included under the Call

Report and TFR definitions of small

business and small farm loans. Loans to

nonprofits that are reported as small

business or small farm loans cannot also

be reported as community development

loans, except by wholesale and limited

purpose institutions.

Performance Tests, Standards and

Ratings in General

Several changes have been made to

the section of the 1994 proposal on

assessment tests, standards, and ratings.

As an initial matter, the terms

‘‘performance tests,’’ ‘‘performance

standards,’’ and ‘‘performance criteria’’

have been substituted for the terms

‘‘assessment tests,’’ ‘‘assessment

standards,’’ and ‘‘assessment criteria’’ to

reflect more accurately the final rule’s

focus on performance rather than

process. The agencies have also changed

the term ‘‘assessment context’’ to

‘‘performance context’’ because the

latter term better describes the role of

this information in the CRA evaluation

process.

Performance context. An institution’s

performance under the tests and

standards in the rule is judged in the

context of information about the

institution, its community, its

competitors, and its peers. Examiners

will consider the following information,

as appropriate, in order to assist in
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22163

understanding the context in which the

institution’s performance should be

evaluated: (1) The economic and

demographic characteristics of the

assessment area(s); (2) lending,

investment, and service opportunities in

the assessment area(s); (3) the

institution’s product offerings and

business strategy; (4) the institution’s

capacity and constraints; (5) the prior

performance of the institution and, in

appropriate circumstances, the

performance of similarly situated

institutions; and (6) other relevant

information. The final rule clarifies that

a proposed strategic plan will also be

evaluated in the same context. However,

all of the factors described in the

performance context would not

necessarily apply to each strategic plan.

In this regard, the performance of

similarly situated lenders would not

generally be appropriate for evaluating

future goals under a strategic plan.

Under the 1994 proposal, the

assessment context would have

included examiner-developed

information on the credit needs of an

institution’s service area. Many

commenters interpreted the proposal to

mean that the agencies would prepare a

detailed needs assessment for each

institution’s service area(s). Several

bank and thrift commenters criticized

such a role for the agencies, reasoning

that institutions know their

communities far better than a regulatory

agency, and that agency-prepared

assessments would lead to credit

allocation. Some community

organization commenters, while more

supportive of the concept of agency

prepared needs assessments, were

concerned that the proposal might

imply that institutions did not need to

make an effort to know their

communities’ credit needs, but could

instead look to the agencies for that

determination.

The agencies did not intend to suggest

that an agency-developed needs

assessment would prescribe the credit

needs an institution must address.

Instead, the examiner-developed

information on credit needs was

intended to help inform the examiner’s

judgment about the institution’s record

of performance. Institutions are in the

better position to know their

communities, and it is neither

appropriate nor feasible for the agencies

to prepare a detailed assessment of the

credit needs of an institution’s

community. Thus, under the final rule

the agencies will analyze the

information an institution maintains on

the credit needs of its community along

with relevant information available from

other sources. At the same time, the

final rule does not establish a

requirement that each institution

prepare a ‘‘needs assessment’’ to be

evaluated by the examiner as urged in

some comments provided by financial

institutions and community

organizations.

Under the final rule, the agencies will

neither prepare a formal assessment of

community credit needs nor evaluate an

institution on its efforts to ascertain

community credit needs. Instead, the

agencies will request any information

that the institution has developed on

lending, investment, and service

opportunities in its assessment area(s).

The agencies will not expect more

information than what the institution

normally would develop to prepare a

business plan or to identify potential

markets and customers, including lowand moderate-income persons and

geographies in its assessment area(s).

This information from the institution

will be considered along with

information from community,

government, civic and other sources to

enable the examiner to gain a working

knowledge of the institution’s

community. In response to comments,

the final rule also clarifies that

information about lending, investment,

and service opportunities in an

institution’s assessment area will, where

appropriate, be obtained from tribal

governments, as well as from other

sources.

Statutory limits on investment

authority. Several thrift commenters had

concerns about the application of the

investment test to thrift institutions

because of their limited investment

authority. Rather than providing a

blanket exemption from the investment

test, the final rule modifies the

‘‘capacity and constraints’’ section of

the performance context to clarify that

examiners should consider an

institution’s investment authority in

evaluating performance under the

investment test. A thrift that has few or

no qualified investments may still be

considered to be performing adequately

under the investment test if, for

example, the institution is particularly

effective in responding to the

community’s credit needs through

community development lending

activities.

Safety and soundness. The CRA

requires the agencies to assess an

institution’s record of helping to meet

the credit needs of its entire community,

consistent with the safe and sound

operation of the institution. A number

of industry commenters were concerned

that the 1994 proposal would not have

stressed the importance of the safety

and soundness of an institution’s

operation to the same extent as the CRA

statute or the current regulations. These

commenters responded primarily to the

omission of a statement in the 1993

proposal that the CRA does not require

any institution to make loans or

investments that are expected to result

in losses or are otherwise inconsistent

with safe and sound operations. The

agencies did not intend by this omission

to encourage unprofitable or otherwise

unsafe and unsound practices. The

agencies firmly believe that institutions

can and should expect lending and

investments encouraged by the CRA to

be profitable. The final rule explicitly

reflects this belief and addresses the

importance of safety and soundness

considerations in several sections and in

the ratings appendix. The agencies

assess an institution’s record of helping

to meet community credit needs with

careful attention to the constraints

imposed by safety and soundness. As in

other areas of bank and thrift operations,

unsafe and unsound practices are

viewed unfavorably. The ratings

appendix specifically states: ‘‘The

bank’s overall performance, however,

must be consistent with safe and sound

banking practices. * * * ’’

Flexible underwriting approaches.

The final rule states that the agencies

permit and encourage an institution’s

use of flexible underwriting approaches

to facilitate lending to low- and

moderate-income individuals and areas,

but only if consistent with safe and

sound operations. This is consistent

with, and clarifies, language in the 1994

proposal. Some commenters urged that

the rule expressly identify particular

types of areas or borrowers covered by

this provision. Mentioning particular

types of borrowers or areas in the

regulatory text is unnecessary and

inconsistent with the principle of

evaluating each institution and its

community based on their

characteristics, capacity, and needs.

However, certain borrowers or areas,

such as Native Americans residing in

Indian country, may face difficulties

obtaining credit that could warrant

special consideration. The efforts of

lenders that utilize innovative or

flexible methods, in a safe and sound

manner, to address these or other

unusual underwriting issues are

recognized under the lending test.

The Lending Test

The lending test in the final rule is

substantially similar to the 1994

proposal. However, there are some

significant changes in response to the

comments.

Consideration of originations and

purchases. The 1994 proposal would
22164 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

have evaluated home mortgage lending

based on HMDA data, which is based on

loan originations and purchases.

However, the proposal would have

required institutions to collect, report,

and be evaluated on loans outstanding

for other types of loans. The agencies

took this approach in an effort to reduce

burden on the industry, because

institutions must already report loans

outstanding on Call Reports and TFRs.

The vast majority of commenters who

addressed this issue (almost exclusively

industry commenters) stated that use of

originations would provide a

substantially more accurate picture of

actual lending activity, because current

activity would not be obscured by past

activity and the data would reflect

seasonal variations and sale of loans in

the secondary market. Moreover, using

originations rewards, rather than

penalizes, institutions for selling loans

on the secondary market, which frees up

capital for additional lending and

increases credit availability. The

commenters did not support the

premise that use of originations would

be more burdensome than using loans

outstanding. Because institutions would

have to collect and report additional

information on each loan for CRA

purposes, using loans outstanding

would not significantly decrease

burden. The bulk, if not all, of the

burden reduction would be achieved by

using the Call Report and TFR

definitions. The final rule therefore uses

originations and purchases, instead of

loans outstanding, for all types of loans.

Lines of credit are considered

originated at the time the line is

approved or increased; and an increase

is considered a new origination.

Generally, the full amount of the credit

line (or in the case of an increase in an

existing line, the amount of the

increase) is the amount that is

considered originated. Although some

lines of credit may be for both home

improvement and other purposes, only

the amount that is considered to be for

home improvement purposes is reported

as a home improvement loan under

HMDA. Lines of credit should be

considered in assessing an institution’s

lending activity in all applicable loan

types. Therefore, where a portion of a

line of credit is reported under HMDA

and another portion meets the definition

either of a ‘‘small business loan’’ or a

‘‘consumer loan,’’ the full amount of the

line of credit should be reported as a

small business loan or collected as a

consumer loan, as appropriate, and the

agencies will also consider as a home

mortgage loan the portion of the credit

line that is reported under HMDA.

The final rule contains an option for

lenders also to provide data on loans

outstanding, which may, in certain

circumstances, enhance an examiner’s

understanding of an institution’s

performance. Institutions may also

provide for examiner consideration

information on letters of credit and

commitments, as well as any other loan

information. The language of the

lending test (and the definition of

‘‘community development loan’’) has

been adjusted as appropriate to reflect

these changes.

Consumer loan evaluation. Under the

1994 proposal, consumer lending would

have been evaluated under the lending

test only if an institution elected to have

it evaluated and provided the necessary

loan data. Thus, the 1994 proposal

would have permitted an institution

that is primarily a consumer lender not

to be evaluated on a substantial portion

of its business if it so chose. Under these

circumstances, meaningful evaluation of

certain institutions might have been

very difficult. The final rule, therefore,

changes the treatment of consumer

lending. Under the rule, if a substantial

majority of an institution’s business is

consumer lending, this lending is

evaluated in the lending test. The rule

does not impose any reporting

requirements for consumer lending,

however. If an examiner determines that

a substantial portion of an institution’s

business is consumer lending, and the

institution has not elected to provide

consumer loan data, the examiner will

evaluate consumer lending by analyzing

an appropriate sample of the

institution’s consumer loan portfolio. In

addition, this aspect of the final rule

does not affect the evaluation of a

limited purpose bank, because the bank

will be evaluated under the community

development test, not the lending test.

The 1994 proposal would have

required that institutions provide

information on all consumer loans if

they choose to provide information on

any consumer loans. The agencies

included this requirement because they

were concerned that, otherwise, an

institution might provide information

only on those consumer products that

would reflect well on the institution’s

CRA performance and would choose not

to provide information on those

products that would reflect poorly.

Many industry commenters stated

that the prospect of reporting all their

consumer loan information was so

burdensome that they would not report

any information. On the other hand,

consumer and community groups

commented that, if consumer lending is

to be considered in CRA at all,

consumer loan reporting should be

mandatory. After considering these

comments, the agencies have decided to

permit institutions to provide

information on one or more categories

(motor vehicle, credit card, home

equity, other secured, and other

unsecured) of consumer loans.

Although an institution may have

some opportunity to mask poor

performance or otherwise

inappropriately influence its CRA

evaluation through selective provision

of data, this opportunity will be limited

by the provision in the final rule

requiring an institution to maintain data

on all loans in the category or categories

in which it seeks to be evaluated. For

example, if an institution provides

information on its credit card lending, it

would have to provide information on

all its credit card lending, although it

need not provide information on its

motor vehicle lending. Furthermore,

under the final rule, if an institution is

a substantial consumer lender, the

agencies will evaluate its consumer

lending in appropriate categories

regardless of whether the institution

reports data for those categories.

Relative weight of different lending

categories. The 1994 proposal explicitly

stated that home mortgage, small

business, and small farm lending (and

consumer lending if it was considered)

would have been weighted to reflect the

relative importance of the categories to

the institution’s overall business. The

proposal also stated that community

development lending would have been

weighted to reflect the characteristics

and needs of an institution’s assessment

area(s), the capacity and constraints of

the institution, and the opportunities

available for this lending. Several

commenters expressed concern about

the lack of certainty in these provisions;

some also believed that community

development lending would have

received excessive weight. However, a

fixed formula for the relative weight of

different categories would require a

determination that some categories of

lending are uniformly more important

than others, when the appropriate

weight depends on the specific

institution and its community. The

agencies have removed the discussion of

the relative weight assigned to different

lending categories because examiners

will determine the appropriate weight

based on the performance context.

Lending activity criterion. The

lending test in the 1994 proposal, unlike

the current CRA regulations, did not

specifically consider the volume of

lending activity—the number and

amount of home mortgage, small

business, small farm, and consumer

loans located in the institution’s
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22165

assessment area(s). Experience under

the current regulations has

demonstrated that this criterion can be

useful in assessing performance.

Therefore, based on further internal

agency considerations, the final rule

contains a lending activity performance

criterion. This criterion encourages an

institution that does not itself engage in

the categories of lending evaluated

under the lending test to seek

designation as a wholesale or limited

purpose institution so that the

institution’s CRA performance can be

evaluated under criteria appropriate to

the institution. The criterion also creates

a disincentive for institutions to try to

influence inappropriately the evaluation

of their CRA performance by conducting

activities viewed favorably under CRA

in the institution and other activities in

an affiliate. An institution’s

performance on the lending activity

criterion will be assessed taking into

account the information described in

the section of the preamble discussing

the performance context, including the

institution’s business strategy regarding

the lending conducted by the institution

itself and the lending conducted by

affiliates.

Market share analysis. Many

commenters, particularly community

and consumer groups, suggested that the

market share evaluation of the 1993

proposal be reinstated or that the

agencies substitute an alternative

objective ratio to serve as the linchpin

for an institution’s lending test rating.

Other commenters, particularly those

representing the industry, opposed

using any market share analysis. In the

agencies’ opinion, the 1994 proposal

struck the appropriate balance between

objective performance measures and

subjective judgments. A single,

standardized set of performance

evaluation tools is not appropriate

because of the variety of institutions and

the differences among the communities

that they serve. The public evaluation

prepared by the agencies will explain

the data and analytic tools used to

evaluate the institution.

The geographic distribution of an

institution’s loans remains a component

of the lending test. One element of the

geographic distribution analysis, both in

the 1994 proposal and in the final rule,

is the amount of lending to low-,

moderate-, middle- and upper-income

geographies. As part of the performance

context, examiners would consider,

among other considerations described

earlier in this preamble, the

performance of other similarly-situated

lenders. In this regard, examiners would

use market share and other analyses to

assist in evaluating the geographic

distribution of an institution’s lending

where such analyses would provide

accurate insight. However, the final rule

does not require examiners to use any

single type of analysis, and would not

link a particular market share ratio, or

any ratio, with a particular lending test

rating.

Proportion of lending within

assessment areas. Under the final rule,

as under the 1994 proposal, another

component of the geographic

distribution criterion is the proportion

of total loans made in an institution’s

assessment area(s). Some commenters

believed that this criterion is

inappropriate; they noted that safety

and soundness considerations require

an institution to lend to a geographically

dispersed area. This criterion is a

consideration under the existing CRA

rules and has proved over the years to

be one useful indicator of the degree to

which an institution is focused on

serving its local community. Moreover,

the agencies believe the criterion

encourages an institution to draw its

assessment area broadly enough to

allow the dispersion of its lending and

distribution of its loans among

geographies of different income levels.

Therefore, the agencies retained the

provision unchanged in the final rule.

Dispersion. The third component of

the geographic distribution criterion of

the lending test is the dispersion of the

institution’s lending activity. The 1994

proposal would have assessed the

degree of dispersion ‘‘throughout’’ an

institution’s assessment area(s). For

clarification, the word ‘‘throughout’’ has

been changed to ‘‘in’’ in the final rule.

The agencies will still examine the

entire assessment area; however, an

institution is not expected to lend

evenly throughout or to every geography

in its assessment area. Rather, an

institution’s lending pattern should not

exhibit conspicuous gaps that are not

adequately explained by the

performance context.

Borrower distribution. The lending

test also considers the distribution of an

institution’s loans among borrowers of

different income levels and businesses

of different sizes. Favorable

consideration is given for loans to lowand moderate-income persons and small

businesses and farm loans outside of the

institution’s assessment area, provided

that the institution has adequately

served borrowers within its assessment

area. The importance of this criterion,

particularly in relation to the geographic

distribution criterion, will depend on

the performance context. For example,

borrower distribution may be more

important in rural areas or in

assessment areas without identifiable

geographies of different income

categories; geographic distribution may

be more important in urban areas and

assessment areas with the full range of

geographies of different income

categories.

Some commenters recommended that

the lending test evaluate an institution’s

record of lending to different racial and

ethnic groups and to women. The final

rule does not incorporate this

suggestion. The appropriate inquiry

regarding service to particular racial or

ethnic groups and men and women is

whether the institution is operating in a

non-discriminatory manner. Therefore,

in arriving at an institution’s assigned

rating, the agencies consider whether

there is evidence of discrimination in

violation of the Fair Housing Act or

Equal Credit Opportunity Act, or

evidence of other illegal credit practices.

Innovative or flexible lending

practices. The final rule, like the 1994

proposal, assesses an institution’s use of

innovative or flexible lending practices

in a safe and sound manner to address

the credit needs of low- and moderateincome individuals or geographies. An

innovative practice is one that serves

low- and moderate-income creditworthy

borrowers in new ways or serves groups

of creditworthy borrowers not

previously served by the institution.

Both innovative practices and flexible

practices are favorably considered.

Although a practice ceases to be

innovative if its use is widespread, it

may nonetheless receive consideration

if it is a flexible practice. An institution

need not provide lending data

connected with a practice in order to

receive consideration. For example, an

examiner could consider an institution’s

secured credit card program as a flexible

lending practice even though the

institution has not provided its credit

card loan data for evaluation under the

other criteria of the lending test.

Compliance with private

commitments. Some commenters

suggested that, in the lending test, the

agencies should consider the extent to

which an institution has fulfilled

lending agreements that the institution

has made with third parties. The final

rule does not incorporate this

suggestion. The CRA requires the

agencies to assess an institution’s record

of helping to meet the credit needs of its

community, not to enforce privately

negotiated agreements. Therefore, an

institution’s record of fulfilling these

types of agreements is not an

appropriate CRA performance criterion.

Affiliate lending. The 1994 proposal

would have permitted consideration of

affiliate lending at an institution’s

option or if the agency determined that
22166 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

the affiliate’s activity is integral to the

institution’s business. Many industry

commenters opposed consideration of

affiliate lending except at the

institution’s option on the ground that

consideration without the institution’s

consent may be equivalent to extending

CRA coverage to affiliates that may not

be subject to the statute. Some

community and consumer groups

supported consideration of affiliate

activity and urged that the regulatory

language be strengthened to require the

agencies to take affiliate lending into

account under certain circumstances. In

the final rule, affiliate lending is

considered only at the election of the

institution, except with regard to the

lending activity criterion, where, as

described earlier, it will provide context

for the assessment in order to

discourage an institution from

inappropriately influencing an

evaluation of its CRA performance by

conducting activities that would be

viewed unfavorably in an affiliate. The

agencies also received comments that

the phrase ‘‘integral to the institution’s

business’’ in the proposal was unclear.

The final rule does not use this phrase.

The other limitations on

consideration of affiliate lending

contained in the 1994 proposal have

been retained in the final rule. However,

the limitation against double-counting

of loans has been modified to clarify

that an institution can count as a

purchase a loan originated by an

affiliate, or count as an origination a

loan sold to an affiliate, provided the

same loans are not sold several times to

inflate their value for CRA purposes.

The agencies have added language to

the final rule to clarify that affiliate

lending is not considered in evaluating

the proportion of total lending made

within an institution’s assessment

area(s). The agencies also wish to clarify

that if an institution elects to have the

lending activities of its affiliates

considered in the evaluation of the

institution’s lending, the geographies

served by the affiliate’s lending

activities do not affect the institution’s

delineation of assessment area(s).

Furthermore, the final rule would not

change the existing supervisory

authority of the agencies over

institutions and their affiliates.

Therefore, although lending by affiliates

may be treated as lending by an

institution, this treatment for CRA

purposes will not permit a regulatory

agency to examine any institution or its

affiliate if it does not otherwise have

such authority.

Direct and indirect lending. Many

consumer and community groups

expressed concern that the 1994

proposal did not adequately emphasize

direct lending by the institution as

compared to indirect lending carried out

through consortia and third parties.

Other commenters, particularly from the

industry, urged a return to the

provisions of the 1993 proposal that

would have treated direct and indirect

lending as interchangeable. The final

rule clarifies that loans originated or

purchased by third parties and consortia

in which an institution participates or

invests may only be considered if they

qualify as community development

loans and may only be considered under

the community development lending

criterion. Indirect loans will not affect

an institution’s performance under the

other four lending test criteria. Under

the final rule, direct lending

performance is an essential element of

an institution’s CRA performance.

Some commenters requested

clarification whether an institution is

required to participate directly in

making or funding each loan that is

made through a consortium or third

party in order for the loan to be

considered under the community

development lending criterion of the

lending test. An institution need not

directly participate in the making or

funding of consortia- and third partyloans for the loans to be considered

(subject to the constraints set out in the

rule) under the community

development lending criterion,

provided the loans meet the definition

of community development loan. Loans

originated directly on the books of the

institution or purchased by the

institution are considered to have been

made directly by the institution, even if

the institution originated or purchased

the loans as a result of its participation

in a loan consortium.

Investment Test

The 1994 proposal would have

focused on the dollar amount of an

institution’s qualified investments, the

innovativeness and complexity of the

qualified investments and their

responsiveness to the credit and

economic development needs of the

community. The 1994 proposal also

would have clarified that the investment

test considers all qualified investments

benefitting a broader statewide or

regional area that included an

institution’s assessment area. Most of

the comments on the investment test

concerned the definition of qualified

investment and have been discussed

earlier in the preamble.

Limited investment authority. One

group of commenters representing

institutions with statutory constraints

on their authority to make this type of

investment maintained that reliance on

an investment test in assigning a CRA

rating could unfairly stigmatize their

CRA performance. As previously

discussed, the final rule has modified

the performance context for CRA

evaluations to account for financial

institutions with limited investment

authority. These modifications would

permit an institution with limited

authority to make investments to receive

a low satisfactory rating under the

investment test, although it has made

few or no qualified investments, if the

institution has a strong lending record,

thereby preventing potential anomalies

in the CRA performance ratings.

Disposition of branch premises. To

implement the statutory requirement in

12 U.S.C. 2907(a), the final rule

specifies that a donation, sale on

favorable terms or rent-free occupancy

of a branch (in whole or in part) in a

predominantly minority neighborhood

to any minority- or women-owned

depository institution is a qualifying

investment. Similar disposition of

branch premises to a financial

institution with a primary mission of

promoting community development is

also a qualified investment.

Service Test

Compared to the 1993 proposal, the

service test in the 1994 proposal would

have reduced the significance in the

CRA performance evaluation of an

institution’s full service, ‘‘brick and

mortar’’ branch structure by elevating

the consideration given to alternative

systems for delivering retail banking

services (e.g., ATMs, mobile branches,

loan production offices, or banking-bytelephone or banking-by-computer). In

this regard, the provision of retail

banking services would have been

evaluated on the basis of an

institution’s: (1) Distribution of

branches and ATMs among low-,

moderate-, middle-, and upper-income

areas; (2) record of opening and closing

branches and ATMs; (3) range of

services to low-, moderate-, middle-,

and upper-income areas; and (4) efforts

to make alternative delivery systems

responsive to the needs of low- and

moderate-income areas and individuals.

In addition, the extent to which an

institution provided innovative and

responsive community development

services would also have been

considered under the service test. The

final rule retains the essential structure

and elements of the test as proposed but

makes some modifications.

Relative weight of branches and

alternative delivery systems. The

overwhelming majority of community

and consumer group commenters stated
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22167

that the 1994 proposal placed too little

emphasis on the location of an

institution’s full service branches in

evaluating performance under the

service test. Many of those commenters

also were concerned that the proposed

service test would have erroneously

equated ATMs with full service

branches. On the other hand, several

industry commenters commended the

proposal’s recognition that full service

branches should not be the determining

factor under the service test as

consistent with the trend in the industry

toward the use of alternative service

delivery systems.

The final rule responds to these issues

by adjusting the balance of the service

performance evaluation in favor of fullservice branches while still considering

alternative systems. In this regard,

references to ATMs in the criteria for

evaluating the distribution of an

institution’s branches have been

removed, and conforming changes have

been made in the ratings appendix.

These changes signify a recognition that

convenient access to full-service

branches within a community is an

important factor in determining the

availability of credit and non-credit

services. The focus of the service test,

however, remains on an institution’s

current distribution of branches, and the

test does not require an institution to

expand its branch network or operate

unprofitable branches.

The final rule emphasizes that

alternative systems for delivering retail

banking services, such as ATMs, are to

be considered only to the extent that

they are effective alternatives in

providing needed services to low- and

moderate-income areas and individuals.

Furthermore, network ATMs owned by

other institutions do not receive the

same consideration in an institution’s

evaluation as ATMs owned by or

operated exclusively for that institution.

An institution’s branches and other

service delivery systems need not be

accessible to every part of an

institution’s assessment area. However,

the service delivery systems should not

exhibit conspicuous gaps in

accessibility, particularly to low- or

moderate-income areas or individuals,

unless the gaps are adequately

explained by the performance context.

Other issues. The final rule conforms

the community development services

component of the service test to that of

the investment test by giving

consideration to community

development services that benefit a

broader statewide or regional area

encompassing an institution’s

assessment area.

Some of the specific suggestions in

the comments were not implemented in

the final rule. For example, the rule

does not require institutions to provide

basic banking services or low-cost

checking accounts, because the CRA

permits institutions substantial leeway

to determine the specific policies and

programs that help meet credit needs in

their communities. In addition, the final

rule does not evaluate the effectiveness

of service performance on the basis of

deposit growth. This measurement is

not clearly related to helping to meet the

credit needs of the community and

could necessitate burdensome coding of

deposit accounts on a geographic basis.

Finally, debit cards are not a retail

credit delivery system, and therefore the

agencies have not included debit cards

in the list of examples of alternative

delivery systems for retail services.

Community Development Test

The performance of wholesale and

limited purpose institutions would have

been evaluated in the 1994 proposal

separately under the community

development test. This test would have

focused on the record of these

institutions in helping to meet credit

needs through community development

lending, qualified investments, and

community development services. The

1994 proposal also would have required

wholesale or limited purpose

institutions to serve a designated local

area and would have placed limits on

consideration of activities outside this

designated area. The final rule

maintains the community development

test with some changes.

Request for designation as a wholesale

or limited purpose institution. In

response to comments on the 1994

proposal, the final rule provides more

detail on the process by which an

institution is designated wholesale or

limited purpose. An institution that

seeks designation as wholesale or

limited purpose must file a request in

writing at least three months prior to the

proposed effective date of the

designation. If the designation is

approved, it remains in effect until the

institution requests revocation of the

designation or until one year after the

agency notifies the institution that the

agency has revoked the designation on

its own initiative. Thus, once an

institution has received a designation,

the institution need not reapply before

each CRA examination.

Benefit to assessment area. Many

commenters, including both industry

and some community group

commenters, maintained that the

limitations placed on considering outof-assessment area activities were too

restrictive and did not account for the

broader business strategies and

operations of wholesale and limited

purpose institutions, which often serve

communities on a nationwide basis.

The final rule removes the specific

limitation that community development

activities outside an institution’s

assessment area be considered only up

to the amount of activities within the

institution’s assessment area. Under the

final rule, the agencies consider all

activities that benefit the institution’s

assessment area(s) or a broader

statewide or regional area that includes

the assessment area(s). In addition,

other activities receive full

consideration as long as the institution

has adequately addressed the needs of

its assessment area.

Technical changes and clarifications.

The final rule clarifies that investments

in third party community development

organizations may be treated either as

qualified investments or as community

development loans (with the institution

receiving credit for a pro rata share of

the loans made by the third party, at the

institution’s option). In addition, the

agencies note that a wholesale or

limited purpose institution need not

engage in all three categories of

activities considered under the

community development test but can

perform well under the test by engaging

in one or more of these categories.

Technical changes have also been made

to conform with the modifications,

previously discussed, to the definition

of community development loans, the

definitions of wholesale and limited

purpose institutions, and the focus of

lending performance assessments on

originations and purchases rather than

loans outstanding.

Small Institution Performance

Standards

The small institution performance

standards have been retained in the

final rule essentially as proposed in

1994, except for the change in the

eligibility threshold described earlier.

As a technical matter, the final rule has

been changed to clarify that an

institution that was a small institution

as of the end of the prior calendar year

is examined as a small institution.

Many commenters, predominantly

representing community organizations

but also including some larger

institutions, stated that the streamlined

approach would amount to a de facto

exemption from CRA for small

institutions. Other commenters,

predominantly representing the

industry, supported the proposal for

streamlined examinations and an

exemption from new data collection and
22168 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

reporting. Many commenters

representing the industry stated that

data collection may place a greater

relative burden on smaller institutions

than larger institutions due to

limitations in staff and financial

resources. After considering the

comments, the agencies have decided

not to change materially the smaller

institution performance standards.

Examinations of small banks and thrifts

will be streamlined and will not require

the periodic reporting of new data.

Examinations will be meaningful and

will not be implemented as de facto

exemptions.

Performance criteria. The 1994

proposal provided that to determine

whether a small institution’s CRA

record is satisfactory, the agencies

would consider the institution’s loan-todeposit 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. This provision

of the 1994 proposal responded to

concerns following the 1993 proposal

that institutions that package and sell

their loans would be disadvantaged

when compared to portfolio lenders by

a strict loan-to-deposit ratio test. This

provision of the 1994 proposal has been

retained in the final rule. Evaluations

will also take into account the

institution’s size, financial condition,

and the credit needs of its assessment

area.

The final rule also requires

consideration of the proportion of the

institution’s total lending made to

borrowers in its assessment area. The

agencies will take into account local

lending and investment opportunities in

assessing this criterion.

In addition, the agencies will evaluate

the distribution of loans and lendingrelated activities among individuals of

different income levels and businesses

and farms of different sizes. Where

appropriate, the agencies will also

evaluate the geographic distribution of

loans in the institution’s assessment

area, including low- and moderateincome geographies. Contrary to the

concerns expressed by some

commenters, however, a small

institution is not expected to lend

evenly throughout its service area;

rather, loan distribution will be

evaluated within the context of an

institution’s capacity to lend, local

economic conditions, and lending

opportunities in the assessment area.

The agencies also will evaluate

whether an institution has taken

appropriate action, as warranted, in

response to written complaints about

the institution’s performance in helping

to meet the credit needs of its

assessment area(s). Some commenters

suggested that complaints resolved

satisfactorily for the complainant not be

considered in the evaluation. The

agencies will consider those complaints,

but their satisfactory resolution will be

a favorable element in an evaluation.

Other commenters expressed concern

that the agencies might not adequately

consider bona fide complaints from

community members. However, the

agencies intend to consider all CRA

complaints in the course of an

examination. Therefore, this criterion is

retained in the final rule as proposed.

Elements of outstanding performance.

Some commenters requested a

clarification of the circumstances under

which a small institution could earn an

‘‘outstanding’’ rating. Others urged that

some flexibility be provided to consider

a range of activities that enhance credit

availability and promote community

development. Under the final rule, in

addition to determining whether an

institution has exceeded some or all of

the standards for a satisfactory rating,

the agencies will consider a small

institution’s investment and service

performance based on the broad range of

investment and service activities

discussed in the rule for other

institutions.

Strategic Plan

The provisions of the strategic plan in

the 1994 proposal have been adopted

largely as proposed, with some changes.

The 1994 proposal provided that, as

an alternative to being rated under the

lending, service, and investment tests,

or the small institution performance

standards, a bank or thrift could submit

to its supervisory agency for approval a

strategic plan developed with

community input detailing how the

institution proposed to meet its CRA

obligation. The 1994 proposal made

clear that an institution would not be

assessed under a plan unless the plan

had been approved by its supervisory

agency. To facilitate examinations of

institutions with approved plans, the

final rule clarifies that an institution is

only evaluated under a plan if the plan

is in effect and if the institution has

operated under an approved plan

(although not necessarily the particular

plan currently in effect) for at least one

year. Affiliates may prepare joint plans.

The final rule permits activities to be

allocated among affiliated institutions at

the institutions’ option, provided that

the same activities are not considered

for more than one institution. This

change was made in response to

comments requesting greater flexibility

and increased opportunities for

affiliated institutions sharing the same

assessment area(s) to work together to

help meet the credit needs of their

communities and, in particular, in lowand moderate-income areas.

Public participation. The final rule

retains the public participation

provisions in the 1994 proposal. The

final rule requires an institution

informally to seek suggestions from the

public while developing a plan. Once

the institution has developed a plan, it

must publish notice of the plan and

solicit written public comment for at

least 30 days. In order to avoid unduly

lengthening the plan approval process,

the final rule does not extend the

minimum comment period. After the

comment period, the institution shall

submit the plan to its regulator, along

with any written comments received. If

the plan was revised in light of the

comments received, the institution shall

also submit the plan in the form

released for public comment. The

agencies have added in the final rule a

requirement that an institution submit

with its plan a description of its

informal efforts to seek suggestions from

members of the public. As under the

1994 proposal, the final rule states that

a plan will be approved if the agency

fails to act on it within 60 days after

submission, unless the agency extends

the review period for good cause.

Because of the importance of

constructive community involvement in

the plan process, the agencies have not

changed in the final rule the amount of

public participation required. Requiring

an institution to seek informal

suggestions in formulating a plan, and

then to solicit formal comment before

submitting a plan to the agency,

encourages consultation between an

institution and its community,

including local government, community

leaders, the public and tribal

governments. There is no need for a

further comment period after the

institution submits its proposed plan to

the agency because such a comment

period could undermine the direct

communication and consultation

between an institution and its

community that is most beneficial to the

process.

Several comments appeared to

misunderstand why the strategic plan

provides for comment from the public.

The strategic plan option provides

institutions an opportunity to tailor

their CRA objectives to the needs of

their community and their capacity and

expertise. Several industry comments

were concerned that under the strategic

plan option, community organizations

would play an inappropriate role in an
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22169

institution’s operations. However, the

purpose of the consultation is for the

institution to develop the fullest

possible information about the needs of

its community and how these needs

might be met. The institution

nevertheless makes all decisions

regarding how it plans to help meet

those needs. In reviewing the public

participation, the agencies will not

consider whether community

organizations unanimously support the

plan, but whether the institution made

an appropriate investigation to

determine the needs of its community,

and whether the goals of the plan serve

those needs.

As a technical clarification, the final

rule provides that an institution may

impose a reasonable charge for copying

or mailing a plan but may not charge for

reviewing the plan.

Assessment of performance under the

plan. Under the final rule, as under the

1994 proposal, the agencies will

generally rate an institution’s

performance under an approved plan

solely in relation to goals set out in the

plan. An institution has the option,

however, to elect in its plan to be

subject to the standard tests should it

fail to meet substantially its

‘‘satisfactory’’ goals under the plan. The

final rule makes this election clear. An

institution operating under an approved

plan would, during the period of the

plan, not be subject to assessment under

the standard tests, unless the institution

so chose. In considering whether an

institution has substantially met plan

goals, an agency will give consideration

to circumstances beyond the

institution’s control, such as economic

conditions, that have affected its ability

to perform.

Confidential information. A number

of industry commenters indicated that

the possibility of public disclosure of

confidential information presented a

major disincentive to their use of the

strategic plan alternative. In response to

similar comments on the 1993 proposal,

the 1994 proposal would have permitted

institutions to submit additional

information to the relevant agency on a

confidential basis. The final rule

includes this provision, which

adequately addresses confidentiality

concerns.

Data collection and reporting

responsibilities. Despite industry

comments to the contrary, the final rule

provides that approval of a plan does

not affect an institution’s data collection

responsibilities. These data are useful to

the agencies in assessing overall lending

in communities, and would also be of

value to the public. Since the

institution’s plan will be in its public

file, the public will have the appropriate

context in which to evaluate the lending

data.

Assigned Ratings

In the final rule, as under the 1994

proposal, an institution will be assigned

one of the four assigned ratings required

by the statute: ‘‘outstanding,’’

‘‘satisfactory,’’ ‘‘needs to improve,’’ or

‘‘substantial noncompliance.’’ (12 U.S.C.

2906(b)(2)) For institutions that are

evaluated under the community

development test for wholesale or

limited purpose institutions, the small

institution performance standards, or an

approved strategic plan, the rating on

these tests will be the institution’s

assigned rating with adjustment for any

evidence of discrimination. Retail

institutions that are evaluated under the

lending, investment and service tests

will be assigned a rating based upon the

assigned rating principles and the

matrix that implements these principles,

also with adjustment for any evidence of

discrimination.

Ratings principles and matrix. A

number of comments discussed the

principles and methodology by which

an assigned rating would be given to

retail institutions evaluated under the

lending, investment and service tests.

The 1994 proposal set forth five

principles that governed the assignment

of this rating. The methodology for

calculating the assigned rating was

described in Appendix A. The proposal

would have required that an

institution’s rating on the lending test

count for at least 50 percent of its

assigned rating. Furthermore, an

institution would have been required to

achieve a ‘‘satisfactory’’ rating on the

lending test in order to receive an

assigned rating of ‘‘satisfactory.’’ In

addition, the 1994 proposal would have

allowed investment and service

performance to raise a institution’s

assigned rating if it had earned at least

a ‘‘satisfactory’’ rating on the lending

test. Poor performance on either the

investment or service test also could

have negatively affected an institution’s

assigned rating. The proposal would

have required the agencies to adjust

ratings for all institutions, regardless of

which test the agencies used to evaluate

their performance, to take into

consideration evidence of

discriminatory or other illegal credit

practices. Finally, an institution that

otherwise would have received a ‘‘needs

to improve’’ rating would have been

rated as ‘‘substantial noncompliance’’ if

it received no better than a ‘‘needs to

improve’’ rating on each of its two

previous examinations.

Commenters generally supported the

1994 proposal’s emphasis on lending

performance, but a number were

concerned about several apparently

anomalous ratings that would have

resulted from applying the rating

principles and the matrix in the

appendix. Several commenters,

particularly community groups, were

concerned that an institution could

receive an assigned rating of

‘‘satisfactory’’ even if it received a rating

of ‘‘substantial noncompliance’’ on both

the investment and service tests, if its

rating on the lending test was at least a

‘‘high satisfactory.’’ In addition, an

institution with a rating of ‘‘substantial

noncompliance’’ on either the service or

investment test could get an

‘‘outstanding’’ composite rating if its

rating on the lending and the third test

was ‘‘outstanding.’’ These commenters

suggested revising the rating principles

and matrix to avoid these anomalous

results.

After considering the comments, the

agencies have revised the final rule to

eliminate these anomalies. The agencies

eliminated the principle that an

‘‘outstanding’’ rating on the lending test

and either the service or investment test

would mean an ‘‘outstanding’’ assigned

rating even if the rating on the third test

was ‘‘substantial noncompliance.’’ The

agencies also eliminated the principle

that an institution’s rating on the

lending test would count for at least 50

percent of its assigned rating. This

change does not alter the agencies’

emphasis on the primacy of lending

when evaluating CRA performance,

because no institution may receive an

assigned rating of ‘‘satisfactory’’ unless

it receives a rating of at least ‘‘low

satisfactory’’ on the lending test.

In light of the comments, the matrix

that sets forth the methodology for

aggregating an institution’s scores on the

lending, service and investment tests to

arrive at an assigned rating has also

been revised. The number of points to

be given for each rating on the lending,

service and investment tests remains

unchanged as shown in the following

table.
22170 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

Component test ratings Lending Service Investment

Outstanding ................................................................................................................................................................ 12 6 6

High Satisfactory ........................................................................................................................................................ 9 4 4

Low Satisfactory ......................................................................................................................................................... 6 3 3

Needs to Improve ....................................................................................................................................................... 3 1 1

Substantial Noncompliance ........................................................................................................................................ 0 0 0

The number of points needed to

achieve each of the four composite

assigned ratings has been modified

slightly, as shown in the following table,

to remove the anomalies discussed

earlier.

Points Composite assigned rating

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

11 through 19 .. Satisfactory.

5 through 10 .... Needs to Improve.

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

To ensure that an institution does not

receive an assigned rating of

‘‘satisfactory’’ unless it receives a rating

of at least ‘‘low satisfactory’’ on the

lending test, an institution’s assigned

rating will be calculated using three

times the lending test score if the

institution’s point total exceeds three

times the lending test score.

The agencies have removed the matrix

from Appendix A. This change will

allow the agencies some flexibility in

adjusting the matrix to prevent any

other unintended anomalies that may be

found during the examination process.

If the agencies change the matrix in the

future, the new matrix will be published

for information, but not necessarily for

comment, in the Federal Register.

Automatic downgrade of third ‘‘needs

to improve’’ rating. The agencies have

also removed the requirement that an

institution’s CRA rating be downgraded

automatically from ‘‘needs to improve’’

to ‘‘substantial noncompliance’’ if it

received no better than a ‘‘needs to

improve’’ rating on each of its two

previous examinations. Even though the

automatic downgrading has been

eliminated in the final rule, the agencies

will consider an institution’s past

performance in its overall evaluation. If

the poor performance continues, an

institution could be rated ‘‘substantial

noncompliance’’ if prior ratings were

‘‘needs to improve’’ and the institution

has not made efforts to improve its

performance.

Weight of service test. Some

consumer groups urged that an

institution be required to get at least a

‘‘low satisfactory’’ on the service test in

order to get an assigned rating of

‘‘satisfactory’’ or better. The agencies

considered this suggestion, but decided

that because the CRA’s focus is on

helping to meet a community’s credit

needs, it would be inappropriate to

impose this requirement. However, the

changes to the ratings principles and

matrix increase the weight of both the

service and investment tests.

High satisfactory and low satisfactory

ratings. Some commenters found

confusing the use of a ‘‘high’’ and ‘‘low’’

satisfactory rating on the lending,

service and investment tests and only a

‘‘satisfactory’’ on the assigned rating.

Because a wide range of performance

may be rated as satisfactory, the

agencies decided to keep the five ratings

on the underlying tests, even though the

assigned ratings are limited to the four

statutory ratings. This will permit the

agencies, banks and thrifts, and their

customers to recognize the stronger

performances on the lending,

investment, and service tests of those

institutions that are doing a very good,

but not quite outstanding, job of helping

to meet the credit needs of their

communities.

Effect of CRA Performance on

Applications

The CRA requires the agencies to

consider an institution’s CRA

performance record when considering

an application by the institution to

establish a deposit facility. The statute

defines applications for a deposit

facility as including applications for a

Federal financial institution charter or

FDIC deposit insurance, applications to

establish or relocate a branch or home

office, and applications for mergers,

consolidations, or the purchase of assets

or assumption of liabilities of a

regulated financial institution. The 1994

proposal provided that in considering

an institution’s application for a deposit

facility, the agencies would consider the

institution’s CRA performance and take

into account any views expressed by

interested parties submitted in

accordance with the applicable agency’s

rules and procedures. The proposal also

stated that an institution’s record of

CRA performance could provide a basis

for approving, denying, or conditioning

approval of an application.

A number of comments from financial

institutions asked the agencies to create

a ‘‘safe harbor’’ from CRA protests for

banks with good CRA ratings that apply

to establish a deposit facility. Some

commenters suggested that a ‘‘safe

harbor’’ would provide an incentive to

achieve an outstanding rating.

Community and consumer groups, on

the other hand, opposed any sort of safe

harbor from CRA protests.

The agencies have consistently

recognized that materials relating to

CRA performance received during the

applications process can and do provide

relevant and valuable information. The

agencies also continue to believe, as

provided in the Interagency Policy

Statement Regarding the Community

Reinvestment Act, that information from

an examination is a particularly

important consideration in the

applications process because it

represents the on-site evaluation of an

institution’s CRA performance by its

primary Federal regulator. The final rule

implements without change the balance

given in the 1994 proposal between

CRA performance ratings and material

information presented through public

comment in the applications process.

The agencies noted in the preamble to

the 1993 proposal that the frequency

with which the agencies will examine

an institution will depend in part on its

record of performance. A similar

discussion was inadvertently omitted

from the 1994 proposal. Examination

frequency will be based, in part, on an

institution’s record of performance. This

policy combines an efficient use of

agency resources with an incentive for

good performance.

Assessment Area Delineation

As a result of numerous comments

received on this issue, the final rule

makes several changes to the definition

of service area in the 1994 proposal.

Assessment area. The CRA requires

the agencies to assess an institution’s

record of helping to meet the credit

needs of its local community. The

assessment area as defined in the final

rule represents the community within

which the agencies assess an

institution’s record of CRA performance.

As noted earlier in the preamble, in

the final rule, the term ‘‘assessment

area’’ replaces the term ‘‘service area,’’

which was used in the 1993 and 1994

proposals. The agencies believe the term

‘‘assessment area’’ more accurately
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22171

describes the geographic area within

which the specific performance criteria

in the rule will be assessed. Based on

the continuing criticisms of the

‘‘delineated community’’ in the current

regulation and the ‘‘service area’’ in

both the 1993 and 1994 proposals, the

agencies have decided to place a

different emphasis on the institution’s

specific delineation and the methods

used by the institution to establish that

delineation. The agencies do not expect

that, simply because a census tract or

block numbering area is within an

institution’s assessment area, the

institution must lend to that census tract

or block numbering area. The capacity

and constraints of the institution, its

business decisions about how it can best

help to meet the needs of its assessment

area, including those of low- and

moderate-income neighborhoods, and

other aspects of the performance

context, would be relevant to explain

why the institution is not serving

portions of the assessment area(s).

The rule also clarifies that an

institution’s delineation of its

assessment area(s) is not separately

evaluated as an aspect of CRA

performance, although the delineation

will be reviewed for compliance with

the assessment area requirements of the

rule. If, for example, an institution

delineated the entire county in which it

is located as its assessment area but

could have delineated its assessment

area as only a portion of the county, it

will not be penalized for lending only

in that portion of the county, so long as

that portion does not reflect illegal

discrimination or arbitrarily exclude

low- or moderate-income geographies.

Assessment area boundaries. The

1994 proposal would have prohibited a

financial institution, other than a

wholesale or limited purpose

institution, from delineating a service

area that extends substantially across

boundaries of a metropolitan statistical

area (MSA) or state boundaries, unless

the service area was located in a

multistate MSA. Further, the proposal

would have prohibited an institution’s

service area from reflecting illegal

discrimination or arbitrarily excluding

low- and moderate-income geographies

(taking into account the institution’s

size and financial condition).

The final rule states that an institution

shall not delineate an assessment area

extending substantially across the

boundaries of a consolidated

metropolitan statistical area (CMSA). An

institution shall delineate separate

assessment areas for the areas inside

and outside the CMSA and for different

CMSAs. The 1994 proposal expressed

these limitations in terms of MSAs

rather than CMSAs. The change in the

final rule has been made to address a

technical shortcoming in the 1994

proposal, but does not change its

substance. The final rule retains the

provision from both the 1993 and 1994

proposals that an assessment area not

extend substantially across state

boundaries unless the assessment area is

located in a multistate MSA. The final

rule applies these limitations to

wholesale and limited purpose

institutions as well as other institutions

because of changes made to the

community development test.

To simplify the process of delineating

an assessment area, the final rule

encourages institutions to establish

assessment area boundaries that

coincide with the boundaries of one or

more MSAs or one or more contiguous

political subdivisions, such as counties,

cities, or towns. An institution is

permitted, but is not required, to adjust

the boundaries of its assessment area(s)

so as to include only the portion of a

political subdivision it reasonably can

be expected to serve. This provision

gives institutions some flexibility in

their delineations, particularly in the

case of an area that would otherwise be

extremely large, of unusual

configuration, or divided by significant

geographic barriers. As with the 1994

proposal, however, such adjustments

may not arbitrarily exclude low- and

moderate-income geographies from the

institution’s assessment area(s). For

purposes of assessment area delineation,

an institution should use the MSA and

CMSA boundaries in effect on January

1 of the calendar year in which the

institution is making the delineation.

Equidistance principle. The 1994

proposal would have adopted the

effective lending territory principle from

the current regulations in slightly

modified form. The 1994 proposal

would have explicitly linked an

institution’s CRA obligations to the

areas around its branches and deposittaking ATMs, rather than its other nondeposit taking offices. The service area

delineated by the institution would

have had to include all geographies

around its branches in which the

institution originated or had

outstanding during the previous year a

significant number and amount of home

mortgage, small business and small

farm, and consumer loans and any other

geographies equidistant from its

branches and deposit-taking ATMs.

The final rule eliminates the

equidistance principle as a required part

of the delineation of an assessment area.

This change provides institutions

greater flexibility in their delineations.

Several commenters suggested that, in

certain circumstances, the equidistance

requirement could be inappropriate,

because institutions do not routinely

serve areas that are uniformly

equidistant from their deposit-taking

offices. The final rule retains the

requirement that an assessment area not

arbitrarily exclude low- or moderateincome geographies.

Wholesale and limited purpose

institutions. The final rule requires that

the assessment area(s) for a wholesale or

limited purpose institution must

generally consist of one or more MSAs

or one or more contiguous political

subdivisions in which the institution

has its main office, branches, and

deposit-taking ATMs. This requirement

is substantively consistent with the

1994 proposed delineation of service

area for wholesale and limited purpose

institutions, but the final rule differs

from the 1994 proposal in two ways.

First, the final rule specifies that the

assessment area must generally consist

of one or more MSAs or contiguous

political subdivisions; the 1994

proposal would have required the

institution to delineate ‘‘an area or areas

around its offices.’’ Second, the

assessment area has been modified to

conform to changes made to the scope

of the community development test. The

community development test permits

consideration of community

development activities that are outside

of an institution’s assessment area, but

that are in a broader statewide or

regional area that includes the

institution’s assessment area. As a

result, an institution need not delineate

a statewide or regional, rather than

local, assessment area in order to

receive consideration for these

activities.

Use of assessment area. In response to

comments indicating concern that

examiners might modify the area

delineated by the institution, the final

rule explicitly provides that the

agencies will use the assessment area

delineated by the institution, unless

they determine that the assessment area

does not comply with the requirements

for assessment areas set forth in the final

rule. If the assessment area fails to

comply with the rule’s requirements,

the examiner will designate an area that

does comply and will use that area in

evaluating the institution’s performance.

Technical changes and clarifications.

The final rule includes other technical

changes to provide clarification. For

example, some commenters interpreted

the use of the phrase ‘‘significant

number and amount of loans’’ in the

1994 proposal to have a different

meaning than the phrase ‘‘substantial

portion of its loans’’ in the current
22172 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

regulations. The agencies did not intend

a different meaning and have used the

wording from the current regulations in

the final rule. In addition, changes in

the final rule reflect the rule’s shift in

focus from loans outstanding to

originations and the different

circumstances under which the lending

test considers consumer loans.

Data Collection and Reporting

In the final rule, the agencies

continued their efforts to streamline

data collection and reporting

requirements in response to comments

concerning potential burden. The final

rule simplifies data requirements and

eliminates Appendix C.

Application of data collection

provisions to small institutions and

wholesale and limited purpose

institutions. The 1994 proposal would

not have applied small business and

farm loan and community development

loan data requirements to small

institutions. Some commenters

criticized the exemption from data

collection and reporting requirements

for small institutions because only a

subset of data would actually be

collected, restricting the regulators’

ability accurately to assess the overall

performance of institutions in helping to

meet credit needs. These commenters

stated that the benefits of collecting the

data across the industry outweighed the

associated burden. However, the burden

on small institutions would be

significant and the benefit less than the

commenters assert. Therefore, the final

rule does not subject a small institution

to additional data collection and

reporting requirements. The volume of

originations of loans other than home

mortgage loans in a small institution

will generally be small enough that an

examiner can view a substantial

sampling of loans without advance

collection and reporting of information

by the institution. In addition, although

small institutions are large in number,

they have a relatively small percentage

of the total assets of the industry.

An institution that was a small

institution during the prior calendar

year but is no longer a small institution

would be subject to data collection and

maintenance requirements but not data

reporting requirements. The data

reporting requirements do not apply

because the institution would not have

collected the data to report. The

institution would be subject to data

reporting requirements in the year

following the first year for which it was

required to collect data, provided the

institution does not qualify as a small

institution at the time the data must be

reported.

The 1994 proposal would have

required large wholesale and limited

purpose institutions to collect and

report data. Some commenters urged

that wholesale and limited purpose

institutions be exempt from data

collection and reporting. The final rule

does not include an exemption. The

data are necessary for the agencies to

determine whether the institutions

initially qualify and continue to remain

qualified for treatment as wholesale or

limited purpose institutions. The data

also will be helpful in understanding

the context in which the performance of

other institutions should be evaluated.

Collection and reporting of

originations and purchases rather than

loans outstanding. For the reasons

stated in the discussion of the lending

test earlier in the preamble, the final

rule requires reporting of and evaluation

based on originations and purchases for

all categories of loans. Institutions still

have the option to provide data on loans

outstanding, which examiners would

consider to round out the picture of

lending performance.

Community development loan

reporting. The community development

loan reporting provisions in the final

rule have been modified to reflect the

decision to rely on originations and

purchases. Institutions, except small

institutions and institutions that were

small institutions during the prior

calendar year, are required to report to

their primary regulator annually on

March 1 the aggregate number and

aggregate amount of community

development loans originated and

purchased during the prior calendar

year. The agencies will include this

information in the CRA Disclosure

Statements that they prepare for each

institution, and which an institution

shall place in its public file within three

days of receipt.

Some commenters requested reporting

and disclosure of more detailed

information on community

development loans, including a

breakdown by location and purpose of

the loan. The agencies did not adopt

these suggestions because the additional

burden would outweigh the potential

usefulness of more specific data. In

assessing an institution’s performance

under the lending or community

development test, examiners will review

actual community development loan

files to determine the complexity and

innovativeness of the loans and their

responsiveness to credit and community

development needs. Examiners will

discuss the community development

loans reviewed in the public portion of

the institution’s CRA performance

evaluation. The discussion will include

the nature and location (if relevant) of

the activities supported by the loans

reviewed.

Consumer loan collection and

maintenance. In the final rule, as in the

1994 proposal, data collection and

maintenance are optional for consumer

loans, and there are no reporting

requirements. As described in the

discussion of the lending test earlier in

the preamble, an institution may

provide data on one or more categories

of consumer loans, such as motor

vehicle loans, and not on others.

However, if an institution provides data

for any loan in a category, it is required

to provide data for all loans in the

category. For each loan category for

which an institution elects to provide

data, the data must include for each

loan in the category originated or

purchased since the last CRA

examination: (1) the amount at

origination or purchase, (2) the loan

location, and (3) the gross annual

income of the borrower that the

institution considered in making the

credit decision. If the institution does

not consider income in making an

underwriting decision, it need not

collect income information. Further, if

the institution routinely collects, but

does not verify, a borrower’s income

when making a credit decision, it need

not verify the income for purposes of

data maintenance. The location of the

loan must be maintained by census tract

or block numbering area.

Reporting of loan information outside

assessment areas and outside MSAs.

Some commenters asked that

institutions not be required to report

small business and small farm loans

located outside their assessment areas or

outside MSAs. The agencies have not

made this change in the final rule. The

data on lending in rural areas provide

important information on how well

institutions are serving rural

communities where they have branches.

The data are also necessary for the

lending test assessment criterion that

evaluates the degree to which an

institution’s lending is inside its

assessment area. Finally, the lending

data provide information that assists

examiners in understanding the context

in which the performance of other

institutions should be evaluated. The

commenters that opposed reporting of

small business and small farm loans

outside their assessment areas or

outside MSAs also generally opposed

the proposed change to require

institutions that are not small

institutions and are subject to HMDA to

report the location of applications and

originations of home mortgage loans

outside the MSAs in which the
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22173

institutions have offices. The agencies

have adopted the proposed change

despite these objections for the same

reasons that the agencies did not change

the final rule for collecting of small

business and small farm loans outside

MSAs or assessment areas. Conforming

amendments to Regulation C (HMDA)

have been adopted by the Board.

Race and gender information on small

business borrower not required. The

1994 proposal would have required

each institution, other than a small

institution, to collect and report data on

the race and gender of small business

and small farm borrowers. This

provision, which was the most

frequently addressed issue in the

comments, was proposed in order to

support the fair lending component of

the CRA assessment. The agencies have

removed this proposed requirement

from the final rule.

Many commenters, including

virtually every community or consumer

group that addressed the issue,

supported the provision. These

commenters believed that the

information was critical to determine

whether discrimination was occurring

in small business and small farm

lending. The commenters noted the

value of HMDA data on race and gender

in monitoring home mortgage lending.

Nearly every industry comment

opposed the collection as proposed.

These commenters stated that the

requirement was burdensome and the

data, as proposed to be collected and

reported, would be of limited utility.

They asserted that reporting institutions

would be at a competitive disadvantage

because small institutions and nonfinancial institution lenders not only

would not be required to collect and

report the information but actually

would be prohibited from doing so

(because of the Board’s Regulation B,

implementing the Equal Credit

Opportunity Act). Some commenters

also questioned the relevance of the race

and gender data to CRA. A few industry

commenters endorsed collection of race

and gender data, provided it was done

through Regulation B. A larger number

opposed collection, but believed that, if

the agencies concluded the data were

necessary, collection should be required

under Regulation B.

The agencies have removed the

proposed requirement from the final

rule. Although the agencies believe that

fair lending performance is directly

relevant to CRA performance, they

recognize the anomaly of requiring some

institutions to collect and report

information that other lenders are

prohibited from collecting. Therefore,

they believe that it is more appropriate

to address the issue of race and gender

data in fair lending regulations that

apply equally to all lenders.

Small business data collection,

maintenance, and reporting generally. In

response to industry comments

regarding the burden associated with

the small business and small farm loan

data requirements, the final rule

streamlines the data collection,

maintenance and reporting. The

agencies have replaced loan-by-loan

reporting using loan registers with

aggregate reporting by census tract.

The 1994 proposal would have

required lenders to indicate whether

small business borrowers had gross

annual revenues $1 million or less.

Some commenters suggested that the

requirement be eliminated because they

believed it was burdensome and

unnecessary. The final rule retains the

requirement. The burden of collecting

this information is minimal, because $1

million is already used in the Board’s

Regulation B as a threshold for certain

requirements related to adverse action

notifications and record retention.

Therefore, many institutions already

have a reason to track business and farm

loans based on this revenue figure.

The information on the revenue size

of business and farm borrowers is useful

because, in combination with loan

amount information, it will enable the

agencies to make accurate judgments

about the size of businesses and farms

receiving reported loans. Some

commenters questioned whether an

institution should report the revenue of

the entity to which the loan is actually

extended or of its parent corporation if

the entity is a subsidiary. An institution

should report the revenues that the

institution considered in making its

credit decision.

Some commenters asked that the

agencies require collection and

reporting of data on applications and

denials. The agencies did not adopt this

suggestion. The small business lending

process is generally far less formal than

the consumer or home mortgage lending

process. Sometimes institutions do not

require written applications for small

business loans; when they do,

applications often come after potential

problems have been addressed in

informal discussions. Because the

agencies do not believe information on

applications and denials would be

particularly helpful, the final rule does

not require collection or reporting of

information on small business and small

farm applications and denials. Instead,

institutions are required to report all

small business and small farm loans that

they originate or purchase.

Under the final rule, each covered

institution is required to collect and

maintain in a standardized, machine

readable format the following

information on each small business loan

originated or purchased since the prior

CRA examination: (1) amount at

origination; (2) location; and (3) an

indicator whether the loan was to a

business with $1 million or less in gross

annual revenues. The location of the

loan must be maintained by census tract

or block numbering area.

Each covered institution is required to

report in machine-readable form

annually on March 1 the following

information, aggregated for each census

tract/block numbering area in which the

institution made at least one small

business or small farm loan during the

prior calendar year: (1) number and

amount of loans with original amounts

of $100,000 or less; (2) number and

amount of loans with original amounts

of more than $100,000 but less than or

equal to $250,000; (3) number and

amount of loans with original amounts

of more than $250,000; and (4) number

and amount of loans to businesses and

farms with gross annual revenues of $1

million or less (using the revenues the

institution considered in making its

credit decision).

Need for data collection and

reporting. Some commenters continued

to question the validity and propriety of

any data collection and reporting for

larger institutions. As discussed earlier,

the agencies have significantly reduced

the data collection and reporting from

that originally proposed, and where

feasible the rule relies on existing data

collections. However, the rule continues

to provide for some additional data

collection and reporting by larger

institutions. In a performance-based

CRA process, these requirements are

necessary to permit the agencies to carry

out their statutory obligation to examine

and assess institutions’ CRA records and

to prepare the public sections of CRA

performance evaluations. The emphasis

on actual performance responds to the

nearly universal criticism that current

CRA examinations rely too heavily on

documentation of an institution’s

policies, procedures and community

contacts rather than lending. While the

agencies recognize that the collection of

data regarding lending activity will

impose burden on many institutions,

the final rule has been tailored to rely

primarily on data readily available to or

already collected by institutions in

order to minimize the collection burden.

In addition, the burden of collecting

actual loan performance data will be

offset somewhat by the elimination of

requirements under the current CRA
22174 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

evaluation scheme that institutions

document policies, procedures, and

CRA contacts. Finally, the agencies will

prescribe a standardized format for data

maintenance and reporting and make

available software to facilitate data

maintenance and reporting.

Disclosure of small business and

small farm loan data. Under the 1994

proposal, every large institution would

have been required to include in its

public file the following information on

small business loans: (1) the number

and amount of loans in low-, moderate-

, middle- and upper-income census

tracts; (2) a list of each census tract with

at least one loan; (3) the number and

amount of loans inside the institution’s

service areas and outside the

institution’s service areas; (4) the

number and amount of loans to

businesses with gross annual revenues

of $1 million or less; (5) the number and

amount of loans to minority-owned

businesses; and (6) the number and

amount of loans to women-owned

businesses. The proposal did not

provide that the agencies would make

any aggregate data available to the

public.

The vast majority of consumer and

community group commenters

maintained that the public disclosure

provisions of the 1994 proposal were

not sufficient. They asked that small

business loan data be made available to

the public in a HMDA-like format for

individual institutions and in

aggregated form. They asked that, at a

minimum, data be available to the

public on an aggregate and institutionby-institution basis by individual

census tract, including for each census

tract the number and volume of loans.

Otherwise, the public would not be able

to judge how an institution is

performing in one low-income

neighborhood as compared to another

and, without incurring unreasonable

cost, would not be able to compare the

performance of one institution with the

performance of another. The

commenters also expressed concern

about the agencies’ using certain data to

evaluate institutions but not making the

data available to the public. Industry

commenters generally opposed detailed

data collection and reporting

requirements as burdensome.

Census tract-by-census tract

information provides the most detailed

information to the public. However,

some commenters were concerned that

disclosure at this level for each

institution might invade the privacy of

small business and small farm

borrowers, could reveal protected

business information, might erroneously

signal an expectation that an institution

lend in each census tract in its

assessment area(s), and might lead to

misinterpretation of the data.

Based on these considerations, under

the final rule, the agencies, rather than

the institutions, will prepare disclosure

statements in order to reduce burden on

the industry. The agencies will prepare

annually individual CRA Disclosure

Statements for each reporting institution

and aggregate disclosure statements for

each MSA and the non-MSA portion of

each state. The agencies will make both

the individual and the aggregate

disclosure statements available to the

public at central depositories.

The aggregate disclosure statements

will indicate, for each geography, the

number and amount of small business

and small farm loans originated or

purchased by all reporting institutions,

except that the agencies may adjust the

form of the disclosure if necessary,

because of special circumstances, to

protect the privacy of a borrower or the

competitive position of an institution.

The disclosure statements for the

individual institutions will be prepared

on a state-by-state basis and will contain

for each county (and each assessment

area smaller than a county) with a

population of 500,000 or fewer in which

the institution reported a small business

or small farm loan: (1) The number and

amount of small business and small

farm loans located in low-, moderate-,

middle-, and upper-income census

tracts or block numbering areas; (2) a list

of each census tract or block numbering

area in the county or assessment area

grouped according to whether the

geography is low-, moderate-, middle-,

or upper income; (3) a list of each

census tract or block numbering area in

which the institution reported a small

business or small farm loan; and (4) the

number and amount of small business

and small farm loans to businesses and

farms with gross annual revenues of $1

million or less. For each county (and

each assessment area smaller than a

county) with a population greater than

500,000, the number and amount of

small business and small farm loans

will be provided for geographies

grouped according to whether the

median income of the geography

relative to the area median income is

less than 10 percent, 10 or more but less

than 20 percent, 20 or more but less

than 30 percent, 30 or more but less

than 40 percent, 40 or more but less

than 50 percent, 50 or more but less

than 60 percent, 60 or more but less

than 70 percent, 70 or more but less

than 80 percent, 80 or more but less

than 90 percent, 90 or more but less

than 100 percent, 100 or more but less

than 110 percent, 110 or more but less

than 120 percent, or 120 percent or

more.

The disclosure statements will also

contain information on the number and

amount of loans inside each and outside

any assessment area of the institution

and the institution’s community

development loan information. The

disclosure statements will include

affiliate lending if the institution

reported the affiliate lending for

consideration in its assessment.

An institution itself no longer has to

prepare information on small business

and small farm lending or community

development lending to place in its

public file. Instead, each institution is

required to put its CRA Disclosure

Statement in its public file within three

days of receipt of the statement from its

regulator.

List of geographies in assessment area

and map of each assessment area. The

1994 proposal also would have required

each institution to report (and include

in its public file) a list of the

geographies the institution considers to

be within its assessment area and a map

of each assessment area showing its

geographies. Several industry comments

suggested that this requirement was

overly burdensome and that either a

map or a list of the geographies in the

assessment area(s) be reported but not

both. Under the final rule, institutions

would only report the list of geographies

in each assessment area, and small

institutions or institutions that were

small during the prior calendar year

would not have to report at all. In

addition, the agencies have changed the

reporting date to March 1 to provide a

uniform date for reporting of

information required under the final

rule.

All institutions would still have to

include a map of each assessment area

in the public file because the agencies

believe a list of census tract numbers is

likely not to be useful to many members

of the public. To reduce burden, the

final rule clarifies that the map itself

need not show the geographies. The

geographies may be identified on the

map; alternatively, if the institution

provides a separate list of the

geographies contained in the area, the

map may need to show only the

boundaries of the area.

Public File

Other aspects of the public file

requirements have also been amended

to provide more clarity and to respond

to the criticism that the requirements in

the 1994 proposal were burdensome.

List of branches, ATMs, and services.

The 1994 proposal would have required

the public file to include a list of the
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22175

institution’s branches and ATMs, their

street addresses, and geographies; a list

of branches and ATMs opened or closed

by the institution during the current and

each of the prior two calendar years,

their street addresses, and geographies;

and a list of services offered at the

institution’s branches and ATMs. Many

industry commenters stated that these

requirements were extremely

burdensome, particularly the list of

services offered at the branches. Much

of this information is central to the

institution’s performance under the

service test, and the public should have

access to it. The final rule therefore

retains the requirement that the public

file include a list of services offered at

the branches as well as the requirement

that the file include a list of the

branches, their street addresses, and

geographies and a list of branches

opened and closed during the current

and prior two calendar years.

However, the final rule does not

require institutions to list ATMs by

street address or geography. Nor does

the final rule require that institutions

provide a list of ATMs that have been

opened or closed in the current or prior

two years. This change reduces burden

on an institution in trying to keep the

public file current because ATMs may

be opened and closed more frequently

than branches. This change is also

consistent with other changes that

clarify that the agencies do not consider

ATMs as equivalent to branches in

providing services to the community.

Small business, small farm, consumer,

and community development loan data.

The 1994 proposal would have required

institutions that were not small

institutions (and small institutions that

elected to be evaluated under the

lending, investment, and service tests)

to include data collected or reported to

the agencies for each of the prior two

calendar years in their public file. The

1994 proposal would not have required

public disclosure of data if it might

reasonably be expected to disclose the

identity of the borrower because of the

small number of loans made in

particular geographies or to particular

groups of borrowers.

Institutions will no longer have to

compile information on small business,

small farm, and community

development loans for inclusion in their

public files. As described earlier, the

information regarding these loans that

continues to be relevant under the final

rule will be contained in the

institution’s CRA Disclosure Statement

prepared by the agencies.

Institutions that elect to have any

portion of their consumer lending

portfolios considered under the lending

test will be required to provide in the

public file information on the number

and amount of consumer loans to

low-, moderate-, middle- and upperincome borrowers and census tracts, as

well as information on the number and

amount of consumer loans located both

inside and outside of the institution’s

assessment area.

The final rule also removes the

exception to providing data in the

public file that might reasonably be

expected to disclose the identity of the

borrower. Because of changes to data

disclosure in the final rule, the agencies

believe that a privacy exception is not

necessary for the individual CRA

Disclosure Statements. As described

earlier, the agencies will take privacy

concerns into account in preparing

aggregate disclosure statements.

Inclusion of comments received. The

1994 proposal would have required an

institution to include in the public file

all signed, written comments that it

received from the public for the past

two years. A few industry commenters

did not perceive a need to keep

correspondence related to complaints

that have been satisfactorily resolved.

The agencies have not made a change in

response to these comments because, as

discussed earlier, satisfactorily resolved

comments are relevant to assessment of

the institution’s performance. The final

rule removes the requirement that

written comments be signed in order to

be included in the public file, because

all written comments should be

considered even if the commenter

wishes to remain anonymous. Of course,

the response appropriate to a comment

may well vary depending on whether

the commenter has provided his or her

name.

Loan-to-deposit ratio for small

institutions. The 1994 proposal would

have required small institutions to

include in the public file their loan-todeposit ratios computed at the end of

the most recent calendar year. Many

small institutions requested that the

public file requirement for loan-todeposit ratio information be expanded

to include loan-to-deposit ratios for each

quarter, or alternatively, that an annual

average loan-to-deposit ratio be placed

in the file in order to better convey

seasonal fluctuations in lending to the

public. In accordance with the

comments, the final rule requires a

small institution to place annually in

the public file the loan-to-deposit ratio

at the end of each quarter of the prior

calendar year.

Public file location and number of

copies. The 1994 proposal would have

required that institutions maintain a

complete copy of the public file at the

home office. At least one branch office

in each assessment area would have

been required to have the HMDA

Disclosure Statement and any materials

from the public file relating to that

assessment area available to the public.

In addition, if a request for the public

file was made at a branch office that did

not maintain the file, the institution

would have been required to make a

complete copy of the file for that

assessment area available for review at

the branch within five days at no cost.

An institution could have imposed

reasonable copying and mailing charges

if a member of the public requested

copies of information in the file.

Industry commenters maintained that

the requirement to keep multiple copies

of the public file was extremely

burdensome, particularly given the large

amount of information in the file. These

commenters suggested that only one

public file should be required.

Under the final rule, an institution

need maintain only one copy of its

public file in each state in which it has

its main office or a branch. The final

rule provides that each institution shall

make available to the public for

inspection upon request and at no cost

the information in the file at the main

office and, if the institution is an

interstate institution, at one branch

office in each state. At each branch, an

institution shall provide its public

evaluation and a list of services

provided at the branch. The institution

shall also make all information in the

public file relating to the assessment

area in which the branch is located

available for review at the branch within

five calendar days of a request to review

the file. These changes reduce the

burden associated with the maintenance

of public files at a branch in each

assessment area while making it easier

for the public to access the file at any

branch. They also reflect the statutory

provisions of the IBEA requiring

separate written evaluations for each

state in which an interstate institution

operates.

Additional clarifications. Some

commenters requested the agencies to

specify a date on which the public file

information should be updated. The

final rule provides that the public file be

updated as of April 1 of each year

unless the rule specifies another time

for a particular element, such as the

CRA Disclosure Statement. The final

rule also clarifies that contents of the

public file can be supplemented with

any other information the institution

deems appropriate. The final rule

further clarifies that lending data

contained in the public file relate to

lending not only by the institution, but
22176 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

also its affiliates, if the lending by

affiliates is considered in the assessment

of the institution.

Transition

The 1994 proposal would have

established a transition period from July

1, 1995, to July 1, 1996. Institutions

subject to data collection and reporting

requirements would have been required

to begin collecting home mortgage,

small business, and consumer loan data

on July 1, 1995. Assessments under the

proposed standards would have begun

July 1, 1996. However, small

institutions would have had the

opportunity to be examined, at their

option, under the small institution

assessment method anytime after July 1,

1995. Anytime on or after July 1, 1995,

an institution could have elected to

submit for approval a strategic plan, and

examinations under approved strategic

plans would have begun July 1, 1996.

Many industry commenters requested

that the transition period be lengthened

to provide institutions with more time

to develop procedures for satisfying the

data collection requirements. Also,

some of these commenters

recommended against implementing the

data collection requirements on July 1,

because they believed that data

collected for a half year would not be

useful. Moreover, some industry

commenters asked that data collection

begin on January 1, to fall in line with

other materials that are maintained on a

calendar-year basis.

In light of these comments and the

fact that the implementation dates set

forth in the 1994 proposal reflected

anticipated publication of the final rule

in January 1995, the data collection

requirements set forth in the final rule

will become effective January 1, 1996.

The reporting requirements will become

effective January 1, 1997. Evaluations

under the lending, investment, service,

and community development tests will

begin July 1, 1997, in order to allow the

agencies to use the newly reported data.

However, evaluations under the small

bank performance standards, which do

not utilize new data, will begin January

1, 1996. In addition, beginning January

1, 1996, any institution may submit a

strategic plan for approval or elect to be

examined under the revised

performance tests, if the institution

provides the necessary data.

An institution that elects evaluation

under the lending, investment, and

service tests before July 1, 1997, must

provide, in machine readable form, data

on small business and small farm loans

and community development loans for

the twelve month period preceding the

examination. The institution must also

provide, in machine readable form, the

location of home mortgage loans located

outside MSAs in which the institution

has an office (or outside any MSA) for

that period. If the institution elects

evaluation of any category of consumer

loans, the institution must also provide

consumer loan data, in machine

readable form, for that category for that

period. An institution that seeks

evaluation under the community

development test must apply for

designation as a wholesale or limited

purpose bank three months prior to its

examination and must provide data on

community development loans for the

twelve months prior to the examination.

All institutions evaluated under the

revised tests and standards or under an

approved strategic plan before July 1,

1997, must delineate their assessment

areas in accordance with the provisions

of the final rule.

CRA Notice

The 1994 proposal would have made

minor changes to the notice

requirements set forth in the 1993

proposal. The term ‘‘head office’’ was

changed to ‘‘main office’’ for clarity.

Within the notice, the statement of what

is included in the CRA performance file

would have been expanded to describe

more accurately the contents of the file.

The final rule makes additional changes

to reflect changes in the public file

provisions.

Multiple Assessment Areas

The 1994 proposal did not address

how institutions with multiple

assessment areas would be examined or

how performance in different

assessment areas would affect the

overall rating. The agencies received

comments expressing a broad range of

opinions regarding the examination

treatment and assessment of institutions

with multiple assessment areas. Several

community group commenters stated

that ‘‘sampling’’ among assessment

areas was unacceptable, while an

industry organization suggested an

elaborate sampling procedure. Other

commenters proposed that certain

assessment area characteristics, such as

the percentage of the institution’s

deposits or assets in the assessment

area, should determine the weight that

performance in that assessment area

should have on the overall rating of the

institution. Other commenters were

concerned that such proposals could

mean that rural assessment areas would

not be given appropriate consideration

in the examination process.

The agencies continue to believe that

the examination treatment of multiple

assessment areas is best left for

examination procedures, rather than

stated in regulatory text. Whether an

institution has one assessment area or

several, the examiner must have an

adequate factual basis on which to

assess an institution’s record of

performance, and the overall rating

must be fair and appropriate. These

objectives do not necessarily require

that an agency examine an institution’s

performance in every assessment area in

the same way or that the rule state how

performance in different assessment

areas is aggregated. Just as a single

mathematical calculation cannot

determine performance in an

assessment area, so the appropriate

treatment of multiple assessment areas

cannot be reduced to a formula.

The agencies note that the IBEA

amended the provisions of the CRA

regarding written evaluations, and the

examination procedures will be

consistent with those requirements.

Written Evaluations

Although the 1994 proposal did not

directly address the content of the

written performance evaluations

required by the CRA statute, some

commenters did. These commenters

focused on whether the agencies would

disclose an institution’s ratings on the

lending, investment, and service tests to

the institution and to the public.

The agencies jointly will issue

guidelines for the contents and

disclosure of written evaluations

prepared under the final rule, and these

guidelines will implement the IBEA

amendments regarding written

evaluations. To address the issue raised

in the comments, the agencies envision

that these guidelines will provide that

an institution’s ratings on the different

tests in the rule be disclosed both to the

institution and, as part of the public

section of the written evaluation, to the

public. A guiding principle of the CRA

reform effort has been to clarify for all

concerned the basis for an institution’s

rating, and the disclosure of ratings will

provide essential information regarding

the assessment of an institution’s

performance. Contrary to the claim

raised in some comments, neither the

use of five ratings, nor the disclosure of

those ratings to the public, conflicts

with the statutory mandate that the

agencies use four ratings in assessing

the overall performance of an

institution.

Appeals

Many commenters requested that the

agencies establish an interagency

appeals process. The final rule does not

adopt this suggestion. Each agency has

a process under which an institution
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22177

can appeal its CRA rating. The agencies

have recently reviewed and modified, as

necessary, their appeals processes

pursuant to the Community

Development and Regulatory

Improvement Act of 1994. In light of the

recent review, the agencies do not

believe that it is necessary to adopt an

interagency appeals process in the final

rule.

Additional Interagency Initiatives

In addition to this rulemaking, the

agencies will work together to improve

training for examiners, to increase

interagency efforts to apply standards

consistently and reliably, and to

minimize unnecessary compliance

burden. These efforts will focus on

producing a CRA assessment process

that imposes fewer burdens on

institutions yet yields better results for

the local communities in which they are

chartered to do business.

The agencies have also agreed to

conduct a full review of the final rule in

the year 2002, five years after the rule

is fully implemented. This review will

be conducted to determine whether the

rule has been effective in achieving the

goals of the final rule, including

emphasizing performance rather than

process, promoting consistency in

evaluations, and eliminating

unnecessary burden. Any regulatory

changes that are determined to be

necessary to improve the rule’s

effectiveness will be made at that time.

Paperwork Reduction Act

OCC: The collections of information

contained in this final rule have been

reviewed and approved by the Office of

Management and Budget in accordance

with the requirements of the Paperwork

Reduction Act of 1980 (44 U.S.C.

3504(h)) under control number 1557–

0160.

The estimated annual burden per

respondent varies, depending on

individual circumstances, from 2 hours

for a small bank required to perform

only recordkeeping, to 280 hours for a

large bank required to perform all

elements in part 25, with an estimated

average burden of 18.5 hours.

The collections of information in this

final rule are in 12 CFR 25.25, 25.27,

25.29, 25.41, 25.42, and 25.43.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be directed

to Legislative and Regulatory Activities

Division, Attention: 1557–0160, Office

of the Comptroller of the Currency, 250

E Street, SW., Washington, DC 20219,

and to the Office of Management and

Budget, Paperwork Reduction Project

(1557–0160), Washington, DC 20503.

Board: In accordance with section

3507 of the Paperwork Reduction Act of

1980 (44 U.S.C. Ch. 35; 5 CFR 1320.13),

the proposed information collection was

reviewed by the Board under the

authority delegated to the Board by the

Office of Management and Budget after

consideration of the comments received

during the public comment period.

The collections of information in this

rule are in 12 CFR 228.25, 228.27,

228.41, 228.42, and 228.43. This

information is required to evidence the

efforts of State member banks in helping

to meet the credit needs of their entire

communities, including low- and

moderate-income areas. This

information will be used to assess State

member bank performance in satisfying

the credit needs of their communities

and in evaluating certain applications.

The estimated annual burden per

respondent/recordkeeper varies from 2

to 280 hours, depending on individual

circumstances, with an estimated

average of 17 hours. There will be an

estimated 969 recordkeepers, averaging

16 hours. Among those will be an

estimated 274 respondents, responsible

for an additional average of 4 hours of

reporting burden. These estimates

include a prediction that five percent of

respondents/recordkeepers will keep or

submit optional data.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be directed

to Secretary, Board of Governors of the

Federal Reserve System, 20th and C

Streets, NW., Washington, DC 20551;

and to the Office of Management and

Budget, Paperwork Reduction Project

(7100–0247), Washington, DC 20503.

FDIC: The collections of information

contained in this final rule have been

reviewed and approved by the Office of

Management and Budget in accordance

with the requirements of the Paperwork

Reduction Act of 1980 (44 U.S.C.

3504(h)) under control number 3064–

0092.

The estimated annual burden per

respondent varies, depending on

individual circumstances, from 2 hours

for a small bank required to perform

only recordkeeping, to 280 hours for a

large bank required to perform all

elements in part 345, with an estimated

average burden of 12 hours.

The collections of information in this

final rule are in 12 CFR 345.25, 345.27,

345.29, 345.41, 345.42, and 345.43.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be directed

to the Office of Management and

Budget, Paperwork Reduction Project

(3604–0092), Washington, DC 20503,

with copies of such comments to be sent

to Steven F. Hanft, Office of the

Executive Secretary, room F–453,

Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC

20429.

OTS: The collections of information

contained in this final rule have been

reviewed and approved by the Office of

Management and Budget in accordance

with the requirements of the Paperwork

Reduction Act of 1980 (44 U.S.C.

3504(h)) under control number 1550–

0012.

The estimated annual burden per

respondent varies, depending on

individual circumstances, from 2 hours

for a small savings association required

to perform only recordkeeping, to 214

hours for a large savings association

required to perform all elements in part

563e, with an estimated average burden

of 16 hours.

The collections of information in this

final rule are in 12 CFR 563e.25,

563e.27, 563e.29, 563e.41, 563e.42, and

563e.43.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be directed

to the Office of Management and

Budget, Paperwork Reduction Project

(1550–0012), Washington, DC 20503,

with copies to the Office of Thrift

Supervision, 1700 G Street, NW.,

Washington, DC 20552.

Regulatory Flexibility Act

The agencies concluded that the 1994

proposal, if adopted as a final rule,

would not have a significant economic

impact on a substantial number of small

banks and thrifts and invited comment

on this determination. In response to

comments received, the agencies have

conducted an analysis under The

Regulatory Flexibility Act (5 U.S.C.

601–612, the ‘‘Act’’).

The Act requires an agency to take

certain considerations into account

when a rule will have a significant

economic impact on a substantial

number of small entities. Two of the

three requirements of a final regulatory

flexibility analysis (5 U.S.C. 604)—(1) a

succinct statement of the need for and

the objectives of the rule, and (2) a

summary of the issues raised by the

public comments, the agency’s

assessment of the issues, and a

statement of the changes made in the

final rule in response to the comments—

are discussed earlier in the preamble.

The third requirement is for a

description of the alternatives the

agency considered to the rule being

adopted that were designed to minimize

the effect on small entities subject to the

rule and why, if applicable, they were

rejected.
22178 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

The agencies have carefully

considered the effects of the final rule

on small entities and the alternatives

available to mitigate its potential

burdens. The final rule provides

separate, less burdensome treatment for

small institutions, which are defined as

institutions with total assets of $250

million or less that are either

independent or are affiliates of a

holding company with banking and

thrift assets of less than $1 billion. The

rule contains a specific small institution

performance evaluation that relies on

simplified criteria, to account for the

operational differences between large

and small institutions. Small

institutions are also not subject to the

data collection and reporting provisions

in the rule for large institutions.

The agencies believe that the rule has

minimized the burden on small

institutions, while still enabling the

agencies to fulfill their statutory

mandate to examine the CRA record of

these institutions. Although exempting

small institutions from evaluation under

the CRA would eliminate any possible

burden imposed by the final rule, the

CRA does not provide an exemption for

small institutions.

Some small institutions would

continue to be subject to the same

potential burdens imposed on large

institutions if they were affiliates in a

holding company with banking and

thrift assets of more than $1 billion. The

agencies have rejected the alternative of

eliminating the holding company

limitation altogether in order to prevent

holding companies from manipulating

the asset size of their institutions to

qualify for the small institution

treatment.

However, by raising the holding

company asset limit from $250 million

in the 1994 proposal to $1 billion in the

final rule, the agencies have sought to

mitigate any unfairness and unnecessary

burden resulting from the holding

company limitation. The agencies

selected a higher asset level for the

holding company limitation in

recognition that smaller holding

companies may be unable to provide the

necessary support for the CRA activities

of their small institution subsidiaries.

The agencies anticipate that larger

holding companies under the final rule

would be capable of supporting the CRA

activities of their subsidiary small

institutions.

Executive Order 12866

OCC and OTS: The OCC and OTS

have determined that this document is

a significant regulatory action because

of the legal and policy issues it raises.

Because of the significance of the rule,

the OCC and OTS will review its

effectiveness in achieving the goals of

the CRA prior to and in preparation for

the full CRA regulatory review in the

year 2002, discussed earlier.

Unfunded Mandates Reform Act of

1995

OCC and OTS: Section 202 of the

Unfunded Mandates Reform Act of

1995, signed into law on March 22,

1995, provides that before promulgating

certain rulemakings, covered agencies

must prepare a written statement

containing a cost/benefit analysis.

Under section 205, before promulgating

any rule for which a written statement

is required under section 202, covered

agencies must identify and consider a

reasonable number of regulatory

alternatives, and from those alternatives,

select the least costly, most costeffective, or least burdensome one that

achieves the objective of the

rulemaking.

In promulgating this rulemaking, the

Federal financial supervisory agencies

considered a wide range of alternatives

described in notices of proposed

rulemaking published in 1993 and 1994.

In addition to the comments that the

agencies received in response to the

notices of proposed rulemaking, the

agencies conducted a series of seven

public hearings across the country in

1993, at which hundreds of witnesses

commented and others provided written

statements. Although the OCC and OTS

have determined that they are not

required to prepare a written statement

under section 202 or to make a finding

under section 205, they conclude that,

on balance, this final rule provides the

most cost-effective and least

burdensome alternative to achieve the

objectives of the rule, consistent with

statutory requirements.

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, Federal Reserve

System, Investments, Reporting and

recordkeeping requirements.

12 CFR Part 345

Banks, Banking, Community

development, Credit, Investments,

Reporting and recordkeeping

requirements.

12 CFR Part 563e

Community development, Credit,

Investments, Reporting and

recordkeeping requirements, Savings

associations.

Authority and Issuance

Office of the Comptroller of the

Currency

12 CFR Chapter I

For the reasons outlined in the joint

preamble, the Office of the Comptroller

of the Currency amends 12 CFR chapter

I as set forth below:

PART 25—COMMUNITY

REINVESTMENT ACT REGULATIONS

1. The authority citation for part 25 is

revised to read as follows:

Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36,

93a, 161, 215, 215a, 481, 1814, 1816, 1828(c),

and 2901 through 2907.

2. Part 25 is amended by adding

Subparts A through D and Appendices

A and B to read as follows:

Subpart A—General

Sec.

25.11 Authority, purposes, and scope.

25.12 Definitions.

Subpart B—Standards for Assessing

Performance

25.21 Performance tests, standards, and

ratings, in general.

25.22 Lending test.

25.23 Investment test.

25.24 Service test.

25.25 Community development test for

wholesale or limited purpose banks.

25.26 Small bank performance standards.

25.27 Strategic plan.

25.28 Assigned ratings.

25.29 Effect of CRA performance on

applications.

Subpart C—Records, Reporting, and

Disclosure Requirements

25.41 Assessment area delineation.

25.42 Data collection, reporting, and

disclosure.

25.43 Content and availability of public file.

25.44 Public notice by banks.

25.45 Publication of planned examination

schedule.

Subpart D—Transition Rules

25.51 Transition rules.

Appendix A to Part 25—Ratings

Appendix B to Part 25—CRA Notice

Subpart A—General

§ 25.11 Authority, purposes, and scope.

(a) Authority and OMB control

number—(1) Authority. The authority

for this part is 12 U.S.C. 21, 22, 26, 27,

30, 36, 93a, 161, 215, 215a, 481, 1814,

1816, 1828(c), and 2901 through 2907.

(2) OMB control number. The

information collection requirements

contained in this part were approved by

the Office of Management and Budget
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22179

under the provisions of 44 U.S.C. 3501

et seq. and have been assigned OMB

control number 1557–0160.

(b) Purposes. In enacting the

Community Reinvestment Act (CRA),

the Congress required each appropriate

Federal financial supervisory agency to

assess an institution’s record of helping

to meet the credit needs of the local

communities in which the institution is

chartered, consistent with the safe and

sound operation of the institution, and

to take this record into account in the

agency’s evaluation of an application for

a deposit facility by the institution. This

part is intended to carry out the

purposes of the CRA by:

(1) Establishing the framework and

criteria by which the Office of the

Comptroller of the Currency (OCC)

assesses a bank’s record of helping to

meet the credit needs of its entire

community, including low- and

moderate-income neighborhoods,

consistent with the safe and sound

operation of the bank; and

(2) Providing that the OCC takes that

record into account in considering

certain applications.

(c) Scope—(1)General. This part

applies to all banks except as provided

in paragraphs (c)(2) and (c)(3) of this

section.

(2) Federal branches and agencies. (i)

This part applies to all insured Federal

branches and to any Federal branch that

is uninsured that results from an

acquisition described in section 5(a)(8)

of the International Banking Act of 1978

(12 U.S.C. 3103(a)(8)).

(ii) Except as provided in paragraph

(c)(2)(i) of this section, this part does not

apply to Federal branches that are

uninsured, limited Federal branches, or

Federal agencies, as those terms are

defined in part 28 of this chapter.

(3) Certain special purpose banks.

This part does not apply to special

purpose banks that do not perform

commercial or retail banking services by

granting credit to the public in the

ordinary course of business, other than

as incident to their specialized

operations. These banks include

banker’s banks, as defined in 12 U.S.C.

24 (Seventh), and banks that engage

only in one or more of the following

activities: providing cash management

controlled disbursement services or

serving as correspondent banks, trust

companies, or clearing agents.

§ 25.12 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate means any company that

controls, is controlled by, or is under

common control with another company.

The term ‘‘control’’ has the meaning

given to that term in 12 U.S.C.

1841(a)(2), and a company is under

common control with another company

if both companies are directly or

indirectly controlled by the same

company.

(b) Area median income means:

(1) The median family income for the

MSA, if a person or geography is located

in an MSA; or

(2) The statewide nonmetropolitan

median family income, if a person or

geography is located outside an MSA.

(c) Assessment area means a

geographic area delineated in

accordance with § 25.41.

(d) Automated teller machine (ATM)

means an automated, unstaffed banking

facility owned or operated by, or

operated exclusively for, the bank at

which deposits are received, cash

dispersed, or money lent.

(e) Bank means a national bank

(including a Federal branch as defined

in part 28 of this chapter) with Federally

insured deposits, except as provided in

§ 25.11(c).

(f) Branch means a staffed banking

facility authorized as a branch, whether

shared or unshared, including, for

example, a mini-branch in a grocery

store or a branch operated in

conjunction with any other local

business or nonprofit organization.

(g) CMSA means a consolidated

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(h) Community development means:

(1) Affordable housing (including

multifamily rental housing) for low- or

moderate-income individuals;

(2) Community services targeted to

low- or moderate-income individuals;

(3) Activities that promote economic

development by financing businesses or

farms that meet the size eligibility

standards of 13 CFR 121.802(a)(2) or

have gross annual revenues of $1

million or less; or

(4) Activities that revitalize or

stabilize low- or moderate-income

geographies.

(i) Community development loan

means a loan that:

(1) Has as its primary purpose

community development; and

(2) Except in the case of a wholesale

or limited purpose bank:

(i) Has not been reported or collected

by the bank or an affiliate for

consideration in the bank’s assessment

as a home mortgage, small business,

small farm, or consumer loan, unless it

is a multifamily dwelling loan (as

described in Appendix A to Part 203 of

this title); and

(ii) Benefits the bank’s assessment

area(s) or a broader statewide or regional

area that includes the bank’s assessment

area(s).

(j) Community development service

means a service that:

(1) Has as its primary purpose

community development;

(2) Is related to the provision of

financial services; and

(3) Has not been considered in the

evaluation of the bank’s retail banking

services under § 25.24(d).

(k) Consumer loan means a loan to

one or more individuals for household,

family, or other personal expenditures.

A consumer loan does not include a

home mortgage, small business, or small

farm loan. Consumer loans include the

following categories of loans:

(1) Motor vehicle loan, which is a

consumer loan extended for the

purchase of and secured by a motor

vehicle;

(2) Credit card loan, which is a line

of credit for household, family, or other

personal expenditures that is accessed

by a borrower’s use of a ‘‘credit card,’’

as this term is defined in § 226.2 of this

title;

(3) Home equity loan, which is a

consumer loan secured by a residence of

the borrower;

(4) Other secured consumer loan,

which is a secured consumer loan that

is not included in one of the other

categories of consumer loans; and

(5) Other unsecured consumer loan,

which is an unsecured consumer loan

that is not included in one of the other

categories of consumer loans.

(l) Geography means a census tract or

a block numbering area delineated by

the United States Bureau of the Census

in the most recent decennial census.

(m) Home mortgage loan means a

‘‘home improvement loan’’ or a ‘‘home

purchase loan’’ as defined in § 203.2 of

this title.

(n) Income level includes:

(1) Low-income, which means an

individual income that is less than 50

percent of the area median income, or

a median family income that is less than

50 percent, in the case of a geography.

(2) Moderate-income, which means an

individual income that is at least 50

percent and less than 80 percent of the

area median income, or a median family

income that is at least 50 and less than

80 percent, in the case of a geography.

(3) Middle-income, which means an

individual income that is at least 80

percent and less than 120 percent of the

area median income, or a median family

income that is at least 80 and less than

120 percent, in the case of a geography.

(4) Upper-income, which means an

individual income that is 120 percent or

more of the area median income, or a

median family income that is 120
22180 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

percent or more, in the case of a

geography.

(o) Limited purpose bank means a

bank that offers only a narrow product

line (such as credit card or motor

vehicle loans) to a regional or broader

market and for which a designation as

a limited purpose bank is in effect, in

accordance with § 25.25(b).

(p) Loan location. A loan is located as

follows:

(1) A consumer loan is located in the

geography where the borrower resides;

(2) A home mortgage loan is located

in the geography where the property to

which the loan relates is located; and

(3) A small business or small farm

loan is located in the geography where

the main business facility or farm is

located or where the loan proceeds

otherwise will be applied, as indicated

by the borrower.

(q) Loan production office means a

staffed facility, other than a branch, that

is open to the public and that provides

lending-related services, such as loan

information and applications.

(r) MSA means a metropolitan

statistical area or a primary

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(s) Qualified investment means a

lawful investment, deposit, membership

share, or grant that has as its primary

purpose community development.

(t) Small bank means a bank that, as

of December 31 of either of the prior two

calendar years, had total assets of less

than $250 million and was independent

or an affiliate of a holding company

that, as of December 31 of either of the

prior two calendar years, had total

banking and thrift assets of less than $1

billion.

(u) Small business loan means a loan

included in ‘‘loans to small businesses’’

as defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(v) Small farm loan means a loan

included in ‘‘loans to small farms’’ as

defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(w) Wholesale bank means a bank that

is not in the business of extending home

mortgage, small business, small farm, or

consumer loans to retail customers, and

for which a designation as a wholesale

bank is in effect, in accordance with

§ 25.25(b).

Subpart B—Standards for Assessing

Performance

§ 25.21 Performance tests, standards, and

ratings, in general.

(a) Performance tests and standards.

The OCC assesses the CRA performance

of a bank in an examination as follows:

(1) Lending, investment, and service

tests. The OCC applies the lending,

investment, and service tests, as

provided in §§ 25.22 through 25.24, in

evaluating the performance of a bank,

except as provided in paragraphs (a)(2),

(a)(3), and (a)(4) of this section.

(2) Community development test for

wholesale or limited purpose banks. The

OCC applies the community

development test for a wholesale or

limited purpose bank, as provided in

§ 25.25, except as provided in paragraph

(a)(4) of this section.

(3) Small bank performance

standards. The OCC applies the small

bank performance standards as provided

in § 25.26 in evaluating the performance

of a small bank or a bank that was a

small bank during the prior calendar

year, unless the bank elects to be

assessed as provided in paragraphs

(a)(1), (a)(2), or (a)(4) of this section. The

bank may elect to be assessed as

provided in paragraph (a)(1) of this

section only if it collects and reports the

data required for other banks under

§ 25.42.

(4) Strategic plan. The OCC evaluates

the performance of a bank under a

strategic plan if the bank submits, and

the OCC approves, a strategic plan as

provided in § 25.27.

(b) Performance context. The OCC

applies the tests and standards in

paragraph (a) of this section and also

considers whether to approve a

proposed strategic plan in the context

of:

(1) Demographic data on median

income levels, distribution of household

income, nature of housing stock,

housing costs, and other relevant data

pertaining to a bank’s assessment

area(s);

(2) Any information about lending,

investment, and service opportunities in

the bank’s assessment area(s)

maintained by the bank or obtained

from community organizations, state,

local, and tribal governments, economic

development agencies, or other sources;

(3) The bank’s product offerings and

business strategy as determined from

data provided by the bank;

(4) Institutional capacity and

constraints, including the size and

financial condition of the bank, the

economic climate (national, regional,

and local), safety and soundness

limitations, and any other factors that

significantly affect the bank’s ability to

provide lending, investments, or

services in its assessment area(s);

(5) The bank’s past performance and

the performance of similarly situated

lenders;

(6) The bank’s public file, as

described in § 25.43, and any written

comments about the bank’s CRA

performance submitted to the bank or

the OCC; and

(7) Any other information deemed

relevant by the OCC.

(c) Assigned ratings. The OCC assigns

to a bank one of the following four

ratings pursuant to § 25.28 and

Appendix A of this part: ‘‘outstanding’’;

‘‘satisfactory’’; ‘‘needs to improve’’; or

‘‘substantial noncompliance’’ as

provided in 12 U.S.C. 2906(b)(2). The

rating assigned by the OCC reflects the

bank’s record of helping to meet the

credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the bank.

(d) Safe and sound operations. This

part and the CRA do not require a bank

to make loans or investments or to

provide services that are inconsistent

with safe and sound operations. To the

contrary, the OCC anticipates banks can

meet the standards of this part with safe

and sound loans, investments, and

services on which the banks expect to

make a profit. Banks are permitted and

encouraged to develop and apply

flexible underwriting standards for

loans that benefit low- or moderateincome geographies or individuals, only

if consistent with safe and sound

operations.

§ 25.22 Lending test.

(a) Scope of test. (1) The lending test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through its lending activities by

considering a bank’s home mortgage,

small business, small farm, and

community development lending. If

consumer lending constitutes a

substantial majority of a bank’s

business, the OCC will evaluate the

bank’s consumer lending in one or more

of the following categories: motor

vehicle, credit card, home equity, other

secured, and other unsecured loans. In

addition, at a bank’s option, the OCC

will evaluate one or more categories of

consumer lending, if the bank has

collected and maintained, as required in

§ 25.42(c)(1), the data for each category

that the bank elects to have the OCC

evaluate.

(2) The OCC considers originations

and purchases of loans. The OCC will

also consider any other loan data the

bank may choose to provide, including
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22181

data on loans outstanding, commitments

and letters of credit.

(3) A bank may ask the OCC to

consider loans originated or purchased

by consortia in which the bank

participates or by third parties in which

the bank has invested only if the loans

meet the definition of community

development loans and only in

accordance with paragraph (d) of this

section. The OCC will not consider

these loans under any criterion of the

lending test except the community

development lending criterion.

(b) Performance criteria. The OCC

evaluates a bank’s lending performance

pursuant to the following criteria:

(1) Lending activity. The number and

amount of the bank’s home mortgage,

small business, small farm, and

consumer loans, if applicable, in the

bank’s assessment area(s);

(2) Geographic distribution. The

geographic distribution of the bank’s

home mortgage, small business, small

farm, and consumer loans, if applicable,

based on the loan location, including:

(i) The proportion of the bank’s

lending in the bank’s assessment area(s);

(ii) The dispersion of lending in the

bank’s assessment area(s); and

(iii) The number and amount of loans

in low-, moderate-, middle-, and upperincome geographies in the bank’s

assessment area(s);

(3) Borrower characteristics. The

distribution, particularly in the bank’s

assessment area(s), of the bank’s home

mortgage, small business, small farm,

and consumer loans, if applicable, based

on borrower characteristics, including

the number and amount of:

(i) Home mortgage loans to low-,

moderate-, middle-, and upper-income

individuals;

(ii) Small business and small farm

loans to businesses and farms with gross

annual revenues of $1 million or less;

(iii) Small business and small farm

loans by loan amount at origination; and

(iv) Consumer loans, if applicable, to

low-, moderate-, middle-, and upperincome individuals;

(4) Community development lending.

The bank’s community development

lending, including the number and

amount of community development

loans, and their complexity and

innovativeness; and

(5) Innovative or flexible lending

practices. The bank’s use of innovative

or flexible lending practices in a safe

and sound manner to address the credit

needs of low- or moderate-income

individuals or geographies.

(c) Affiliate lending. (1) At a bank’s

option, the OCC will consider loans by

an affiliate of the bank, if the bank

provides data on the affiliate’s loans

pursuant to § 25.42.

(2) The OCC considers affiliate

lending subject to the following

constraints:

(i) No affiliate may claim a loan

origination or loan purchase if another

institution claims the same loan

origination or purchase; and

(ii) If a bank elects to have the OCC

consider loans within a particular

lending category made by one or more

of the bank’s affiliates in a particular

assessment area, the bank shall elect to

have the OCC consider, in accordance

with paragraph (c)(1) of this section, all

the loans within that lending category in

that particular assessment area made by

all of the bank’s affiliates.

(3) The OCC does not consider

affiliate lending in assessing a bank’s

performance under paragraph (b)(2)(i) of

this section.

(d) Lending by a consortium or a third

party. Community development loans

originated or purchased by a consortium

in which the bank participates or by a

third party in which the bank has

invested:

(1) Will be considered, at the bank’s

option, if the bank reports the data

pertaining to these loans under

§ 25.42(b)(2); and

(2) May be allocated among

participants or investors, as they choose,

for purposes of the lending test, except

that no participant or investor:

(i) May claim a loan origination or

loan purchase if another participant or

investor claims the same loan

origination or purchase; or

(ii) May claim loans accounting for

more than its percentage share (based on

the level of its participation or

investment) of the total loans originated

by the consortium or third party.

(e) Lending performance rating. The

OCC rates a bank’s lending performance

as provided in Appendix A of this part.

§ 25.23 Investment test.

(a) Scope of test. The investment test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through qualified investments

that benefit its assessment area(s) or a

broader statewide or regional area that

includes the bank’s assessment area(s).

(b) Exclusion. Activities considered

under the lending or service tests may

not be considered under the investment

test.

(c) Affiliate investment. At a bank’s

option, the OCC will consider, in its

assessment of a bank’s investment

performance, a qualified investment

made by an affiliate of the bank, if the

qualified investment is not claimed by

any other institution.

(d) Disposition of branch premises.

Donating, selling on favorable terms, or

making available on a rent-free basis a

branch of the bank that is located in a

predominantly minority neighborhood

to a minority depository institution or

women’s depository institution (as these

terms are defined in 12 U.S.C. 2907(b))

will be considered as a qualified

investment.

(e) Performance criteria. The OCC

evaluates the investment performance of

a bank pursuant to the following

criteria:

(1) The dollar amount of qualified

investments;

(2) The innovativeness or complexity

of qualified investments;

(3) The responsiveness of qualified

investments to credit and community

development needs; and

(4) The degree to which the qualified

investments are not routinely provided

by private investors.

(f) Investment performance rating.

The OCC rates a bank’s investment

performance as provided in Appendix A

of this part.

§ 25.24 Service test.

(a) Scope of test. The service test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) by analyzing both the availability

and effectiveness of a bank’s systems for

delivering retail banking services and

the extent and innovativeness of its

community development services.

(b) Area(s) benefitted. Community

development services must benefit a

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(c) Affiliate service. At a bank’s

option, the OCC will consider, in its

assessment of a bank’s service

performance, a community development

service provided by an affiliate of the

bank, if the community development

service is not claimed by any other

institution.

(d) Performance criteria—retail

banking services. The OCC evaluates the

availability and effectiveness of a bank’s

systems for delivering retail banking

services, pursuant to the following

criteria:

(1) The current distribution of the

bank’s branches among low-,

moderate-, middle-, and upper-income

geographies;

(2) In the context of its current

distribution of the bank’s branches, the

bank’s record of opening and closing

branches, particularly branches located

in low- or moderate-income geographies

or primarily serving low- or moderateincome individuals;

(3) The availability and effectiveness

of alternative systems for delivering
22182 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

retail banking services (e.g., ATMs,

ATMs not owned or operated by or

exclusively for the bank, banking by

telephone or computer, loan production

offices, and bank-at-work or bank-bymail programs) in low- and moderateincome geographies and to low- and

moderate-income individuals; and

(4) The range of services provided in

low-, moderate-, middle-, and upperincome geographies and the degree to

which the services are tailored to meet

the needs of those geographies.

(e) Performance criteria—community

development services. The OCC

evaluates community development

services pursuant to the following

criteria:

(1) The extent to which the bank

provides community development

services; and

(2) The innovativeness and

responsiveness of community

development services.

(f) Service performance rating. The

OCC rates a bank’s service performance

as provided in Appendix A of this part.

§ 25.25 Community development test for

wholesale or limited purpose banks.

(a) Scope of test. The OCC assesses a

wholesale or limited purpose bank’s

record of helping to meet the credit

needs of its assessment area(s) under the

community development test through

its community development lending,

qualified investments, or community

development services.

(b) Designation as a wholesale or

limited purpose bank. In order to

receive a designation as a wholesale or

limited purpose bank, a bank shall file

a request, in writing, with the OCC, at

least three months prior to the proposed

effective date of the designation. If the

OCC approves the designation, it

remains in effect until the bank requests

revocation of the designation or until

one year after the OCC notifies the bank

that the OCC has revoked the

designation on its own initiative.

(c) Performance criteria. The OCC

evaluates the community development

performance of a wholesale or limited

purpose bank pursuant to the following

criteria:

(1) The number and amount of

community development loans

(including originations and purchases of

loans and other community

development loan data provided by the

bank, such as data on loans outstanding,

commitments, and letters of credit),

qualified investments, or community

development services;

(2) The use of innovative or complex

qualified investments, community

development loans, or community

development services and the extent to

which the investments are not routinely

provided by private investors; and

(3) The bank’s responsiveness to

credit and community development

needs.

(d) Indirect activities. At a bank’s

option, the OCC will consider in its

community development performance

assessment:

(1) Qualified investments or

community development services

provided by an affiliate of the bank, if

the investments or services are not

claimed by any other institution; and

(2) Community development lending

by affiliates, consortia and third parties,

subject to the requirements and

limitations in § 25.22(c) and (d).

(e) Benefit to assessment area(s)—(1)

Benefit inside assessment area(s). The

OCC considers all qualified

investments, community development

loans, and community development

services that benefit areas within the

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(2) Benefit outside assessment area(s).

The OCC considers the qualified

investments, community development

loans, and community development

services that benefit areas outside the

bank’s assessment area(s), if the bank

has adequately addressed the needs of

its assessment area(s).

(f) Community development

performance rating. The OCC rates a

bank’s community development

performance as provided in Appendix A

of this part.

§ 25.26 Small bank performance

standards.

(a) Performance criteria. The OCC

evaluates the record of a small bank, or

a bank that was a small bank during the

prior calendar year, of helping to meet

the credit needs of its assessment area(s)

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).

(b) Small bank performance rating.

The OCC rates the performance of a

bank evaluated under this section as

provided in Appendix A of this part.

§ 25.27 Strategic plan.

(a) Alternative election. The OCC will

assess a bank’s record of helping to meet

the credit needs of its assessment area(s)

under a strategic plan if:

(1) The bank has submitted the plan

to the OCC as provided for in this

section;

(2) The OCC has approved the plan;

(3) The plan is in effect; and

(4) The bank has been operating under

an approved plan for at least one year.

(b) Data reporting. The OCC’s

approval of a plan does not affect the

bank’s obligation, if any, to report data

as required by § 25.42.

(c) Plans in general.—(1) Term. A

plan may have a term of no more than

five years, and any multi-year plan must

include annual interim measurable

goals under which the OCC will

evaluate the bank’s performance.

(2) Multiple assessment areas. A bank

with more than one assessment area

may prepare a single plan for all of its

assessment areas or one or more plans

for one or more of its assessment areas.

(3) Treatment of affiliates. Affiliated

institutions may prepare a joint plan if

the plan provides measurable goals for

each institution. Activities may be

allocated among institutions at the

institutions’ option, provided that the

same activities are not considered for

more than one institution.

(d) Public participation in plan

development. Before submitting a plan

to the OCC for approval, a bank shall:

(1) Informally seek suggestions from

members of the public in its assessment

area(s) covered by the plan while

developing the plan;

(2) Once the bank has developed a

plan, formally solicit public comment

on the plan for at least 30 days by

publishing notice in at least one

newspaper of general circulation in each

assessment area covered by the plan;

and

(3) During the period of formal public

comment, make copies of the plan

available for review by the public at no

cost at all offices of the bank in any

assessment area covered by the plan and

provide copies of the plan upon request

for a reasonable fee to cover copying

and mailing, if applicable.

(e) Submission of plan. The bank shall

submit its plan to the OCC at least three

months prior to the proposed effective

date of the plan. The bank shall also
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22183

submit with its plan a description of its

informal efforts to seek suggestions from

members of the public, any written

public comment received, and, if the

plan was revised in light of the

comment received, the initial plan as

released for public comment.

(f) Plan content.—(1) Measurable

goals. (i) A bank shall specify in its plan

measurable goals for helping to meet the

credit needs of each assessment area

covered by the plan, particularly the

needs of low- and moderate-income

geographies and low- and moderateincome individuals, through lending,

investment, and services, as

appropriate.

(ii) A bank shall address in its plan all

three performance categories and,

unless the bank has been designated as

a wholesale or limited purpose bank,

shall emphasize lending and lendingrelated activities. Nevertheless, a

different emphasis, including a focus on

one or more performance categories,

may be appropriate if responsive to the

characteristics and credit needs of its

assessment area(s), considering public

comment and the bank’s capacity and

constraints, product offerings, and

business strategy.

(2) Confidential information. A bank

may submit additional information to

the OCC on a confidential basis, but the

goals stated in the plan must be

sufficiently specific to enable the public

and the OCC to judge the merits of the

plan.

(3) Satisfactory and outstanding goals.

A bank shall specify in its plan

measurable goals that constitute

‘‘satisfactory’’ performance. A plan may

specify measurable goals that constitute

‘‘outstanding’’ performance. If a bank

submits, and the OCC approves, both

‘‘satisfactory’’ and ‘‘outstanding’’

performance goals, the OCC will

consider the bank eligible for an

‘‘outstanding’’ performance rating.

(4) Election if satisfactory goals not

substantially met. A bank may elect in

its plan that, if the bank fails to meet

substantially its plan goals for a

satisfactory rating, the OCC will

evaluate the bank’s performance under

the lending, investment, and service

tests, the community development test,

or the small bank performance

standards, as appropriate.

(g) Plan approval.—(1) Timing. The

OCC will act upon a plan within 60

calendar days after the OCC receives the

complete plan and other material

required under paragraph (d) of this

section. If the OCC fails to act within

this time period, the plan shall be

deemed approved unless the OCC

extends the review period for good

cause.

(2) Public participation. In evaluating

the plan’s goals, the OCC considers the

public’s involvement in formulating the

plan, written public comment on the

plan, and any response by the bank to

public comment on the plan.

(3) Criteria for evaluating plan. The

OCC evaluates a plan’s measurable goals

using the following criteria, as

appropriate:

(i) The extent and breadth of lending

or lending-related activities, including,

as appropriate, the distribution of loans

among different geographies, businesses

and farms of different sizes, and

individuals of different income levels,

the extent of community development

lending, and the use of innovative or

flexible lending practices to address

credit needs;

(ii) The amount and innovativeness,

complexity, and responsiveness of the

bank’s qualified investments; and

(iii) The availability and effectiveness

of the bank’s systems for delivering

retail banking services and the extent

and innovativeness of the bank’s

community development services.

(h) Plan amendment. During the term

of a plan, a bank may request the OCC

to approve an amendment to the plan on

grounds that there has been a material

change in circumstances. The bank shall

develop an amendment to a previously

approved plan in accordance with the

public participation requirements of

paragraph (c) of this section.

(i) Plan assessment. The OCC

approves the goals and assesses

performance under a plan as provided

for in Appendix A of this part.

§ 25.28 Assigned ratings.

(a) Ratings in general. Subject to

paragraphs (b) and (c) of this section,

the OCC assigns to a bank a rating of

‘‘outstanding,’’ ‘‘satisfactory,’’ ‘‘needs to

improve,’’ or ‘‘substantial

noncompliance’’ based on the bank’s

performance under the lending,

investment and service tests, the

community development test, the small

bank performance standards, or an

approved strategic plan, as applicable.

(b) Lending, investment, and service

tests. The OCC assigns a rating for a

bank assessed under the lending,

investment, and service tests in

accordance with the following

principles:

(1) A bank that receives an

‘‘outstanding’’ rating on the lending test

receives an assigned rating of at least

‘‘satisfactory’’;

(2) A bank that receives an

‘‘outstanding’’ rating on both the service

test and the investment test and a rating

of at least ‘‘high satisfactory’’ on the

lending test receives an assigned rating

of ‘‘outstanding’’; and

(3) No bank may receive an assigned

rating of ‘‘satisfactory’’ or higher unless

it receives a rating of at least ‘‘low

satisfactory’’ on the lending test.

(c) Effect of evidence of

discriminatory or other illegal credit

practices. Evidence of discriminatory or

other illegal credit practices adversely

affects the OCC’s evaluation of a bank’s

performance. In determining the effect

on the bank’s assigned rating, the OCC

considers the nature and extent of the

evidence, the policies and procedures

that the bank has in place to prevent

discriminatory or other illegal credit

practices, any corrective action that the

bank has taken or has committed to

take, particularly voluntary corrective

action resulting from self-assessment,

and other relevant information.

§ 25.29 Effect of CRA performance on

applications.

(a) CRA performance. Among other

factors, the OCC takes into account the

record of performance under the CRA of

each applicant bank in considering an

application for:

(1) The establishment of a domestic

branch;

(2) The relocation of the main office

or a branch;

(3) Under the Bank Merger Act (12

U.S.C. 1828(c)), the merger or

consolidation with or the acquisition of

assets or assumption of liabilities of an

insured depository institution; and

(4) The conversion of an insured

depository institution to a national bank

charter.

(b) Charter application. An applicant

(other than an insured depository

institution) for a national bank charter

shall submit with its application a

description of how it will meet its CRA

objectives. The OCC takes the

description into account in considering

the application and may deny or

condition approval on that basis.

(c) Interested parties. The OCC takes

into account any views expressed by

interested parties that are submitted in

accordance with the OCC’s procedures

set forth in part 5 of this chapter in

considering CRA performance in an

application listed in paragraphs (a) and

(b) of this section.

(d) Denial or conditional approval of

application. A bank’s record of

performance may be the basis for

denying or conditioning approval of an

application listed in paragraph (a) of

this section.

(e) Insured depository institution. For

purposes of this section, the term

‘‘insured depository institution’’ has the
22184 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

meaning given to that term in 12 U.S.C.

1813.

Subpart C—Records, Reporting, and

Disclosure Requirements

§ 25.41 Assessment area delineation.

(a) In general. A bank shall delineate

one or more assessment areas within

which the OCC evaluates the bank’s

record of helping to meet the credit

needs of its community. The OCC does

not evaluate the bank’s delineation of its

assessment area(s) as a separate

performance criterion, but the OCC

reviews the delineation for compliance

with the requirements of this section.

(b) Geographic area(s) for wholesale

or limited purpose banks. The

assessment area(s) for a wholesale or

limited purpose bank must consist

generally of one or more MSAs (using

the MSA boundaries that were in effect

as of January 1 of the calendar year in

which the delineation is made) or one

or more contiguous political

subdivisions, such as counties, cities, or

towns, in which the bank has its main

office, branches, and deposit-taking

ATMs.

(c) Geographic area(s) for other banks.

The assessment area(s) for a bank other

than a wholesale or limited purpose

bank must:

(1) Consist generally of one or more

MSAs (using the MSA boundaries that

were in effect as of January 1 of the

calendar year in which the delineation

is made) or one or more contiguous

political subdivisions, such as counties,

cities, or towns; and

(2) Include the geographies in which

the bank has its main office, its

branches, and its deposit-taking ATMs,

as well as the surrounding geographies

in which the bank has originated or

purchased a substantial portion of its

loans (including home mortgage loans,

small business and small farm loans,

and any other loans the bank chooses,

such as those consumer loans on which

the bank elects to have its performance

assessed).

(d) Adjustments to geographic area(s).

A bank may adjust the boundaries of its

assessment area(s) to include only the

portion of a political subdivision that it

reasonably can be expected to serve. An

adjustment is particularly appropriate in

the case of an assessment area that

otherwise would be extremely large, of

unusual configuration, or divided by

significant geographic barriers.

(e) Limitations on the delineation of

an assessment area. Each bank’s

assessment area(s):

(1) Must consist only of whole

geographies;

(2) May not reflect illegal

discrimination;

(3) May not arbitrarily exclude low- or

moderate-income geographies, taking

into account the bank’s size and

financial condition; and

(4) May not extend substantially

beyond a CMSA boundary or beyond a

state boundary unless the assessment

area is located in a multistate MSA. If

a bank serves a geographic area that

extends substantially beyond a state

boundary, the bank shall delineate

separate assessment areas for the areas

in each state. If a bank serves a

geographic area that extends

substantially beyond a CMSA boundary,

the bank shall delineate separate

assessment areas for the areas inside

and outside the CMSA.

(f) Banks serving military personnel.

Notwithstanding the requirements of

this section, a bank whose business

predominantly consists of serving the

needs of military personnel or their

dependents who are not located within

a defined geographic area may delineate

its entire deposit customer base as its

assessment area.

(g) Use of assessment area(s). The

OCC uses the assessment area(s)

delineated by a bank in its evaluation of

the bank’s CRA performance unless the

OCC determines that the assessment

area(s) do not comply with the

requirements of this section.

§ 25.42 Data collection, reporting, and

disclosure.

(a) Loan information required to be

collected and maintained. A bank,

except a small bank, shall collect, and

maintain in machine readable form (as

prescribed by the OCC) until the

completion of its next CRA

examination, the following data for each

small business or small farm loan

originated or purchased by the bank:

(1) A unique number or alphanumeric symbol that can be used to

identify the relevant loan file;

(2) The loan amount at origination;

(3) The loan location; and

(4) An indicator whether the loan was

to a business or farm with gross annual

revenues of $1 million or less.

(b) Loan information required to be

reported. A bank, except a small bank or

a bank that was a small bank during the

prior calendar year, shall report

annually by March 1 to the OCC in

machine readable form (as prescribed by

the OCC) the following data for the prior

calendar year:

(1) Small business and small farm

loan data. For each geography in which

the bank originated or purchased a

small business or small farm loan, the

aggregate number and amount of loans:

(i) With an amount at origination of

$100,000 or less;

(ii) With amount at origination of

more than $100,000 but less than or

equal to $250,000;

(iii) With an amount at origination of

more than $250,000; and

(iv) To businesses and farms with

gross annual revenues of $1 million or

less (using the revenues that the bank

considered in making its credit

decision);

(2) Community development loan

data. The aggregate number and

aggregate amount of community

development loans originated or

purchased; and

(3) Home mortgage loans. If the bank

is subject to reporting under part 203 of

this title, the location of each home

mortgage loan application, origination,

or purchase outside the MSAs in which

the bank has a home or branch office (or

outside any MSA) in accordance with

the requirements of part 203 of this title.

(c) Optional data collection and

maintenance.—(1) Consumer loans. A

bank may collect and maintain in

machine readable form (as prescribed by

the OCC) data for consumer loans

originated or purchased by the bank for

consideration under the lending test. A

bank may maintain data for one or more

of the following categories of consumer

loans: motor vehicle, credit card, home

equity, other secured, and other

unsecured. If the bank maintains data

for loans in a certain category, it shall

maintain data for all loans originated or

purchased within that category. The

bank shall maintain data separately for

each category, including for each loan:

(i) A unique number or alpha-numeric

symbol that can be used to identify the

relevant loan file;

(ii) The loan amount at origination or

purchase;

(iii) The loan location; and

(iv) The gross annual income of the

borrower that the bank considered in

making its credit decision.

(2) Other loan data. At its option, a

bank may provide other information

concerning its lending performance,

including additional loan distribution

data.

(d) Data on affiliate lending. A bank

that elects to have the OCC consider

loans by an affiliate, for purposes of the

lending or community development test

or an approved strategic plan, shall

collect, maintain, and report for those

loans the data that the bank would have

collected, maintained, and reported

pursuant to paragraphs (a), (b), and (c)

of this section had the loans been

originated or purchased by the bank. For

home mortgage loans, the bank shall

also be prepared to identify the home
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22185

mortgage loans reported under part 203

of this title by the affiliate.

(e) Data on lending by a consortium

or a third party. A bank that elects to

have the OCC consider community

development loans by a consortium or

third party, for purposes of the lending

or community development tests or an

approved strategic plan, shall report for

those loans the data that the bank would

have reported under paragraph (b)(2) of

this section had the loans been

originated or purchased by the bank.

(f) Small banks electing evaluation

under the lending, investment, and

service tests. A bank that qualifies for

evaluation under the small bank

performance standards but elects

evaluation under the lending,

investment, and service tests shall

collect, maintain, and report the data

required for other banks pursuant to

paragraphs (a) and (b) of this section.

(g) Assessment area data. A bank,

except a small bank or a bank that was

a small bank during the prior calendar

year, shall collect and report to the OCC

by March 1 of each year a list for each

assessment area showing the

geographies within the area.

(h) CRA Disclosure Statement. The

OCC prepares annually for each bank

that reports data pursuant to this section

a CRA Disclosure Statement that

contains, on a state-by-state basis:

(1) For each county (and for each

assessment area smaller than a county)

with a population of 500,000 persons or

fewer in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

low-, moderate-, middle-, and upperincome geographies;

(ii) A list grouping each geography

according to whether the geography is

low-, moderate-, middle-, or upperincome;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(2) For each county (and for each

assessment area smaller than a county)

with a population in excess of 500,000

persons in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

geographies with median income

relative to the area median income of

less than 10 percent, 10 or more but less

than 20 percent, 20 or more but less

than 30 percent, 30 or more but less

than 40 percent, 40 or more but less

than 50 percent, 50 or more but less

than 60 percent, 60 or more but less

than 70 percent, 70 or more but less

than 80 percent, 80 or more but less

than 90 percent, 90 or more but less

than 100 percent, 100 or more but less

than 110 percent, 110 or more but less

than 120 percent, and 120 percent or

more;

(ii) A list grouping each geography in

the county or assessment area according

to whether the median income in the

geography relative to the area median

income is less than 10 percent, 10 or

more but less than 20 percent, 20 or

more but less than 30 percent, 30 or

more but less than 40 percent, 40 or

more but less than 50 percent, 50 or

more but less than 60 percent, 60 or

more but less than 70 percent, 70 or

more but less than 80 percent, 80 or

more but less than 90 percent, 90 or

more but less than 100 percent, 100 or

more but less than 110 percent, 110 or

more but less than 120 percent, and 120

percent or more;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(3) The number and amount of small

business and small farm loans located

inside each assessment area reported by

the bank and the number and amount of

small business and small farm loans

located outside the assessment area(s)

reported by the bank; and

(4) The number and amount of

community development loans reported

as originated or purchased.

(i) Aggregate disclosure statements.

The OCC, in conjunction with the Board

of Governors of the Federal Reserve

System, the Federal Deposit Insurance

Corporation, and the Office of Thrift

Supervision, prepares annually, for each

MSA (including an MSA that crosses a

state boundary) and the non-MSA

portion of each state, an aggregate

disclosure statement of small business

and small farm lending by all

institutions subject to reporting under

this part or parts 228, 345, or 563e of

this title. These disclosure statements

indicate, for each geography, the

number and amount of all small

business and small farm loans

originated or purchased by reporting

institutions, except that the OCC may

adjust the form of the disclosure if

necessary, because of special

circumstances, to protect the privacy of

a borrower or the competitive position

of an institution.

(j) Central data depositories. The OCC

makes the aggregate disclosure

statements, described in paragraph (i) of

this section, and the individual bank

CRA Disclosure Statements, described

in paragraph (h) of this section,

available to the public at central data

depositories. The OCC publishes a list

of the depositories at which the

statements are available.

§ 25.43 Content and availability of public

file.

(a) Information available to the

public. A bank shall maintain a public

file that includes the following

information:

(1) All written comments received

from the public for the current year and

each of the prior two calendar years that

specifically relate to the bank’s

performance in helping to meet

community credit needs, and any

response to the comments by the bank,

if neither the comments nor the

responses contain statements that reflect

adversely on the good name or

reputation of any persons other than the

bank or publication of which would

violate specific provisions of law;

(2) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation prepared by the OCC. The

bank shall place this copy in the public

file within 30 business days after its

receipt from the OCC;

(3) A list of the bank’s branches, their

street addresses, and geographies;

(4) A list of branches opened or closed

by the bank during the current year and

each of the prior two calendar years,

their street addresses, and geographies;

(5) A list of services (including hours

of operation, available loan and deposit

products, and transaction fees) generally

offered at the bank’s branches and

descriptions of material differences in

the availability or cost of services at

particular branches, if any. At its option,

a bank may include information

regarding the availability of alternative

systems for delivering retail banking

services (e.g., ATMs, ATMs not owned

or operated by or exclusively for the

bank, banking by telephone or

computer, loan production offices, and

bank-at-work or bank-by-mail

programs);

(6) A map of each assessment area

showing the boundaries of the area and

identifying the geographies contained

within the area, either on the map or in

a separate list; and

(7) Any other information the bank

chooses.

(b) Additional information available

to the public.—(1) Banks other than

small banks. A bank, except a small

bank or a bank that was a small bank
22186 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

during the prior calendar year, shall

include in its public file the following

information pertaining to the bank and

its affiliates, if applicable, for each of

the prior two calendar years:

(i) If the bank has elected to have one

or more categories of its consumer loans

considered under the lending test, for

each of these categories, the number and

amount of loans:

(A) To low-, moderate-, middle-, and

upper-income individuals;

(B) Located in low-, moderate-,

middle-, and upper-income census

tracts; and

(C) Located inside the bank’s

assessment area(s) and outside the

bank’s assessment area(s); and

(ii) The bank’s CRA Disclosure

Statement. The bank shall place the

statement in the public file within three

business days of its receipt from the

OCC.

(2) Banks required to report Home

Mortgage Disclosure Act (HMDA) data.

A bank required to report home

mortgage loan data pursuant part 203 of

this title shall include in its public file

a copy of the HMDA Disclosure

Statement provided by the Federal

Financial Institutions Examination

Council pertaining to the bank for each

of the prior two calendar years. In

addition, a bank that elected to have the

OCC consider the mortgage lending of

an affiliate for any of these years shall

include in its public file the affiliate’s

HMDA Disclosure Statement for those

years. The bank shall place the

statement(s) in the public file within

three business days after its receipt.

(3) Small banks. A small bank or a

bank that was a small bank during the

prior calendar year shall include in its

public file:

(i) The bank’s loan-to-deposit ratio for

each quarter of the prior calendar year

and, at its option, additional data on its

loan-to-deposit ratio; and

(ii) The information required for other

banks by paragraph (b)(1) of this section,

if the bank has elected to be evaluated

under the lending, investment, and

service tests.

(4) Banks with strategic plans. A bank

that has been approved to be assessed

under a strategic plan shall include in

its public file a copy of that plan. A

bank need not include information

submitted to the OCC on a confidential

basis in conjunction with the plan.

(5) Banks with less than satisfactory

ratings. A bank that received a less than

satisfactory rating during its most recent

examination shall include in its public

file a description of its current efforts to

improve its performance in helping to

meet the credit needs of its entire

community. The bank shall update the

description quarterly.

(c) Location of public information. A

bank shall make available to the public

for inspection upon request and at no

cost the information required in this

section as follows:

(1) At the main office and, if an

interstate bank, at one branch office in

each state, all information in the public

file; and

(2) At each branch:

(i) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation and a list of services

provided by the branch; and

(ii) Within five calendar days of the

request, all the information in the public

file relating to the assessment area in

which the branch is located.

(d) Copies. Upon request, a bank shall

provide copies, either on paper or in

another form acceptable to the person

making the request, of the information

in its public file. The bank may charge

a reasonable fee not to exceed the cost

of copying and mailing (if applicable).

(e) Updating. Except as otherwise

provided in this section, a bank shall

ensure that the information required by

this section is current as of April 1 of

each year.

§ 25.44 Public notice by banks.

A bank shall provide in the public

lobby of its main office and each of its

branches the appropriate public notice

set forth in Appendix B of this part.

Only a branch of a bank having more

than one assessment area shall include

the bracketed material in the notice for

branch offices. Only a bank that is an

affiliate of a holding company shall

include the next to the last sentence of

the notices. A bank shall include the

last sentence of the notices only if it is

an affiliate of a holding company that is

not prevented by statute from acquiring

additional banks.

§ 25.45 Publication of planned

examination schedule.

The OCC publishes at least 30 days in

advance of the beginning of each

calendar quarter a list of banks

scheduled for CRA examinations in that

quarter.

Subpart D—Transition Rules

§ 25.51 Transition rules.

(a) Effective date. Sections of this part

become applicable over a period of time

in accordance with the schedule set

forth in paragraph (c) of this section.

(b) Data collection and reporting;

strategic plan; performance tests and

standards. (1) Data collection and

reporting. (i) On January 1, 1996, the

data collection requirements set forth in

§ 25.42 (except § 25.42 (b) and (g))

become applicable.

(ii) On January 1, 1997, the data

reporting requirements set forth in

§ 25.42 (b) and (g) become applicable.

(2) Small banks. Beginning January 1,

1996, the OCC evaluates banks that

qualify for the small bank performance

standards described in § 25.26 under

that section.

(3) Strategic plan. Beginning January

1, 1996, a bank that elects to be

evaluated under an approved strategic

plan pursuant to § 25.27 may submit its

strategic plan to the OCC for approval.

(4) Other performance tests. (i)

Beginning January 1, 1996, a bank may

elect to be evaluated under the pertinent

revised performance tests described in

§§ 25.22, 25.23, 25.24, and 25.25, if the

bank provides the necessary data to

permit evaluation.

(ii) Beginning July 1, 1997, the OCC

evaluates all banks under the pertinent

revised performance tests.

(c) Schedule. (1) On July 1, 1995,

§§ 25.11, 25.12, 25.29, and 25.51

become applicable, and §§ 25.1, 25.2,

25.8 and 25.101 expire.

(2) On January 1, 1996, § 25.41 and

the pertinent provisions of Subpart B of

this part will apply to banks that elect

to be evaluated under §§ 25.22 through

25.25, banks that submit for approval

strategic plans under § 25.27, and banks

that qualify for the small bank

performance standards described in

§ 25.26.

(3) On January 1, 1996, §§ 25.42

(except § 25.42 (b) and (g)) and 25.45

become applicable.

(4) On January 1, 1997, §§ 25.41 and

25.42 (b) and (g) become applicable.

(5) On July 1, 1997, §§ 25.21 through

25.28, 25.43, and 25.44 become

applicable, and §§ 25.3 through 25.7,

and 25.51 expire.

Appendix A to Part 25—Ratings

(a) Ratings in general. (1) In assigning a

rating, the OCC evaluates a bank’s

performance under the applicable

performance criteria in this part, in

accordance with § 25.21, and § 25.28, which

provides for adjustments on the basis of

evidence of discriminatory or other illegal

credit practices.

(2) A bank’s performance need not fit each

aspect of a particular rating profile in order

to receive that rating, and exceptionally

strong performance with respect to some

aspects may compensate for weak

performance in others. The bank’s overall

performance, however, must be consistent

with safe and sound banking practices and

generally with the appropriate rating profile

as follows.

(b) Banks evaluated under the lending,

investment, and service tests. (1) Lending

performance rating. The OCC assigns each

bank’s lending performance one of the five

following ratings.
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22187

(i) Outstanding. The OCC rates a bank’s

lending performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) Excellent responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A substantial majority of its loans are

made in its assessment area(s);

(C) An excellent geographic distribution of

loans in its assessment area(s);

(D) An excellent distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An excellent record of serving the

credit needs of highly economically

disadvantaged areas in its assessment area(s),

low-income individuals, or businesses

(including farms) with gross annual revenues

of $1 million or less, consistent with safe and

sound operations;

(F) Extensive use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It is a leader in making community

development loans.

(ii) High satisfactory. The OCC rates a

bank’s lending performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) Good responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A high percentage of its loans are made

in its assessment area(s);

(C) A good geographic distribution of loans

in its assessment area(s);

(D) A good distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A good record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made a relatively high level of

community development loans.

(iii) Low satisfactory. The OCC rates a

bank’s lending performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) Adequate responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) An adequate percentage of its loans are

made in its assessment area(s);

(C) An adequate geographic distribution of

loans in its assessment area(s);

(D) An adequate distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An adequate record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Limited use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made an adequate level of

community development loans.

(iv) Needs to improve. The OCC rates a

bank’s lending performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) Poor responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A small percentage of its loans are

made in its assessment area(s);

(C) A poor geographic distribution of loans,

particularly to low- or moderate-income

geographies, in its assessment area(s);

(D) A poor distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Little use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made a low level of community

development loans.

(v) Substantial noncompliance. The OCC

rates a bank’s lending performance as being

in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) A very poor responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A very small percentage of its loans are

made in its assessment area(s);

(C) A very poor geographic distribution of

loans, particularly to low- or moderateincome geographies, in its assessment area(s);

(D) A very poor distribution, particularly in

its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A very poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) No use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made few, if any, community

development loans.

(2) Investment performance rating. The

OCC assigns each bank’s investment

performance one of the five following ratings.

(i) Outstanding. The OCC rates a bank’s

investment performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) An excellent level of qualified

investments, particularly those that are not

routinely provided by private investors, often

in a leadership position;

(B) Extensive use of innovative or complex

qualified investments; and

(C) Excellent responsiveness to credit and

community development needs.

(ii) High satisfactory. The OCC rates a

bank’s investment performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) A significant level of qualified

investments, particularly those that are not

routinely provided by private investors,

occasionally in a leadership position;

(B) Significant use of innovative or

complex qualified investments; and

(C) Good responsiveness to credit and

community development needs.

(iii) Low satisfactory. The OCC rates a

bank’s investment performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) An adequate level of qualified

investments, particularly those that are not

routinely provided by private investors,

although rarely in a leadership position;

(B) Occasional use of innovative or

complex qualified investments; and

(C) Adequate responsiveness to credit and

community development needs. 

(iv) Needs to improve. The OCC rates a

bank’s investment performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) A poor level of qualified investments,

particularly those that are not routinely

provided by private investors;

(B) Rare use of innovative or complex

qualified investments; and

(C) Poor responsiveness to credit and

community development needs.

(v) Substantial noncompliance. The OCC

rates a bank’s investment performance as

being in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) Few, if any, qualified investments,

particularly those that are not routinely

provided by private investors;

(B) No use of innovative or complex

qualified investments; and

(C) Very poor responsiveness to credit and

community development needs.

(3) Service performance rating. The OCC

assigns each bank’s service performance one

of the five following ratings.

(i) Outstanding. The OCC rates a bank’s

service performance ‘‘outstanding’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are readily

accessible to geographies and individuals of
22188 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has improved the accessibility of its delivery

systems, particularly in low- or moderateincome geographies or to low- or moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) are tailored to

the convenience and needs of its assessment

area(s), particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It is a leader in providing community

development services.

(ii) High satisfactory. The OCC rates a

bank’s service performance ‘‘high

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has not adversely affected the accessibility of

its delivery systems, particularly in low- and

moderate-income geographies and to lowand moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides a relatively high level of

community development services.

(iii) Low satisfactory. The OCC rates a

bank’s service performance ‘‘low

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

reasonably accessible to geographies and

individuals of different income levels in its

assessment area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has generally not adversely affected the

accessibility of its delivery systems,

particularly in low- and moderate-income

geographies and to low- and moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides an adequate level of

community development services.

(iv) Needs to improve. The OCC rates a

bank’s service performance ‘‘needs to

improve’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to portions of its

assessment area(s), particularly to low- or

moderate-income geographies or to low- or

moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has adversely affected the accessibility its

delivery systems, particularly in low- or

moderate-income geographies or to low- or

moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that inconveniences its assessment area(s),

particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It provides a limited level of

community development services.

(v) Substantial noncompliance. The OCC

rates a bank’s service performance as being

in ‘‘substantial noncompliance’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to significant

portions of its assessment area(s), particularly

to low- or moderate-income geographies or to

low- or moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has significantly adversely affected the

accessibility of its delivery systems,

particularly in low- or moderate-income

geographies or to low- or moderate-income

individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that significantly inconveniences its

assessment area(s), particularly low- or

moderate-income geographies or low- or

moderate-income individuals; and

(D) It provides few, if any, community

development services.

(c) Wholesale or limited purpose banks.

The OCC assigns each wholesale or limited

purpose bank’s community development

performance one of the four following

ratings.

(1) Outstanding. The OCC rates a

wholesale or limited purpose bank’s

community development performance

‘‘outstanding’’ if, in general, it demonstrates:

(i) A high level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Extensive use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Excellent responsiveness to credit and

community development needs in its

assessment area(s).

(2) Satisfactory. The OCC rates a wholesale

or limited purpose bank’s community

development performance ‘‘satisfactory’’ if,

in general, it demonstrates:

(i) An adequate level of community

development loans, community development

services, or qualified investments,

particularly investments that are not

routinely provided by private investors;

(ii) Occasional use of innovative or

complex qualified investments, community

development loans, or community

development services; and

(iii) Adequate responsiveness to credit and

community development needs in its

assessment area(s).

(3) Needs to improve. The OCC rates a

wholesale or limited purpose bank’s

community development performance as

‘‘needs to improve’’ if, in general, it

demonstrates:

(i) A poor level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Rare use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Poor responsiveness to credit and

community development needs in its

assessment area(s).

(4) Substantial noncompliance. The OCC

rates a wholesale or limited purpose bank’s

community development performance in

‘‘substantial noncompliance’’ if, in general, it

demonstrates:

(i) Few, if any, community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) No use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Very poor responsiveness to credit and

community development needs in its

assessment area(s).

(d) Banks evaluated under the small bank

performance standards. The OCC rates the

performance of each bank evaluated under

the small bank performance standards as

follows:

(1) Eligibility for a satisfactory rating. The

OCC rates a bank’s performance

‘‘satisfactory’’ if, in general, the bank

demonstrates:

(i) 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, lending-related

activities such as loan originations for sale to

the secondary markets and community

development loans and qualified

investments;

(ii) A majority of its loans and, as

appropriate, other lending-related activities

are in its assessment area(s);

(iii) 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);

(iv) A record of taking appropriate action,

as 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

(v) A reasonable geographic distribution of

loans given the bank’s assessment area(s).

(2) Eligibility for an outstanding rating. A

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 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
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22189

enhance credit availability in its assessment

area(s).

(3) Needs to improve or substantial

noncompliance ratings. A bank also may

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.

(e) Strategic plan assessment and rating—

(1) Satisfactory goals. The OCC approves as

‘‘satisfactory’’ measurable goals that

adequately help to meet the credit needs of

the bank’s assessment area(s).

(2) Outstanding goals. If the plan identifies

a separate group of measurable goals that

substantially exceed the levels approved as

‘‘satisfactory,’’ the OCC will approve those

goals as ‘‘outstanding.’’

(3) Rating. The OCC assesses the

performance of a bank operating under an

approved plan to determine if the bank has

met its plan goals:

(i) If the bank substantially achieves its

plan goals for a satisfactory rating, the OCC

will rate the bank’s performance under the

plan as ‘‘satisfactory.’’

(ii) If the bank exceeds its plan goals for

a satisfactory rating and substantially

achieves its plan goals for an outstanding

rating, the OCC will rate the bank’s

performance under the plan as

‘‘outstanding.’’

(iii) If the bank fails to meet substantially

its plan goals for a satisfactory rating, the

OCC will rate the bank as either ‘‘needs to

improve’’ or ‘‘substantial noncompliance,’’

depending on the extent to which it falls

short of its plan goals, unless the bank

elected in its plan to be rated otherwise, as

provided in § 25.27(f)(4).

Appendix B to Part 25—CRA Notice

(a) Notice for main offices and, if an

interstate bank, one branch office in each

state.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Comptroller of

the Currency evaluates our record of helping

to meet the credit needs of this community

consistent with safe and sound operations.

The Comptroller also takes this record into

account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA, including, for example,

information about our branches, such as their

location and services provided at them; the

public section of our most recent CRA

Performance Evaluation, prepared by the

Comptroller; and comments received from

the public relating to our performance in

helping to meet community credit needs, as

well as our responses to those comments.

You may review this information today.

At least 30 days before the beginning of

each quarter, the Comptroller publishes a

nationwide list of the banks that are

scheduled for CRA examination in that

quarter. This list is available from the Deputy

Comptroller (address). You may send written

comments about our performance in helping

to meet community credit needs to (name

and address of official at bank) and Deputy

Comptroller (address). Your letter, together

with any response by us, will be considered

by the Comptroller in evaluating our CRA

performance and may be made public.

You may ask to look at any comments

received by the Deputy Comptroller. You

may also request from the Deputy

Comptroller an announcement of our

applications covered by the CRA filed with

the Comptroller. We are an affiliate of (name

of holding company), a bank holding

company. You may request from the (title of

responsible official), Federal Reserve Bank of

llll (address) an announcement of

applications covered by the CRA filed by

bank holding companies.

(b) Notice for branch offices.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Comptroller of

the Currency evaluates our record of helping

to meet the credit needs of this community

consistent with safe and sound operations.

The Comptroller also takes this record into

account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA. You may review today the

public section of our most recent CRA

evaluation, prepared by the Comptroller, and

a list of services provided at this branch. You

may also have access to the following

additional information, which we will make

available to you at this branch within five

calendar days after you make a request to us:

(1) A map showing the assessment area

containing this branch, which is the area in

which the Comptroller evaluates our CRA

performance in this community; (2)

information about our branches in this

assessment area; (3) a list of services we

provide at those locations; (4) data on our

lending performance in this assessment area;

and (5) copies of all written comments

received by us that specifically relate to our

CRA performance in this assessment area,

and any responses we have made to those

comments. If we are operating under an

approved strategic plan, you may also have

access to a copy of the plan.

[If you would like to review information

about our CRA performance in other

communities served by us, the public file for

our entire bank is available at (name of office

located in state), located at (address).]

At least 30 days before the beginning of

each quarter, the Comptroller publishes a

nationwide list of the banks that are

scheduled for CRA examination in that

quarter. This list is available from the Deputy

Comptroller (address). You may send written

comments about our performance in helping

to meet community credit needs to (name

and address of official at bank) and Deputy

Comptroller (address). Your letter, together

with any response by us, will be considered

by the Comptroller in evaluating our CRA

performance and may be made public.

You may ask to look at any comments

received by the Deputy Comptroller. You

may also request from the Deputy

Comptroller an announcement of our

applications covered by the CRA filed with

the Comptroller. We are an affiliate of (name

of holding company), a bank holding

company. You may request from the (title of

responsible official), Federal Reserve Bank of

llll (address) an announcement of

applications covered by the CRA filed by

bank holding companies.

§§ 25.1, 25.2, 25.8, and 25.101, and the

undesignated center heading preceding

§ 25.101 [Removed]

3. Sections 25.1, 25.2, 25.8 and 25.101

and the undesignated center heading

preceding § 25.101 are removed

effective July 1, 1995.

§§ 25.3, 25.4, 25.5, 25.6, 25.7, and Subpart D

[Removed]

4. Sections 25.3, 25.4, 25.5, 25.6, and

25.7 and subpart D, consisting of

§ 25.51, are removed effective July 1,

1997.

Dated: April 19, 1995.

Eugene A. Ludwig,

Comptroller of the Currency.

Federal Reserve System

12 CFR CHAPTER II

For the reasons outlined in the joint

preamble, the Board of Governors of the

Federal Reserve System amends 12 CFR

chapter II as set forth below:

PART 228—COMMUNITY

REINVESTMENT (REGULATION BB)

1. The authority citation for part 228

is revised to read as follows:

Authority: 12 U.S.C. 321, 325, 1828(c),

1842, 1843, 1844, and 2901 et seq.

2. Part 228 is amended by adding

Subparts A through D and Appendices

A and B to read as follows:

Subpart A—General

Sec.

228.11 Authority, purposes, and scope.

228.12 Definitions.

Subpart B—Standards for Assessing

Performance

228.21 Performance tests, standards, and

ratings, in general.

228.22 Lending test.

228.23 Investment test.

228.24 Service test.

228.25 Community development test for

wholesale or limited purpose banks.

228.26 Small bank performance standards.

228.27 Strategic plan.

228.28 Assigned ratings.

228.29 Effect of CRA performance on

applications.

Subpart C—Records, Reporting, and

Disclosure Requirements

228.41 Assessment area delineation.

228.42 Data collection, reporting, and

disclosure.

228.43 Content and availability of public

file.
22190 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

228.44 Public notice by banks.

228.45 Publication of planned examination

schedule.

Subpart D—Transition Rules

228.51 Transition rules.

Appendix A to Part 228—Ratings

Appendix B to Part 228—CRA Notice

Subpart A—General

§ 228.11 Authority, purposes, and scope.

(a) Authority. The Board of Governors

of the Federal Reserve System (the

Board) issues this part to implement the

Community Reinvestment Act (12

U.S.C. 2901 et seq.) (CRA). The

regulations comprising this part are

issued under the authority of the CRA

and under the provisions of the United

States Code authorizing the Board:

(1) To conduct examinations of Statechartered banks that are members of the

Federal Reserve System (12 U.S.C. 325);

(2) To conduct examinations of bank

holding companies and their

subsidiaries (12 U.S.C. 1844); and

(3) To consider applications for:

(i) Domestic branches by State

member banks (12 U.S.C. 321);

(ii) Mergers in which the resulting

bank would be a State member bank (12

U.S.C. 1828(c));

(iii) Formations of, acquisitions of

banks by, and mergers of, bank holding

companies (12 U.S.C. 1842); and

(iv) The acquisition of savings

associations by bank holding companies

(12 U.S.C. 1843).

(b) Purposes. In enacting the CRA, the

Congress required each appropriate

Federal financial supervisory agency to

assess an institution’s record of helping

to meet the credit needs of the local

communities in which the institution is

chartered, consistent with the safe and

sound operation of the institution, and

to take this record into account in the

agency’s evaluation of an application for

a deposit facility by the institution. This

part is intended to carry out the

purposes of the CRA by:

(1) Establishing the framework and

criteria by which the Board assesses a

bank’s record of helping to meet the

credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the bank; and

(2) Providing that the Board takes that

record into account in considering

certain applications.

(c) Scope—(1) General. This part

applies to all banks except as provided

in paragraph (c)(3) of this section.

(2) Foreign bank acquisitions. This

part also applies to an uninsured State

branch (other than a limited branch) of

a foreign bank that results from an

acquisition described in section 5(a)(8)

of the International Banking Act of 1978

(12 U.S.C. 3103(a)(8)). The terms ‘‘State

branch’’ and ‘‘foreign bank’’ have the

same meanings as in section 1(b) of the

International Banking Act of 1978 (12

U.S.C. 3101 et seq.); the term

‘‘uninsured State branch’’ means a State

branch the deposits of which are not

insured by the Federal Deposit

Insurance Corporation; the term

‘‘limited branch’’ means a State branch

that accepts only deposits that are

permissible for a corporation organized

under section 25A of the Federal

Reserve Act (12 U.S.C. 611 et seq.).

(3) Certain special purpose banks.

This part does not apply to special

purpose banks that do not perform

commercial or retail banking services by

granting credit to the public in the

ordinary course of business, other than

as incident to their specialized

operations. These banks include

banker’s banks, as defined in 12 U.S.C.

24 (Seventh), and banks that engage

only in one or more of the following

activities: providing cash management

controlled disbursement services or

serving as correspondent banks, trust

companies, or clearing agents.

§ 228.12 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate means any company that

controls, is controlled by, or is under

common control with another company.

The term ‘‘control’’ has the meaning

given to that term in 12 U.S.C.

1841(a)(2), and a company is under

common control with another company

if both companies are directly or

indirectly controlled by the same

company.

(b) Area median income means:

(1) The median family income for the

MSA, if a person or geography is located

in an MSA; or

(2) The statewide nonmetropolitan

median family income, if a person or

geography is located outside an MSA.

(c) Assessment area means a

geographic area delineated in

accordance with § 228.41.

(d) Automated teller machine (ATM)

means an automated, unstaffed banking

facility owned or operated by, or

operated exclusively for, the bank at

which deposits are received, cash

dispersed, or money lent.

(e) Bank means a State member bank

as that term is defined in section 3(d)(2)

of the Federal Deposit Insurance Act (12

U.S.C. 1813(d)(2)), except as provided in

§ 228.11(c)(3), and includes an

uninsured State branch (other than a

limited branch) of a foreign bank

described in § 228.11(c)(2).

(f) Branch means a staffed banking

facility approved as a branch, whether

shared or unshared, including, for

example, a mini-branch in a grocery

store or a branch operated in

conjunction with any other local

business or nonprofit organization.

(g) CMSA means a consolidated

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(h) Community development means:

(1) Affordable housing (including

multifamily rental housing) for low- or

moderate-income individuals;

(2) Community services targeted to

low- or moderate-income individuals;

(3) Activities that promote economic

development by financing businesses or

farms that meet the size eligibility

standards of 13 CFR 121.802(a)(2) or

have gross annual revenues of $1

million or less; or

(4) Activities that revitalize or

stabilize low- or moderate-income

geographies.

(i) Community development loan

means a loan that:

(1) Has as its primary purpose

community development; and

(2) Except in the case of a wholesale

or limited purpose bank:

(i) Has not been reported or collected

by the bank or an affiliate for

consideration in the bank’s assessment

as a home mortgage, small business,

small farm, or consumer loan, unless it

is a multifamily dwelling loan (as

described in Appendix A to Part 203 of

this chapter); and

(ii) Benefits the bank’s assessment

area(s) or a broader statewide or regional

area that includes the bank’s assessment

area(s).

(j) Community development service

means a service that:

(1) Has as its primary purpose

community development;

(2) Is related to the provision of

financial services; and

(3) Has not been considered in the

evaluation of the bank’s retail banking

services under § 228.24(d).

(k) Consumer loan means a loan to

one or more individuals for household,

family, or other personal expenditures.

A consumer loan does not include a

home mortgage, small business, or small

farm loan. Consumer loans include the

following categories of loans:

(1) Motor vehicle loan, which is a

consumer loan extended for the

purchase of and secured by a motor

vehicle;

(2) Credit card loan, which is a line

of credit for household, family, or other

personal expenditures that is accessed

by a borrower’s use of a ‘‘credit card,’’

as this term is defined in § 226.2 of this

chapter;
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22191

(3) Home equity loan, which is a

consumer loan secured by a residence of

the borrower;

(4) Other secured consumer loan,

which is a secured consumer loan that

is not included in one of the other

categories of consumer loans; and

(5) Other unsecured consumer loan,

which is an unsecured consumer loan

that is not included in one of the other

categories of consumer loans.

(l) Geography means a census tract or

a block numbering area delineated by

the United States Bureau of the Census

in the most recent decennial census.

(m) Home mortgage loan means a

‘‘home improvement loan’’ or a ‘‘home

purchase loan’’ as defined in § 203.2 of

this chapter.

(n) Income level includes:

(1) Low-income, which means an

individual income that is less than 50

percent of the area median income, or

a median family income that is less than

50 percent, in the case of a geography.

(2) Moderate-income, which means an

individual income that is at least 50

percent and less than 80 percent of the

area median income, or a median family

income that is at least 50 and less than

80 percent, in the case of a geography.

(3) Middle-income, which means an

individual income that is at least 80

percent and less than 120 percent of the

area median income, or a median family

income that is at least 80 and less than

120 percent, in the case of a geography.

(4) Upper-income, which means an

individual income that is 120 percent or

more of the area median income, or a

median family income that is 120

percent or more, in the case of a

geography.

(o) Limited purpose bank means a

bank that offers only a narrow product

line (such as credit card or motor

vehicle loans) to a regional or broader

market and for which a designation as

a limited purpose bank is in effect, in

accordance with § 228.25(b).

(p) Loan location. A loan is located as

follows:

(1) A consumer loan is located in the

geography where the borrower resides;

(2) A home mortgage loan is located

in the geography where the property to

which the loan relates is located; and

(3) A small business or small farm

loan is located in the geography where

the main business facility or farm is

located or where the loan proceeds

otherwise will be applied, as indicated

by the borrower.

(q) Loan production office means a

staffed facility, other than a branch, that

is open to the public and that provides

lending-related services, such as loan

information and applications.

(r) MSA means a metropolitan

statistical area or a primary

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(s) Qualified investment means a

lawful investment, deposit, membership

share, or grant that has as its primary

purpose community development.

(t) Small bank means a bank that, as

of December 31 of either of the prior two

calendar years, had total assets of less

than $250 million and was independent

or an affiliate of a holding company

that, as of December 31 of either of the

prior two calendar years, had total

banking and thrift assets of less than $1

billion.

(u) Small business loan means a loan

included in ‘‘loans to small businesses’’

as defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(v) Small farm loan means a loan

included in ‘‘loans to small farms’’ as

defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(w) Wholesale bank means a bank that

is not in the business of extending home

mortgage, small business, small farm, or

consumer loans to retail customers, and

for which a designation as a wholesale

bank is in effect, in accordance with

§ 228.25(b).

Subpart B—Standards for Assessing

Performance

§ 228.21 Performance tests, standards,

and ratings, in general.

(a) Performance tests and standards.

The Board assesses the CRA

performance of a bank in an

examination as follows:

(1) Lending, investment, and service

tests. The Board applies the lending,

investment, and service tests, as

provided in §§ 228.22 through 228.24,

in evaluating the performance of a bank,

except as provided in paragraphs (a)(2),

(a)(3), and (a)(4) of this section.

(2) Community development test for

wholesale or limited purpose banks. The

Board applies the community

development test for a wholesale or

limited purpose bank, as provided in

§ 228.25, except as provided in

paragraph (a)(4) of this section.

(3) Small bank performance

standards. The Board applies the small

bank performance standards as provided

in § 228.26 in evaluating the

performance of a small bank or a bank

that was a small bank during the prior

calendar year, unless the bank elects to

be assessed as provided in paragraphs

(a)(1), (a)(2), or (a)(4) of this section. The

bank may elect to be assessed as

provided in paragraph (a)(1) of this

section only if it collects and reports the

data required for other banks under

§ 228.42.

(4) Strategic plan. The Board

evaluates the performance of a bank

under a strategic plan if the bank

submits, and the Board approves, a

strategic plan as provided in § 228.27.

(b) Performance context. The Board

applies the tests and standards in

paragraph (a) of this section and also

considers whether to approve a

proposed strategic plan in the context

of:

(1) Demographic data on median

income levels, distribution of household

income, nature of housing stock,

housing costs, and other relevant data

pertaining to a bank’s assessment

area(s);

(2) Any information about lending,

investment, and service opportunities in

the bank’s assessment area(s)

maintained by the bank or obtained

from community organizations, state,

local, and tribal governments, economic

development agencies, or other sources;

(3) The bank’s product offerings and

business strategy as determined from

data provided by the bank;

(4) Institutional capacity and

constraints, including the size and

financial condition of the bank, the

economic climate (national, regional,

and local), safety and soundness

limitations, and any other factors that

significantly affect the bank’s ability to

provide lending, investments, or

services in its assessment area(s);

(5) The bank’s past performance and

the performance of similarly situated

lenders;

(6) The bank’s public file, as

described in § 228.43, and any written

comments about the bank’s CRA

performance submitted to the bank or

the Board; and

(7) Any other information deemed

relevant by the Board.

(c) Assigned ratings. The Board

assigns to a bank one of the following

four ratings pursuant to § 228.28 and

Appendix A of this part: ‘‘outstanding’’;

‘‘satisfactory’’; ‘‘needs to improve’’; or

‘‘substantial noncompliance’’ as

provided in 12 U.S.C. 2906(b)(2). The

rating assigned by the Board reflects the

bank’s record of helping to meet the

credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the bank.

(d) Safe and sound operations. This

part and the CRA do not require a bank

to make loans or investments or to

provide services that are inconsistent

with safe and sound operations. To the

contrary, the Board anticipates banks

can meet the standards of this part with

safe and sound loans, investments, and
22192 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

services on which the banks expect to

make a profit. Banks are permitted and

encouraged to develop and apply

flexible underwriting standards for

loans that benefit low- or moderateincome geographies or individuals, only

if consistent with safe and sound

operations.

§ 228.22 Lending test.

(a) Scope of test. (1) The lending test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through its lending activities by

considering a bank’s home mortgage,

small business, small farm, and

community development lending. If

consumer lending constitutes a

substantial majority of a bank’s

business, the Board will evaluate the

bank’s consumer lending in one or more

of the following categories: motor

vehicle, credit card, home equity, other

secured, and other unsecured loans. In

addition, at a bank’s option, the Board

will evaluate one or more categories of

consumer lending, if the bank has

collected and maintained, as required in

§ 228.42(c)(1), the data for each category

that the bank elects to have the Board

evaluate.

(2) The Board considers originations

and purchases of loans. The Board will

also consider any other loan data the

bank may choose to provide, including

data on loans outstanding, commitments

and letters of credit.

(3) A bank may ask the Board to

consider loans originated or purchased

by consortia in which the bank

participates or by third parties in which

the bank has invested only if the loans

meet the definition of community

development loans and only in

accordance with paragraph (d) of this

section. The Board will not consider

these loans under any criterion of the

lending test except the community

development lending criterion.

(b) Performance criteria. The Board

evaluates a bank’s lending performance

pursuant to the following criteria:

(1) Lending activity. The number and

amount of the bank’s home mortgage,

small business, small farm, and

consumer loans, if applicable, in the

bank’s assessment area(s);

(2) Geographic distribution. The

geographic distribution of the bank’s

home mortgage, small business, small

farm, and consumer loans, if applicable,

based on the loan location, including:

(i) The proportion of the bank’s

lending in the bank’s assessment area(s);

(ii) The dispersion of lending in the

bank’s assessment area(s); and

(iii) The number and amount of loans

in low-, moderate-, middle-, and upperincome geographies in the bank’s

assessment area(s);

(3) Borrower characteristics. The

distribution, particularly in the bank’s

assessment area(s), of the bank’s home

mortgage, small business, small farm,

and consumer loans, if applicable, based

on borrower characteristics, including

the number and amount of:

(i) Home mortgage loans to low-,

moderate-, middle-, and upper-income

individuals;

(ii) Small business and small farm

loans to businesses and farms with gross

annual revenues of $1 million or less;

(iii) Small business and small farm

loans by loan amount at origination; and

(iv) Consumer loans, if applicable, to

low-, moderate-, middle-, and upperincome individuals;

(4) Community development lending.

The bank’s community development

lending, including the number and

amount of community development

loans, and their complexity and

innovativeness; and

(5) Innovative or flexible lending

practices. The bank’s use of innovative

or flexible lending practices in a safe

and sound manner to address the credit

needs of low- or moderate-income

individuals or geographies.

(c) Affiliate lending. (1) At a bank’s

option, the Board will consider loans by

an affiliate of the bank, if the bank

provides data on the affiliate’s loans

pursuant to § 228.42.

(2) The Board considers affiliate

lending subject to the following

constraints:

(i) No affiliate may claim a loan

origination or loan purchase if another

institution claims the same loan

origination or purchase; and

(ii) If a bank elects to have the Board

consider loans within a particular

lending category made by one or more

of the bank’s affiliates in a particular

assessment area, the bank shall elect to

have the Board consider, in accordance

with paragraph (c)(1) of this section, all

the loans within that lending category in

that particular assessment area made by

all of the bank’s affiliates.

(3) The Board does not consider

affiliate lending in assessing a bank’s

performance under paragraph (b)(2)(i) of

this section.

(d) Lending by a consortium or a third

party. Community development loans

originated or purchased by a consortium

in which the bank participates or by a

third party in which the bank has

invested:

(1) Will be considered, at the bank’s

option, if the bank reports the data

pertaining to these loans under

§ 228.42(b)(2); and

(2) May be allocated among

participants or investors, as they choose,

for purposes of the lending test, except

that no participant or investor:

(i) May claim a loan origination or

loan purchase if another participant or

investor claims the same loan

origination or purchase; or

(ii) May claim loans accounting for

more than its percentage share (based on

the level of its participation or

investment) of the total loans originated

by the consortium or third party.

(e) Lending performance rating. The

Board rates a bank’s lending

performance as provided in Appendix A

of this part.

§ 228.23 Investment test.

(a) Scope of test. The investment test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through qualified investments

that benefit its assessment area(s) or a

broader statewide or regional area that

includes the bank’s assessment area(s).

(b) Exclusion. Activities considered

under the lending or service tests may

not be considered under the investment

test.

(c) Affiliate investment. At a bank’s

option, the Board will consider, in its

assessment of a bank’s investment

performance, a qualified investment

made by an affiliate of the bank, if the

qualified investment is not claimed by

any other institution.

(d) Disposition of branch premises.

Donating, selling on favorable terms, or

making available on a rent-free basis a

branch of the bank that is located in a

predominantly minority neighborhood

to a minority depository institution or

women’s depository institution (as these

terms are defined in 12 U.S.C. 2907(b))

will be considered as a qualified

investment.

(e) Performance criteria. The Board

evaluates the investment performance of

a bank pursuant to the following

criteria:

(1) The dollar amount of qualified

investments;

(2) The innovativeness or complexity

of qualified investments;

(3) The responsiveness of qualified

investments to credit and community

development needs; and

(4) The degree to which the qualified

investments are not routinely provided

by private investors.

(f) Investment performance rating.

The Board rates a bank’s investment

performance as provided in Appendix A

of this part.

§ 228.24 Service test.

(a) Scope of test. The service test

evaluates a bank’s record of helping to
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22193

meet the credit needs of its assessment

area(s) by analyzing both the availability

and effectiveness of a bank’s systems for

delivering retail banking services and

the extent and innovativeness of its

community development services.

(b) Area(s) benefitted. Community

development services must benefit a

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(c) Affiliate service. At a bank’s

option, the Board will consider, in its

assessment of a bank’s service

performance, a community development

service provided by an affiliate of the

bank, if the community development

service is not claimed by any other

institution.

(d) Performance criteria—retail

banking services. The Board evaluates

the availability and effectiveness of a

bank’s systems for delivering retail

banking services, pursuant to the

following criteria:

(1) The current distribution of the

bank’s branches among low-,

moderate-, middle-, and upper-income

geographies;

(2) In the context of its current

distribution of the bank’s branches, the

bank’s record of opening and closing

branches, particularly branches located

in low- or moderate-income geographies

or primarily serving low- or moderateincome individuals;

(3) The availability and effectiveness

of alternative systems for delivering

retail banking services (e.g., ATMs,

ATMs not owned or operated by or

exclusively for the bank, banking by

telephone or computer, loan production

offices, and bank-at-work or bank-bymail programs) in low- and moderateincome geographies and to low- and

moderate-income individuals; and

(4) The range of services provided in

low-, moderate-, middle-, and upperincome geographies and the degree to

which the services are tailored to meet

the needs of those geographies.

(e) Performance criteria—community

development services. The Board

evaluates community development

services pursuant to the following

criteria:

(1) The extent to which the bank

provides community development

services; and

(2) The innovativeness and

responsiveness of community

development services.

(f) Service performance rating. The

Board rates a bank’s service

performance as provided in Appendix A

of this part.

§ 228.25 Community development test for

wholesale or limited purpose banks.

(a) Scope of test. The Board assesses

a wholesale or limited purpose bank’s

record of helping to meet the credit

needs of its assessment area(s) under the

community development test through

its community development lending,

qualified investments, or community

development services.

(b) Designation as a wholesale or

limited purpose bank. In order to

receive a designation as a wholesale or

limited purpose bank, a bank shall file

a request, in writing, with the Board, at

least three months prior to the proposed

effective date of the designation. If the

Board approves the designation, it

remains in effect until the bank requests

revocation of the designation or until

one year after the Board notifies the

bank that the Board has revoked the

designation on its own initiative.

(c) Performance criteria. The Board

evaluates the community development

performance of a wholesale or limited

purpose bank pursuant to the following

criteria:

(1) The number and amount of

community development loans

(including originations and purchases of

loans and other community

development loan data provided by the

bank, such as data on loans outstanding,

commitments, and letters of credit),

qualified investments, or community

development services;

(2) The use of innovative or complex

qualified investments, community

development loans, or community

development services and the extent to

which the investments are not routinely

provided by private investors; and

(3) The bank’s responsiveness to

credit and community development

needs.

(d) Indirect activities. At a bank’s

option, the Board will consider in its

community development performance

assessment:

(1) Qualified investments or

community development services

provided by an affiliate of the bank, if

the investments or services are not

claimed by any other institution; and

(2) Community development lending

by affiliates, consortia and third parties,

subject to the requirements and

limitations in § 228.22(c) and (d).

(e) Benefit to assessment area(s)—(1)

Benefit inside assessment area(s). The

Board considers all qualified

investments, community development

loans, and community development

services that benefit areas within the

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(2) Benefit outside assessment area(s).

The Board considers the qualified

investments, community development

loans, and community development

services that benefit areas outside the

bank’s assessment area(s), if the bank

has adequately addressed the needs of

its assessment area(s).

(f) Community development

performance rating. The Board rates a

bank’s community development

performance as provided in Appendix A

of this part.

§ 228.26 Small bank performance

standards.

(a) Performance criteria. The Board

evaluates the record of a small bank, or

a bank that was a small bank during the

prior calendar year, of helping to meet

the credit needs of its assessment area(s)

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).

(b) Small bank performance rating.

The Board rates the performance of a

bank evaluated under this section as

provided in Appendix A of this part.

§ 228.27 Strategic plan.

(a) Alternative election. The Board

will assess a bank’s record of helping to

meet the credit needs of its assessment

area(s) under a strategic plan if:

(1) The bank has submitted the plan

to the Board as provided for in this

section;

(2) The Board has approved the plan;

(3) The plan is in effect; and

(4) The bank has been operating under

an approved plan for at least one year.

(b) Data reporting. The Board’s

approval of a plan does not affect the

bank’s obligation, if any, to report data

as required by § 228.42.

(c) Plans in general—(1) Term. A plan

may have a term of no more than five

years, and any multi-year plan must
22194 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

include annual interim measurable

goals under which the Board will

evaluate the bank’s performance.

(2) Multiple assessment areas. A bank

with more than one assessment area

may prepare a single plan for all of its

assessment areas or one or more plans

for one or more of its assessment areas.

(3) Treatment of affiliates. Affiliated

institutions may prepare a joint plan if

the plan provides measurable goals for

each institution. Activities may be

allocated among institutions at the

institutions’ option, provided that the

same activities are not considered for

more than one institution.

(d) Public participation in plan

development. Before submitting a plan

to the Board for approval, a bank shall:

(1) Informally seek suggestions from

members of the public in its assessment

area(s) covered by the plan while

developing the plan;

(2) Once the bank has developed a

plan, formally solicit public comment

on the plan for at least 30 days by

publishing notice in at least one

newspaper of general circulation in each

assessment area covered by the plan;

and

(3) During the period of formal public

comment, make copies of the plan

available for review by the public at no

cost at all offices of the bank in any

assessment area covered by the plan and

provide copies of the plan upon request

for a reasonable fee to cover copying

and mailing, if applicable.

(e) Submission of plan. The bank shall

submit its plan to the Board at least

three months prior to the proposed

effective date of the plan. The bank shall

also submit with its plan a description

of its informal efforts to seek suggestions

from members of the public, any written

public comment received, and, if the

plan was revised in light of the

comment received, the initial plan as

released for public comment.

(f) Plan content—(1) Measurable

goals. (i) A bank shall specify in its plan

measurable goals for helping to meet the

credit needs of each assessment area

covered by the plan, particularly the

needs of low- and moderate-income

geographies and low- and moderateincome individuals, through lending,

investment, and services, as

appropriate.

(ii) A bank shall address in its plan all

three performance categories and,

unless the bank has been designated as

a wholesale or limited purpose bank,

shall emphasize lending and lendingrelated activities. Nevertheless, a

different emphasis, including a focus on

one or more performance categories,

may be appropriate if responsive to the

characteristics and credit needs of its

assessment area(s), considering public

comment and the bank’s capacity and

constraints, product offerings, and

business strategy.

(2) Confidential information. A bank

may submit additional information to

the Board on a confidential basis, but

the goals stated in the plan must be

sufficiently specific to enable the public

and the Board to judge the merits of the

plan.

(3) Satisfactory and outstanding goals.

A bank shall specify in its plan

measurable goals that constitute

‘‘satisfactory’’ performance. A plan may

specify measurable goals that constitute

‘‘outstanding’’ performance. If a bank

submits, and the Board approves, both

‘‘satisfactory’’ and ‘‘outstanding’’

performance goals, the Board will

consider the bank eligible for an

‘‘outstanding’’ performance rating.

(4) Election if satisfactory goals not

substantially met. A bank may elect in

its plan that, if the bank fails to meet

substantially its plan goals for a

satisfactory rating, the Board will

evaluate the bank’s performance under

the lending, investment, and service

tests, the community development test,

or the small bank performance

standards, as appropriate.

(g) Plan approval—(1) Timing. The

Board will act upon a plan within 60

calendar days after the Board receives

the complete plan and other material

required under paragraph (d) of this

section. If the Board fails to act within

this time period, the plan shall be

deemed approved unless the Board

extends the review period for good

cause.

(2) Public participation. In evaluating

the plan’s goals, the Board considers the

public’s involvement in formulating the

plan, written public comment on the

plan, and any response by the bank to

public comment on the plan.

(3) Criteria for evaluating plan. The

Board evaluates a plan’s measurable

goals using the following criteria, as

appropriate:

(i) The extent and breadth of lending

or lending-related activities, including,

as appropriate, the distribution of loans

among different geographies, businesses

and farms of different sizes, and

individuals of different income levels,

the extent of community development

lending, and the use of innovative or

flexible lending practices to address

credit needs;

(ii) The amount and innovativeness,

complexity, and responsiveness of the

bank’s qualified investments; and

(iii) The availability and effectiveness

of the bank’s systems for delivering

retail banking services and the extent

and innovativeness of the bank’s

community development services.

(h) Plan amendment. During the term

of a plan, a bank may request the Board

to approve an amendment to the plan on

grounds that there has been a material

change in circumstances. The bank shall

develop an amendment to a previously

approved plan in accordance with the

public participation requirements of

paragraph (c) of this section.

(i) Plan assessment. The Board

approves the goals and assesses

performance under a plan as provided

for in Appendix A of this part.

§ 228.28 Assigned ratings.

(a) Ratings in general. Subject to

paragraphs (b) and (c) of this section,

the Board assigns to a bank a rating of

‘‘outstanding,’’ ‘‘satisfactory,’’ ‘‘needs to

improve,’’ or ‘‘substantial

noncompliance’’ based on the bank’s

performance under the lending,

investment and service tests, the

community development test, the small

bank performance standards, or an

approved strategic plan, as applicable.

(b) Lending, investment, and service

tests. The Board assigns a rating for a

bank assessed under the lending,

investment, and service tests in

accordance with the following

principles:

(1) A bank that receives an

‘‘outstanding’’ rating on the lending test

receives an assigned rating of at least

‘‘satisfactory’’;

(2) A bank that receives an

‘‘outstanding’’ rating on both the service

test and the investment test and a rating

of at least ‘‘high satisfactory’’ on the

lending test receives an assigned rating

of ‘‘outstanding’’; and

(3) No bank may receive an assigned

rating of ‘‘satisfactory’’ or higher unless

it receives a rating of at least ‘‘low

satisfactory’’ on the lending test.

(c) Effect of evidence of

discriminatory or other illegal credit

practices. Evidence of discriminatory or

other illegal credit practices adversely

affects the Board’s evaluation of a bank’s

performance. In determining the effect

on the bank’s assigned rating, the Board

considers the nature and extent of the

evidence, the policies and procedures

that the bank has in place to prevent

discriminatory or other illegal credit

practices, any corrective action that the

bank has taken or has committed to

take, particularly voluntary corrective

action resulting from self-assessment,

and other relevant information.

§ 228.29 Effect of CRA performance on

applications.

(a) CRA performance. Among other

factors, the Board takes into account the
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22195

record of performance under the CRA

of:

(1) Each applicant bank for the:

(i) Establishment of a domestic branch

by a State member bank; and

(ii) Merger, consolidation, acquisition

of assets, or assumption of liabilities

requiring approval under the Bank

Merger Act (12 U.S.C. 1828(c)) if the

acquiring, assuming, or resulting bank is

to be a State member bank; and

(2) Each insured depository

institution (as defined in 12 U.S.C.

1813) controlled by an applicant and

subsidiary bank or savings association

proposed to be controlled by an

applicant:

(i) To become a bank holding

company in a transaction that requires

approval under section 3 of the Bank

Holding Company Act (12 U.S.C. 1842);

(ii) To acquire ownership or control of

shares or all or substantially all of the

assets of a bank, to cause a bank to

become a subsidiary of a bank holding

company, or to merge or consolidate a

bank holding company with any other

bank holding company in a transaction

that requires approval under section 3 of

the Bank Holding Company Act (12

U.S.C. 1842); and

(iii) To own, control or operate a

savings association in a transaction that

requires approval under section 4 of the

Bank Holding Company Act (12 U.S.C.

1843).

(b) Interested parties. In considering

CRA performance in an application

described in paragraph (a) of this

section, the Board takes into account

any views expressed by interested

parties that are submitted in accordance

with the Board’s Rules of Procedure set

forth in part 262 of this chapter.

(c) Denial or conditional approval of

application. A bank’s record of

performance may be the basis for

denying or conditioning approval of an

application listed in paragraph (a) of

this section.

(d) Definitions. For purposes of

paragraph (a)(2) of this section, ‘‘bank,’’

‘‘bank holding company,’’ ‘‘subsidiary,’’

and ‘‘savings association’’ have the

meanings given to those terms in section

2 of the Bank Holding Company Act (12

U.S.C. 1841).

Subpart C—Records, Reporting, and

Disclosure Requirements

§ 228.41 Assessment area delineation.

(a) In general. A bank shall delineate

one or more assessment areas within

which the Board evaluates the bank’s

record of helping to meet the credit

needs of its community. The Board does

not evaluate the bank’s delineation of its

assessment area(s) as a separate

performance criterion, but the Board

reviews the delineation for compliance

with the requirements of this section.

(b) Geographic area(s) for wholesale

or limited purpose banks. The

assessment area(s) for a wholesale or

limited purpose bank must consist

generally of one or more MSAs (using

the MSA boundaries that were in effect

as of January 1 of the calendar year in

which the delineation is made) or one

or more contiguous political

subdivisions, such as counties, cities, or

towns, in which the bank has its main

office, branches, and deposit-taking

ATMs.

(c) Geographic area(s) for other banks.

The assessment area(s) for a bank other

than a wholesale or limited purpose

bank must:

(1) Consist generally of one or more

MSAs (using the MSA boundaries that

were in effect as of January 1 of the

calendar year in which the delineation

is made) or one or more contiguous

political subdivisions, such as counties,

cities, or towns; and

(2) Include the geographies in which

the bank has its main office, its

branches, and its deposit-taking ATMs,

as well as the surrounding geographies

in which the bank has originated or

purchased a substantial portion of its

loans (including home mortgage loans,

small business and small farm loans,

and any other loans the bank chooses,

such as those consumer loans on which

the bank elects to have its performance

assessed).

(d) Adjustments to geographic area(s).

A bank may adjust the boundaries of its

assessment area(s) to include only the

portion of a political subdivision that it

reasonably can be expected to serve. An

adjustment is particularly appropriate in

the case of an assessment area that

otherwise would be extremely large, of

unusual configuration, or divided by

significant geographic barriers.

(e) Limitations on the delineation of

an assessment area. Each bank’s

assessment area(s):

(1) Must consist only of whole

geographies;

(2) May not reflect illegal

discrimination;

(3) May not arbitrarily exclude low- or

moderate-income geographies, taking

into account the bank’s size and

financial condition; and

(4) May not extend substantially

beyond a CMSA boundary or beyond a

state boundary unless the assessment

area is located in a multistate MSA. If

a bank serves a geographic area that

extends substantially beyond a state

boundary, the bank shall delineate

separate assessment areas for the areas

in each state. If a bank serves a

geographic area that extends

substantially beyond a CMSA boundary,

the bank shall delineate separate

assessment areas for the areas inside

and outside the CMSA.

(f) Banks serving military personnel.

Notwithstanding the requirements of

this section, a bank whose business

predominantly consists of serving the

needs of military personnel or their

dependents who are not located within

a defined geographic area may delineate

its entire deposit customer base as its

assessment area.

(g) Use of assessment area(s). The

Board uses the assessment area(s)

delineated by a bank in its evaluation of

the bank’s CRA performance unless the

Board determines that the assessment

area(s) do not comply with the

requirements of this section.

§ 228.42 Data collection, reporting, and

disclosure.

(a) Loan information required to be

collected and maintained. A bank,

except a small bank, shall collect, and

maintain in machine readable form (as

prescribed by the Board) until the

completion of its next CRA

examination, the following data for each

small business or small farm loan

originated or purchased by the bank:

(1) A unique number or alphanumeric symbol that can be used to

identify the relevant loan file;

(2) The loan amount at origination;

(3) The loan location; and

(4) An indicator whether the loan was

to a business or farm with gross annual

revenues of $1 million or less.

(b) Loan information required to be

reported. A bank, except a small bank or

a bank that was a small bank during the

prior calendar year, shall report

annually by March 1 to the Board in

machine readable form (as prescribed by

the Board) the following data for the

prior calendar year:

(1) Small business and small farm

loan data. For each geography in which

the bank originated or purchased a

small business or small farm loan, the

aggregate number and amount of loans:

(i) With an amount at origination of

$100,000 or less;

(ii) With amount at origination of

more than $100,000 but less than or

equal to $250,000;

(iii) With an amount at origination of

more than $250,000; and

(iv) To businesses and farms with

gross annual revenues of $1 million or

less (using the revenues that the bank

considered in making its credit

decision);

(2) Community development loan

data. The aggregate number and

aggregate amount of community
22196 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

development loans originated or

purchased; and

(3) Home mortgage loans. If the bank

is subject to reporting under part 203 of

this chapter, the location of each home

mortgage loan application, origination,

or purchase outside the MSAs in which

the bank has a home or branch office (or

outside any MSA) in accordance with

the requirements of part 203 of this

chapter.

(c) Optional data collection and

maintenance—(1) Consumer loans. A

bank may collect and maintain in

machine readable form (as prescribed by

the Board) data for consumer loans

originated or purchased by the bank for

consideration under the lending test. A

bank may maintain data for one or more

of the following categories of consumer

loans: motor vehicle, credit card, home

equity, other secured, and other

unsecured. If the bank maintains data

for loans in a certain category, it shall

maintain data for all loans originated or

purchased within that category. The

bank shall maintain data separately for

each category, including for each loan:

(i) A unique number or alpha-numeric

symbol that can be used to identify the

relevant loan file;

(ii) The loan amount at origination or

purchase;

(iii) The loan location; and

(iv) The gross annual income of the

borrower that the bank considered in

making its credit decision.

(2) Other loan data. At its option, a

bank may provide other information

concerning its lending performance,

including additional loan distribution

data.

(d) Data on affiliate lending. A bank

that elects to have the Board consider

loans by an affiliate, for purposes of the

lending or community development test

or an approved strategic plan, shall

collect, maintain, and report for those

loans the data that the bank would have

collected, maintained, and reported

pursuant to paragraphs (a), (b), and (c)

of this section had the loans been

originated or purchased by the bank. For

home mortgage loans, the bank shall

also be prepared to identify the home

mortgage loans reported under part 203

of this chapter by the affiliate.

(e) Data on lending by a consortium

or a third party. A bank that elects to

have the Board consider community

development loans by a consortium or

third party, for purposes of the lending

or community development tests or an

approved strategic plan, shall report for

those loans the data that the bank would

have reported under paragraph (b)(2) of

this section had the loans been

originated or purchased by the bank.

(f) Small banks electing evaluation

under the lending, investment, and

service tests. A bank that qualifies for

evaluation under the small bank

performance standards but elects

evaluation under the lending,

investment, and service tests shall

collect, maintain, and report the data

required for other banks pursuant to

paragraphs (a) and (b) of this section.

(g) Assessment area data. A bank,

except a small bank or a bank that was

a small bank during the prior calendar

year, shall collect and report to the

Board by March 1 of each year a list for

each assessment area showing the

geographies within the area.

(h) CRA Disclosure Statement. The

Board prepares annually for each bank

that reports data pursuant to this section

a CRA Disclosure Statement that

contains, on a state-by-state basis:

(1) For each county (and for each

assessment area smaller than a county)

with a population of 500,000 persons or

fewer in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

low-, moderate-, middle-, and upperincome geographies;

(ii) A list grouping each geography

according to whether the geography is

low-, moderate-, middle-, or upperincome;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(2) For each county (and for each

assessment area smaller than a county)

with a population in excess of 500,000

persons in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

geographies with median income

relative to the area median income of

less than 10 percent, 10 or more but less

than 20 percent, 20 or more but less

than 30 percent, 30 or more but less

than 40 percent, 40 or more but less

than 50 percent, 50 or more but less

than 60 percent, 60 or more but less

than 70 percent, 70 or more but less

than 80 percent, 80 or more but less

than 90 percent, 90 or more but less

than 100 percent, 100 or more but less

than 110 percent, 110 or more but less

than 120 percent, and 120 percent or

more;

(ii) A list grouping each geography in

the county or assessment area according

to whether the median income in the

geography relative to the area median

income is less than 10 percent, 10 or

more but less than 20 percent, 20 or

more but less than 30 percent, 30 or

more but less than 40 percent, 40 or

more but less than 50 percent, 50 or

more but less than 60 percent, 60 or

more but less than 70 percent, 70 or

more but less than 80 percent, 80 or

more but less than 90 percent, 90 or

more but less than 100 percent, 100 or

more but less than 110 percent, 110 or

more but less than 120 percent, and 120

percent or more;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(3) The number and amount of small

business and small farm loans located

inside each assessment area reported by

the bank and the number and amount of

small business and small farm loans

located outside the assessment area(s)

reported by the bank; and

(4) The number and amount of

community development loans reported

as originated or purchased.

(i) Aggregate disclosure statements.

The Board, in conjunction with the

Office of the Comptroller of the

Currency, the Federal Deposit Insurance

Corporation, and the Office of Thrift

Supervision, prepares annually, for each

MSA (including an MSA that crosses a

state boundary) and the non-MSA

portion of each state, an aggregate

disclosure statement of small business

and small farm lending by all

institutions subject to reporting under

this part or parts 25, 345, or 563e of this

title. These disclosure statements

indicate, for each geography, the

number and amount of all small

business and small farm loans

originated or purchased by reporting

institutions, except that the Board may

adjust the form of the disclosure if

necessary, because of special

circumstances, to protect the privacy of

a borrower or the competitive position

of an institution.

(j) Central data depositories. The

Board makes the aggregate disclosure

statements, described in paragraph (i) of

this section, and the individual bank

CRA Disclosure Statements, described

in paragraph (h) of this section,

available to the public at central data

depositories. The Board publishes a list

of the depositories at which the

statements are available.
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22197

§ 228.43 Content and availability of public

file.

(a) Information available to the

public. A bank shall maintain a public

file that includes the following

information:

(1) All written comments received

from the public for the current year and

each of the prior two calendar years that

specifically relate to the bank’s

performance in helping to meet

community credit needs, and any

response to the comments by the bank,

if neither the comments nor the

responses contain statements that reflect

adversely on the good name or

reputation of any persons other than the

bank or publication of which would

violate specific provisions of law;

(2) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation prepared by the Board. The

bank shall place this copy in the public

file within 30 business days after its

receipt from the Board;

(3) A list of the bank’s branches, their

street addresses, and geographies;

(4) A list of branches opened or closed

by the bank during the current year and

each of the prior two calendar years,

their street addresses, and geographies;

(5) A list of services (including hours

of operation, available loan and deposit

products, and transaction fees) generally

offered at the bank’s branches and

descriptions of material differences in

the availability or cost of services at

particular branches, if any. At its option,

a bank may include information

regarding the availability of alternative

systems for delivering retail banking

services (e.g., ATMs, ATMs not owned

or operated by or exclusively for the

bank, banking by telephone or

computer, loan production offices, and

bank-at-work or bank-by-mail

programs);

(6) A map of each assessment area

showing the boundaries of the area and

identifying the geographies contained

within the area, either on the map or in

a separate list; and

(7) Any other information the bank

chooses.

(b) Additional information available

to the public—(1) Banks other than

small banks. A bank, except a small

bank or a bank that was a small bank

during the prior calendar year, shall

include in its public file the following

information pertaining to the bank and

its affiliates, if applicable, for each of

the prior two calendar years:

(i) If the bank has elected to have one

or more categories of its consumer loans

considered under the lending test, for

each of these categories, the number and

amount of loans:

(A) To low-, moderate-, middle-, and

upper-income individuals;

(B) Located in low-, moderate-,

middle-, and upper-income census

tracts; and

(C) Located inside the bank’s

assessment area(s) and outside the

bank’s assessment area(s); and

(ii) The bank’s CRA Disclosure

Statement. The bank shall place the

statement in the public file within three

business days of its receipt from the

Board.

(2) Banks required to report Home

Mortgage Disclosure Act (HMDA) data.

A bank required to report home

mortgage loan data pursuant to part 203

of this chapter shall include in its

public file a copy of the HMDA

Disclosure Statement provided by the

Federal Financial Institutions

Examination Council pertaining to the

bank for each of the prior two calendar

years. In addition, a bank that elected to

have the Board consider the mortgage

lending of an affiliate for any of these

years shall include in its public file the

affiliate’s HMDA Disclosure Statement

for those years. The bank shall place the

statement(s) in the public file within

three business days after its receipt.

(3) Small banks. A small bank or a

bank that was a small bank during the

prior calendar year shall include in its

public file:

(i) The bank’s loan-to-deposit ratio for

each quarter of the prior calendar year

and, at its option, additional data on its

loan-to-deposit ratio; and

(ii) The information required for other

banks by paragraph (b)(1) of this section,

if the bank has elected to be evaluated

under the lending, investment, and

service tests.

(4) Banks with strategic plans. A bank

that has been approved to be assessed

under a strategic plan shall include in

its public file a copy of that plan. A

bank need not include information

submitted to the Board on a confidential

basis in conjunction with the plan.

(5) Banks with less than satisfactory

ratings. A bank that received a less than

satisfactory rating during its most recent

examination shall include in its public

file a description of its current efforts to

improve its performance in helping to

meet the credit needs of its entire

community. The bank shall update the

description quarterly.

(c) Location of public information. A

bank shall make available to the public

for inspection upon request and at no

cost the information required in this

section as follows:

(1) At the main office and, if an

interstate bank, at one branch office in

each state, all information in the public

file; and

(2) At each branch:

(i) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation and a list of services

provided by the branch; and

(ii) Within five calendar days of the

request, all the information in the public

file relating to the assessment area in

which the branch is located.

(d) Copies. Upon request, a bank shall

provide copies, either on paper or in

another form acceptable to the person

making the request, of the information

in its public file. The bank may charge

a reasonable fee not to exceed the cost

of copying and mailing (if applicable).

(e) Updating. Except as otherwise

provided in this section, a bank shall

ensure that the information required by

this section is current as of April 1 of

each year.

§ 228.44 Public notice by banks.

A bank shall provide in the public

lobby of its main office and each of its

branches the appropriate public notice

set forth in Appendix B of this part.

Only a branch of a bank having more

than one assessment area shall include

the bracketed material in the notice for

branch offices. Only a bank that is an

affiliate of a holding company shall

include the next to the last sentence of

the notices. A bank shall include the

last sentence of the notices only if it is

an affiliate of a holding company that is

not prevented by statute from acquiring

additional banks.

§ 228.45 Publication of planned

examination schedule.

The Board publishes at least 30 days

in advance of the beginning of each

calendar quarter a list of banks

scheduled for CRA examinations in that

quarter.

Subpart D—Transition Rules

§ 228.51 Transition rules.

(a) Effective date. Sections of this part

become applicable over a period of time

in accordance with the schedule set

forth in paragraph (c) of this section.

(b) Data collection and reporting;

strategic plan; performance tests and

standards. (i) On January 1, 1996, the

data collection requirements set forth in

§ 228.42 (except § 228.42(b) and (g))

become applicable.

(ii) On January 1, 1997, the data

reporting requirements set forth in

§ 228.42(b) and (g) become applicable.

(2) Small banks. Beginning January 1,

1996, the Board evaluates banks that

qualify for the small bank performance

standards described in § 228.26 under

that section.

(3) Strategic plan. Beginning January

1, 1996, a bank that elects to be
22198 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

evaluated under an approved strategic

plan pursuant to § 228.27 may submit

its strategic plan to the Board for

approval.

(4) Other performance tests. (i)

Beginning January 1, 1996, a bank may

elect to be evaluated under the pertinent

revised performance tests described in

§§ 228.22, 228.23, 228.24, and 228.25, if

the bank provides the necessary data to

permit evaluation.

(ii) Beginning July 1, 1997, the Board

evaluates all banks under the pertinent

revised performance tests.

(c) Schedule. (1) On July 1, 1995,

§§ 228.11, 228.12, 228.29, and 228.51

become applicable, and §§ 228.1, 228.2,

228.8, and 228.100 expire.

(2) On January 1, 1996, § 228.41 and

the pertinent provisions of Subpart B of

this part will apply to banks that elect

to be evaluated under §§ 228.22 through

228.25, banks that submit for approval

strategic plans under § 228.27, and

banks that qualify for the small bank

performance standards described in

§ 228.26.

(3) On January 1, 1996, §§ 228.42

(except § 228.42(b) and (g)) and 228.45

become applicable.

(4) On January 1, 1997, §§ 228.41 and

228.42(b) and (g) become applicable.

(5) On July 1, 1997, §§ 228.21 through

228.28, 228.43, and 228.44 become

applicable, and §§ 228.3 through 228.7,

and 228.51 expire.

Appendix A to Part 228—Ratings

(a) Ratings in general. (1) In assigning a

rating, the Board evaluates a bank’s

performance under the applicable

performance criteria in this part, in

accordance with § 228.21, and § 228.28,

which provides for adjustments on the basis

of evidence of discriminatory or other illegal

credit practices.

(2) A bank’s performance need not fit each

aspect of a particular rating profile in order

to receive that rating, and exceptionally

strong performance with respect to some

aspects may compensate for weak

performance in others. The bank’s overall

performance, however, must be consistent

with safe and sound banking practices and

generally with the appropriate rating profile

as follows.

(b) Banks evaluated under the lending,

investment, and service tests—(1) Lending

performance rating. The Board assigns each

bank’s lending performance one of the five

following ratings.

(i) Outstanding. The Board rates a bank’s

lending performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) Excellent responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A substantial majority of its loans are

made in its assessment area(s);

(C) An excellent geographic distribution of

loans in its assessment area(s);

(D) An excellent distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An excellent record of serving the

credit needs of highly economically

disadvantaged areas in its assessment area(s),

low-income individuals, or businesses

(including farms) with gross annual revenues

of $1 million or less, consistent with safe and

sound operations;

(F) Extensive use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It is a leader in making community

development loans.

(ii) High satisfactory. The Board rates a

bank’s lending performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) Good responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A high percentage of its loans are made

in its assessment area(s);

(C) A good geographic distribution of loans

in its assessment area(s);

(D) A good distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A good record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made a relatively high level of

community development loans.

(iii) Low satisfactory. The Board rates a

bank’s lending performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) Adequate responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) An adequate percentage of its loans are

made in its assessment area(s);

(C) An adequate geographic distribution of

loans in its assessment area(s);

(D) An adequate distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An adequate record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Limited use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made an adequate level of

community development loans.

(iv) Needs to improve. The Board rates a

bank’s lending performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) Poor responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A small percentage of its loans are

made in its assessment area(s);

(C) A poor geographic distribution of loans,

particularly to low- or moderate-income

geographies, in its assessment area(s);

(D) A poor distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Little use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made a low level of community

development loans.

(v) Substantial noncompliance. The Board

rates a bank’s lending performance as being

in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) A very poor responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A very small percentage of its loans are

made in its assessment area(s);

(C) A very poor geographic distribution of

loans, particularly to low- or moderateincome geographies, in its assessment area(s);

(D) A very poor distribution, particularly in

its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A very poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) No use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made few, if any, community

development loans.
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22199

(2) Investment performance rating. The

Board assigns each bank’s investment

performance one of the five following ratings.

(i) Outstanding. The Board rates a bank’s

investment performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) An excellent level of qualified

investments, particularly those that are not

routinely provided by private investors, often

in a leadership position;

(B) Extensive use of innovative or complex

qualified investments; and

(C) Excellent responsiveness to credit and

community development needs.

(ii) High satisfactory. The Board rates a

bank’s investment performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) A significant level of qualified

investments, particularly those that are not

routinely provided by private investors,

occasionally in a leadership position;

(B) Significant use of innovative or

complex qualified investments; and

(C) Good responsiveness to credit and

community development needs.

(iii) Low satisfactory. The Board rates a

bank’s investment performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) An adequate level of qualified

investments, particularly those that are not

routinely provided by private investors,

although rarely in a leadership position;

(B) Occasional use of innovative or

complex qualified investments; and

(C) Adequate responsiveness to credit and

community development needs.

(iv) Needs to improve. The Board rates a

bank’s investment performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) A poor level of qualified investments,

particularly those that are not routinely

provided by private investors;

(B) Rare use of innovative or complex

qualified investments; and

(C) Poor responsiveness to credit and

community development needs.

(v) Substantial noncompliance. The Board

rates a bank’s investment performance as

being in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) Few, if any, qualified investments,

particularly those that are not routinely

provided by private investors;

(B) No use of innovative or complex

qualified investments; and

(C) Very poor responsiveness to credit and

community development needs.

(3) Service performance rating. The Board

assigns each bank’s service performance one

of the five following ratings.

(i) Outstanding. The Board rates a bank’s

service performance ‘‘outstanding’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are readily

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has improved the accessibility of its delivery

systems, particularly in low- or moderateincome geographies or to low- or moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) are tailored to

the convenience and needs of its assessment

area(s), particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It is a leader in providing community

development services.

(ii) High satisfactory. The Board rates a

bank’s service performance ‘‘high

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has not adversely affected the accessibility of

its delivery systems, particularly in low- and

moderate-income geographies and to lowand moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides a relatively high level of

community development services.

(iii) Low satisfactory. The Board rates a

bank’s service performance ‘‘low

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

reasonably accessible to geographies and

individuals of different income levels in its

assessment area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has generally not adversely affected the

accessibility of its delivery systems,

particularly in low- and moderate-income

geographies and to low- and moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides an adequate level of

community development services.

(iv) Needs to improve. The Board rates a

bank’s service performance ‘‘needs to

improve’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to portions of its

assessment area(s), particularly to low- or

moderate-income geographies or to low- or

moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has adversely affected the accessibility its

delivery systems, particularly in low- or

moderate-income geographies or to low- or

moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that inconveniences its assessment area(s),

particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It provides a limited level of

community development services.

(v) Substantial noncompliance. The Board

rates a bank’s service performance as being

in ‘‘substantial noncompliance’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to significant

portions of its assessment area(s), particularly

to low- or moderate-income geographies or to

low- or moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has significantly adversely affected the

accessibility of its delivery systems,

particularly in low- or moderate-income

geographies or to low- or moderate-income

individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that significantly inconveniences its

assessment area(s), particularly low- or

moderate-income geographies or low- or

moderate-income individuals; and

(D) It provides few, if any, community

development services.

(c) Wholesale or limited purpose banks.

The Board assigns each wholesale or limited

purpose bank’s community development

performance one of the four following

ratings.

(1) Outstanding. The Board rates a

wholesale or limited purpose bank’s

community development performance

‘‘outstanding’’ if, in general, it demonstrates:

(i) A high level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Extensive use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Excellent responsiveness to credit and

community development needs in its

assessment area(s).

(2) Satisfactory. The Board rates a

wholesale or limited purpose bank’s

community development performance

‘‘satisfactory’’ if, in general, it demonstrates:

(i) An adequate level of community

development loans, community development

services, or qualified investments,

particularly investments that are not

routinely provided by private investors;

(ii) Occasional use of innovative or

complex qualified investments, community

development loans, or community

development services; and

(iii) Adequate responsiveness to credit and

community development needs in its

assessment area(s).

(3) Needs to improve. The Board rates a

wholesale or limited purpose bank’s

community development performance as

‘‘needs to improve’’ if, in general, it

demonstrates:

(i) A poor level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Rare use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Poor responsiveness to credit and

community development needs in its

assessment area(s).

(4) Substantial noncompliance. The Board

rates a wholesale or limited purpose bank’s
22200 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

community development performance in

‘‘substantial noncompliance’’ if, in general, it

demonstrates:

(i) Few, if any, community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) No use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Very poor responsiveness to credit and

community development needs in its

assessment area(s).

(d) Banks evaluated under the small bank

performance standards. The Board rates the

performance of each bank evaluated under

the small bank performance standards as

follows.

(1) Eligibility for a satisfactory rating. The

Board rates a bank’s performance

‘‘satisfactory’’ if, in general, the bank

demonstrates:

(i) 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, lending-related

activities such as loan originations for sale to

the secondary markets and community

development loans and qualified

investments;

(ii) A majority of its loans and, as

appropriate, other lending-related activities

are in its assessment area(s);

(iii) 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);

(iv) A record of taking appropriate action,

as 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

(v) A reasonable geographic distribution of

loans given the bank’s assessment area(s).

(2) Eligibility for an outstanding rating. A

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 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).

(3) Needs to improve or substantial

noncompliance ratings. A bank also may

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.

(e) Strategic plan assessment and rating—

(1) Satisfactory goals. The Board approves as

‘‘satisfactory’’ measurable goals that

adequately help to meet the credit needs of

the bank’s assessment area(s).

(2) Outstanding goals. If the plan identifies

a separate group of measurable goals that

substantially exceed the levels approved as

‘‘satisfactory,’’ the Board will approve those

goals as ‘‘outstanding.’’

(3) Rating. The Board assesses the

performance of a bank operating under an

approved plan to determine if the bank has

met its plan goals:

(i) If the bank substantially achieves its

plan goals for a satisfactory rating, the Board

will rate the bank’s performance under the

plan as ‘‘satisfactory.’’

(ii) If the bank exceeds its plan goals for

a satisfactory rating and substantially

achieves its plan goals for an outstanding

rating, the Board will rate the bank’s

performance under the plan as

‘‘outstanding.’’

(iii) If the bank fails to meet substantially

its plan goals for a satisfactory rating, the

Board will rate the bank as either ‘‘needs to

improve’’ or ‘‘substantial noncompliance,’’

depending on the extent to which it falls

short of its plan goals, unless the bank

elected in its plan to be rated otherwise, as

provided in § 228.27(f)(4).

Appendix B to Part 228—CRA Notice

(a) Notice for main offices and, if an

interstate bank, one branch office in each

state.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Federal Reserve

Board (Board) evaluates our record of helping

to meet the credit needs of this community

consistent with safe and sound operations.

The Board also takes this record into account

when deciding on certain applications

submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA, including, for example,

information about our branches, such as their

location and services provided at them; the

public section of our most recent CRA

Performance Evaluation, prepared by the

Federal Reserve Bank of llll (Reserve

Bank); and comments received from the

public relating to our performance in helping

to meet community credit needs, as well as

our responses to those comments. You may

review this information today.

At least 30 days before the beginning of

each quarter, the Federal Reserve System

publishes a list of the banks that are

scheduled for CRA examination by the

Reserve Bank in that quarter. This list is

available from (title of responsible official),

Federal Reserve Bank of llll (address).

You may send written comments about our

performance in helping to meet community

credit needs to (name and address of official

at bank) and (title of responsible official),

Federal Reserve Bank of llll (address).

Your letter, together with any response by us,

will be considered by the Federal Reserve

System in evaluating our CRA performance

and may be made public.

You may ask to look at any comments

received by the Reserve Bank. You may also

request from the Reserve Bank an

announcement of our applications covered

by the CRA filed with the Reserve Bank. We

are an affiliate of (name of holding company),

a bank holding company. You may request

from (title of responsible official), Federal

Reserve Bank of llll (address) an

announcement of applications covered by the

CRA filed by bank holding companies.

(b) Notice for branch offices.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Federal Reserve

Board (Board) evaluates our record of helping

to meet the credit needs of this community

consistent with safe and sound operations.

The Board also takes this record into account

when deciding on certain applications

submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA. You may review today the

public section of our most recent CRA

evaluation, prepared by the Federal Reserve

Bank of llll (address), and a list of

services provided at this branch. You may

also have access to the following additional

information, which we will make available to

you at this branch within five calendar days

after you make a request to us: (1) a map

showing the assessment area containing this

branch, which is the area in which the Board

evaluates our CRA performance in this

community; (2) information about our

branches in this assessment area; (3) a list of

services we provide at those locations; (4)

data on our lending performance in this

assessment area; and (5) copies of all written

comments received by us that specifically

relate to our CRA performance in this

assessment area, and any responses we have

made to those comments. If we are operating

under an approved strategic plan, you may

also have access to a copy of the plan.

[If you would like to review information

about our CRA performance in other

communities served by us, the public file for

our entire bank is available at (name of office

located in state), located at (address).]

At least 30 days before the beginning of

each quarter, the Federal Reserve System

publishes a list of the banks that are

scheduled for CRA examination by the

Reserve Bank in that quarter. This list is

available from (title of responsible official),

Federal Reserve Bank of llll (address).

You may send written comments about our

performance in helping to meet community

credit needs to (name and address of official

at bank) and (title of responsible official),

Federal Reserve Bank of llll (address).

Your letter, together with any response by us,

will be considered by the Federal Reserve

System in evaluating our CRA performance

and may be made public.

You may ask to look at any comments

received by the Reserve Bank. You may also

request from the Reserve Bank an

announcement of our applications covered

by the CRA filed with the Reserve Bank. We

are an affiliate of (name of holding company),

a bank holding company. You may request

from (title of responsible official), Federal

Reserve Bank of llll (address) an
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22201

announcement of applications covered by the

CRA filed by bank holding companies.

§§ 228.1, 228.2, 228.8, and 228.100

[Removed]

3. Sections 228.1, 228.2, 228.8, and

228.100 are removed effective July 1,

1995.

§§ 228.3, 228.4, 228.5, 228.6, and 228.7, and

Subpart D [Removed]

4. Sections 228.3, 228.4, 228.5, 228.6,

and 228.7, and Subpart D, consisting of

§ 228.51 are removed effective July 1,

1997.

By order of the Board of Governors of the

Federal Reserve System, April 24, 1995.

Jennifer J. Johnson,

Deputy Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

For the reasons outlined in the joint

preamble, the Board of Directors of the

Federal Deposit Insurance Corporation

amends 12 CFR chapter III as set forth

below:

PART 345—COMMUNITY

REINVESTMENT

1. The authority citation for part 345

is revised to read as follows:

Authority: 12 U.S.C. 1814–1817, 1819–

1820, 1828, 1831u and 2901–2907, 3103–

3104, and 3108(a).

2. Part 345 is amended by adding

Subparts A through D and Appendices

A and B to read as follows:

Subpart A—General

Sec.

345.11 Authority, purposes, and scope.

345.12 Definitions.

Subpart B—Standards for Assessing

Performance

345.21 Performance tests, standards, and

ratings, in general.

345.22 Lending test.

345.23 Investment test.

345.24 Service test.

345.25 Community development test for

wholesale or limited purpose banks.

345.26 Small bank performance standards.

345.27 Strategic plan.

345.28 Assigned ratings.

345.29 Effect of CRA performance on

applications.

Subpart C—Records, Reporting, and

Disclosure Requirements

345.41 Assessment area delineation.

345.42 Data collection, reporting, and

disclosure.

345.43 Content and availability of public

file.

345.44 Public notice by banks.

345.45 Publication of planned examination

schedule.

Subpart D—Transition Rules

345.51 Transition rules.

Appendix A to Part 345—Ratings

Appendix B to Part 345—CRA Notice

Subpart A—General

§ 345.11 Authority, purposes, and scope.

(a) Authority and OMB control

number—(1) Authority. The authority

for this part is 12 U.S.C. 1814–1817,

1819–1820, 1828, 1831u and 2901–

2907, 3103–3104, and 3108(a).

(2) OMB control number. The

information collection requirements

contained in this part were approved by

the Office of Management and Budget

under the provisions of 44 U.S.C. 3501

et seq. and have been assigned OMB

control number 3064–0092.

(b) Purposes. In enacting the

Community Reinvestment Act (CRA),

the Congress required each appropriate

Federal financial supervisory agency to

assess an institution’s record of helping

to meet the credit needs of the local

communities in which the institution is

chartered, consistent with the safe and

sound operation of the institution, and

to take this record into account in the

agency’s evaluation of an application for

a deposit facility by the institution. This

part is intended to carry out the

purposes of the CRA by:

(1) Establishing the framework and

criteria by which the Federal Deposit

Insurance Corporation (FDIC) assesses a

bank’s record of helping to meet the

credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the bank; and

(2) Providing that the FDIC takes that

record into account in considering

certain applications.

(c) Scope—(1) General. Except for

certain special purpose banks described

in paragraph (c)(3) of this section, this

part applies to all insured State

nonmember banks, including insured

State branches as described in

paragraph (c)(2) and any uninsured

State branch that results from an

acquisition described in section 5(a)(8)

of the International Banking Act of 1978

(12 U.S.C. 3103(a)(8)).

(2) Insured State branches. Insured

State branches are branches of a foreign

bank established and operating under

the laws of any State, the deposits of

which are insured in accordance with

the provisions of the Federal Deposit

Insurance Act. In the case of insured

State branches, references in this part to

‘‘main office’’ mean the principal

branch within the United States and the

term ‘‘branch’’ or ‘‘branches’’ refers to

any insured State branch or branches

located within the United States. The

‘‘assessment area’’ of an insured State

branch is the community or

communities located within the United

States served by the branch as described

in § 345.41.

(3) Certain special purpose banks.

This part does not apply to special

purpose banks that do not perform

commercial or retail banking services by

granting credit to the public in the

ordinary course of business, other than

as incident to their specialized

operations. These banks include

banker’s banks, as defined in 12 U.S.C.

24 (Seventh), and banks that engage

only in one or more of the following

activities: providing cash management

controlled disbursement services or

serving as correspondent banks, trust

companies, or clearing agents.

§ 345.12 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate means any company that

controls, is controlled by, or is under

common control with another company.

The term ‘‘control’’ has the meaning

given to that term in 12 U.S.C.

1841(a)(2), and a company is under

common control with another company

if both companies are directly or

indirectly controlled by the same

company.

(b) Area median income means:

(1) The median family income for the

MSA, if a person or geography is located

in an MSA; or

(2) The statewide nonmetropolitan

median family income, if a person or

geography is located outside an MSA.

(c) Assessment area means a

geographic area delineated in

accordance with § 345.41.

(d) Remote Service Facility (RSF)

means an automated, unstaffed banking

facility owned or operated by, or

operated exclusively for, the bank, such

as an automated teller machine, cash

dispensing machine, point-of-sale

terminal, or other remote electronic

facility, at which deposits are received,

cash dispersed, or money lent.

(e) Bank means a State nonmember

bank, as that term is defined in section

3(e)(2) of the Federal Deposit Insurance

Act, as amended (FDIA) (12 U.S.C.

1813(e)(2)), with Federally insured

deposits, except as provided in

§ 345.11(c). The term bank also includes

an insured State branch as defined in

§ 345.11(c).

(f) Branch means a staffed banking

facility authorized as a branch, whether

shared or unshared, including, for

example, a mini-branch in a grocery

store or a branch operated in

conjunction with any other local
22202 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

business or nonprofit organization. The

term ‘‘branch’’ only includes a

‘‘domestic branch’’ as that term is

defined in section 3(o) of the FDIA (12

U.S.C. 1813(o)).

(g) CMSA means a consolidated

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(h) Community development means:

(1) Affordable housing (including

multifamily rental housing) for low- or

moderate-income individuals;

(2) Community services targeted to

low- or moderate-income individuals;

(3) Activities that promote economic

development by financing businesses or

farms that meet the size eligibility

standards of 13 CFR 121.802(a)(2) or

have gross annual revenues of $1

million or less; or

(4) Activities that revitalize or

stabilize low- or moderate-income

geographies.

(i) Community development loan

means a loan that:

(1) Has as its primary purpose

community development; and

(2) Except in the case of a wholesale

or limited purpose bank:

(i) Has not been reported or collected

by the bank or an affiliate for

consideration in the bank’s assessment

as a home mortgage, small business,

small farm, or consumer loan, unless it

is a multifamily dwelling loan (as

described in Appendix A to Part 203 of

this title); and

(ii) Benefits the bank’s assessment

area(s) or a broader statewide or regional

area that includes the bank’s assessment

area(s).

(j) Community development service

means a service that:

(1) Has as its primary purpose

community development;

(2) Is related to the provision of

financial services; and

(3) Has not been considered in the

evaluation of the bank’s retail banking

services under § 345.24(d).

(k) Consumer loan means a loan to

one or more individuals for household,

family, or other personal expenditures.

A consumer loan does not include a

home mortgage, small business, or small

farm loan. Consumer loans include the

following categories of loans:

(1) Motor vehicle loan, which is a

consumer loan extended for the

purchase of and secured by a motor

vehicle;

(2) Credit card loan, which is a line

of credit for household, family, or other

personal expenditures that is accessed

by a borrower’s use of a ‘‘credit card,’’

as this term is defined in § 226.2 of this

title;

(3) Home equity loan, which is a

consumer loan secured by a residence of

the borrower;

(4) Other secured consumer loan,

which is a secured consumer loan that

is not included in one of the other

categories of consumer loans; and

(5) Other unsecured consumer loan,

which is an unsecured consumer loan

that is not included in one of the other

categories of consumer loans.

(l) Geography means a census tract or

a block numbering area delineated by

the United States Bureau of the Census

in the most recent decennial census.

(m) Home mortgage loan means a

‘‘home improvement loan’’ or a ‘‘home

purchase loan’’ as defined in § 203.2 of

this title.

(n) Income level includes:

(1) Low-income, which means an

individual income that is less than 50

percent of the area median income or a

median family income that is less than

50 percent in the case of a geography.

(2) Moderate-income, which means an

individual income that is at least 50

percent and less than 80 percent of the

area median income or a median family

income that is at least 50 and less than

80 percent in the case of a geography.

(3) Middle-income, which means an

individual income that is at least 80

percent and less than 120 percent of the

area median income or a median family

income that is at least 80 and less than

120 percent in the case of a geography.

(4) Upper-income, which means an

individual income that is 120 percent or

more of the area median income or a

median family income that is 120

percent or more in the case of a

geography.

(o) Limited purpose bank means a

bank that offers only a narrow product

line (such as credit card or motor

vehicle loans) to a regional or broader

market and for which a designation as

a limited purpose bank is in effect, in

accordance with § 345.25(b).

(p) Loan location. A loan is located as

follows:

(1) A consumer loan is located in the

geography where the borrower resides;

(2) A home mortgage loan is located

in the geography where the property to

which the loan relates is located; and

(3) A small business or small farm

loan is located in the geography where

the main business facility or farm is

located or where the loan proceeds

otherwise will be applied, as indicated

by the borrower.

(q) Loan production office means a

staffed facility, other than a branch, that

is open to the public and that provides

lending-related services, such as loan

information and applications.

(r) MSA means a metropolitan

statistical area or a primary

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(s) Qualified investment means a

lawful investment, deposit, membership

share, or grant that has as its primary

purpose community development.

(t) Small bank means a bank that, as

of December 31 of either of the prior two

calendar years, had total assets of less

than $250 million and was independent

or an affiliate of a holding company

that, as of December 31 of either of the

prior two calendar years, had total

banking and thrift assets of less than $1

billion.

(u) Small business loan means a loan

included in ‘‘loans to small businesses’’

as defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(v) Small farm loan means a loan

included in ‘‘loans to small farms’’ as

defined in the instructions for

preparation of the Consolidated Report

of Condition and Income.

(w) Wholesale bank means a bank that

is not in the business of extending home

mortgage, small business, small farm, or

consumer loans to retail customers, and

for which a designation as a wholesale

bank is in effect, in accordance with

§ 345.25(b).

Subpart B—Standards for Assessing

Performance

§ 345.21 Performance tests, standards,

and ratings, in general.

(a) Performance tests and standards.

The FDIC assesses the CRA performance

of a bank in an examination as follows:

(1) Lending, investment, and service

tests. The FDIC applies the lending,

investment, and service tests, as

provided in §§ 345.22 through 345.24,

in evaluating the performance of a bank,

except as provided in paragraphs (a)(2),

(a)(3), and (a)(4) of this section.

(2) Community development test for

wholesale or limited purpose banks. The

FDIC applies the community

development test for a wholesale or

limited purpose bank, as provided in

§ 345.25, except as provided in

paragraph (a)(4) of this section.

(3) Small bank performance

standards. The FDIC applies the small

bank performance standards as provided

in § 345.26 in evaluating the

performance of a small bank or a bank

that was a small bank during the prior

calendar year, unless the bank elects to

be assessed as provided in paragraphs

(a)(1), (a)(2), or (a)(4) of this section. The

bank may elect to be assessed as

provided in paragraph (a)(1) of this

section only if it collects and reports the

data required for other banks under

§ 345.42.
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(4) Strategic plan. The FDIC evaluates

the performance of a bank under a

strategic plan if the bank submits, and

the FDIC approves, a strategic plan as

provided in § 345.27.

(b) Performance context. The FDIC

applies the tests and standards in

paragraph (a) of this section and also

considers whether to approve a

proposed strategic plan in the context

of:

(1) Demographic data on median

income levels, distribution of household

income, nature of housing stock,

housing costs, and other relevant data

pertaining to a bank’s assessment

area(s);

(2) Any information about lending,

investment, and service opportunities in

the bank’s assessment area(s)

maintained by the bank or obtained

from community organizations, state,

local, and tribal governments, economic

development agencies, or other sources;

(3) The bank’s product offerings and

business strategy as determined from

data provided by the bank;

(4) Institutional capacity and

constraints, including the size and

financial condition of the bank, the

economic climate (national, regional,

and local), safety and soundness

limitations, and any other factors that

significantly affect the bank’s ability to

provide lending, investments, or

services in its assessment area(s);

(5) The bank’s past performance and

the performance of similarly situated

lenders;

(6) The bank’s public file, as

described in § 345.43, and any written

comments about the bank’s CRA

performance submitted to the bank or

the FDIC; and

(7) Any other information deemed

relevant by the FDIC.

(c) Assigned ratings. The FDIC assigns

to a bank one of the following four

ratings pursuant to § 345.28 and

Appendix A of this part: ‘‘outstanding’’;

‘‘satisfactory’’; ‘‘needs to improve’’; or

‘‘substantial noncompliance’’ as

provided in 12 U.S.C. 2906(b)(2). The

rating assigned by the FDIC reflects the

bank’s record of helping to meet the

credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the bank.

(d) Safe and sound operations. This

part and the CRA do not require a bank

to make loans or investments or to

provide services that are inconsistent

with safe and sound operations. To the

contrary, the FDIC anticipates banks can

meet the standards of this part with safe

and sound loans, investments, and

services on which the banks expect to

make a profit. Banks are permitted and

encouraged to develop and apply

flexible underwriting standards for

loans that benefit low- or moderateincome geographies or individuals, only

if consistent with safe and sound

operations.

§ 345.22 Lending test.

(a) Scope of test. (1) The lending test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through its lending activities by

considering a bank’s home mortgage,

small business, small farm, and

community development lending. If

consumer lending constitutes a

substantial majority of a bank’s

business, the FDIC will evaluate the

bank’s consumer lending in one or more

of the following categories: motor

vehicle, credit card, home equity, other

secured, and other unsecured loans. In

addition, at a bank’s option, the FDIC

will evaluate one or more categories of

consumer lending, if the bank has

collected and maintained, as required in

§ 345.42(c)(1), the data for each category

that the bank elects to have the FDIC

evaluate.

(2) The FDIC considers originations

and purchases of loans. The FDIC will

also consider any other loan data the

bank may choose to provide, including

data on loans outstanding, commitments

and letters of credit.

(3) A bank may ask the FDIC to

consider loans originated or purchased

by consortia in which the bank

participates or by third parties in which

the bank has invested only if the loans

meet the definition of community

development loans and only in

accordance with paragraph (d) of this

section. The FDIC will not consider

these loans under any criterion of the

lending test except the community

development lending criterion.

(b) Performance criteria. The FDIC

evaluates a bank’s lending performance

pursuant to the following criteria:

(1) Lending activity. The number and

amount of the bank’s home mortgage,

small business, small farm, and

consumer loans, if applicable, in the

bank’s assessment area(s);

(2) Geographic distribution. The

geographic distribution of the bank’s

home mortgage, small business, small

farm, and consumer loans, if applicable,

based on the loan location, including:

(i) The proportion of the bank’s

lending in the bank’s assessment area(s);

(ii) The dispersion of lending in the

bank’s assessment area(s); and

(iii) The number and amount of loans

in low-, moderate-, middle-, and upperincome geographies in the bank’s

assessment area(s);

(3) Borrower characteristics. The

distribution, particularly in the bank’s

assessment area(s), of the bank’s home

mortgage, small business, small farm,

and consumer loans, if applicable, based

on borrower characteristics, including

the number and amount of:

(i) Home mortgage loans to low-,

moderate-, middle-, and upper-income

individuals;

(ii) Small business and small farm

loans to businesses and farms with gross

annual revenues of $1 million or less;

(iii) Small business and small farm

loans by loan amount at origination; and

(iv) Consumer loans, if applicable, to

low-, moderate-, middle-, and upperincome individuals;

(4) Community development lending.

The bank’s community development

lending, including the number and

amount of community development

loans, and their complexity and

innovativeness; and

(5) Innovative or flexible lending

practices. The bank’s use of innovative

or flexible lending practices in a safe

and sound manner to address the credit

needs of low- or moderate-income

individuals or geographies.

(c) Affiliate lending. (1) At a bank’s

option, the FDIC will consider loans by

an affiliate of the bank, if the bank

provides data on the affiliate’s loans

pursuant to § 345.42.

(2) The FDIC considers affiliate

lending subject to the following

constraints:

(i) No affiliate may claim a loan

origination or loan purchase if another

institution claims the same loan

origination or purchase; and

(ii) If a bank elects to have the FDIC

consider loans within a particular

lending category made by one or more

of the bank’s affiliates in a particular

assessment area, the bank shall elect to

have the FDIC consider, in accordance

with paragraph (c)(1) of this section, all

the loans within that lending category in

that particular assessment area made by

all of the bank’s affiliates.

(3) The FDIC does not consider

affiliate lending in assessing a bank’s

performance under paragraph (b)(2)(i) of

this section.

(d) Lending by a consortium or a third

party. Community development loans

originated or purchased by a consortium

in which the bank participates or by a

third party in which the bank has

invested:

(1) Will be considered, at the bank’s

option, if the bank reports the data

pertaining to these loans under

§ 345.42(b)(2); and

(2) May be allocated among

participants or investors, as they choose,
22204 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

for purposes of the lending test, except

that no participant or investor:

(i) May claim a loan origination or

loan purchase if another participant or

investor claims the same loan

origination or purchase; or

(ii) May claim loans accounting for

more than its percentage share (based on

the level of its participation or

investment) of the total loans originated

by the consortium or third party.

(e) Lending performance rating. The

FDIC rates a bank’s lending performance

as provided in Appendix A of this part.

§ 345.23 Investment test.

(a) Scope of test. The investment test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) through qualified investments

that benefit its assessment area(s) or a

broader statewide or regional area that

includes the bank’s assessment area(s).

(b) Exclusion. Activities considered

under the lending or service tests may

not be considered under the investment

test.

(c) Affiliate investment. At a bank’s

option, the FDIC will consider, in its

assessment of a bank’s investment

performance, a qualified investment

made by an affiliate of the bank, if the

qualified investment is not claimed by

any other institution.

(d) Disposition of branch premises.

Donating, selling on favorable terms, or

making available on a rent-free basis a

branch of the bank that is located in a

predominantly minority neighborhood

to a minority depository institution or

women’s depository institution (as these

terms are defined in 12 U.S.C. 2907(b))

will be considered as a qualified

investment.

(e) Performance criteria. The FDIC

evaluates the investment performance of

a bank pursuant to the following

criteria:

(1) The dollar amount of qualified

investments;

(2) The innovativeness or complexity

of qualified investments;

(3) The responsiveness of qualified

investments to credit and community

development needs; and

(4) The degree to which the qualified

investments are not routinely provided

by private investors.

(f) Investment performance rating.

The FDIC rates a bank’s investment

performance as provided in Appendix A

of this part.

§ 345.24 Service test.

(a) Scope of test. The service test

evaluates a bank’s record of helping to

meet the credit needs of its assessment

area(s) by analyzing both the availability

and effectiveness of a bank’s systems for

delivering retail banking services and

the extent and innovativeness of its

community development services.

(b) Area(s) benefited. Community

development services must benefit a

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(c) Affiliate service. At a bank’s

option, the FDIC will consider, in its

assessment of a bank’s service

performance, a community development

service provided by an affiliate of the

bank, if the community development

service is not claimed by any other

institution.

(d) Performance criteria—retail

banking services. The FDIC evaluates

the availability and effectiveness of a

bank’s systems for delivering retail

banking services, pursuant to the

following criteria:

(1) The current distribution of the

bank’s branches among low-,

moderate-, middle-, and upper-income

geographies;

(2) In the context of its current

distribution of the bank’s branches, the

bank’s record of opening and closing

branches, particularly branches located

in low- or moderate-income geographies

or primarily serving low- or moderateincome individuals;

(3) The availability and effectiveness

of alternative systems for delivering

retail banking services (e.g., RSFs, RSFs

not owned or operated by or exclusively

for the bank, banking by telephone or

computer, loan production offices, and

bank-at-work or bank-by-mail programs)

in low- and moderate-income

geographies and to low- and moderateincome individuals; and

(4) The range of services provided in

low-, moderate-, middle-, and upperincome geographies and the degree to

which the services are tailored to meet

the needs of those geographies.

(e) Performance criteria—community

development services. The FDIC

evaluates community development

services pursuant to the following

criteria:

(1) The extent to which the bank

provides community development

services; and

(2) The innovativeness and

responsiveness of community

development services.

(f) Service performance rating. The

FDIC rates a bank’s service performance

as provided in Appendix A of this part.

§ 345.25 Community development test for

wholesale or limited purpose banks.

(a) Scope of test. The FDIC assesses a

wholesale or limited purpose bank’s

record of helping to meet the credit

needs of its assessment area(s) under the

community development test through

its community development lending,

qualified investments, or community

development services.

(b) Designation as a wholesale or

limited purpose bank. In order to

receive a designation as a wholesale or

limited purpose bank, a bank shall file

a request, in writing, with the FDIC, at

least three months prior to the proposed

effective date of the designation. If the

FDIC approves the designation, it

remains in effect until the bank requests

revocation of the designation or until

one year after the FDIC notifies the bank

that the FDIC has revoked the

designation on its own initiative.

(c) Performance criteria. The FDIC

evaluates the community development

performance of a wholesale or limited

purpose bank pursuant to the following

criteria:

(1) The number and amount of

community development loans

(including originations and purchases of

loans and other community

development loan data provided by the

bank, such as data on loans outstanding,

commitments, and letters of credit),

qualified investments, or community

development services;

(2) The use of innovative or complex

qualified investments, community

development loans, or community

development services and the extent to

which the investments are not routinely

provided by private investors; and

(3) The bank’s responsiveness to

credit and community development

needs.

(d) Indirect activities. At a bank’s

option, the FDIC will consider in its

community development performance

assessment:

(1) Qualified investments or

community development services

provided by an affiliate of the bank, if

the investments or services are not

claimed by any other institution; and

(2) Community development lending

by affiliates, consortia and third parties,

subject to the requirements and

limitations in § 345.22 (c) and (d).

(e) Benefit to assessment area(s)—(1)

Benefit inside assessment area(s). The

FDIC considers all qualified

investments, community development

loans, and community development

services that benefit areas within the

bank’s assessment area(s) or a broader

statewide or regional area that includes

the bank’s assessment area(s).

(2) Benefit outside assessment area(s).

The FDIC considers the qualified

investments, community development

loans, and community development

services that benefit areas outside the

bank’s assessment area(s), if the bank
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22205

has adequately addressed the needs of

its assessment area(s).

(f) Community development

performance rating. The FDIC rates a

bank’s community development

performance as provided in Appendix A

of this part.

§ 345.26 Small bank performance

standards.

(a) Performance criteria. The FDIC

evaluates the record of a small bank, or

a bank that was a small bank during the

prior calendar year, of helping to meet

the credit needs of its assessment area(s)

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).

(b) Small bank performance rating.

The FDIC rates the performance of a

bank evaluated under this section as

provided in Appendix A of this part.

§ 345.27 Strategic plan.

(a) Alternative election. The FDIC will

assess a bank’s record of helping to meet

the credit needs of its assessment area(s)

under a strategic plan if:

(1) The bank has submitted the plan

to the FDIC as provided for in this

section;

(2) The FDIC has approved the plan;

(3) The plan is in effect; and

(4) The bank has been operating under

an approved plan for at least one year.

(b) Data reporting. The FDIC’s

approval of a plan does not affect the

bank’s obligation, if any, to report data

as required by § 345.42.

(c) Plans in general—(1) Term. A plan

may have a term of no more than five

years, and any multi-year plan must

include annual interim measurable

goals under which the FDIC will

evaluate the bank’s performance.

(2) Multiple assessment areas. A bank

with more than one assessment area

may prepare a single plan for all of its

assessment areas or one or more plans

for one or more of its assessment areas.

(3) Treatment of affiliates. Affiliated

institutions may prepare a joint plan if

the plan provides measurable goals for

each institution. Activities may be

allocated among institutions at the

institutions’ option, provided that the

same activities are not considered for

more than one institution.

(d) Public participation in plan

development. Before submitting a plan

to the FDIC for approval, a bank shall:

(1) Informally seek suggestions from

members of the public in its assessment

area(s) covered by the plan while

developing the plan;

(2) Once the bank has developed a

plan, formally solicit public comment

on the plan for at least 30 days by

publishing notice in at least one

newspaper of general circulation in each

assessment area covered by the plan;

and

(3) During the period of formal public

comment, make copies of the plan

available for review by the public at no

cost at all offices of the bank in any

assessment area covered by the plan and

provide copies of the plan upon request

for a reasonable fee to cover copying

and mailing, if applicable.

(e) Submission of plan. The bank shall

submit its plan to the FDIC at least three

months prior to the proposed effective

date of the plan. The bank shall also

submit with its plan a description of its

informal efforts to seek suggestions from

members of the public, any written

public comment received, and, if the

plan was revised in light of the

comment received, the initial plan as

released for public comment.

(f) Plan content—(1) Measurable

goals. (i) A bank shall specify in its plan

measurable goals for helping to meet the

credit needs of each assessment area

covered by the plan, particularly the

needs of low- and moderate-income

geographies and low- and moderateincome individuals, through lending,

investment, and services, as

appropriate.

(ii) A bank shall address in its plan all

three performance categories and,

unless the bank has been designated as

a wholesale or limited purpose bank,

shall emphasize lending and lendingrelated activities. Nevertheless, a

different emphasis, including a focus on

one or more performance categories,

may be appropriate if responsive to the

characteristics and credit needs of its

assessment area(s), considering public

comment and the bank’s capacity and

constraints, product offerings, and

business strategy.

(2) Confidential information. A bank

may submit additional information to

the FDIC on a confidential basis, but the

goals stated in the plan must be

sufficiently specific to enable the public

and the FDIC to judge the merits of the

plan.

(3) Satisfactory and outstanding goals.

A bank shall specify in its plan

measurable goals that constitute

‘‘satisfactory’’ performance. A plan may

specify measurable goals that constitute

‘‘outstanding’’ performance. If a bank

submits, and the FDIC approves, both

‘‘satisfactory’’ and ‘‘outstanding’’

performance goals, the FDIC will

consider the bank eligible for an

‘‘outstanding’’ performance rating.

(4) Election if satisfactory goals not

substantially met. A bank may elect in

its plan that, if the bank fails to meet

substantially its plan goals for a

satisfactory rating, the FDIC will

evaluate the bank’s performance under

the lending, investment, and service

tests, the community development test,

or the small bank performance

standards, as appropriate.

(g) Plan approval—(1) Timing. The

FDIC will act upon a plan within 60

calendar days after the FDIC receives

the complete plan and other material

required under paragraph (d) of this

section. If the FDIC fails to act within

this time period, the plan shall be

deemed approved unless the FDIC

extends the review period for good

cause.

(2) Public participation. In evaluating

the plan’s goals, the FDIC considers the

public’s involvement in formulating the

plan, written public comment on the

plan, and any response by the bank to

public comment on the plan.

(3) Criteria for evaluating plan. The

FDIC evaluates a plan’s measurable

goals using the following criteria, as

appropriate:

(i) The extent and breadth of lending

or lending-related activities, including,

as appropriate, the distribution of loans

among different geographies, businesses

and farms of different sizes, and

individuals of different income levels,

the extent of community development

lending, and the use of innovative or

flexible lending practices to address

credit needs;

(ii) The amount and innovativeness,

complexity, and responsiveness of the

bank’s qualified investments; and

(iii) The availability and effectiveness

of the bank’s systems for delivering

retail banking services and the extent

and innovativeness of the bank’s

community development services.

(h) Plan amendment. During the term

of a plan, a bank may request the FDIC

to approve an amendment to the plan on

grounds that there has been a material

change in circumstances. The bank shall
22206 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

develop an amendment to a previously

approved plan in accordance with the

public participation requirements of

paragraph (c) of this section.

(i) Plan assessment. The FDIC

approves the goals and assesses

performance under a plan as provided

for in Appendix A of this part.

§ 345.28 Assigned ratings.

(a) Ratings in general. Subject to

paragraphs (b) and (c) of this section,

the FDIC assigns to a bank a rating of

‘‘outstanding,’’ ‘‘satisfactory,’’ ‘‘needs to

improve,’’ or ‘‘substantial

noncompliance’’ based on the bank’s

performance under the lending,

investment and service tests, the

community development test, the small

bank performance standards, or an

approved strategic plan, as applicable.

(b) Lending, investment, and service

tests. The FDIC assigns a rating for a

bank assessed under the lending,

investment, and service tests in

accordance with the following

principles:

(1) A bank that receives an

‘‘outstanding’’ rating on the lending test

receives an assigned rating of at least

‘‘satisfactory’’;

(2) A bank that receives an

‘‘outstanding’’ rating on both the service

test and the investment test and a rating

of at least ‘‘high satisfactory’’ on the

lending test receives an assigned rating

of ‘‘outstanding’’; and

(3) No bank may receive an assigned

rating of ‘‘satisfactory’’ or higher unless

it receives a rating of at least ‘‘low

satisfactory’’ on the lending test.

(c) Effect of evidence of

discriminatory or other illegal credit

practices. Evidence of discriminatory or

other illegal credit practices adversely

affects the FDIC’s evaluation of a bank’s

performance. In determining the effect

on the bank’s assigned rating, the FDIC

considers the nature and extent of the

evidence, the policies and procedures

that the bank has in place to prevent

discriminatory or other illegal credit

practices, any corrective action that the

bank has taken or has committed to

take, particularly voluntary corrective

action resulting from self-assessment,

and other relevant information.

§ 345.29 Effect of CRA performance on

applications.

(a) CRA performance. Among other

factors, the FDIC takes into account the

record of performance under the CRA of

each applicant bank in considering an

application for approval of:

(1) The establishment of a domestic

branch or other facility with the ability

to accept deposits;

(2) The relocation of the bank’s main

office or a branch;

(3) The merger, consolidation,

acquisition of assets, or assumption of

liabilities; and

(4) Deposit insurance for a newly

chartered financial institution.

(b) New financial institutions. A

newly chartered financial institution

shall submit with its application for

deposit insurance a description of how

it will meet its CRA objectives. The

FDIC takes the description into account

in considering the application and may

deny or condition approval on that

basis.

(c) Interested parties. The FDIC takes

into account any views expressed by

interested parties that are submitted in

accordance with the FDIC’s procedures

set forth in part 303 of this chapter in

considering CRA performance in an

application listed in paragraphs (a) and

(b) of this section.

(d) Denial or conditional approval of

application. A bank’s record of

performance may be the basis for

denying or conditioning approval of an

application listed in paragraph (a) of

this section.

Subpart C—Records, Reporting, and

Disclosure Requirements

§ 345.41 Assessment area delineation.

(a) In general. A bank shall delineate

one or more assessment areas within

which the FDIC evaluates the bank’s

record of helping to meet the credit

needs of its community. The FDIC does

not evaluate the bank’s delineation of its

assessment area(s) as a separate

performance criterion, but the FDIC

reviews the delineation for compliance

with the requirements of this section.

(b) Geographic area(s) for wholesale

or limited purpose banks. The

assessment area(s) for a wholesale or

limited purpose bank must consist

generally of one or more MSAs (using

the MSA boundaries that were in effect

as of January 1 of the calendar year in

which the delineation is made) or one

or more contiguous political

subdivisions, such as counties, cities, or

towns, in which the bank has its main

office, branches, and deposit-taking

RSFs.

(c) Geographic area(s) for other banks.

The assessment area(s) for a bank other

than a wholesale or limited purpose

bank must:

(1) Consist generally of one or more

MSAs (using the MSA boundaries that

were in effect as of January 1 of the

calendar year in which the delineation

is made) or one or more contiguous

political subdivisions, such as counties,

cities, or towns; and

(2) Include the geographies in which

the bank has its main office, its

branches, and its deposit-taking RSFs,

as well as the surrounding geographies

in which the bank has originated or

purchased a substantial portion of its

loans (including home mortgage loans,

small business and small farm loans,

and any other loans the bank chooses,

such as those consumer loans on which

the bank elects to have its performance

assessed).

(d) Adjustments to geographic area(s).

A bank may adjust the boundaries of its

assessment area(s) to include only the

portion of a political subdivision that it

reasonably can be expected to serve. An

adjustment is particularly appropriate in

the case of an assessment area that

otherwise would be extremely large, of

unusual configuration, or divided by

significant geographic barriers.

(e) Limitations on the delineation of

an assessment area. Each bank’s

assessment area(s):

(1) Must consist only of whole

geographies;

(2) May not reflect illegal

discrimination;

(3) May not arbitrarily exclude low- or

moderate-income geographies, taking

into account the bank’s size and

financial condition; and

(4) May not extend substantially

beyond a CMSA boundary or beyond a

state boundary unless the assessment

area is located in a multistate MSA. If

a bank serves a geographic area that

extends substantially beyond a state

boundary, the bank shall delineate

separate assessment areas for the areas

in each state. If a bank serves a

geographic area that extends

substantially beyond a CMSA boundary,

the bank shall delineate separate

assessment areas for the areas inside

and outside the CMSA.

(f) Banks serving military personnel.

Notwithstanding the requirements of

this section, a bank whose business

predominantly consists of serving the

needs of military personnel or their

dependents who are not located within

a defined geographic area may delineate

its entire deposit customer base as its

assessment area.

(g) Use of assessment area(s). The

FDIC uses the assessment area(s)

delineated by a bank in its evaluation of

the bank’s CRA performance unless the

FDIC determines that the assessment

area(s) do not comply with the

requirements of this section.

§ 345.42 Data collection, reporting, and

disclosure.

(a) Loan information required to be

collected and maintained. A bank,

except a small bank, shall collect, and

maintain in machine readable form (as

prescribed by the FDIC) until the
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22207

completion of its next CRA

examination, the following data for each

small business or small farm loan

originated or purchased by the bank:

(1) A unique number or alphanumeric symbol that can be used to

identify the relevant loan file;

(2) The loan amount at origination;

(3) The loan location; and

(4) An indicator whether the loan was

to a business or farm with gross annual

revenues of $1 million or less.

(b) Loan information required to be

reported. A bank, except a small bank or

a bank that was a small bank during the

prior calendar year, shall report

annually by March 1 to the FDIC in

machine readable form (as prescribed by

the FDIC) the following data for the

prior calendar year:

(1) Small business and small farm

loan data. For each geography in which

the bank originated or purchased a

small business or small farm loan, the

aggregate number and amount of loans:

(i) With an amount at origination of

$100,000 or less;

(ii) With an amount at origination of

more than $100,000 but less than or

equal to $250,000;

(iii) With an amount at origination of

more than $250,000; and

(iv) To businesses and farms with

gross annual revenues of $1 million or

less (using the revenues that the bank

considered in making its credit

decision);

(2) Community development loan

data. The aggregate number and

aggregate amount of community

development loans originated or

purchased; and

(3) Home mortgage loans. If the bank

is subject to reporting under part 203 of

this title, the location of each home

mortgage loan application, origination,

or purchase outside the MSAs in which

the bank has a home or branch office (or

outside any MSA) in accordance with

the requirements of part 203 of this title.

(c) Optional data collection and

maintenance.—(1) Consumer loans. A

bank may collect and maintain in

machine readable form (as prescribed by

the FDIC) data for consumer loans

originated or purchased by the bank for

consideration under the lending test. A

bank may maintain data for one or more

of the following categories of consumer

loans: motor vehicle, credit card, home

equity, other secured, and other

unsecured. If the bank maintains data

for loans in a certain category, it shall

maintain data for all loans originated or

purchased within that category. The

bank shall maintain data separately for

each category, including for each loan:

(i) A unique number or alpha-numeric

symbol that can be used to identify the

relevant loan file;

(ii) The loan amount at origination or

purchase;

(iii) The loan location; and

(iv) The gross annual income of the

borrower that the bank considered in

making its credit decision.

(2) Other loan data. At its option, a

bank may provide other information

concerning its lending performance,

including additional loan distribution

data.

(d) Data on affiliate lending. A bank

that elects to have the FDIC consider

loans by an affiliate, for purposes of the

lending or community development test

or an approved strategic plan, shall

collect, maintain, and report for those

loans the data that the bank would have

collected, maintained, and reported

pursuant to paragraphs (a), (b), and (c)

of this section had the loans been

originated or purchased by the bank. For

home mortgage loans, the bank shall

also be prepared to identify the home

mortgage loans reported under part 203

of this title by the affiliate.

(e) Data on lending by a consortium

or a third party. A bank that elects to

have the FDIC consider community

development loans by a consortium or

third party, for purposes of the lending

or community development tests or an

approved strategic plan, shall report for

those loans the data that the bank would

have reported under paragraph (b)(2) of

this section had the loans been

originated or purchased by the bank.

(f) Small banks electing evaluation

under the lending, investment, and

service tests. A bank that qualifies for

evaluation under the small bank

performance standards but elects

evaluation under the lending,

investment, and service tests shall

collect, maintain, and report the data

required for other banks pursuant to

paragraphs (a) and (b) of this section.

(g) Assessment area data. A bank,

except a small bank or a bank that was

a small bank during the prior calendar

year, shall collect and report to the FDIC

by March 1 of each year a list for each

assessment area showing the

geographies within the area.

(h) CRA Disclosure Statement. The

FDIC prepares annually for each bank

that reports data pursuant to this section

a CRA Disclosure Statement that

contains, on a state-by-state basis:

(1) For each county (and for each

assessment area smaller than a county)

with a population of 500,000 persons or

fewer in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

low-, moderate-, middle-, and upperincome geographies;

(ii) A list grouping each geography

according to whether the geography is

low-, moderate-, middle-, or upperincome;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(2) For each county (and for each

assessment area smaller than a county)

with a population in excess of 500,000

persons in which the bank reported a

small business or small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

geographies with median income

relative to the area median income of

less than 10 percent, 10 or more but less

than 20 percent, 20 or more but less

than 30 percent, 30 or more but less

than 40 percent, 40 or more but less

than 50 percent, 50 or more but less

than 60 percent, 60 or more but less

than 70 percent, 70 or more but less

than 80 percent, 80 or more but less

than 90 percent, 90 or more but less

than 100 percent, 100 or more but less

than 110 percent, 110 or more but less

than 120 percent, and 120 percent or

more;

(ii) A list grouping each geography in

the county or assessment area according

to whether the median income in the

geography relative to the area median

income is less than 10 percent, 10 or

more but less than 20 percent, 20 or

more but less than 30 percent, 30 or

more but less than 40 percent, 40 or

more but less than 50 percent, 50 or

more but less than 60 percent, 60 or

more but less than 70 percent, 70 or

more but less than 80 percent, 80 or

more but less than 90 percent, 90 or

more but less than 100 percent, 100 or

more but less than 110 percent, 110 or

more but less than 120 percent, and 120

percent or more;

(iii) A list showing each geography in

which the bank reported a small

business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(3) The number and amount of small

business and small farm loans located

inside each assessment area reported by

the bank and the number and amount of

small business and small farm loans

located outside the assessment area(s)

reported by the bank; and
22208 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

(4) The number and amount of

community development loans reported

as originated or purchased.

(i) Aggregate disclosure statements.

The FDIC, in conjunction with the

Board of Governors of the Federal

Reserve System, the Office of the

Comptroller of the Currency, and the

Office of Thrift Supervision, prepares

annually, for each MSA (including an

MSA that crosses a state boundary) and

the non-MSA portion of each state, an

aggregate disclosure statement of small

business and small farm lending by all

institutions subject to reporting under

this part or parts 25, 228, or 563e of this

title. These disclosure statements

indicate, for each geography, the

number and amount of all small

business and small farm loans

originated or purchased by reporting

institutions, except that the FDIC may

adjust the form of the disclosure if

necessary, because of special

circumstances, to protect the privacy of

a borrower or the competitive position

of an institution.

(j) Central data depositories. The

FDIC makes the aggregate disclosure

statements, described in paragraph (i) of

this section, and the individual bank

CRA Disclosure Statements, described

in paragraph (h) of this section,

available to the public at central data

depositories. The FDIC publishes a list

of the depositories at which the

statements are available.

§ 345.43 Content and availability of public

file.

(a) Information available to the

public. A bank shall maintain a public

file that includes the following

information:

(1) All written comments received

from the public for the current year and

each of the prior two calendar years that

specifically relate to the bank’s

performance in helping to meet

community credit needs, and any

response to the comments by the bank,

if neither the comments nor the

responses contain statements that reflect

adversely on the good name or

reputation of any persons other than the

bank or publication of which would

violate specific provisions of law;

(2) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation prepared by the FDIC. The

bank shall place this copy in the public

file within 30 business days after its

receipt from the FDIC;

(3) A list of the bank’s branches, their

street addresses, and geographies;

(4) A list of branches opened or closed

by the bank during the current year and

each of the prior two calendar years,

their street addresses, and geographies;

(5) A list of services (including hours

of operation, available loan and deposit

products, and transaction fees) generally

offered at the bank’s branches and

descriptions of material differences in

the availability or cost of services at

particular branches, if any. At its option,

a bank may include information

regarding the availability of alternative

systems for delivering retail banking

services (e.g., RSFs, RSFs not owned or

operated by or exclusively for the bank,

banking by telephone or computer, loan

production offices, and bank-at-work or

bank-by-mail programs);

(6) A map of each assessment area

showing the boundaries of the area and

identifying the geographies contained

within the area, either on the map or in

a separate list; and

(7) Any other information the bank

chooses.

(b) Additional information available

to the public—(1) Banks other than

small banks. A bank, except a small

bank or a bank that was a small bank

during the prior calendar year, shall

include in its public file the following

information pertaining to the bank and

its affiliates, if applicable, for each of

the prior two calendar years:

(i) If the bank has elected to have one

or more categories of its consumer loans

considered under the lending test, for

each of these categories, the number and

amount of loans:

(A) To low-, moderate-, middle-, and

upper-income individuals;

(B) Located in low-, moderate-,

middle-, and upper-income census

tracts; and

(C) Located inside the bank’s

assessment area(s) and outside the

bank’s assessment area(s); and

(ii) The bank’s CRA Disclosure

Statement. The bank shall place the

statement in the public file within three

business days of its receipt from the

FDIC.

(2) Banks required to report Home

Mortgage Disclosure Act (HMDA) data.

A bank required to report home

mortgage loan data pursuant part 203 of

this title shall include in its public file

a copy of the HMDA Disclosure

Statement provided by the Federal

Financial Institutions Examination

Council pertaining to the bank for each

of the prior two calendar years. In

addition, a bank that elected to have the

FDIC consider the mortgage lending of

an affiliate for any of these years shall

include in its public file the affiliate’s

HMDA Disclosure Statement for those

years. The bank shall place the

statement(s) in the public file within

three business days after receipt.

(3) Small banks. A small bank or a

bank that was a small bank during the

prior calendar year shall include in its

public file:

(i) The bank’s loan-to-deposit ratio for

each quarter of the prior calendar year

and, at its option, additional data on its

loan-to-deposit ratio; and

(ii) The information required for other

banks by paragraph (b)(1) of this section,

if the bank has elected to be evaluated

under the lending, investment, and

service tests.

(4) Banks with strategic plans. A bank

that has been approved to be assessed

under a strategic plan shall include in

its public file a copy of that plan. A

bank need not include information

submitted to the FDIC on a confidential

basis in conjunction with the plan.

(5) Banks with less than satisfactory

ratings. A bank that received a less than

satisfactory rating during its most recent

examination shall include in its public

file a description of its current efforts to

improve its performance in helping to

meet the credit needs of its entire

community. The bank shall update the

description quarterly.

(c) Location of public information. A

bank shall make available to the public

for inspection upon request and at no

cost the information required in this

section as follows:

(1) At the main office and, if an

interstate bank, at one branch office in

each state, all information in the public

file; and

(2) At each branch:

(i) A copy of the public section of the

bank’s most recent CRA Performance

Evaluation and a list of services

provided by the branch; and

(ii) Within five calendar days of the

request, all the information in the public

file relating to the assessment area in

which the branch is located.

(d) Copies. Upon request, a bank shall

provide copies, either on paper or in

another form acceptable to the person

making the request, of the information

in its public file. The bank may charge

a reasonable fee not to exceed the cost

of copying and mailing (if applicable).

(e) Updating. Except as otherwise

provided in this section, a bank shall

ensure that the information required by

this section is current as of April 1 of

each year.

§ 345.44 Public notice by banks.

A bank shall provide in the public

lobby of its main office and each of its

branches the appropriate public notice

set forth in Appendix B of this part.

Only a branch of a bank having more

than one assessment area shall include

the bracketed material in the notice for

branch offices. Only a bank that is an

affiliate of a holding company shall

include the next to the last sentence of
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22209

the notices. A bank shall include the

last sentence of the notices only if it is

an affiliate of a holding company that is

not prevented by statute from acquiring

additional banks.

§ 345.45 Publication of planned

examination schedule.

The FDIC publishes at least 30 days

in advance of the beginning of each

calendar quarter a list of banks

scheduled for CRA examinations in that

quarter.

Subpart D—Transition Rules

§ 345.51 Transition rules.

(a) Effective date. Sections of this part

become applicable over a period of time

in accordance with the schedule set

forth in paragraph (c) of this section.

(b) Data collection and reporting;

strategic plan; performance tests and

standards—(1) Data collection and

reporting. (i) On January 1, 1996, the

data collection requirements set forth in

§ 345.42 (except § 345.42(b) and (g))

become applicable.

(ii) On January 1, 1997, the data

reporting requirements set forth in

§ 345.42(b) and (g) become applicable.

(2) Small banks. Beginning January 1,

1996, the FDIC evaluates banks that

qualify for the small bank performance

standards described in § 345.26 under

that section.

(3) Strategic plan. Beginning January

1, 1996, a bank that elects to be

evaluated under an approved strategic

plan pursuant to § 345.27 may submit

its strategic plan to the FDIC for

approval.

(4) Other performance tests. (i)

Beginning January 1, 1996, a bank may

elect to be evaluated under the pertinent

revised performance tests described in

§§ 345.22, 345.23, 345.24, and 345.25, if

the bank provides the necessary data to

permit evaluation.

(ii) Beginning July 1, 1997, the FDIC

evaluates all banks under the pertinent

revised performance tests.

(c) Schedule. (1) On July 1, 1995,

§§ 345.11, 345.12, 345.29, and 345.51

become applicable, and §§ 345.1, 345.2,

345.8, 345.101 and 345.102 expire.

(2) On January 1, 1996, § 345.41 and

the pertinent provisions of Subpart B of

this part will apply to banks that elect

to be evaluated under §§ 345.22 through

345.25, banks that submit for approval

strategic plans under § 345.27, and

banks that qualify for the small bank

performance standards described in

§ 345.26.

(3) On January 1, 1996, §§ 345.42

(except § 345.42(b) and (g)) and 345.45

become applicable.

(4) On January 1, 1997, §§ 345.41 and

345.42(b) and (g) become applicable.

(5) On July 1, 1997, §§ 345.21 through

345.28, 345.43, and 345.44 become

applicable, and §§ 345.3 through 345.7,

and 345.51 expire.

Appendix A to Part 345—Ratings

(a) Ratings in general.—(1) In assigning a

rating, the FDIC evaluates a bank’s

performance under the applicable

performance criteria in this part, in

accordance with § 345.21, and § 345.28,

which provides for adjustments on the basis

of evidence of discriminatory or other illegal

credit practices.

(2) A bank’s performance need not fit each

aspect of a particular rating profile in order

to receive that rating, and exceptionally

strong performance with respect to some

aspects may compensate for weak

performance in others. The bank’s overall

performance, however, must be consistent

with safe and sound banking practices and

generally with the appropriate rating profile

as follows.

(b) Banks evaluated under the lending,

investment, and service tests.—(1) Lending

performance rating. The FDIC assigns each

bank’s lending performance one of the five

following ratings.

(i) Outstanding. The FDIC rates a bank’s

lending performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) Excellent responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A substantial majority of its loans are

made in its assessment area(s);

(C) An excellent geographic distribution of

loans in its assessment area(s);

(D) An excellent distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An excellent record of serving the

credit needs of highly economically

disadvantaged areas in its assessment area(s),

low-income individuals, or businesses

(including farms) with gross annual revenues

of $1 million or less, consistent with safe and

sound operations;

(F) Extensive use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It is a leader in making community

development loans.

(ii) High satisfactory. The FDIC rates a

bank’s lending performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) Good responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A high percentage of its loans are made

in its assessment area(s);

(C) A good geographic distribution of loans

in its assessment area(s);

(D) A good distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A good record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made a relatively high level of

community development loans.

(iii) Low satisfactory. The FDIC rates a

bank’s lending performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) Adequate responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) An adequate percentage of its loans are

made in its assessment area(s);

(C) An adequate geographic distribution of

loans in its assessment area(s);

(D) An adequate distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) An adequate record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Limited use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made an adequate level of

community development loans.

(iv) Needs to improve. The FDIC rates a

bank’s lending performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) Poor responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A small percentage of its loans are

made in its assessment area(s);

(C) A poor geographic distribution of loans,

particularly to low- or moderate-income

geographies, in its assessment area(s);

(D) A poor distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;
22210 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

(F) Little use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made a low level of community

development loans.

(v) Substantial noncompliance. The FDIC

rates a bank’s lending performance as being

in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) A very poor responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A very small percentage of its loans are

made in its assessment area(s);

(C) A very poor geographic distribution of

loans, particularly to low- or moderateincome geographies, in its assessment area(s);

(D) A very poor distribution, particularly in

its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

bank;

(E) A very poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) No use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made few, if any, community

development loans.

(2) Investment performance rating. The

FDIC assigns each bank’s investment

performance one of the five following ratings.

(i) Outstanding. The FDIC rates a bank’s

investment performance ‘‘outstanding’’ if, in

general, it demonstrates:

(A) An excellent level of qualified

investments, particularly those that are not

routinely provided by private investors, often

in a leadership position;

(B) Extensive use of innovative or complex

qualified investments; and

(C) Excellent responsiveness to credit and

community development needs.

(ii) High satisfactory. The FDIC rates a

bank’s investment performance ‘‘high

satisfactory’’ if, in general, it demonstrates:

(A) A significant level of qualified

investments, particularly those that are not

routinely provided by private investors,

occasionally in a leadership position;

(B) Significant use of innovative or

complex qualified investments; and

(C) Good responsiveness to credit and

community development needs.

(iii) Low satisfactory. The FDIC rates a

bank’s investment performance ‘‘low

satisfactory’’ if, in general, it demonstrates:

(A) An adequate level of qualified

investments, particularly those that are not

routinely provided by private investors,

although rarely in a leadership position;

(B) Occasional use of innovative or

complex qualified investments; and

(C) Adequate responsiveness to credit and

community development needs.

(iv) Needs to improve. The FDIC rates a

bank’s investment performance ‘‘needs to

improve’’ if, in general, it demonstrates:

(A) A poor level of qualified investments,

particularly those that are not routinely

provided by private investors;

(B) Rare use of innovative or complex

qualified investments; and

(C) Poor responsiveness to credit and

community development needs.

(v) Substantial noncompliance. The FDIC

rates a bank’s investment performance as

being in ‘‘substantial noncompliance’’ if, in

general, it demonstrates:

(A) Few, if any, qualified investments,

particularly those that are not routinely

provided by private investors;

(B) No use of innovative or complex

qualified investments; and

(C) Very poor responsiveness to credit and

community development needs.

(3) Service performance rating. The FDIC

assigns each bank’s service performance one

of the five following ratings.

(i) Outstanding. The FDIC rates a bank’s

service performance ‘‘outstanding’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are readily

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has improved the accessibility of its delivery

systems, particularly in low- or moderateincome geographies or to low- or moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) are tailored to

the convenience and needs of its assessment

area(s), particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It is a leader in providing community

development services.

(ii) High satisfactory. The FDIC rates a

bank’s service performance ‘‘high

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has not adversely affected the accessibility of

its delivery systems, particularly in low- and

moderate-income geographies and to lowand moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides a relatively high level of

community development services.

(iii) Low satisfactory. The FDIC rates a

bank’s service performance ‘‘low

satisfactory’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

reasonably accessible to geographies and

individuals of different income levels in its

assessment area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has generally not adversely affected the

accessibility of its delivery systems,

particularly in low- and moderate-income

geographies and to low- and moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides an adequate level of

community development services.

(iv) Needs to improve. The FDIC rates a

bank’s service performance ‘‘needs to

improve’’ if, in general, the bank

demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to portions of its

assessment area(s), particularly to low- or

moderate-income geographies or to low- or

moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has adversely affected the accessibility its

delivery systems, particularly in low- or

moderate-income geographies or to low- or

moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that inconveniences its assessment area(s),

particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It provides a limited level of

community development services.

(v) Substantial noncompliance. The FDIC

rates a bank’s service performance as being

in ‘‘substantial noncompliance’’ if, in

general, the bank demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to significant

portions of its assessment area(s), particularly

to low- or moderate-income geographies or to

low- or moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has significantly adversely affected the

accessibility of its delivery systems,

particularly in low- or moderate-income

geographies or to low- or moderate-income

individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that significantly inconveniences its

assessment area(s), particularly low- or

moderate-income geographies or low- or

moderate-income individuals; and

(D) It provides few, if any, community

development services.

(c) Wholesale or limited purpose banks.

The FDIC assigns each wholesale or limited

purpose bank’s community development

performance one of the four following

ratings.

(1) Outstanding. The FDIC rates a

wholesale or limited purpose bank’s

community development performance

‘‘outstanding’’ if, in general, it demonstrates:

(i) A high level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Extensive use of innovative or complex

qualified investments, community
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22211

development loans, or community

development services; and

(iii) Excellent responsiveness to credit and

community development needs in its

assessment area(s).

(2) Satisfactory. The FDIC rates a wholesale

or limited purpose bank’s community

development performance ‘‘satisfactory’’ if,

in general, it demonstrates:

(i) An adequate level of community

development loans, community development

services, or qualified investments,

particularly investments that are not

routinely provided by private investors;

(ii) Occasional use of innovative or

complex qualified investments, community

development loans, or community

development services; and

(iii) Adequate responsiveness to credit and

community development needs in its

assessment area(s).

(3) Needs to improve. The FDIC rates a

wholesale or limited purpose bank’s

community development performance as

‘‘needs to improve’’ if, in general, it

demonstrates:

(i) A poor level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Rare use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Poor responsiveness to credit and

community development needs in its

assessment area(s).

(4) Substantial noncompliance. The FDIC

rates a wholesale or limited purpose bank’s

community development performance in

‘‘substantial noncompliance’’ if, in general, it

demonstrates:

(i) Few, if any, community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) No use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Very poor responsiveness to credit and

community development needs in its

assessment area(s).

(d) Banks evaluated under the small bank

performance standards. The FDIC rates the

performance of each bank evaluated under

the small bank performance standards as

follows.

(1) Eligibility for a satisfactory rating. The

FDIC rates a bank’s performance

‘‘satisfactory’’ if, in general, the bank

demonstrates:

(i) 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, lending-related

activities such as loan originations for sale to

the secondary markets and community

development loans and qualified

investments;

(ii) A majority of its loans and, as

appropriate, other lending-related activities

are in its assessment area(s);

(iii) 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);

(iv) A record of taking appropriate action,

as 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

(v) A reasonable geographic distribution of

loans given the bank’s assessment area(s).

(2) Eligibility for an outstanding rating. A

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 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).

(3) Needs to improve or substantial

noncompliance ratings. A bank also may

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.

(e) Strategic plan assessment and rating.

(1) Satisfactory goals. The FDIC approves as

‘‘satisfactory’’ measurable goals that

adequately help to meet the credit needs of

the bank’s assessment area(s).

(2) Outstanding goals. If the plan identifies

a separate group of measurable goals that

substantially exceed the levels approved as

‘‘satisfactory,’’ the FDIC will approve those

goals as ‘‘outstanding.’’

(3) Rating. The FDIC assesses the

performance of a bank operating under an

approved plan to determine if the bank has

met its plan goals:

(i) If the bank substantially achieves its

plan goals for a satisfactory rating, the FDIC

will rate the bank’s performance under the

plan as ‘‘satisfactory.’’

(ii) If the bank exceeds its plan goals for

a satisfactory rating and substantially

achieves its plan goals for an outstanding

rating, the FDIC will rate the bank’s

performance under the plan as

‘‘outstanding.’’

(iii) If the bank fails to meet substantially

its plan goals for a satisfactory rating, the

FDIC will rate the bank as either ‘‘needs to

improve’’ or ‘‘substantial noncompliance,’’

depending on the extent to which it falls

short of its plan goals, unless the bank

elected in its plan to be rated otherwise, as

provided in § 345.27(f)(4).

Appendix B to Part 345—CRA Notice

(a) Notice for main offices and, if an

interstate bank, one branch office in each

state.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Federal Deposit

Insurance Corporation (FDIC) evaluates our

record of helping to meet the credit needs of

this community consistent with safe and

sound operations. The FDIC also takes this

record into account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA, including, for example,

information about our branches, such as their

location and services provided at them; the

public section of our most recent CRA

Performance Evaluation, prepared by the

FDIC; and comments received from the

public relating to our performance in helping

to meet community credit needs, as well as

our responses to those comments. You may

review this information today.

At least 30 days before the beginning of

each quarter, the FDIC publishes a

nationwide list of the banks that are

scheduled for CRA examination in that

quarter. This list is available from the

Regional Manager, Division of Compliance

and Consumer Affairs, FDIC (address). You

may send written comments about our

performance in helping to meet community

credit needs to (name and address of official

at bank) and FDIC Regional Manager. Your

letter, together with any response by us, will

be considered by the FDIC in evaluating our

CRA performance and may be made public.

You may ask to look at any comments

received by the FDIC Regional Manager. You

may also request from the FDIC Regional

Manager an announcement of our

applications covered by the CRA filed with

the FDIC. We are an affiliate of (name of

holding company), a bank holding company.

You may request from the (title of

responsible official), Federal Reserve Bank of

llllllllll (address) an

announcement of applications covered by the

CRA filed by bank holding companies.

(b) Notice for branch offices.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Federal Deposit

Insurance Corporation (FDIC) evaluates our

record of helping to meet the credit needs of

this community consistent with safe and

sound operations. The FDIC also takes this

record into account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA. You may review today the

public section of our most recent CRA

evaluation, prepared by the FDIC, and a list

of services provided at this branch. You may

also have access to the following additional

information, which we will make available to

you at this branch within five calendar days

after you make a request to us: (1) a map

showing the assessment area containing this

branch, which is the area in which the FDIC

evaluates our CRA performance in this

community; (2) information about our

branches in this assessment area; (3) a list of

services we provide at those locations; (4)

data on our lending performance in this
22212 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

assessment area; and (5) copies of all written

comments received by us that specifically

relate to our CRA performance in this

assessment area, and any responses we have

made to those comments. If we are operating

under an approved strategic plan, you may

also have access to a copy of the plan.

[If you would like to review information

about our CRA performance in other

communities served by us, the public file for

our entire bank is available at (name of office

located in state), located at (address).]

At least 30 days before the beginning of

each quarter, the FDIC publishes a

nationwide list of the banks that are

scheduled for CRA examination in that

quarter. This list is available from the

Regional Manager, Division of Compliance

and Consumer Affairs, FDIC (address). You

may send written comments about our

performance in helping to meet community

credit needs to (name and address of official

at bank) and the FDIC Regional Manager.

Your letter, together with any response by us,

will be considered by the FDIC in evaluating

our CRA performance and may be made

public.

You may ask to look at any comments

received by the FDIC Regional Manager. You

may also request from the FDIC Regional

Manager an announcement of our

applications covered by the CRA filed with

the FDIC. We are an affiliate of (name of

holding company), a bank holding company.

You may request from the (title of

responsible official), Federal Reserve Bank of

llllllllll (address) an

announcement of applications covered by the

CRA filed by bank holding companies.

§§ 345.1, 345.2, 345.8, 345.101, and 345.102,

and the undersigned center heading

preceding § 345.101 [Removed]

3. Sections 345.1, 345.2, 345.8,

345.101 and 345.102, and the

undersigned center heading preceding

§ 345.101 are removed effective July 1,

1995.

§§ 345.3, 345.4, 345.5, 345.6, 345.7, and

subpart D [Removed]

4. Sections 345.3, 345.4, 345.5, 345.6,

345.7, and 345.51 are removed effective

July 1, 1997.

By order of the Board of Directors of the

Federal Deposit Insurance Corporation:

Dated: April 24, 1995.

Robert E. Feldman,

Acting Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

For the reasons outlined in the joint

preamble, the Office of Thrift

Supervision amends 12 CFR chapter V

as set forth below:

PART 563e—COMMUNITY

REINVESTMENT

1. The authority citation for part 563e

is revised to read as follows:

Authority: 12 U.S.C. 1462a, 1463, 1464,

1467a, 1814, 1816, 1828(c), and 2901 through

2907.

2. Part 563e is amended by adding

Subparts A through D and Appendices

A and B to read as follows:

Subpart A—General

Sec.

563e.11 Authority, purposes, and scope.

563e.12 Definitions.

Subpart B—Standards for Assessing

Performance

563e.21 Performance tests, standards, and

ratings, in general.

563e.22 Lending test.

563e.23 Investment test.

563e.24 Service test.

563e.25 Community development test for

wholesale or limited purpose savings

associations.

563e.26 Small savings association

performance standards.

563e.27 Strategic plan.

563e.28 Assigned ratings.

563e.29 Effect of CRA performance on

applications.

Subpart C—Records, Reporting, and

Disclosure Requirements

563e.41 Assessment area delineation.

563e.42 Data collection, reporting, and

disclosure.

563e.43 Content and availability of public

file.

563e.44 Public notice by savings

associations.

563e.45 Publication of planned

examination schedule.

Subpart D—Transition Rules

563e.51 Transition rules.

Appendix A to Part 563e—Ratings

Appendix B to Part 563e—CRA Notice

Subpart A—General

§ 563e.11 Authority, purposes, and scope.

(a) Authority and OMB control

number—(1) Authority. This part is

issued under the Community

Reinvestment Act of 1977 (CRA), as

amended (12 U.S.C. 2901 et seq.);

section 5, as amended, and sections 3,

4, and 10, as added, of the Home

Owners’ Loan Act of 1933 (12 U.S.C.

1462a, 1463, 1464, and 1467a); and

sections 4, 6, and 18(c), as amended of

the Federal Deposit Insurance Act (12

U.S.C. 1814, 1816, 1828(c)).

(2) OMB control number. The

information collection requirements

contained in this part were approved by

the Office of Management and Budget

under the provisions of 44 U.S.C. 3501

et seq. and have been assigned OMB

control number 1550–0012.

(b) Purposes. In enacting the CRA, the

Congress required each appropriate

Federal financial supervisory agency to

assess an institution’s record of helping

to meet the credit needs of the local

communities in which the institution is

chartered, consistent with the safe and

sound operation of the institution, and

to take this record into account in the

agency’s evaluation of an application for

a deposit facility by the institution. This

part is intended to carry out the

purposes of the CRA by:

(1) Establishing the framework and

criteria by which the OTS assesses a

savings association’s record of helping

to meet the credit needs of its entire

community, including low- and

moderate-income neighborhoods,

consistent with the safe and sound

operation of the savings association; and

(2) Providing that the OTS takes that

record into account in considering

certain applications.

(c) Scope. This part applies to all

savings associations as defined in

§ 561.43 of this subchapter.

§ 563e.12 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate means any company that

controls, is controlled by, or is under

common control with another company.

The term ‘‘control’’ has the meaning

given to that term in 12 U.S.C.

1841(a)(2), and a company is under

common control with another company

if both companies are directly or

indirectly controlled by the same

company.

(b) Area median income means:

(1) The median family income for the

MSA, if a person or geography is located

in an MSA; or

(2) The statewide nonmetropolitan

median family income, if a person or

geography is located outside an MSA.

(c) Assessment area means a

geographic area delineated in

accordance with § 563e.41.

(d) Automated teller machine (ATM)

means an automated, unstaffed banking

facility owned or operated by, or

operated exclusively for, the savings

association at which deposits are

received, cash dispersed, or money lent.

(e) Branch means a staffed banking

facility authorized as a branch, whether

shared or unshared, including, for

example, a mini-branch in a grocery

store or a branch operated in

conjunction with any other local

business or nonprofit organization.

(f) CMSA means a consolidated

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(g) Community development means:

(1) Affordable housing (including

multifamily rental housing) for low or

moderate-income individuals;

(2) Community services targeted to

low- or moderate-income individuals;
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22213

(3) Activities that promote economic

development by financing businesses or

farms that meet the size eligibility

standards of 13 CFR 121.802(a)(2) or

have gross annual revenues of $1

million or less; or

(4) Activities that revitalize or

stabilize low- or moderate-income

geographies.

(h) Community development loan

means a loan that:

(1) Has as its primary purpose

community development; and

(2) Except in the case of a wholesale

or limited purpose savings association:

(i) Has not been reported or collected

by the savings association or an affiliate

for consideration in the savings

association’s assessment as a home

mortgage, small business, small farm, or

consumer loan, unless it is a

multifamily dwelling loan (as described

in Appendix A to Part 203 of this title);

and

(ii) Benefits the savings association’s

assessment area(s) or a broader

statewide or regional area that includes

the savings association’s assessment

area(s).

(i) Community development service

means a service that:

(1) Has as its primary purpose

community development;

(2) Is related to the provision of

financial services; and

(3) Has not been considered in the

evaluation of the savings association’s

retail banking services under

§ 563e.24(d).

(j) Consumer loan means a loan to one

or more individuals for household,

family, or other personal expenditures.

A consumer loan does not include a

home mortgage, small business, or small

farm loan. Consumer loans include the

following categories of loans:

(1) Motor vehicle loan, which is a

consumer loan extended for the

purchase of and secured by a motor

vehicle;

(2) Credit card loan, which is a line

of credit for household, family, or other

personal expenditures that is accessed

by a borrower’s use of a ‘‘credit card,’’

as this term is defined in § 226.2 of this

title;

(3) Home equity loan, which is a

consumer loan secured by a residence of

the borrower;

(4) Other secured consumer loan,

which is a secured consumer loan that

is not included in one of the other

categories of consumer loans; and

(5) Other unsecured consumer loan,

which is an unsecured consumer loan

that is not included in one of the other

categories of consumer loans.

(k) Geography means a census tract or

a block numbering area delineated by

the United States Bureau of the Census

in the most recent decennial census.

(l) Home mortgage loan means a

‘‘home improvement loan’’ or a ‘‘home

purchase loan’’ as defined in § 203.2 of

this title.

(m) Income level includes:

(1) Low-income, which means an

individual income that is less than 50

percent of the area median income or a

median family income that is less than

50 percent in the case of a geography.

(2) Moderate-income, which means an

individual income that is at least 50

percent and less than 80 percent of the

area median income or a median family

income that is at least 50 and less than

80 percent in the case of a geography.

(3) Middle-income, which means an

individual income that is at least 80

percent and less than 120 percent of the

area median income or a median family

income that is at least 80 and less than

120 percent in the case of a geography.

(4) Upper-income, which means an

individual income that is 120 percent or

more of the area median income or a

median family income that is 120

percent or more in the case of a

geography.

(n) Limited purpose savings

association means a savings association

that offers only a narrow product line

(such as credit card or motor vehicle

loans) to a regional or broader market

and for which a designation as a limited

purpose savings association is in effect,

in accordance with § 563e.25(b).

(o) Loan location. A loan is located as

follows:

(1) A consumer loan is located in the

geography where the borrower resides;

(2) A home mortgage loan is located

in the geography where the property to

which the loan relates is located; and

(3) A small business or small farm

loan is located in the geography where

the main business facility or farm is

located or where the loan proceeds

otherwise will be applied, as indicated

by the borrower.

(p) Loan production office means a

staffed facility, other than a branch, that

is open to the public and that provides

lending-related services, such as loan

information and applications.

(q) MSA means a metropolitan

statistical area or a primary

metropolitan statistical area as defined

by the Director of the Office of

Management and Budget.

(r) Qualified investment means a

lawful investment, deposit, membership

share, or grant that has as its primary

purpose community development.

(s) Small savings association means a

savings association that, as of December

31 of either of the prior two calendar

years, had total assets of less than $250

million and was independent or an

affiliate of a holding company that, as of

December 31 of either of the prior two

calendar years, had total banking and

thrift assets of less than $1 billion.

(t) Small business loan means a loan

included in ‘‘loans to small businesses’’

as defined in the instructions for

preparation of the Thrift Financial

Report.

(u) Small farm loan means a loan

included in ‘‘loans to small farms’’ as

defined in the instructions for

preparation of the Thrift Financial

Report.

(v) Wholesale savings association

means a savings association that is not

in the business of extending home

mortgage, small business, small farm, or

consumer loans to retail customers, and

for which a designation as a wholesale

savings association is in effect, in

accordance with § 563e.25(b).

Subpart B—Standards for Assessing

Performance

§ 563e.21 Performance tests, standards,

and ratings, in general.

(a) Performance tests and standards.

The OTS assesses the CRA performance

of a savings association in an

examination as follows:

(1) Lending, investment, and service

tests. The OTS applies the lending,

investment, and service tests, as

provided in §§ 563e.22 through 563e.24,

in evaluating the performance of a

savings association, except as provided

in paragraphs (a)(2), (a)(3), and (a)(4) of

this section.

(2) Community development test for

wholesale or limited purpose savings

associations. The OTS applies the

community development test for a

wholesale or limited purpose savings

association, as provided in § 563e.25,

except as provided in paragraph (a)(4) of

this section.

(3) Small savings association

performance standards. The OTS

applies the small savings association

performance standards as provided in

§ 563e.26 in evaluating the performance

of a small savings association or a

savings association that was a small

savings association during the prior

calendar year, unless the savings

association elects to be assessed as

provided in paragraphs (a)(1), (a)(2), or

(a)(4) of this section. The savings

association may elect to be assessed as

provided in paragraph (a)(1) of this

section only if it collects and reports the

data required for other savings

associations under § 563e.42.

(4) Strategic plan. The OTS evaluates

the performance of a savings association

under a strategic plan if the savings
22214 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

association submits, and the OTS

approves, a strategic plan as provided in

§ 563e.27.

(b) Performance context. The OTS

applies the tests and standards in

paragraph (a) of this section and also

considers whether to approve a

proposed strategic plan in the context

of:

(1) Demographic data on median

income levels, distribution of household

income, nature of housing stock,

housing costs, and other relevant data

pertaining to a savings association’s

assessment area(s);

(2) Any information about lending,

investment, and service opportunities in

the savings association’s assessment

area(s) maintained by the savings

association or obtained from community

organizations, state, local, and tribal

governments, economic development

agencies, or other sources;

(3) The savings association’s product

offerings and business strategy as

determined from data provided by the

savings association;

(4) Institutional capacity and

constraints, including the size and

financial condition of the savings

association, the economic climate

(national, regional, and local), safety

and soundness limitations, and any

other factors that significantly affect the

savings association’s ability to provide

lending, investments, or services in its

assessment area(s);

(5) The savings association’s past

performance and the performance of

similarly situated lenders;

(6) The savings association’s public

file, as described in § 563e.43, and any

written comments about the savings

association’s CRA performance

submitted to the savings association or

the OTS; and

(7) Any other information deemed

relevant by the OTS.

(c) Assigned ratings. The OTS assigns

to a savings association one of the

following four ratings pursuant to

§ 563e.28 and Appendix A of this part:

‘‘outstanding’’; ‘‘satisfactory’’; ‘‘needs to

improve’’; or ‘‘substantial

noncompliance,’’ as provided in 12

U.S.C. 2906(b)(2). The rating assigned

by the OTS reflects the savings

association’s record of helping to meet

the credit needs of its entire community,

including low- and moderate-income

neighborhoods, consistent with the safe

and sound operation of the savings

association.

(d) Safe and sound operations. This

part and the CRA do not require a

savings association to make loans or

investments or to provide services that

are inconsistent with safe and sound

operations. To the contrary, the OTS

anticipates savings associations can

meet the standards of this part with safe

and sound loans, investments, and

services on which the savings

associations expect to make a profit.

Savings associations are permitted and

encouraged to develop and apply

flexible underwriting standards for

loans that benefit low- or moderateincome geographies or individuals, only

if consistent with safe and sound

operations.

§ 563e.22 Lending test.

(a) Scope of test. (1) The lending test

evaluates a savings association’s record

of helping to meet the credit needs of its

assessment area(s) through its lending

activities by considering a savings

association’s home mortgage, small

business, small farm, and community

development lending. If consumer

lending constitutes a substantial

majority of a savings association’s

business, the OTS will evaluate the

savings association’s consumer lending

in one or more of the following

categories: motor vehicle, credit card,

home equity, other secured, and other

unsecured loans. In addition, at a

savings association’s option, the OTS

will evaluate one or more categories of

consumer lending, if the savings

association has collected and

maintained, as required in

§ 563e.42(c)(1), the data for each

category that the savings association

elects to have the OTS evaluate.

(2) The OTS considers originations

and purchases of loans. The OTS will

also consider any other loan data the

savings association may choose to

provide, including data on loans

outstanding, commitments and letters of

credit.

(3) A savings association may ask the

OTS to consider loans originated or

purchased by consortia in which the

savings association participates or by

third parties in which the savings

association has invested only if the

loans meet the definition of community

development loans and only in

accordance with paragraph (d) of this

section. The OTS will not consider

these loans under any criterion of the

lending test except the community

development lending criterion.

(b) Performance criteria. The OTS

evaluates a savings association’s lending

performance pursuant to the following

criteria:

(1) Lending activity. The number and

amount of the savings association’s

home mortgage, small business, small

farm, and consumer loans, if applicable,

in the savings association’s assessment

area(s);

(2) Geographic distribution. The

geographic distribution of the savings

association’s home mortgage, small

business, small farm, and consumer

loans, if applicable, based on the loan

location, including:

(i) The proportion of the savings

association’s lending in the savings

association’s assessment area(s);

(ii) The dispersion of lending in the

savings association’s assessment area(s);

and

(iii) The number and amount of loans

in low-, moderate-, middle-, and upperincome geographies in the savings

association’s assessment area(s);

(3) Borrower characteristics. The

distribution, particularly in the savings

association’s assessment area(s), of the

savings association’s home mortgage,

small business, small farm, and

consumer loans, if applicable, based on

borrower characteristics, including the

number and amount of:

(i) Home mortgage loans to low-,

moderate-, middle-, and upper-income

individuals;

(ii) Small business and small farm

loans to businesses and farms with gross

annual revenues of $1 million or less;

(iii) Small business and small farm

loans by loan amount at origination; and

(iv) Consumer loans, if applicable, to

low-, moderate-, middle-, and upperincome individuals;

(4) Community development lending.

The savings association’s community

development lending, including the

number and amount of community

development loans, and their

complexity and innovativeness; and

(5) Innovative or flexible lending

practices. The savings association’s use

of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or

moderate-income individuals or

geographies.

(c) Affiliate lending. (1) At a savings

association’s option, the OTS will

consider loans by an affiliate of the

savings association, if the savings

association provides data on the

affiliate’s loans pursuant to § 563e.42.

(2) The OTS considers affiliate

lending subject to the following

constraints:

(i) No affiliate may claim a loan

origination or loan purchase if another

institution claims the same loan

origination or purchase; and

(ii) If a savings association elects to

have the OTS consider loans within a

particular lending category made by one

or more of the savings association’s

affiliates in a particular assessment area,

the savings association shall elect to

have the OTS consider, in accordance

with paragraph (c)(1) of this section, all
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22215

the loans within that lending category in

that particular assessment area made by

all of the savings association’s affiliates.

(3) The OTS does not consider

affiliate lending in assessing a savings

association’s performance under

paragraph (b)(2)(i) of this section.

(d) Lending by a consortium or a third

party. Community development loans

originated or purchased by a consortium

in which the savings association

participates or by a third party in which

the savings association has invested:

(1) Will be considered, at the savings

association’s option, if the savings

association reports the data pertaining

to these loans under § 563e.42(b)(2); and

(2) May be allocated among

participants or investors, as they choose,

for purposes of the lending test, except

that no participant or investor:

(i) May claim a loan origination or

loan purchase if another participant or

investor claims the same loan

origination or purchase; or

(ii) May claim loans accounting for

more than its percentage share (based on

the level of its participation or

investment) of the total loans originated

by the consortium or third party.

(e) Lending performance rating. The

OTS rates a savings association’s

lending performance as provided in

Appendix A of this part.

§ 563e.23 Investment test.

(a) Scope of test. The investment test

evaluates a savings association’s record

of helping to meet the credit needs of its

assessment area(s) through qualified

investments that benefit its assessment

area(s) or a broader statewide or regional

area that includes the savings

association’s assessment area(s).

(b) Exclusion. Activities considered

under the lending or service tests may

not be considered under the investment

test.

(c) Affiliate investment. At a savings

association’s option, the OTS will

consider, in its assessment of a savings

association’s investment performance, a

qualified investment made by an

affiliate of the savings association, if the

qualified investment is not claimed by

any other institution.

(d) Disposition of branch premises.

Donating, selling on favorable terms, or

making available on a rent-free basis a

branch of the savings association that is

located in a predominantly minority

neighborhood to a minority depository

institution or women’s depository

institution (as these terms are defined in

12 U.S.C. 2907(b)) will be considered as

a qualified investment.

(e) Performance criteria. The OTS

evaluates the investment performance of

a savings association pursuant to the

following criteria:

(1) The dollar amount of qualified

investments;

(2) The innovativeness or complexity

of qualified investments;

(3) The responsiveness of qualified

investments to credit and community

development needs; and

(4) The degree to which the qualified

investments are not routinely provided

by private investors.

(f) Investment performance rating.

The OTS rates a savings association’s

investment performance as provided in

Appendix A of this part.

§ 563e.24 Service test.

(a) Scope of test. The service test

evaluates a savings association’s record

of helping to meet the credit needs of its

assessment area(s) by analyzing both the

availability and effectiveness of a

savings association’s systems for

delivering retail banking services and

the extent and innovativeness of its

community development services.

(b) Area(s) benefitted. Community

development services must benefit a

savings association’s assessment area(s)

or a broader statewide or regional area

that includes the savings association’s

assessment area(s).

(c) Affiliate service. At a savings

association’s option, the OTS will

consider, in its assessment of a savings

association’s service performance, a

community development service

provided by an affiliate of the savings

association, if the community

development service is not claimed by

any other institution.

(d) Performance criteria—retail

banking services. The OTS evaluates the

availability and effectiveness of a

savings association’s systems for

delivering retail banking services,

pursuant to the following criteria:

(1) The current distribution of the

savings association’s branches among

low-,moderate-, middle-, and upperincome geographies;

(2) In the context of its current

distribution of the savings association’s

branches, the savings association’s

record of opening and closing branches,

particularly branches located in low- or

moderate-income geographies or

primarily serving low- or moderateincome individuals;

(3) The availability and effectiveness

of alternative systems for delivering

retail banking services (e.g., ATMs,

ATMs not owned or operated by or

exclusively for the savings association,

banking by telephone or computer, loan

production offices, and bank-at-work or

bank-by-mail programs) in low- and

moderate-income geographies and to

low- and moderate-income individuals;

and

(4) The range of services provided in

low-, moderate-, middle-, and upperincome geographies and the degree to

which the services are tailored to meet

the needs of those geographies.

(e) Performance criteria—community

development services. The OTS

evaluates community development

services pursuant to the following

criteria:

(1) The extent to which the savings

association provides community

development services; and

(2) The innovativeness and

responsiveness of community

development services.

(f) Service performance rating. The

OTS rates a savings association’s service

performance as provided in Appendix A

of this part.

§ 563e.25 Community development test for

wholesale or limited purpose savings

associations.

(a) Scope of test. The OTS assesses a

wholesale or limited purpose savings

association’s record of helping to meet

the credit needs of its assessment area(s)

under the community development test

through its community development

lending, qualified investments, or

community development services.

(b) Designation as a wholesale or

limited purpose savings association. In

order to receive a designation as a

wholesale or limited purpose savings

association, a savings association shall

file a request, in writing, with the OTS,

at least three months prior to the

proposed effective date of the

designation. If the OTS approves the

designation, it remains in effect until

the savings association requests

revocation of the designation or until

one year after the OTS notifies the

savings association that the OTS has

revoked the designation on its own

initiative.

(c) Performance criteria. The OTS

evaluates the community development

performance of a wholesale or limited

purpose savings association pursuant to

the following criteria:

(1) The number and amount of

community development loans

(including originations and purchases of

loans and other community

development loan data provided by the

savings association, such as data on

loans outstanding, commitments, and

letters of credit), qualified investments,

or community development services;

(2) The use of innovative or complex

qualified investments, community

development loans, or community

development services and the extent to
22216 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

which the investments are not routinely

provided by private investors; and

(3) The savings association’s

responsiveness to credit and community

development needs.

(d) Indirect activities. At a savings

association’s option, the OTS will

consider in its community development

performance assessment:

(1) Qualified investments or

community development services

provided by an affiliate of the savings

association, if the investments or

services are not claimed by any other

institution; and

(2) Community development lending

by affiliates, consortia and third parties,

subject to the requirements and

limitations in § 563e.22 (c) and (d).

(e) Benefit to assessment area(s).—(1)

Benefit inside assessment area(s). The

OTS considers all qualified investments,

community development loans, and

community development services that

benefit areas within the savings

association’s assessment area(s) or a

broader statewide or regional area that

includes the savings association’s

assessment area(s).

(2) Benefit outside assessment area(s).

The OTS considers the qualified

investments, community development

loans, and community development

services that benefit areas outside the

savings association’s assessment area(s),

if the savings association has adequately

addressed the needs of its assessment

area(s).

(f) Community development

performance rating. The OTS rates a

savings association’s community

development performance as provided

in Appendix A of this part.

§ 563e.26 Small savings association

performance standards.

(a) Performance criteria. The OTS

evaluates the record of a small savings

association, or a savings association that

was a small savings association during

the prior calendar year, of helping to

meet the credit needs of its assessment

area(s) pursuant to the following

criteria:

(1) The savings association’s loan-todeposit 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 savings

association’s assessment area(s);

(3) The savings association’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

savings association’s loans; and

(5) The savings association’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).

(b) Small savings association

performance rating. The OTS rates the

performance of a savings association

evaluated under this section as provided

in Appendix A of this part.

§ 563e.27 Strategic plan.

(a) Alternative election. The OTS will

assess a savings association’s record of

helping to meet the credit needs of its

assessment area(s) under a strategic plan

if:

(1) The savings association has

submitted the plan to the OTS as

provided for in this section;

(2) The OTS has approved the plan;

(3) The plan is in effect; and

(4) The savings association has been

operating under an approved plan for at

least one year.

(b) Data reporting. The OTS’s

approval of a plan does not affect the

savings association’s obligation, if any,

to report data as required by § 563e.42.

(c) Plans in general. (1) Term. A plan

may have a term of no more than five

years, and any multi-year plan must

include annual interim measurable

goals under which the OTS will

evaluate the savings association’s

performance.

(2) Multiple assessment areas. A

savings association with more than one

assessment area may prepare a single

plan for all of its assessment areas or

one or more plans for one or more of its

assessment areas.

(3) Treatment of affiliates. Affiliated

institutions may prepare a joint plan if

the plan provides measurable goals for

each institution. Activities may be

allocated among institutions at the

institutions’ option, provided that the

same activities are not considered for

more than one institution.

(d) Public participation in plan

development. Before submitting a plan

to the OTS for approval, a savings

association shall:

(1) Informally seek suggestions from

members of the public in its assessment

area(s) covered by the plan while

developing the plan;

(2) Once the savings association has

developed a plan, formally solicit public

comment on the plan for at least 30 days

by publishing notice in at least one

newspaper of general circulation in each

assessment area covered by the plan;

and

(3) During the period of formal public

comment, make copies of the plan

available for review by the public at no

cost at all offices of the savings

association in any assessment area

covered by the plan and provide copies

of the plan upon request for a

reasonable fee to cover copying and

mailing, if applicable.

(e) Submission of plan. The savings

association shall submit its plan to the

OTS at least three months prior to the

proposed effective date of the plan. The

savings association shall also submit

with its plan a description of its

informal efforts to seek suggestions from

members of the public, any written

public comment received, and, if the

plan was revised in light of the

comment received, the initial plan as

released for public comment.

(f) Plan content—(1) Measurable

goals. (i) A savings association shall

specify in its plan measurable goals for

helping to meet the credit needs of each

assessment area covered by the plan,

particularly the needs of low- and

moderate-income geographies and lowand moderate-income individuals,

through lending, investment, and

services, as appropriate.

(ii) A savings association shall

address in its plan all three performance

categories and, unless the savings

association has been designated as a

wholesale or limited purpose savings

association, shall emphasize lending

and lending-related activities.

Nevertheless, a different emphasis,

including a focus on one or more

performance categories, may be

appropriate if responsive to the

characteristics and credit needs of its

assessment area(s), considering public

comment and the savings association’s

capacity and constraints, product

offerings, and business strategy.

(2) Confidential information. A

savings association may submit

additional information to the OTS on a

confidential basis, but the goals stated

in the plan must be sufficiently specific

to enable the public and the OTS to

judge the merits of the plan.

(3) Satisfactory and outstanding goals.

A savings association shall specify in its

plan measurable goals that constitute

‘‘satisfactory’’ performance. A plan may

specify measurable goals that constitute

‘‘outstanding’’ performance. If a savings

association submits, and the OTS

approves, both ‘‘satisfactory’’ and

‘‘outstanding’’ performance goals, the

OTS will consider the savings

association eligible for an ‘‘outstanding’’

performance rating.

(4) Election if satisfactory goals not

substantially met. A savings association

may elect in its plan that, if the savings
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22217

association fails to meet substantially its

plan goals for a satisfactory rating, the

OTS will evaluate the savings

association’s performance under the

lending, investment, and service tests,

the community development test, or the

small savings association performance

standards, as appropriate.

(g) Plan approval—(1) Timing. The

OTS will act upon a plan within 60

calendar days after the OTS receives the

complete plan and other material

required under paragraph (d) of this

section. If the OTS fails to act within

this time period, the plan shall be

deemed approved unless the OTS

extends the review period for good

cause.

(2) Public participation. In evaluating

the plan’s goals, the OTS considers the

public’s involvement in formulating the

plan, written public comment on the

plan, and any response by the savings

association to public comment on the

plan.

(3) Criteria for evaluating plan. The

OTS evaluates a plan’s measurable goals

using the following criteria, as

appropriate:

(i) The extent and breadth of lending

or lending-related activities, including,

as appropriate, the distribution of loans

among different geographies, businesses

and farms of different sizes, and

individuals of different income levels,

the extent of community development

lending, and the use of innovative or

flexible lending practices to address

credit needs;

(ii) The amount and innovativeness,

complexity, and responsiveness of the

savings association’s qualified

investments; and

(iii) The availability and effectiveness

of the savings association’s systems for

delivering retail banking services and

the extent and innovativeness of the

savings association’s community

development services.

(h) Plan amendment. During the term

of a plan, a savings association may

request the OTS to approve an

amendment to the plan on grounds that

there has been a material change in

circumstances. The savings association

shall develop an amendment to a

previously approved plan in accordance

with the public participation

requirements of paragraph (c) of this

section.

(i) Plan assessment. The OTS

approves the goals and assesses

performance under a plan as provided

for in Appendix A of this part.

§ 563e.28 Assigned ratings.

(a) Ratings in general. Subject to

paragraphs (b) and (c) of this section,

the OTS assigns to a savings association

a rating of ‘‘outstanding,’’ ‘‘satisfactory,’’

‘‘needs to improve,’’ or ‘‘substantial

noncompliance’’ based on the savings

association’s performance under the

lending, investment and service tests,

the community development test, the

small savings association performance

standards, or an approved strategic plan,

as applicable.

(b) Lending, investment, and service

tests. The OTS assigns a rating for a

savings association assessed under the

lending, investment, and service tests in

accordance with the following

principles:

(1) A savings association that receives

an ‘‘outstanding’’ rating on the lending

test receives an assigned rating of at

least ‘‘satisfactory’’;

(2) A savings association that receives

an ‘‘outstanding’’ rating on both the

service test and the investment test and

a rating of at least ‘‘high satisfactory’’ on

the lending test receives an assigned

rating of ‘‘outstanding’’; and

(3) No savings association may receive

an assigned rating of ‘‘satisfactory’’ or

higher unless it receives a rating of at

least ‘‘low satisfactory’’ on the lending

test.

(c) Effect of evidence of

discriminatory or other illegal credit

practices. Evidence of discriminatory or

other illegal credit practices adversely

affects the OTS’s evaluation of a savings

association’s performance. In

determining the effect on the savings

association’s assigned rating, the OTS

considers the nature and extent of the

evidence, the policies and procedures

that the savings association has in place

to prevent discriminatory or other

illegal credit practices, any corrective

action that the savings association has

taken or has committed to take,

particularly voluntary corrective action

resulting from self-assessment, and

other relevant information.

§ 563e.29 Effect of CRA performance on

applications.

(a) CRA performance. Among other

factors, the OTS takes into account the

record of performance under the CRA of

each applicant savings association, and

for applications under section 10(e) of

the Home Owners’ Loan Act (12 U.S.C.

1467a(e)), of each proposed subsidiary

savings association, in considering an

application for:

(1) The establishment of a domestic

branch or other facility that would be

authorized to take deposits;

(2) The relocation of the main office

or a branch;

(3) The merger or consolidation with

or the acquisition of the assets or

assumption of the liabilities of an

insured depository institution requiring

OTS approval under the Bank Merger

Act (12 U.S.C. 1828(c));

(4) A Federal thrift charter; and

(5) Acquisitions subject to section

10(e) of the Home Owners’ Loan Act (12

U.S.C. 1467a(e)).

(b) Charter application. An applicant

for a Federal thrift charter shall submit

with its application a description of

how it will meet its CRA objectives. The

OTS takes the description into account

in considering the application and may

deny or condition approval on that

basis.

(c) Interested parties. The OTS takes

into account any views expressed by

interested parties that are submitted in

accordance with the applicable

comment procedures in considering

CRA performance in an application

listed in paragraphs (a) and (b) of this

section.

(d) Denial or conditional approval of

application. A savings association’s

record of performance may be the basis

for denying or conditioning approval of

an application listed in paragraph (a) of

this section.

(e) Insured depository institution. For

purposes of this section, the term

‘‘insured depository institution’’ has the

meaning given to that term in 12 U.S.C.

1813.

Subpart C—Records, Reporting, and

Disclosure Requirements

§ 563e.41 Assessment area delineation.

(a) In general. A savings association

shall delineate one or more assessment

areas within which the OTS evaluates

the savings association’s record of

helping to meet the credit needs of its

community. The OTS does not evaluate

the savings association’s delineation of

its assessment area(s) as a separate

performance criterion, but the OTS

reviews the delineation for compliance

with the requirements of this section.

(b) Geographic area(s) for wholesale

or limited purpose savings associations.

The assessment area(s) for a wholesale

or limited purpose savings association

must consist generally of one or more

MSAs (using the MSA boundaries that

were in effect as of January 1 of the

calendar year in which the delineation

is made) or one or more contiguous

political subdivisions, such as counties,

cities, or towns, in which the savings

association has its main office,

branches, and deposit-taking ATMs.

(c) Geographic area(s) for other

savings associations. The assessment

area(s) for a savings association other

than a wholesale or limited purpose

savings association must:

(1) Consist generally of one or more

MSAs (using the MSA boundaries that
22218 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

were in effect as of January 1 of the

calendar year in which the delineation

is made) or one or more contiguous

political subdivisions, such as counties,

cities, or towns; and

(2) Include the geographies in which

the savings association has its main

office, its branches, and its deposittaking ATMs, as well as the surrounding

geographies in which the savings

association has originated or purchased

a substantial portion of its loans

(including home mortgage loans, small

business and small farm loans, and any

other loans the savings association

chooses, such as those consumer loans

on which the savings association elects

to have its performance assessed).

(d) Adjustments to geographic area(s).

A savings association may adjust the

boundaries of its assessment area(s) to

include only the portion of a political

subdivision that it reasonably can be

expected to serve. An adjustment is

particularly appropriate in the case of

an assessment area that otherwise

would be extremely large, of unusual

configuration, or divided by significant

geographic barriers.

(e) Limitations on the delineation of

an assessment area. Each savings

association’s assessment area(s):

(1) Must consist only of whole

geographies;

(2) May not reflect illegal

discrimination;

(3) May not arbitrarily exclude low- or

moderate-income geographies, taking

into account the savings association’s

size and financial condition; and

(4) May not extend substantially

beyond a CMSA boundary or beyond a

state boundary unless the assessment

area is located in a multistate MSA. If

a savings association serves a

geographic area that extends

substantially beyond a state boundary,

the savings association shall delineate

separate assessment areas for the areas

in each state. If a savings association

serves a geographic area that extends

substantially beyond a CMSA boundary,

the savings association shall delineate

separate assessment areas for the areas

inside and outside the CMSA.

(f) Savings associations serving

military personnel. Notwithstanding the

requirements of this section, a savings

association whose business

predominantly consists of serving the

needs of military personnel or their

dependents who are not located within

a defined geographic area may delineate

its entire deposit customer base as its

assessment area.

(g) Use of assessment area(s). The

OTS uses the assessment area(s)

delineated by a savings association in its

evaluation of the savings association’s

CRA performance unless the OTS

determines that the assessment area(s)

do not comply with the requirements of

this section.

§ 563e.42 Data collection, reporting, and

disclosure.

(a) Loan information required to be

collected and maintained. A savings

association, except a small savings

association, shall collect, and maintain

in machine readable form (as prescribed

by the OTS) until the completion of its

next CRA examination, the following

data for each small business or small

farm loan originated or purchased by

the savings association:

(1) A unique number or alphanumeric symbol that can be used to

identify the relevant loan file;

(2) The loan amount at origination;

(3) The loan location; and

(4) An indicator whether the loan was

to a business or farm with gross annual

revenues of $1 million or less.

(b) Loan information required to be

reported. A savings association, except

a small savings association or a savings

association that was a small savings

association during the prior calendar

year, shall report annually by March 1

to the OTS in machine readable form (as

prescribed by the OTS) the following

data for the prior calendar year:

(1) Small business and small farm

loan data. For each geography in which

the savings association originated or

purchased a small business or small

farm loan, the aggregate number and

amount of loans:

(i) With an amount at origination of

$100,000 or less;

(ii) With amount at origination of

more than $100,000 but less than or

equal to $250,000;

(iii) With an amount at origination of

more than $250,000; and

(iv) To businesses and farms with

gross annual revenues of $1 million or

less (using the revenues that the savings

association considered in making its

credit decision);

(2) Community development loan

data. The aggregate number and

aggregate amount of community

development loans originated or

purchased; and

(3) Home mortgage loans. If the

savings association is subject to

reporting under part 203 of this title, the

location of each home mortgage loan

application, origination, or purchase

outside the MSAs in which the savings

association has a home or branch office

(or outside any MSA) in accordance

with the requirements of part 203 of this

title.

(c) Optional data collection and

maintenance—(1) Consumer loans. A

savings association may collect and

maintain in machine readable form (as

prescribed by the OTS) data for

consumer loans originated or purchased

by the savings association for

consideration under the lending test. A

savings association may maintain data

for one or more of the following

categories of consumer loans: motor

vehicle, credit card, home equity, other

secured, and other unsecured. If the

savings association maintains data for

loans in a certain category, it shall

maintain data for all loans originated or

purchased within that category. The

savings association shall maintain data

separately for each category, including

for each loan:

(i) A unique number or alpha-numeric

symbol that can be used to identify the

relevant loan file;

(ii) The loan amount at origination or

purchase;

(iii) The loan location; and

(iv) The gross annual income of the

borrower that the savings association

considered in making its credit

decision.

(2) Other loan data. At its option, a

savings association may provide other

information concerning its lending

performance, including additional loan

distribution data.

(d) Data on affiliate lending. A

savings association that elects to have

the OTS consider loans by an affiliate,

for purposes of the lending or

community development test or an

approved strategic plan, shall collect,

maintain, and report for those loans the

data that the savings association would

have collected, maintained, and

reported pursuant to paragraphs (a), (b),

and (c) of this section had the loans

been originated or purchased by the

savings association. For home mortgage

loans, the savings association shall also

be prepared to identify the home

mortgage loans reported under part 203

of this title by the affiliate.

(e) Data on lending by a consortium

or a third-party. A savings association

that elects to have the OTS consider

community development loans by a

consortium or third party, for purposes

of the lending or community

development tests or an approved

strategic plan, shall report for those

loans the data that the savings

association would have reported under

paragraph (b)(2) of this section had the

loans been originated or purchased by

the savings association.

(f) Small savings associations electing

evaluation under the lending,

investment, and service tests. A savings

association that qualifies for evaluation

under the small savings association

performance standards but elects
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22219

evaluation under the lending,

investment, and service tests shall

collect, maintain, and report the data

required for other savings associations

pursuant to paragraphs (a) and (b) of

this section.

(g) Assessment area data. A savings

association, except a small savings

association or a savings association that

was a small savings association during

the prior calendar year, shall collect and

report to the OTS by March 1 of each

year a list for each assessment area

showing the geographies within the

area.

(h) CRA Disclosure Statement. The

OTS prepares annually for each savings

association that reports data pursuant to

this section a CRA Disclosure Statement

that contains, on a state-by-state basis:

(1) For each county (and for each

assessment area smaller than a county)

with a population of 500,000 persons or

fewer in which the savings association

reported a small business or small farm

loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

low-, moderate-, middle-, and upperincome geographies;

(ii) A list grouping each geography

according to whether the geography is

low-, moderate-, middle-, or upperincome;

(iii) A list showing each geography in

which the savings association reported

a small business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(2) For each county (and for each

assessment area smaller than a county)

with a population in excess of 500,000

persons in which the savings

association reported a small business or

small farm loan:

(i) The number and amount of small

business and small farm loans reported

as originated or purchased located in

geographies with median income

relative to the area median income of

less than 10 percent, 10 or more but less

than 20 percent, 20 or more but less

than 30 percent, 30 or more but less

than 40 percent, 40 or more but less

than 50 percent, 50 or more but less

than 60 percent, 60 or more but less

than 70 percent, 70 or more but less

than 80 percent, 80 or more but less

than 90 percent, 90 or more but less

than 100 percent, 100 or more but less

than 110 percent, 110 or more but less

than 120 percent, and 120 percent or

more;

(ii) A list grouping each geography in

the county or assessment area according

to whether the median income in the

geography relative to the area median

income is less than 10 percent, 10 or

more but less than 20 percent, 20 or

more but less than 30 percent, 30 or

more but less than 40 percent, 40 or

more but less than 50 percent, 50 or

more but less than 60 percent, 60 or

more but less than 70 percent, 70 or

more but less than 80 percent, 80 or

more but less than 90 percent, 90 or

more but less than 100 percent, 100 or

more but less than 110 percent, 110 or

more but less than 120 percent, and 120

percent or more;

(iii) A list showing each geography in

which the savings association reported

a small business or small farm loan; and

(iv) The number and amount of small

business and small farm loans to

businesses and farms with gross annual

revenues of $1 million or less;

(3) The number and amount of small

business and small farm loans located

inside each assessment area reported by

the savings association and the number

and amount of small business and small

farm loans located outside the

assessment area(s) reported by the

savings association; and

(4) The number and amount of

community development loans reported

as originated or purchased.

(i) Aggregate disclosure statements.

The OTS, in conjunction with the Board

of Governors of the Federal Reserve

System, the Federal Deposit Insurance

Corporation, and the Office of the

Comptroller of the Currency, prepares

annually, for each MSA (including an

MSA that crosses a state boundary) and

the non-MSA portion of each state, an

aggregate disclosure statement of small

business and small farm lending by all

institutions subject to reporting under

this part or parts 25, 228, or 345 of this

title. These disclosure statements

indicate, for each geography, the

number and amount of all small

business and small farm loans

originated or purchased by reporting

institutions, except that the OTS may

adjust the form of the disclosure if

necessary, because of special

circumstances, to protect the privacy of

a borrower or the competitive position

of an institution.

(j) Central data depositories. The OTS

makes the aggregate disclosure

statements, described in paragraph (i) of

this section, and the individual savings

association CRA Disclosure Statements,

described in paragraph (h) of this

section, available to the public at central

data depositories. The OTS publishes a

list of the depositories at which the

statements are available.

§ 563e.43 Content and availability of public

file.

(a) Information available to the

public. A savings association shall

maintain a public file that includes the

following information:

(1) All written comments received

from the public for the current year and

each of the prior two calendar years that

specifically relate to the savings

association’s performance in helping to

meet community credit needs, and any

response to the comments by the

savings association, if neither the

comments nor the responses contain

statements that reflect adversely on the

good name or reputation of any persons

other than the savings association or

publication of which would violate

specific provisions of law;

(2) A copy of the public section of the

savings association’s most recent CRA

Performance Evaluation prepared by the

OTS. The savings association shall place

this copy in the public file within 30

business days after its receipt from the

OTS;

(3) A list of the savings association’s

branches, their street addresses, and

geographies;

(4) A list of branches opened or closed

by the savings association during the

current year and each of the prior two

calendar years, their street addresses,

and geographies;

(5) A list of services (including hours

of operation, available loan and deposit

products, and transaction fees) generally

offered at the savings association’s

branches and descriptions of material

differences in the availability or cost of

services at particular branches, if any.

At its option, a savings association may

include information regarding the

availability of alternative systems for

delivering retail banking services (e.g.,

ATMs, ATMs not owned or operated by

or exclusively for the savings

association, banking by telephone or

computer, loan production offices, and

bank-at-work or bank-by-mail

programs);

(6) A map of each assessment area

showing the boundaries of the area and

identifying the geographies contained

within the area, either on the map or in

a separate list; and

(7) Any other information the savings

association chooses.

(b) Additional information available

to the public—(1) Savings associations

other than small savings associations. A

savings association, except a small

savings association or a savings

association that was a small savings

association during the prior calendar

year, shall include in its public file the

following information pertaining to the

savings association and its affiliates, if
22220 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

applicable, for each of the prior two

calendar years:

(i) If the savings association has

elected to have one or more categories

of its consumer loans considered under

the lending test, for each of these

categories, the number and amount of

loans:

(A) To low-, moderate-, middle-, and

upper-income individuals;

(B) Located in low-, moderate-,

middle-, and upper-income census

tracts; and

(C) Located inside the savings

association’s assessment area(s) and

outside the savings association’s

assessment area(s); and

(ii) The savings association’s CRA

Disclosure Statement. The savings

association shall place the statement in

the public file within three business

days of its receipt from the OTS.

(2) Savings associations required to

report Home Mortgage Disclosure Act

(HMDA) data. A savings association

required to report home mortgage loan

data pursuant to part 203 of this title

shall include in its public file a copy of

the HMDA Disclosure Statement

provided by the Federal Financial

Institutions Examination Council

pertaining to the savings association for

each of the prior two calendar years. In

addition, a savings association that

elected to have the OTS consider the

mortgage lending of an affiliate for any

of these years shall include in its public

file the affiliate’s HMDA Disclosure

Statement for those years. The savings

association shall place the statement(s)

in the public file within three business

days after its receipt.

(3) Small savings associations. A

small savings association or a savings

association that was a small savings

association during the prior calendar

year shall include in its public file:

(i) The savings association’s loan-todeposit ratio for each quarter of the

prior calendar year and, at its option,

additional data on its loan-to-deposit

ratio; and

(ii) The information required for other

savings associations by paragraph (b)(1)

of this section, if the savings association

has elected to be evaluated under the

lending, investment, and service tests.

(4) Savings associations with strategic

plans. A savings association that has

been approved to be assessed under a

strategic plan shall include in its public

file a copy of that plan. A savings

association need not include

information submitted to the OTS on a

confidential basis in conjunction with

the plan.

(5) Savings associations with less than

satisfactory ratings. A savings

association that received a less than

satisfactory rating during its most recent

examination shall include in its public

file a description of its current efforts to

improve its performance in helping to

meet the credit needs of its entire

community. The savings association

shall update the description quarterly.

(c) Location of public information. A

savings association shall make available

to the public for inspection upon

request and at no cost the information

required in this section as follows:

(1) At the main office and, if an

interstate savings association, at one

branch office in each state, all

information in the public file; and

(2) At each branch:

(i) A copy of the public section of the

savings association’s most recent CRA

Performance Evaluation and a list of

services provided by the branch; and

(ii) Within five calendar days of the

request, all the information in the public

file relating to the assessment area in

which the branch is located.

(d) Copies. Upon request, a savings

association shall provide copies, either

on paper or in another form acceptable

to the person making the request, of the

information in its public file. The

savings association may charge a

reasonable fee not to exceed the cost of

copying and mailing (if applicable).

(e) Updating. Except as otherwise

provided in this section, a savings

association shall ensure that the

information required by this section is

current as of April 1 of each year.

§ 563e.44 Public notice by savings

associations.

A savings association shall provide in

the public lobby of its main office and

each of its branches the appropriate

public notice set forth in Appendix B of

this part. Only a branch of a savings

association having more than one

assessment area shall include the

bracketed material in the notice for

branch offices. Only a savings

association that is an affiliate of a

holding company shall include the last

two sentences of the notices.

§ 563e.45 Publication of planned

examination schedule.

The OTS publishes at least 30 days in

advance of the beginning of each

calendar quarter a list of savings

associations scheduled for CRA

examinations in that quarter.

Subpart D—Transition Rules

§ 563e.51 Transition rules.

(a) Effective date. Sections of this part

become applicable over a period of time

in accordance with the schedule set

forth in paragraph (c) of this section.

(b) Data collection and reporting;

strategic plan; performance tests and

standards—(1) Data collection and

reporting. (i) On January 1, 1996, the

data collection requirements set forth in

§ 563e.42 (except § 563e.42(b) and (g))

become applicable.

(ii) On January 1, 1997, the data

reporting requirements set forth in

§ 563e.42(b) and (g) become applicable.

(2) Small savings associations.

Beginning January 1, 1996, the OTS

evaluates savings associations that

qualify for the small savings association

performance standards described in

§ 563e.26 under that section.

(3) Strategic plan. Beginning January

1, 1996, a savings association that elects

to be evaluated under an approved

strategic plan pursuant to § 563e.27 may

submit its strategic plan to the OTS for

approval.

(4) Other performance tests. (i)

Beginning January 1, 1996, a savings

association may elect to be evaluated

under the pertinent revised performance

tests described in §§ 563e.22, 563e.23,

563e.24, and 563e.25, if the savings

association provides the necessary data

to permit evaluation.

(ii) Beginning July 1, 1997, the OTS

evaluates all savings associations under

the pertinent revised performance tests.

(c) Schedule. (1) On July 1, 1995,

§§ 563e.11, 563e.12, 563e.29, and

563e.51 become applicable, and

§§ 563e.1, 563e.2, and 563e.8 expire.

(2) On January 1, 1996, § 563e.41 and

the pertinent provisions of Subpart B of

this part will apply to savings

associations that elect to be evaluated

under §§ 563e.22 through 563e.25,

savings associations that submit for

approval strategic plans under

§ 563e.27, and savings associations that

qualify for the small savings association

performance standards described in

§ 563e.26.

(3) On January 1, 1996, §§ 563e.42

(except § 563e.42(b) and (g)) and

563e.45 become applicable.

(4) On January 1, 1997, §§ 563e.41 and

563e.42(b) and (g) become applicable.

(5) On July 1, 1997, §§ 563e.21

through 563e.28, 563e.43, and 563e.44

become applicable, and §§ 563e.3

through 563e.7, and 563e.51 expire.

Appendix A to Part 563e—Ratings

(a) Ratings in general. (1) In assigning a

rating, the OTS evaluates a savings

association’s performance under the

applicable performance criteria in this part,

in accordance with § 563e.21 and § 563e.28,

which provides for adjustments on the basis

of evidence of discriminatory or other illegal

credit practices.

(2) A savings association’s performance

need not fit each aspect of a particular rating

profile in order to receive that rating, and
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22221

exceptionally strong performance with

respect to some aspects may compensate for

weak performance in others. The savings

association’s overall performance, however,

must be consistent with safe and sound

banking practices and generally with the

appropriate rating profile as follows.

(b) Savings associations evaluated under

the lending, investment, and service tests. (1)

Lending performance rating. The OTS assigns

each savings association’s lending

performance one of the five following ratings.

(i) Outstanding. The OTS rates a savings

association’s lending performance

‘‘outstanding’’ if, in general, it demonstrates:

(A) Excellent responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A substantial majority of its loans are

made in its assessment area(s);

(C) An excellent geographic distribution of

loans in its assessment area(s);

(D) An excellent distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

savings association;

(E) An excellent record of serving the

credit needs of highly economically

disadvantaged areas in its assessment area(s),

low-income individuals, or businesses

(including farms) with gross annual revenues

of $1 million or less, consistent with safe and

sound operations;

(F) Extensive use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It is a leader in making community

development loans.

(ii) High satisfactory. The OTS rates a

savings association’s lending performance

‘‘high satisfactory’’ if, in general, it

demonstrates:

(A) Good responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A high percentage of its loans are made

in its assessment area(s);

(C) A good geographic distribution of loans

in its assessment area(s);

(D) A good distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

savings association;

(E) A good record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made a relatively high level of

community development loans.

(iii) Low satisfactory. The OTS rates a

savings association’s lending performance

‘‘low satisfactory’’ if, in general, it

demonstrates:

(A) Adequate responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) An adequate percentage of its loans are

made in its assessment area(s);

(C) An adequate geographic distribution of

loans in its assessment area(s);

(D) An adequate distribution, particularly

in its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

savings association;

(E) An adequate record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Limited use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made an adequate level of

community development loans.

(iv) Needs to improve. The OTS rates a

savings association’s lending performance

‘‘needs to improve’’ if, in general, it

demonstrates:

(A) Poor responsiveness to credit needs in

its assessment area(s), taking into account the

number and amount of home mortgage, small

business, small farm, and consumer loans, if

applicable, in its assessment area(s);

(B) A small percentage of its loans are

made in its assessment area(s);

(C) A poor geographic distribution of loans,

particularly to low- or moderate-income

geographies, in its assessment area(s);

(D) A poor distribution, particularly in its

assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

savings association;

(E) A poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) Little use of innovative or flexible

lending practices in a safe and sound manner

to address the credit needs of low- or

moderate-income individuals or geographies;

and

(G) It has made a low level of community

development loans.

(v) Substantial noncompliance. The OTS

rates a savings association’s lending

performance as being in ‘‘substantial

noncompliance’’ if, in general, it

demonstrates:

(A) A very poor responsiveness to credit

needs in its assessment area(s), taking into

account the number and amount of home

mortgage, small business, small farm, and

consumer loans, if applicable, in its

assessment area(s);

(B) A very small percentage of its loans are

made in its assessment area(s);

(C) A very poor geographic distribution of

loans, particularly to low- or moderateincome geographies, in its assessment area(s);

(D) A very poor distribution, particularly in

its assessment area(s), of loans among

individuals of different income levels and

businesses (including farms) of different

sizes, given the product lines offered by the

savings association;

(E) A very poor record of serving the credit

needs of highly economically disadvantaged

areas in its assessment area(s), low-income

individuals, or businesses (including farms)

with gross annual revenues of $1 million or

less, consistent with safe and sound

operations;

(F) No use of innovative or flexible lending

practices in a safe and sound manner to

address the credit needs of low- or moderateincome individuals or geographies; and

(G) It has made few, if any, community

development loans.

(2) Investment performance rating. The

OTS assigns each savings association’s

investment performance one of the five

following ratings.

(i) Outstanding. The OTS rates a savings

association’s investment performance

‘‘outstanding’’ if, in general, it demonstrates:

(A) An excellent level of qualified

investments, particularly those that are not

routinely provided by private investors, often

in a leadership position;

(B) Extensive use of innovative or complex

qualified investments; and

(C) Excellent responsiveness to credit and

community development needs.

(ii) High satisfactory. The OTS rates a

savings association’s investment performance

‘‘high satisfactory’’ if, in general, it

demonstrates:

(A) A significant level of qualified

investments, particularly those that are not

routinely provided by private investors,

occasionally in a leadership position;

(B) Significant use of innovative or

complex qualified investments; and

(C) Good responsiveness to credit and

community development needs.

(iii) Low satisfactory. The OTS rates a

savings association’s investment performance

‘‘low satisfactory’’ if, in general, it

demonstrates:

(A) An adequate level of qualified

investments, particularly those that are not

routinely provided by private investors,

although rarely in a leadership position;

(B) Occasional use of innovative or

complex qualified investments; and

(C) Adequate responsiveness to credit and

community development needs.

(iv) Needs to improve. The OTS rates a

savings association’s investment performance

‘‘needs to improve’’ if, in general, it

demonstrates:

(A) A poor level of qualified investments,

particularly those that are not routinely

provided by private investors;

(B) Rare use of innovative or complex

qualified investments; and

(C) Poor responsiveness to credit and

community development needs.
22222 Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations

(v) Substantial noncompliance. The OTS

rates a savings association’s investment

performance as being in ‘‘substantial

noncompliance’’ if, in general, it

demonstrates:

(A) Few, if any, qualified investments,

particularly those that are not routinely

provided by private investors;

(B) No use of innovative or complex

qualified investments; and

(C) Very poor responsiveness to credit and

community development needs.

(3) Service performance rating. The OTS

assigns each savings association’s service

performance one of the five following ratings.

(i) Outstanding. The OTS rates a savings

association’s service performance

‘‘outstanding’’ if, in general, the savings

association demonstrates:

(A) Its service delivery systems are readily

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has improved the accessibility of its delivery

systems, particularly in low- or moderateincome geographies or to low- or moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) are tailored to

the convenience and needs of its assessment

area(s), particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It is a leader in providing community

development services.

(ii) High satisfactory. The OTS rates a

savings association’s service performance

‘‘high satisfactory’’ if, in general, the savings

association demonstrates:

(A) Its service delivery systems are

accessible to geographies and individuals of

different income levels in its assessment

area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has not adversely affected the accessibility of

its delivery systems, particularly in low- and

moderate-income geographies and to lowand moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides a relatively high level of

community development services.

(iii) Low satisfactory. The OTS rates a

savings association’s service performance

‘‘low satisfactory’’ if, in general, the savings

association demonstrates:

(A) Its service delivery systems are

reasonably accessible to geographies and

individuals of different income levels in its

assessment area(s);

(B) To the extent changes have been made,

its record of opening and closing branches

has generally not adversely affected the

accessibility of its delivery systems,

particularly in low- and moderate-income

geographies and to low- and moderateincome individuals;

(C) Its services (including, where

appropriate, business hours) do not vary in

a way that inconveniences its assessment

area(s), particularly low- and moderateincome geographies and low- and moderateincome individuals; and

(D) It provides an adequate level of

community development services.

(iv) Needs to improve. The OTS rates a

savings association’s service performance

‘‘needs to improve’’ if, in general, the savings

association demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to portions of its

assessment area(s), particularly to low- or

moderate-income geographies or to low- or

moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has adversely affected the accessibility of its

delivery systems, particularly in low- or

moderate-income geographies or to low- or

moderate-income individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that inconveniences its assessment area(s),

particularly low- or moderate-income

geographies or low- or moderate-income

individuals; and

(D) It provides a limited level of

community development services.

(v) Substantial noncompliance. The OTS

rates a savings association’s service

performance as being in ‘‘substantial

noncompliance’’ if, in general, the savings

association demonstrates:

(A) Its service delivery systems are

unreasonably inaccessible to significant

portions of its assessment area(s), particularly

to low- or moderate-income geographies or to

low- or moderate-income individuals;

(B) To the extent changes have been made,

its record of opening and closing branches

has significantly adversely affected the

accessibility of its delivery systems,

particularly in low- or moderate-income

geographies or to low- or moderate-income

individuals;

(C) Its services (including, where

appropriate, business hours) vary in a way

that significantly inconveniences its

assessment area(s), particularly low- or

moderate-income geographies or low- or

moderate-income individuals; and

(D) It provides few, if any, community

development services.

(c) Wholesale or limited purpose savings

associations. The OTS assigns each

wholesale or limited purpose savings

association’s community development

performance one of the four following

ratings.

(1) Outstanding. The OTS rates a wholesale

or limited purpose savings association’s

community development performance

‘‘outstanding’’ if, in general, it demonstrates:

(i) A high level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Extensive use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Excellent responsiveness to credit and

community development needs in its

assessment area(s).

(2) Satisfactory. The OTS rates a wholesale

or limited purpose savings association’s

community development performance

‘‘satisfactory’’ if, in general, it demonstrates:

(i) An adequate level of community

development loans, community development

services, or qualified investments,

particularly investments that are not

routinely provided by private investors;

(ii) Occasional use of innovative or

complex qualified investments, community

development loans, or community

development services; and

(iii) Adequate responsiveness to credit and

community development needs in its

assessment area(s).

(3) Needs to improve. The OTS rates a

wholesale or limited purpose savings

association’s community development

performance as ‘‘needs to improve’’ if, in

general, it demonstrates:

(i) A poor level of community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) Rare use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Poor responsiveness to credit and

community development needs in its

assessment area(s).

(4) Substantial noncompliance. The OTS

rates a wholesale or limited purpose savings

association’s community development

performance in ‘‘substantial noncompliance’’

if, in general, it demonstrates:

(i) Few, if any, community development

loans, community development services, or

qualified investments, particularly

investments that are not routinely provided

by private investors;

(ii) No use of innovative or complex

qualified investments, community

development loans, or community

development services; and

(iii) Very poor responsiveness to credit and

community development needs in its

assessment area(s).

(d) Savings associations evaluated under

the small savings association performance

standards. The OTS rates the performance of

each savings association evaluated under the

small savings association performance

standards as follows:

(1) Eligibility for a satisfactory rating. The

OTS rates a savings association’s

performance ‘‘satisfactory’’ if, in general, the

savings association demonstrates:

(i) A reasonable loan-to-deposit ratio

(considering seasonal variations) given the

savings association’s size, financial

condition, the credit needs of its assessment

area(s), and taking into account, as

appropriate, lending-related activities such as

loan originations for sale to the secondary

markets and community development loans

and qualified investments;

(ii) A majority of its loans and, as

appropriate, other lending-related activities

are in its assessment area(s);

(iii) A distribution of loans to and, as

appropriate, other lending related-activities

for individuals of different income levels

(including low- and moderate-income
Federal Register / Vol. 60, No. 86 / Thursday, May 4, 1995 / Rules and Regulations 22223

individuals) and businesses and farms of

different sizes that is reasonable given the

demographics of the savings association’s

assessment area(s);

(iv) A record of taking appropriate action,

as warranted, in response to written

complaints, if any, about the savings

association’s performance in helping to meet

the credit needs of its assessment area(s); and

(v) A reasonable geographic distribution of

loans given the savings association’s

assessment area(s).

(2) Eligibility for an outstanding rating. A

savings association 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 an overall rating of ‘‘outstanding.’’ In

assessing whether a savings association’s

performance is ‘‘outstanding,’’ the OTS

considers the extent to which the savings

association 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).

(3) Needs to improve or substantial

noncompliance ratings. A savings association

also may 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.

(e) Strategic plan assessment and rating.

(1) Satisfactory goals. The OTS approves as

‘‘satisfactory’’ measurable goals that

adequately help to meet the credit needs of

the savings association’s assessment area(s).

(2) Outstanding goals. If the plan identifies

a separate group of measurable goals that

substantially exceed the levels approved as

‘‘satisfactory,’’ the OTS will approve those

goals as ‘‘outstanding.’’

(3) Rating. The OTS assesses the

performance of a savings association

operating under an approved plan to

determine if the savings association has met

its plan goals:

(i) If the savings association substantially

achieves its plan goals for a satisfactory

rating, the OTS will rate the savings

association’s performance under the plan as

‘‘satisfactory.’’

(ii) If the savings association exceeds its

plan goals for a satisfactory rating and

substantially achieves its plan goals for an

outstanding rating, the OTS will rate the

savings association’s performance under the

plan as ‘‘outstanding.’’

(iii) If the savings association fails to meet

substantially its plan goals for a satisfactory

rating, the OTS will rate the savings

association as either ‘‘needs to improve’’ or

‘‘substantial noncompliance,’’ depending on

the extent to which it falls short of its plan

goals, unless the savings association elected

in its plan to be rated otherwise, as provided

in § 25.27(f)(4).

Appendix B to Part 563e—CRA Notice

(a) Notice for main offices and, if an

interstate savings association, one branch

office in each state.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Office of Thrift

Supervision (OTS) evaluates our record of

helping to meet the credit needs of this

community consistent with safe and sound

operations. The OTS also takes this record

into account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA, including, for example,

information about our branches, such as their

location and services provided at them; the

public section of our most recent CRA

Performance Evaluation, prepared by the

OTS; and comments received from the public

relating to our performance in helping to

meet community credit needs, as well as our

responses to those comments. You may

review this information today.

At least 30 days before the beginning of

each quarter, the OTS publishes a nationwide

list of the savings associations that are

scheduled for CRA examination in that

quarter. This list is available from the

Regional Director (address). You may send

written comments about our performance in

helping to meet community credit needs to

(name and address of official at savings

association) and OTS (address). Your letter,

together with any response by us, will be

considered by the OTS in evaluating our CRA

performance and may be made public.

You may ask to look at any comments

received by the Regional Director. You may

also request from the Regional Director an

announcement of our applications covered

by the CRA filed with the OTS. We are an

affiliate of (name of holding company), a

savings and loan holding company. You may

request from the Regional Director an

announcement of applications covered by the

CRA filed by savings and loan holding

companies.

(b) Notice for branch offices.

Community Reinvestment Act Notice

Under the Federal Community

Reinvestment Act (CRA), the Office of Thrift

Supervision (OTS) evaluates our record of

helping to meet the credit needs of this

community consistent with safe and sound

operations. The OTS also takes this record

into account when deciding on certain

applications submitted by us.

Your involvement is encouraged.

You are entitled to certain information

about our operations and our performance

under the CRA. You may review today the

public section of our most recent CRA

evaluation, prepared by the OTS, and a list

of services provided at this branch. You may

also have access to the following additional

information, which we will make available to

you at this branch within five calendar days

after you make a request to us: (1) A map

showing the assessment area containing this

branch, which is the area in which the OTS

evaluates our CRA performance in this

community; (2) information about our

branches in this assessment area; (3) a list of

services we provide at those locations; (4)

data on our lending performance in this

assessment area; and (5) copies of all written

comments received by us that specifically

relate to our CRA performance in this

assessment area, and any responses we have

made to those comments. If we are operating

under an approved strategic plan, you may

also have access to a copy of the plan.

[If you would like to review information

about our CRA performance in other

communities served by us, the public file for

our entire savings association is available at

(name of office located in state), located at

(address).]

At least 30 days before the beginning of

each quarter, the OTS publishes a nationwide

list of the savings associations that are

scheduled for CRA examination in that

quarter. This list is available from the

Regional Director (address). You may send

written comments about our performance in

helping to meet community credit needs to

(name and address of official at savings

association) and the Regional Director

(address). Your letter, together with any

response by us, will be considered by the

OTS in evaluating our CRA performance and

may be made public.

You may ask to look at any comments

received by the Regional Director. You may

also request from the Regional Director an

announcement of our applications covered

by the CRA filed with the OTS. We are an

affiliate of (name of holding company), a

savings and loan holding company. You may

request from the Regional Director an

announcement of applications covered by the

CRA filed by savings and loan holding

companies.

§§ 563e.1, 563e.2, and 563e.8 [Removed]

3. Sections 563e.1, 563e.2, and 563e.8

are removed effective July 1, 1995.

§§ 563e.3, 563e.4, 563e.5, 563e.6, and 563e.7

and Subpart D [Removed]

4. Sections 563e.3, 563e.4, 563e.5,

563e.6 and 563e.7, and subpart D,

consisting of 563e.51 are removed

effective July 1, 1997.

Dated: April 19, 1995.

By the Office of Thrift Supervision.

Jonathan L Fiechter,

Acting Director.

[FR Doc. 95–10503 Filed 5–3–95; 8:45 am]

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

6720–01–P

FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R–0848]

Home Mortgage Disclosure

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board is publishing a

final rule to amend Regulation C (Home

Mortgage Disclosure) and the

instructions that financial institutions