Thursday, March 11, 2010

Part II

Department of the Treasury Office of the Comptroller of the Currency Federal Reserve System Federal Deposit Insurance Corporation Department of the Treasury Office of Thrift Supervision

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

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DEPARTMENT OF THE TREASURY OTS: Stephanie M. Caputo, Senior and a number, connected by a dash. For Compliance Program Analyst, example, the first Q&A addressing 12 Office of the Comptroller of the Compliance and Consumer Protection, CFR ll.26 would be identified as Currency (202) 906–6549; or Richard Bennett, § ll.26—1. Senior Compliance Counsel, Although a particular Q&A may [Docket ID OCC–2010–0002] Regulations and Legislation Division, provide guidance on one regulatory FEDERAL RESERVE SYSTEM (202) 906–7409, Office of Thrift provision, e.g., 12 CFR ll.22, which Supervision, 1700 G Street, NW., relates to the lending test applicable to [Docket No. OP–1349] Washington, DC 20552. large institutions, its content may also SUPPLEMENTARY INFORMATION: be applicable to, for example, small FEDERAL DEPOSIT INSURANCE institutions, which are evaluated CORPORATION Background pursuant to small institution RIN—3064–AC97 The OCC, Board, FDIC, and OTS performance standards found at 12 CFR implement the Community ll.26. Thus, readers with a particular DEPARTMENT OF THE TREASURY Reinvestment Act (CRA) (12 U.S.C. 2901 interest in small institution issues, for et seq.) through their CRA regulations. example, should also consult the Office of Thrift Supervision See 12 CFR parts 25, 228, 345, and 563e. guidance that describes the lending, The agencies’ regulations are interpreted investment, and service tests. [Docket ID OTS–2010–0004] primarily through the ‘‘Interagency The Questions and Answers are Questions and Answers Regarding Community Reinvestment Act; indexed to aid readers in locating Community Reinvestment’’ (Questions Interagency Questions and Answers specific information in the document. and Answers), which provide guidance Regarding Community Reinvestment; The index contains keywords, listed for use by agency personnel, financial Notice alphabetically, along with numerical institutions, and the public. The indicators of questions and answers that AGENCIES: Office of the Comptroller of Questions and Answers were first relate to that keyword. The list of Q&As the Currency, Treasury (OCC); Board of published under the auspices of the addressing each keyword in the index is Governors of the Federal Reserve Federal Financial Institutions not intended to be exhaustive. System (Board); Federal Deposit Examination Council (FFIEC) in 1996 New and Revised Q&As Insurance Corporation (FDIC); Office of (61 FR 54647), and were last revised on Thrift Supervision, Treasury (OTS). January 6, 2009 (2009 Questions and New Q&A: Community Services Answers) (74 FR 498). ACTION: Notice. Targeted to Low- or Moderate-Income The SUPPLEMENTARY INFORMATION Individuals SUMMARY: published with the 2009 Questions and The OCC, Board, FDIC, and The agencies proposed a new Q&A, OTS (the agencies) are adopting as final Answers also proposed for comment one new question and answer (Q&A) § ll.12(g)(2)—1, that would provide the Interagency Questions and Answers examples of ways an institution that Regarding Community Reinvestment and two revised Q&As. 74 FR 504–06. Together, the agencies received provides community services could (Questions and Answers) that were determine that the community services proposed on January 6, 2009. In comments from 19 different parties. The commenters represented financial are targeted to low- and moderate- response to comments received, the income individuals when the institution agencies made minor clarifications to institutions and their trade associations, community development advocates and does not know the actual income of the the new and revised questions and individuals. Several comments were answers that were proposed. organizations, and others. As discussed below, this document received from community groups and DATES: Effective Date: March 11, 2010. adopts the three new and revised Q&As banking organizations that supported FOR FURTHER INFORMATION CONTACT: that were proposed in January 2009, the examples in the proposal. In OCC: Gregory Nagel or Karen Tucker, with minor clarifications, as addition, one suggestion was made to National Bank Examiners, Compliance appropriate, in response to comments clarify that community services can Policy Division, (202) 874–4428; or received. The agencies are also adopting include those provided by an entity Margaret Hesse, Special Counsel, conforming revisions to an existing with a broad mission, provided that the Community and Consumer Law Q&A. activities themselves qualify as Division, (202) 874–5750, Office of the The Interagency Questions and community services. This suggestion Comptroller of the Currency, 250 E Answers are grouped by the provision of was incorporated into the Q&A Street, SW., Washington, DC 20219. the CRA regulations that they discuss, examples as a new fourth bullet. Board: Cathy Gates, Senior Project are presented in the same order as the Another commenter suggested that Manager, (202) 452–3946; or Brent regulatory provisions, and employ an the definition of community services be Lattin, Attorney, (202) 452–3667, abbreviated method of citing to the broadened to cover financial literacy Division of Consumer and Community regulations. For example, the small bank programs provided to school children of Affairs, Board of Governors of the performance standards for national any income level in any school. Federal Reserve System, 20th Street and banks appear at 12 CFR 25.26; for Financial literacy programs are an Constitution Avenue, NW., Washington, Federal Reserve System member banks example of community development DC 20551. supervised by the Board, they appear at services. See Q&A § ll.12(i)—3. The FDIC: Janet R. Gordon, Senior Policy 12 CFR 228.26; for state nonmember commenter’s suggestion was not Analyst, Division of Supervision and banks, they appear at 12 CFR 345.26; adopted because community Consumer Protection, Compliance and for thrifts, the small savings development services must have a Policy Branch, (202) 898–3850; or Susan association performance standards primary purpose of community van den Toorn, Counsel, Legal Division, appear at 12 CFR 563e.26. Accordingly, development, which would require the (202) 898–8707, Federal Deposit the citation would be to 12 CFR ll.26. financial literacy programs to be Insurance Corporation, 550 17th Street, Each Q&A is numbered using a system targeted to low- or moderate-income NW., Washington, DC 20429. that consists of the regulatory citation individuals.

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The new Q&A is being adopted as for consideration as an activity that has responses. A number of commenters revised. a ‘‘primary purpose’’ of community believed that allowing pro rata development at the election of the consideration may provide an added Revised Q&A § ll.12(h)—8: Primary institution. In those cases, the proposed incentive to financial institutions. A Purpose of Community Development Q&A would allow an institution to couple of commenters, however, The regulations require community receive pro rata consideration for the believed that the revision would not development activities to have a portion of the activity that provides spur additional construction and ‘‘primary purpose of community affordable housing to low- or moderate- rehabilitation because, for example, the development.’’ See 12 CFR ll.12(h), income individuals. development of local housing is based ll.12(i), and ll.12(t). Q&A Commenters generally supported the on a local agency’s determination of its § ll.12(h)—8 historically has proposed revision. One commenter community housing needs and is not provided two methods of determining suggested that the agencies should allow influenced by a financial institution’s whether an activity has a primary only pro rata treatment in all situations CRA requirements. purpose of community development: (1) where less than a majority of an Commenters responded nearly If a majority of the dollars or activity’s dollars will be used for unanimously that the pro rata treatment beneficiaries of the activity are community development. This should not be restricted only to identifiable to one or more of the commenter further suggested that the instances where a governmental entity enumerated community development agencies should eliminate full requires a set-aside. Commenters purposes, then an activity will be consideration of activities that have an believed that the voluntary inclusion of considered to possess the requisite ‘‘express, bona fide intent’’ of affordable housing components in primary purpose; and (2) if the express, community development when the development by private developers bona fide intent of the activity, as stated, measurable portion of any benefit should also receive consideration. As for example, in a prospectus, loan bestowed or dollars applied is less than one commenter stated, ‘‘Affordable proposal, or community action plan, is a majority of the entire activity’s housing is affordable housing.’’ The final primarily one or more of the benefits or dollar value. The agencies question and answer would allow pro enumerated community development decline to adopt this suggestion. If the rata treatment in connection with any purposes; the activity is specifically express, bona fide intent of an activity project that provides affordable housing, structured (given any relevant market or is community development, even regardless of whether a governmental legal constraints or performance context though the measurable portion of any entity requires a set-aside. factors) to achieve the expressed benefit bestowed or dollars applied is In response to the agencies’ question community development purpose; and less than a majority of the entire about how the amount of the pro rata the activity accomplishes, or is activity’s benefits or dollar value, the share should be determined for reasonably certain to accomplish, the agencies continue to believe that it is reporting purposes (by units or by loan community development purpose important that such activities, such as proceeds), several commenters urged involved, then the requisite primary projects involving low-income housing flexibility. Several commenters believed purpose may be found. tax credits, receive full consideration. that the entire amount of the loan To date, the agencies have generally Several commenters were concerned should be reported. Other commenters indicated that if an activity has a that the proposal would result in a suggested that when the actual amount primary purpose of community reduction of the amount of CRA of funds attributed to the affordable development (determined by either consideration provided to financial units is readily apparent, for example in method above), the entire investment, institutions’ loans or investments in connection with a construction loan, the loan, or service would be considered in mixed-income properties. The agencies actual dollar amount should be an institution’s CRA evaluation. do not intend this result. In fact, the considered. However, in other cases, However, if an activity does not have a proposed revision should increase the where the actual amount of funds is not primary purpose of community amount of consideration available to readily apparent, the pro rata share development applying these standards, institutions. Some commenters believed should be determined based on the then it would not be considered as a that all activities in connection with percentage of set-aside units. qualified investment, community properties with a set-aside for affordable The final question and answer has development loan, or community units received total quantitative CRA been clarified. Institutions will development service. consideration. Although this is true if determine the pro rata share of the The agencies proposed to revise Q&A the express, bona fide intent of the activity that provides affordable housing § ll.12(h)—8 to allow pro rata entire project is community to low- or moderate-income individuals consideration for an activity that development, that is not always the based on the percentage of units set- provides some affordable housing intent. For example, a private aside for affordable housing for low- or targeted to low- or moderate-income development in which a developer is moderate-income individuals. The individuals, but when it would not be required to set aside a small percentage Agencies believe that this method of deemed to have a primary purpose of of the units as affordable housing in determining the portion of a loan or community development measured by a order to receive zoning approval would investment that provides affordable majority of the entire activity’s not have the requisite express, bona fide housing for low- or moderate-income beneficiaries or dollar value, or by intent. As a result of the revision, individuals imposes the least amount of relying on the express purpose of the however, the financial institution could burden on developers and lenders to activity. The proposed Q&A would receive consideration for the pro rata differentiate the construction costs, specifically allow activities related to amount of the affordable housing set- including the proportional share of costs the provision of mixed-income housing, aside. related to infrastructure, common areas, such as in connection with a The agencies had asked whether and site amenities, between market and development that has a mixed-income allowing pro rata consideration would affordable units. housing component or an affordable spur the construction and rehabilitation The proposed revision restricted the housing set-aside required by federal, of housing for low- or moderate-income pro rata treatment only to affordable state, or local government, to be eligible persons. Commenters provided mixed housing activities by financial

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institutions. The agencies asked affordable for low- or moderate-income Interagency Questions and Answers whether the pro rata treatment should individuals. Regarding Community Reinvestment Three commenters addressed the apply only to affordable housing or § ll.11—Authority, purposes, and proposed revision to this Q&A. The whether the pro rata treatment should scope also apply to loans or investments with general concern addressed by the other community development commenters was the potential for § ll.11(c) Scope purposes. confusion in reporting the pro rata share §§ ll.11(c)(3) & 563e.11(c)(2) Certain Since the CRA regulations were of an affordable housing activity. As in special purpose institutions revised in 1995, affordable housing the past, the full amount of the loan initiatives have included more and more should be collected and reported if the §§ ll.11(c)(3) & 563e.11(c)(2)—1: Is mixed-income housing. Fewer new or majority of the dollars or beneficiaries the list of special purpose institutions rehabilitated housing projects provide are identifiable to a community exclusive? primarily low-income housing. Mixed- development purpose. Similarly, the A1. No, there may be other examples income housing is an important goal in full amount of the loan should be of special purpose institutions. These government housing assistance collected and reported if the express, institutions engage in specialized programs. Because of the compelling bona fide intent of the loan or activities that do not involve granting public interest in affordable housing investment is community development, credit to the public in the ordinary programs, the agencies believe that it is even though a majority of the dollars or course of business. Special purpose appropriate that the pro rata treatment beneficiaries are not identifiable with a institutions typically serve as be adopted with regard to affordable community development purpose. In correspondent banks, trust companies, housing. However, the agencies decline connection with affordable housing or clearing agents or engage only in to expand the coverage of this treatment projects that provide mixed-income specialized services, such as cash to activities other than those providing housing, but where a majority of the management controlled disbursement affordable housing at this time. The dollars or units do not have a services. A financial institution, agencies will keep abreast of community development purpose and however, does not become a special developments in other types of the express, bona fide intent of the loan purpose institution merely by ceasing to community development activities and is not community development, the make loans and, instead, making evaluate the effectiveness of the pro rata institution must report only the pro rata investments and providing other retail treatment in connection with affordable dollar amount of the portion of the loan banking services. housing programs. We will reassess that provides affordable housing to low- §§ ll.11(c)(3) & 563e.11(c)(2)—2: To or moderate-income individuals. The whether such treatment should be be a special purpose institution, must pro rata dollar amount of the total afforded other types of community an institution limit its activities in its activity will be based on the percentage development activities at a later date. charter? of units set-aside for affordable housing The agencies have added clarifying A2. No. A special purpose institution for low- or moderate-income language to the final answer to may, but is not required to, limit the individuals. The agencies are adopting emphasize that the pro rata treatment scope of its activities in its charter, the proposed revision to the Q&A, but applies only to affordable housing articles of association, or other corporate have added a sentence to the final activities. organizational documents. An answer to clarify this guidance. Finally, the agencies asked for institution that does not have legal comment on whether the adoption of Conforming Revision to Q&A limitations on its activities, but has pro rata treatment would lead to § ll.22(a)(2)—4: Other Loan Data voluntarily limited its activities, however, would no longer be exempt unjustifiable inflation of community Q&A § ll.22(a)(2)—4, as adopted in from Community Reinvestment Act development activities. Commenters January of 2009 (74 FR 517), stated that (CRA) requirements if it subsequently unanimously asserted that it would not. loans that do not have a primary engaged in activities that involve The agencies are adopting the revised purpose of community development, granting credit to the public in the Q&A with the clarifications described but where a certain amount or ordinary course of business. An above. percentage of units is set aside for institution that believes it is exempt affordable housing, should be submitted Revised Q&A § ll.42(b)(2)—3: Data from CRA as a special purpose by the financial institution for Collection institution should seek confirmation of consideration as ‘‘other loan data.’’ In the this status from its supervisory agency. The agencies explained in January supplementary information published 2009 that if the proposed revision to with the proposed revisions to the § ll.12—Definitions Q&A § ll.12(h)—8, described above, interagency questions and answers, the § ll.12(a) Affiliate were adopted, the agencies would also agencies advised that, if the proposed revise Q&A § ll.42(b)(2)—3 to address revision to Q&A § ll.12(h)—8 were § ll.12(a)—1: Does the definition of data collection and reporting of the pro adopted, a conforming change to Q&A ‘‘affiliate’’ include subsidiaries of an rata share of the mixed-income housing § ll.22(a)(2)—4 would be made. The institution? loans described in the Q&A. The answer to Q&A § ll.22(a)(2)—4 has A1. Yes, ‘‘affiliate’’ includes any agencies proposed that, if an institution been revised to remove the reference to company that controls, is controlled by, were to elect to have the portion of ‘‘loans that do not have a primary or is under common control with mixed-income housing loans that were purpose of community development, another company. An institution’s set aside for low- or moderate-income but where a certain amount or subsidiary is controlled by the housing considered as community percentage of units is set aside for institution and is, therefore, an affiliate. development loans, in order to receive affordable housing’’ as an example of § ll.12(f) Branch consideration for such loans, the ‘‘other loan data’’ because such activities institution would need to collect and are eligible for pro rata treatment. § ll.12(f)—1: Do the definitions of report data on only the portions of the The text of the final Interagency ‘‘branch,’’ ‘‘automated teller machine loans that provide housing that is Questions and Answers follows: (ATM),’’ and ‘‘remote service facility

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(RSF)’’ include mobile branches, ATMs, stabilizes the adjacent low-income services, as appropriate), even if the and RSFs? community by providing needed MWLIs are not located in, or such A1. Yes. Staffed mobile offices that shopping services that are not otherwise activities do not benefit, the assessment are authorized as branches are available in the low-income community. area(s) of the majority-owned institution considered ‘‘branches,’’ and mobile § ll.12(g)—3: Does the regulation or the broader statewide or regional area ATMs and RSFs are considered ‘‘ATMs’’ provide flexibility in considering that includes its assessment area(s). The and ‘‘RSFs.’’ performance in high-cost areas? activities must, however, help meet the § ll.12(f)—2: Are loan production A3. Yes, the flexibility of the credit needs of the local communities in offices (LPOs) branches for purposes of performance standards allows which the MWLIs are chartered. The the CRA? examiners to account in their impact of a majority-owned institution’s A2. LPOs and other offices are not evaluations for conditions in high-cost activities in cooperation with MWLIs on ‘‘branches’’ unless they are authorized as areas. Examiners consider lending and the majority-owned institution’s CRA branches of the institution through the services to individuals and geographies rating will be determined in conjunction regulatory approval process of the of all income levels and businesses of with its overall performance in its institution’s supervisory agency. all sizes and revenues. In addition, the assessment area(s). § ll.12(g) Community development flexibility in the requirement that Examples of activities undertaken by community development loans, a majority-owned financial institution § ll.12(g)—1: Are community community development services, and in cooperation with MWLIs that would development activities limited to those qualified investments have as their receive CRA consideration may include: that promote economic development? ‘‘primary’’ purpose community • Making a deposit or capital A1. No. Although the definition of development allows examiners to investment; ‘‘community development’’ includes account for conditions in high-cost • Purchasing a participation in a loan; activities that promote economic areas. For example, examiners could • Loaning an officer or providing development by financing small take into account the fact that activities other technical expertise to assist an businesses or farms, the rule does not address a credit shortage among middle- MWLI in improving its lending policies limit community development loans income people or areas caused by the and practices; and services and qualified investments disproportionately high cost of building, • Providing financial support to to those activities. Community maintaining or acquiring a house when enable an MWLI to partner with schools development also includes community- determining whether an institution’s or universities to offer financial literacy or tribal-based child care, educational, loan to or investment in an organization education to members of its local health, or social services targeted to that funds affordable housing for community; or low- or moderate-income persons, middle-income people or areas, as well • Providing free or discounted data affordable housing for low- or moderate- as low- and moderate-income people or processing systems, or office facilities to income individuals, and activities that areas, has as its primary purpose aid an MWLI in serving its customers. revitalize or stabilize low- or moderate- community development. See also Q&A § ll.12(g)(1) Affordable housing income areas, designated disaster areas, § ll.12(h)—8 for more information on (including multifamily rental housing) or underserved or distressed ‘‘primary purpose.’’ nonmetropolitan middle-income § ll.12(g)—4: The CRA provides for low- or moderate-income individuals geographies. that, in assessing the CRA performance § ll.12(g)(1)—1: When determining § ll.12(g)—2: Must a community of non-minority- and non-women-owned whether a project is ‘‘affordable housing development activity occur inside a low- (majority-owned) financial institutions, for low- or moderate-income or moderate-income area, designated examiners may consider as a factor individuals,’’ thereby meeting the disaster area, or underserved or capital investments, loan participations, definition of ‘‘community development,’’ distressed nonmetropolitan middle- and other ventures undertaken by the will it be sufficient to use a formula that income area in order for an institution institutions in cooperation with relates the cost of ownership, rental, or to receive CRA consideration for the minority- or women-owned financial borrowing to the income levels in the activity? institutions and low-income credit area as the only factor, regardless of A2. No. Community development unions (MWLIs), provided that these whether the users, likely users, or includes activities, regardless of their activities help meet the credit needs of beneficiaries of that affordable housing location, that provide affordable local communities in which the MWLIs are low- or moderate-income housing for, or community services are chartered. Must such activities also individuals? targeted to, low- or moderate-income benefit the majority-owned financial A1. The concept of ‘‘affordable individuals and activities that promote institution’s assessment area? housing’’ for low- or moderate-income economic development by financing A4. No. Although the regulations individuals does hinge on whether low- small businesses and farms. Activities generally provide that an institution’s or moderate-income individuals benefit, that stabilize or revitalize particular CRA activities will be evaluated for the or are likely to benefit, from the low- or moderate-income areas, extent to which they benefit the housing. It would be inappropriate to designated disaster areas, or institution’s assessment area(s) or a give consideration to a project that underserved or distressed broader statewide or regional area that exclusively or predominately houses nonmetropolitan middle-income areas includes the institution’s assessment families that are not low- or moderate- (including by creating, retaining, or area(s), the agencies apply a broader income simply because the rents or improving jobs for low- or moderate- geographic criterion when evaluating housing prices are set according to a income persons) also qualify as capital investments, loan participations, particular formula. community development, even if the and other ventures undertaken by that For projects that do not yet have activities are not located in these areas. institution in cooperation with MWLIs, occupants, and for which the income of One example is financing a supermarket as provided by the CRA. Thus, such the potential occupants cannot be that serves as an anchor store in a small activities will be favorably considered determined in advance, or in other strip mall located at the edge of a in the CRA performance evaluation of projects where the income of occupants middle-income area, if the mall the institution (as loans, investments, or cannot be verified, examiners will

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review factors such as demographic, § ll.12(g)(3) Activities that promote and services in that area may have a economic, and market data to determine economic development by financing greater impact and be more responsive the likelihood that the housing will businesses or farms that meet certain to the community credit needs than ‘‘primarily’’ accommodate low- or size eligibility standards does a loan to a small business in the moderate-income individuals. For § ll.12(g)(3)—1: ‘‘Community same geography that does not directly example, examiners may look at median development’’ includes activities that provide additional jobs or services to rents of the assessment area and the promote economic development by the community. project; the median home value of either financing businesses or farms that meet § ll.12(g)(4) Activities that revitalize the assessment area, low- or moderate- certain size eligibility standards. Are all or stabilize certain geographies income geographies or the project; the activities that finance businesses and § ll.12(g)(4)—1: Is the revised low- or moderate-income population in farms that meet these size eligibility the area of the project; or the past definition of community development, standards considered to be community effective September 1, 2005 (under the performance record of the development? organization(s) undertaking the project. OCC, Board, and FDIC rules) and A1. No. The concept of ‘‘community effective April 12, 2006 (under OTS’s Further, such a project could receive development’’ under 12 CFR consideration if its express, bona fide rule), applicable to all institutions or ll.12(g)(3) involves both a ‘‘size’’ test only to intermediate small institutions? intent, as stated, for example, in a and a ‘‘purpose’’ test. An institution’s prospectus, loan proposal, or A1. The revised definition of loan, investment, or service meets the community development is applicable community action plan, is community ‘‘size’’ test if it finances, either directly development. to all institutions. Examiners will not or through an intermediary, entities that use the revised definition to qualify § ll.12(g)(2) Community services either meet the size eligibility standards activities that were funded or provided targeted to low- or moderate-income of the Small Business Administration’s prior to September 1, 2005 (under the individuals Development Company (SBDC) or Small OCC, Board, and FDIC rules) or prior to Business Investment Company (SBIC) April 12, 2006 (under OTS’s rule). § ll.12(g)(2)—1: Community programs, or have gross annual revenues § ll.12(g)(4)—2: Will activities that development includes community of $1 million or less. provide housing for middle-income and services targeted to low- or moderate- To meet the ‘‘purpose test,’’ the upper-income persons qualify for income individuals. What are examples institution’s loan, investment, or service favorable consideration as community of ways that an institution could must promote economic development. development activities when they help determine that community services are These activities are considered to to revitalize or stabilize a distressed or offered to low- or moderate-income promote economic development if they underserved nonmetropolitan middle- individuals? support permanent job creation, income geography or designated A1: Examples of ways in which an retention, and/or improvement for disaster areas? institution could determine that persons who are currently low- or A2. An activity that provides housing community services are targeted to low- moderate-income, or supports for middle- or upper-income individuals or moderate-income persons include: permanent job creation, retention, and/ qualifies as an activity that revitalizes or • or improvement either in low- or stabilizes a distressed nonmetropolitan The community service is targeted moderate-income geographies or in middle-income geography or a to the clients of a nonprofit organization areas targeted for redevelopment by designated disaster area if the housing that has a defined mission of serving Federal, state, local, or tribal directly helps to revitalize or stabilize low- and moderate-income persons, or, governments. The agencies will the community by attracting new, or because of government grants, for presume that any loan to or investment retaining existing, businesses or example, is limited to offering services in a SBDC, SBIC, Rural Business residents and, in the case of a only to low- or moderate-income Investment Company, New Markets designated disaster area, is related to persons. Venture Capital Company, or New disaster recovery. The Agencies • The community service is offered Markets Tax Credit-eligible Community generally will consider all activities that by a nonprofit organization that is Development Entity promotes economic revitalize or stabilize a distressed located in and serves a low- or development. (But also refer to Q&As nonmetropolitan middle-income moderate-income geography. § ll.42(b)(2)—2, § ll.12(h)—2, and geography or designated disaster area, • The community service is § ll.12(h)—3 for more information but will give greater weight to those conducted in a low- or moderate-income about which loans may be considered activities that are most responsive to area and targeted to the residents of the community development loans.) community needs, including needs of area. In addition to their quantitative low- or moderate-income individuals or assessment of the amount of a financial neighborhoods. Thus, for example, a • The community service is a clearly institution’s community development loan solely to develop middle- or upper- defined program that benefits primarily activities, examiners must make income housing in a community in need low- or moderate-income persons, even qualitative assessments of an of low- and moderate-income housing if it is provided by an entity that offers institution’s leadership in community would be given very little weight if other programs that serve individuals of development matters and the there is only a short-term benefit to low- all income levels. complexity, responsiveness, and impact and moderate-income individuals in the • The community service is offered at of the community development community through the creation of a workplace to workers who are low- activities of the institution. In reaching temporary construction jobs. (Except in and moderate-income, based on readily a conclusion about the impact of an connection with intermediate small available data for the average wage for institution’s community development institutions, a housing-related loan is workers in that particular occupation or activities, examiners may, for example, not evaluated as a ‘‘community industry (see, e.g., http://www.bls.gov/ determine that a loan to a small development loan’’ if it has been bls/blswage.htm (Bureau of Labor business in a low- or moderate-income reported or collected by the institution Statistics)). geography that provides needed jobs or its affiliate as a home mortgage loan,

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unless it is a multifamily dwelling loan. determine whether the activity is including for low- and moderate-income See 12 CFR ll.12(h)(2)(i) and Q&As consistent with the community’s formal individuals; providing financing or § ll.12(h)—2 and § ll.12(h)—3.) An or informal plans for the revitalization other assistance for essential activity will be presumed to revitalize or and stabilization of the low- or community-wide infrastructure, stabilize such a geography or area if the moderate-income geography. For more community services, and rebuilding activity is consistent with a bona fide information on what activities revitalize needs; and activities that provide government revitalization or or stabilize a low- or moderate-income housing, financial assistance, and stabilization plan or disaster recovery geography, see Q&As § ll.12(g)—2 services to individuals in designated plan. See Q&As § ll.12(g)(4)(i)—1 and and § ll.12(h)—5. disaster areas and to individuals who § ll.12(h)—5. § ll.12(g)(4)(ii) Activities that have been displaced from those areas, In underserved nonmetropolitan including low- and moderate-income middle-income geographies, activities revitalize or stabilize designated disaster areas individuals (see, e.g., Q&As that provide housing for middle- and § ll.12(i)—3; § ll.12(t)—4; upper-income individuals may qualify § ll.12(g)(4)(ii)—1: What is a § ll.22(b)(2) & (3)—4; § ll.22(b)(2) & as activities that revitalize or stabilize ‘‘designated disaster area’’ and how long (3)—5; and § ll.24(d)(3)—1). such underserved areas if the activities does it last? also provide housing for low- or A1. A ‘‘designated disaster area’’ is a § ll.12(g)(4)(iii) Activities that moderate-income individuals. For major disaster area designated by the revitalize or stabilize distressed or example, a loan to build a mixed- federal government. Such disaster underserved nonmetropolitan middle- income housing development that designations include, in particular, income geographies provides housing for middle- and Major Disaster Declarations § ll.12(g)(4)(iii)—1: What criteria upper-income individuals in an administered by the Federal Emergency are used to identify distressed or underserved nonmetropolitan middle- Management Agency (FEMA) (http:// underserved nonmetropolitan, middle- income geography would receive www.fema.gov), but excludes counties income geographies? designated to receive only FEMA Public positive consideration if it also provides A1. Eligible nonmetropolitan middle- Assistance Emergency Work Category A housing for low- or moderate-income income geographies are those (Debris Removal) and/or Category B individuals. designated by the Agencies as being in (Emergency Protective Measures). § ll.12(g)(4)(i) Activities that Examiners will consider institution distress or that could have difficulty revitalize or stabilize low- or moderate- activities related to disaster recovery meeting essential community needs income geographies that revitalize or stabilize a designated (underserved). A particular geography § ll.12(g)(4)(i)—1: What activities disaster area for 36 months following could be designated as both distressed are considered to ‘‘revitalize or stabilize’’ the date of designation. Where there is and underserved. As defined in 12 CFR ll a low- or moderate-income geography, a demonstrable community need to .12(k), a geography is a census tract and how are those activities considered? extend the period for recognizing delineated by the United States Bureau A1. Activities that revitalize or revitalization or stabilization activities of the Census. stabilize a low- or moderate-income in a particular disaster area to assist in A nonmetropolitan middle-income geography are activities that help to long-term recovery efforts, this time geography will be designated as attract new, or retain existing, period may be extended. distressed if it is in a county that meets businesses or residents. Examiners will § ll.12(g)(4)(ii)—2: What activities one or more of the following triggers: (1) presume that an activity revitalizes or are considered to ‘‘revitalize or stabilize’’ An unemployment rate of at least 1.5 stabilizes a low- or moderate-income a designated disaster area, and how are times the national average, (2) a poverty geography if the activity has been those activities considered? rate of 20 percent or more, or (3) a approved by the governing board of an A2. The Agencies generally will population loss of 10 percent or more Enterprise Community or Empowerment consider an activity to revitalize or between the previous and most recent Zone (designated pursuant to 26 U.S.C. stabilize a designated disaster area if it decennial census or a net migration loss § 1391) and is consistent with the helps to attract new, or retain existing, of five percent or more over the five- board’s strategic plan. They will make businesses or residents and is related to year period preceding the most recent the same presumption if the activity has disaster recovery. An activity will be census. received similar official designation as presumed to revitalize or stabilize the A nonmetropolitan middle-income consistent with a federal, state, local, or area if the activity is consistent with a geography will be designated as tribal government plan for the bona fide government revitalization or underserved if it meets criteria for revitalization or stabilization of the low- stabilization plan or disaster recovery population size, density, and dispersion or moderate-income geography. For plan. The Agencies generally will that indicate the area’s population is example, foreclosure prevention consider all activities relating to disaster sufficiently small, thin, and distant from programs with the objective of recovery that revitalize or stabilize a a population center that the tract is providing affordable, sustainable, long- designated disaster area, but will give likely to have difficulty financing the term loan restructurings or greater weight to those activities that are fixed costs of meeting essential modifications to homeowners in low- or most responsive to community needs, community needs. The Agencies will moderate-income geographies, including the needs of low- or use as the basis for these designations consistent with safe and sound banking moderate-income individuals or the ‘‘urban influence codes,’’ numbered practices, may help to revitalize or neighborhoods. Qualifying activities ‘‘7,’’ ‘‘10,’’ ‘‘11,’’ and ‘‘12,’’ maintained by stabilize those geographies. may include, for example, providing the Economic Research Service of the To determine whether other activities financing to help retain businesses in United States Department of revitalize or stabilize a low- or the area that employ local residents, Agriculture. moderate-income geography, examiners including low- and moderate-income The Agencies publish data source will evaluate the activity’s actual impact individuals; providing financing to information along with the list of on the geography, if information about attract a major new employer that will eligible nonmetropolitan census tracts this is available. If not, examiners will create long-term job opportunities, on the Federal Financial Institutions

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Examination Council Web site (http:// A4. The regulation provides that housing or other community www.ffiec.gov). activities revitalize or stabilize an development needs; § ll.12(g)(4)(iii)—2: How often will underserved nonmetropolitan middle- • Borrowers to construct or the Agencies update the list of income geography if they help to meet rehabilitate community facilities that designated distressed and underserved essential community needs, including are located in low- and moderate- nonmetropolitan middle-income needs of low- or moderate-income income areas or that serve primarily geographies? individuals. Activities such as financing low- and moderate-income individuals; • A2. The Agencies will review and for the construction, expansion, Financial intermediaries including update the list annually. The list is improvement, maintenance, or Community Development Financial published on the Federal Financial operation of essential infrastructure or Institutions (CDFIs), New Markets Tax Institutions Examination Council Web facilities for health services, education, Credit-eligible Community Development site (http://www.ffiec.gov). public safety, public services, industrial Entities, Community Development To the extent that changes to the parks, or affordable housing, will be Corporations (CDCs), minority- and designated census tracts occur, the evaluated under these criteria to women-owned financial institutions, Agencies have determined to adopt a determine if they qualify for community loan funds or pools, and one-year ‘‘lag period.’’ This lag period revitalization or stabilization low-income or community development will be in effect for the twelve months consideration. Examples of the types of credit unions that primarily lend or immediately following the date when a projects that qualify as meeting essential facilitate lending to promote community census tract that was designated as community needs, including needs of development; • Local, state, and tribal governments distressed or underserved is removed low- or moderate-income individuals, would be a new or expanded hospital for community development activities; from the designated list. Revitalization • Borrowers to finance environmental or stabilization activities undertaken that serves the entire county, including low- and moderate-income residents; an clean-up or redevelopment of an during the lag period will receive industrial site as part of an effort to consideration as community industrial park for businesses whose employees include low- or moderate- revitalize the low- or moderate-income development activities if they would community in which the property is have been considered to have a primary income individuals; a new or rehabilitated sewer line that serves located; and purpose of community development if • community residents, including low- or Businesses, in an amount greater the census tract in which they were than $1 million, when made as part of located were still designated as moderate-income residents; a mixed- income housing development that the Small Business Administration’s distressed or underserved. 504 Certified Development Company § ll.12(g)(4)(iii)—3: What activities includes affordable housing for low- and moderate-income families; or a program. are considered to ‘‘revitalize or stabilize’’ The rehabilitation and construction of a distressed nonmetropolitan middle- renovated elementary school that serves children from the community, including affordable housing or community income geography, and how are those facilities, referred to above, may include activities evaluated? children from low- and moderate- income families. the abatement or remediation of, or A3. An activity revitalizes or Other activities in the area, such as other actions to correct, environmental stabilizes a distressed nonmetropolitan financing a project to build a sewer line hazards, such as lead-based paint, that middle-income geography if it helps to spur that connects services to a middle- are present in the housing, facilities, or attract new, or retain existing, or upper-income housing development site. businesses or residents. An activity will while bypassing a low- or moderate- § ll.12(h)—2: If a retail institution be presumed to revitalize or stabilize the income development that also needs the that is not required to report under the area if the activity is consistent with a sewer services, generally would not Home Mortgage Disclosure Act (HMDA) bona fide government revitalization or qualify for revitalization or stabilization makes affordable home mortgage loans stabilization plan. The Agencies consideration in geographies designated that would be HMDA-reportable home generally will consider all activities that as underserved. However, if an mortgage loans if it were a reporting revitalize or stabilize a distressed underserved geography is also institution, or if a small institution that nonmetropolitan middle-income designated as distressed or a disaster is not required to collect and report loan geography, but will give greater weight area, additional activities may be data under the CRA makes small to those activities that are most considered to revitalize or stabilize the business and small farm loans and responsive to community needs, geography, as explained in Q&As consumer loans that would be collected including needs of low- or moderate- § ll.12(g)(4)(ii)—2 and and/or reported if the institution were a income individuals or neighborhoods. § ll.12(g)(4)(iii)—3. large institution, may the institution Qualifying activities may include, for have these loans considered as example, providing financing to attract § ll.12(h) Community development community development loans? a major new employer that will create loan A2. No. Although small institutions long-term job opportunities, including § ll.12(h)—1: What are examples of are not required to report or collect for low- and moderate-income community development loans? information on small business and small individuals, and activities that provide A1. Examples of community farm loans and consumer loans, and financing or other assistance for development loans include, but are not some institutions are not required to essential infrastructure or facilities limited to, loans to: report information about their home necessary to attract or retain businesses • Borrowers for affordable housing mortgage loans under HMDA, if these or residents. See Q&As rehabilitation and construction, institutions are retail institutions, the § ll.12(g)(4)(i)—1 and § ll.12(h)—5. including construction and permanent agencies will consider in their CRA § ll.12(g)(4)(iii)—4: What activities financing of multifamily rental property evaluations the institutions’ originations are considered to ‘‘revitalize or stabilize’’ serving low- and moderate-income and purchases of loans that would have an underserved nonmetropolitan persons; been collected or reported as small middle-income geography, and how are • Not-for-profit organizations serving business, small farm, consumer or home those activities evaluated? primarily low- and moderate-income mortgage loans, had the institution been

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a collecting and reporting institution targeted to low- or moderate-income institution’s assessment area(s) need not under the CRA or the HMDA. Therefore, individuals qualify as community receive an immediate or direct benefit these loans will not be considered as development loans? from the institution’s specific community development loans, unless A4. No. Credit cards issued to low- or participation in the broader organization the small institution is an intermediate moderate-income individuals for or activity, provided that the purpose, small institution (see § ll.12(h)—3). household, family, or other personal mandate, or function of the organization Multifamily dwelling loans, however, expenditures, whether as part of a or activity includes serving geographies may be considered as community program targeted to such individuals or or individuals located within the development loans as well as home otherwise, do not qualify as community institution’s assessment area(s). mortgage loans. See also Q&A development loans because they do not In addition, a retail institution that, § ll.42(b)(2)—2. have as their primary purpose any of the considering its performance context, has § ll.12(h)—3: May an intermediate activities included in the definition of adequately addressed the community small institution that is not subject to ‘‘community development.’’ development needs of its assessment HMDA reporting have home mortgage § ll.12(h)—5: The regulation area(s) will receive consideration for loans considered as community indicates that community development certain other community development development loans? Similarly, may an includes ‘‘activities that revitalize or activities. These community intermediate small institution have stabilize low- or moderate-income development activities must benefit small business and small farm loans geographies.’’ Do all loans in a low- to geographies or individuals located and consumer loans considered as moderate-income geography have a somewhere within a broader statewide community development loans? stabilizing effect? or regional area that includes the A3. Yes. In instances where A5. No. Some loans may provide only institution’s assessment area(s). indirect or short-term benefits to low- or intermediate small institutions are not Examiners will consider these activities moderate-income individuals in a low- required to report HMDA or small even if they will not benefit the or moderate-income geography. These business or small farm loans, these institution’s assessment area(s). loans may be considered, at the loans are not considered to have a § ll.12(h)—7: What is meant by the institution’s option, as community community development purpose. For term ‘‘regional area’’? development loans, provided they meet example, a loan for upper-income A7. A ‘‘regional area’’ may be as large the regulatory definition of ‘‘community housing in a low- or moderate-income as a multistate area. For example, the development.’’ If small business or small area is not considered to have a ‘‘mid-Atlantic states’’ may comprise a farm loan data have been reported to the community development purpose regional area. agencies to preserve the option to be simply because of the indirect benefit to evaluated as a large institution, but the low- or moderate-income persons from Community development loans and institution ultimately chooses to be construction jobs or the increase in the services and qualified investments to evaluated under the intermediate small local tax base that supports enhanced statewide or regional organizations that institution examination standards, then services to low- and moderate-income have a bona fide purpose, mandate, or the institution would continue to have area residents. On the other hand, a loan function that includes serving the the option to have such loans for an anchor business in a low- or geographies or individuals within the considered as community development moderate-income area (or a nearby area) institution’s assessment area(s) will be loans. However, if the institution opts to that employs or serves residents of the considered as addressing assessment be evaluated under the lending, area and, thus, stabilizes the area, may area needs. When examiners evaluate investment, and service tests applicable be considered to have a community community development loans and to large institutions, it may not choose development purpose. For example, in a services and qualified investments that to have home mortgage, small business, low-income area, a loan for a pharmacy benefit a regional area that includes the small farm, or consumer loans that employs and serves residents of the institution’s assessment area(s), they considered as community development area promotes community development. will consider the institution’s loans. § ll.12(h)—6: Must there be some performance context as well as the size Loans other than multifamily immediate or direct benefit to the of the regional area and the actual or dwelling loans may not be considered institution’s assessment area(s) to potential benefit to the institution’s under both the lending test and the satisfy the regulations’ requirement that assessment area(s). With larger regional community development test for qualified investments and community areas, benefit to the institution’s intermediate small institutions. Thus, if development loans or services benefit an assessment area(s) may be diffused and, an institution elects to have certain institution’s assessment area(s) or a thus, less responsive to assessment area loans considered under the community broader statewide or regional area that needs. development test, those loans may not includes the institution’s assessment In addition, as long as an institution also be considered under the lending area(s)? has adequately addressed the test, and would be excluded from the A6. No. The regulations recognize that community development needs of its lending test analysis. community development organizations assessment area(s), it will also receive Intermediate small institutions may and programs are efficient and effective consideration for community choose individual loans within their ways for institutions to promote development activities that benefit portfolio for community development community development. These geographies or individuals located consideration. Examiners will evaluate organizations and programs often somewhere within the broader an intermediate small institution’s operate on a statewide or even statewide or regional area that includes community development activities multistate basis. Therefore, an the institution’s assessment area(s), even within the context of the responsiveness institution’s activity is considered a if those activities do not benefit its of the activity to the community community development loan or service assessment area(s). development needs of the institution’s or a qualified investment if it supports § ll.12(h)—8: What is meant by the assessment area. an organization or activity that covers term ‘‘primary purpose’’ as that term is § ll.12(h)—4: Do secured credit an area that is larger than, but includes, used to define what constitutes a cards or other credit card programs the institution’s assessment area(s). The community development loan, a

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qualified investment, or a community purpose’’ of community development at institution’s employees or directors development service? the election of the institution. In such outside the ordinary course of their A8. A loan, investment, or service has cases, an institution may receive pro employment considered community as its primary purpose community rata consideration for the portion of development services? development when it is designed for the such activities that helps to provide A2. No. Services must be provided as express purpose of revitalizing or affordable housing to low- or moderate- a representative of the institution. For stabilizing low- or moderate-income income individuals. For example, if an example, if a financial institution’s areas, designated disaster areas, or institution makes a $10 million loan to director, on her own time and not as a underserved or distressed finance a mixed-income housing representative of the institution, nonmetropolitan middle-income areas, development in which ten percent of volunteers one evening a week at a local providing affordable housing for, or the units will be set aside as affordable community development corporation’s community services targeted to, low- or housing for low- and moderate-income financial counseling program, the moderate-income persons, or promoting individuals, the institution may elect to institution may not consider this economic development by financing treat $1 million of such loan as a activity a community development small businesses and farms that meet community development loan. In other service. the requirements set forth in 12 CFR words, the pro rata dollar amount of the § ll.12(i)—3: What are examples of ll.12(g). To determine whether an total activity will be based on the community development services? activity is designed for an express percentage of units set-aside for A3. Examples of community community development purpose, the affordable housing for low- or moderate- development services include, but are agencies apply one of two approaches. income individuals. not limited to, the following: First, if a majority of the dollars or The fact that an activity provides • Providing financial services to low- beneficiaries of the activity are indirect or short-term benefits to low- or and moderate-income individuals identifiable to one or more of the moderate-income persons does not through branches and other facilities enumerated community development make the activity community located in low- and moderate-income purposes, then the activity will be development, nor does the mere areas, unless the provision of such considered to possess the requisite presence of such indirect or short-term services has been considered in the primary purpose. Alternatively, where benefits constitute a primary purpose of evaluation of an institution’s retail the measurable portion of any benefit community development. Financial banking services under 12 CFR bestowed or dollars applied to the institutions that want examiners to ll.24(d); community development purpose is less consider certain activities should be • Increasing access to financial than a majority of the entire activity’s prepared to demonstrate the activities’ services by opening or maintaining benefits or dollar value, then the activity qualifications. branches or other facilities that help to may still be considered to possess the revitalize or stabilize a low- or § ll.12(i) Community development requisite primary purpose, and the moderate-income geography, a service institution may receive CRA designated disaster area, or a distressed consideration for the entire activity, if § ll.12(i)—1: In addition to meeting or underserved nonmetropolitan (1) the express, bona fide intent of the the definition of ‘‘community middle-income geography, unless the activity, as stated, for example, in a development’’ in the regulation, opening or maintaining of such prospectus, loan proposal, or community development services must branches or other facilities has been community action plan, is primarily one also be related to the provision of considered in the evaluation of the or more of the enumerated community financial services. What is meant by institution’s retail banking services development purposes; (2) the activity ‘‘provision of financial services’’? under 12 CFR ll.24(d); is specifically structured (given any A1. Providing financial services • Providing technical assistance on relevant market or legal constraints or means providing services of the type financial matters to nonprofit, tribal, or performance context factors) to achieve generally provided by the financial government organizations serving low- the expressed community development services industry. Providing financial and moderate-income housing or purpose; and (3) the activity services often involves informing economic revitalization and accomplishes, or is reasonably certain to community members about how to get development needs; accomplish, the community or use credit or otherwise providing • Providing technical assistance on development purpose involved. credit services or information to the financial matters to small businesses or Generally, a loan, investment, or community. For example, service on the community development organizations, service will be determined to have a board of directors of an organization including organizations and individuals ‘‘primary purpose’’ of community that promotes credit availability or who apply for loans or grants under the development only if it meets the criteria finances affordable housing is related to Federal Home Loan Banks’ Affordable described above. However, an activity the provision of financial services. Housing Program; involving the provision of affordable Providing technical assistance about • Lending employees to provide housing also may be deemed to have a financial services to community-based financial services for organizations ‘‘primary purpose’’ of community groups, local or tribal government facilitating affordable housing development in certain other limited agencies, or intermediaries that help to construction and rehabilitation or circumstances in which these criteria meet the credit needs of low- and development of affordable housing; have not been met. Specifically, moderate-income individuals or small • Providing credit counseling, home- activities related to the provision of businesses and farms is also providing buyer and home-maintenance mixed-income housing, such as in financial services. By contrast, activities counseling, financial planning or other connection with a development that has that do not take advantage of the financial services education to promote a mixed-income housing component or employees’ financial expertise, such as community development and affordable an affordable housing set-aside required neighborhood cleanups, do not involve housing, including credit counseling to by federal, state, or local government, the provision of financial services. assist low- or moderate-income also would be eligible for consideration § ll.12(i)—2: Are personal borrowers in avoiding foreclosure on as an activity that has a ‘‘primary charitable activities provided by an their homes;

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• Establishing school savings household, family, or other personal A2. Yes. A financial institution that programs or developing or teaching expenditures. funds home mortgage loans but financial education or literacy curricula § ll.12(j)—2: May a home equity immediately assigns the loans to the for low- or moderate-income line of credit be considered a ‘‘consumer lender that made the credit decisions individuals; loan’’ even if part of the line is for home may present information about these • Providing electronic benefits improvement purposes? loans to examiners for consideration transfer and point of sale terminal A2. If the predominant purpose of the under the lending test as ‘‘other loan systems to improve access to financial line is home improvement, the line may data.’’ Under Regulation C, the broker services, such as by decreasing costs, for only be reported under HMDA and may institution does not record the loans on low- or moderate-income individuals; not be considered a consumer loan. its HMDA–LAR because it does not • Providing international remittance However, the full amount of the line make the credit decisions, even if it services that increase access to financial may be considered a ‘‘consumer loan’’ if funds the loans. An institution electing services by low- and moderate-income its predominant purpose is for to have these home mortgage loans persons (for example, by offering household, family, or other personal considered must maintain information reasonably priced international expenditures, and to a lesser extent about all of the home mortgage loans remittance services in connection with home improvement, and the full amount that it has funded in this way. a low-cost account); of the line has not been reported under Examiners will consider these other • Providing other financial services HMDA. This is the case even though loan data using the same criteria by with the primary purpose of community there may be ‘‘double counting’’ because which home mortgage loans originated development, such as low-cost savings part of the line may also have been or purchased by an institution are or checking accounts, including reported under HMDA. evaluated. ‘‘Electronic Transfer Accounts’’ provided § ll.12(j)—3: How should an Institutions that do not provide pursuant to the Debt Collection institution collect or report information funding but merely take applications Improvement Act of 1996, individual on loans the proceeds of which will be and provide settlement services for development accounts (IDAs), or free or used for multiple purposes? another lender that makes the credit decisions will receive consideration for low-cost government, payroll, or other A3. If an institution makes a single this service as a retail banking service. check cashing services, that increase loan or provides a line of credit to a Examiners will consider an institution’s access to financial services for low- or customer to be used for both consumer mortgage brokerage services when moderate-income individuals; and and small business purposes, consistent • evaluating the range of services Providing foreclosure prevention with the Call Report and TFR provided to low-, moderate-, middle- programs to low- or moderate-income instructions, the institution should homeowners who are facing foreclosure and upper-income geographies and the determine the major (predominant) degree to which the services are tailored on their primary residence with the component of the loan or the credit line objective of providing affordable, to meet the needs of those geographies. and collect or report the entire loan or Alternatively, an institution’s mortgage sustainable, long-term loan credit line in accordance with the modifications and restructurings. brokerage service may be considered a regulation’s specifications for that loan community development service if the Examples of technical assistance type. activities that might be provided to primary purpose of the service is community development organizations § ll.12(l) Home mortgage loan community development. An institution wishing to have its mortgage brokerage include: ll ‘‘ • § .12(l)—1: Does the term home service considered as a community Serving on a loan review ’’ mortgage loan include loans other than development service must provide committee; ‘‘home purchase loans’’? • Developing loan application and sufficient information to substantiate A1. Yes. ‘‘Home mortgage loan’’ underwriting standards; that its primary purpose is community ‘‘ ’’ • Developing loan processing includes home improvement loan, development and to establish the extent ‘‘ ’’ systems; home purchase loan, and of the services provided. • Developing secondary market ‘‘refinancing,’’ as defined in the HMDA § ll.12(m) Income level vehicles or programs; regulation, Regulation C, 12 CFR part • Assisting in marketing financial 203. This definition also includes § ll.12(m)—1: Where do institutions services, including development of multifamily (five-or-more families) find income level data for geographies advertising and promotions, dwelling loans, and loans for the and individuals? publications, workshops and purchase of manufactured homes. See A1. The income levels for conferences; also Q&A § ll.22(a)(2)—7. geographies, i.e., census tracts, are • Furnishing financial services § ll.12(l)—2: Some financial derived from Census Bureau training for staff and management; institutions broker home mortgage information and are updated • Contributing accounting/ loans. They typically take the borrower’s approximately every ten years. The bookkeeping services; and application and perform other income levels for individuals are • Assisting in fund raising, including settlement activities; however, they do derived from information calculated by soliciting or arranging investments. not make the credit decision. The broker the Department of Housing and Urban institutions may also initially fund these Development (HUD) and updated ll § .12(j) Consumer loan mortgage loans, then immediately annually. § ll.12(j)—1: Are home equity loans assign them to another lender. Because Institutions may obtain 2000 considered ‘‘consumer loans’’? the broker institution does not make the geography income information and the A1. Home equity loans made for credit decision, under Regulation C annually updated HUD median family purposes other than home purchase, (HMDA), they do not record the loans on incomes for metropolitan statistical home improvement or refinancing home their HMDA–LARs, even if they fund the areas (MSAs) and statewide purchase or home improvement loans loans. May an institution receive any nonmetropolitan areas by accessing the are consumer loans if they are extended consideration under CRA for its home Federal Financial Institution to one or more individuals for mortgage loan brokerage activities? Examination Council’s (FFIEC’s) Web

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site at http://www.ffiec.gov/cra or by loans (for example, home mortgage or § ll.12(t)—4: What are examples of calling the FFIEC’s CRA Assistance Line small business loans) to certain types of qualified investments? at (202) 872–7584. borrowers (for example, to high-end A4. Examples of qualified income level customers or to investments include, but are not limited § ll.12(n) Limited purpose institution corporations or partnerships of licensed to, investments, grants, deposits, or § ll.12(n)—1: What constitutes a professional practitioners) (‘‘niche shares in or to: ‘‘narrow product line’’ in the definition institutions’’) generally would not • Financial intermediaries (including of ‘‘limited purpose institution’’? qualify as limited purpose (or Community Development Financial A1. An institution offers a narrow wholesale) institutions. Institutions (CDFIs), New Markets Tax product line by limiting its lending Credit-eligible Community Development § ll.12(t) Qualified investment activities to a product line other than a Entities, Community Development traditional retail product line required § ll.12(t)—1: Does the CRA Corporations (CDCs), minority- and to be evaluated under the lending test regulation provide authority for women-owned financial institutions, (i.e., home mortgage, small business, institutions to make investments? community loan funds, and low-income and small farm loans). Thus, an A1. No. The CRA regulation does not or community development credit institution engaged only in making provide authority for institutions to unions) that primarily lend or facilitate credit card or motor vehicle loans offers make investments that are not otherwise lending in low- and moderate-income a narrow product line, while an allowed by Federal law. areas or to low- and moderate-income institution limiting its lending activities § ll.12(t)—2: Are mortgage-backed individuals in order to promote to home mortgages is not offering a securities or municipal bonds ‘‘qualified community development, such as a narrow product line. investments’’? CDFI that promotes economic § ll.12(n)—2: What factors will the A2. As a general rule, mortgage- development on an Indian reservation; agencies consider to determine whether backed securities and municipal bonds • Organizations engaged in affordable an institution that, if limited purpose, are not qualified investments because housing rehabilitation and construction, makes loans outside a narrow product they do not have as their primary including multifamily rental housing; line, or, if wholesale, engages in retail purpose community development, as • Organizations, including, for lending, will lose its limited purpose or defined in the CRA regulations. example, Small Business Investment wholesale designation because of too Nonetheless, mortgage-backed securities Companies (SBICs), specialized SBICs, much other lending? or municipal bonds designed primarily and Rural Business Investment A2. Wholesale institutions may to finance community development Companies (RBICs) that promote engage in some retail lending without generally are qualified investments. economic development by financing losing their designation if this activity is Municipal bonds or other securities small businesses; incidental and done on an with a primary purpose of community • Community development venture accommodation basis. Similarly, limited development need not be housing- capital companies that promote purpose institutions continue to meet related. For example, a bond to fund a economic development by financing the narrow product line requirement if community facility or park or to provide small businesses; they provide other types of loans on an sewage services as part of a plan to • Facilities that promote community infrequent basis. In reviewing other redevelop a low-income neighborhood development by providing community lending activities by these institutions, is a qualified investment. Certain services for low- and moderate-income the agencies will consider the following municipal bonds in underserved individuals, such as youth programs, factors: nonmetropolitan middle-income homeless centers, soup kitchens, health • Is the retail lending provided as an geographies may also be qualified care facilities, battered women’s centers, incident to the institution’s wholesale investments. See Q&A and alcohol and drug recovery centers; lending? § ll.12(g)(4)(iii)—4. Housing-related • • Are the retail loans provided as an Projects eligible for low-income bonds or securities must primarily housing tax credits; accommodation to the institution’s • wholesale customers? address affordable housing (including State and municipal obligations, • Are the other types of loans made multifamily rental housing) needs of such as revenue bonds, that specifically only infrequently to the limited purpose low- or moderate-income individuals in support affordable housing or other order to qualify. See also Q&A community development; institution’s customers? • • Does only an insignificant portion § ll.23(b)—2. Not-for-profit organizations serving of the institution’s total assets and § ll.12(t)—3: Are Federal Home low- and moderate-income housing or income result from the other lending? Loan Bank stocks or unpaid dividends other community development needs, • How significant a role does the and membership reserves with the such as counseling for credit, home- institution play in providing that type(s) Federal Reserve Banks ‘‘qualified ownership, home maintenance, and of loan(s) in the institution’s assessment investments’’? other financial literacy programs; and area(s)? A3. No. Federal Home Loan Bank • Organizations supporting activities • Does the institution hold itself out (FHLB) stocks or unpaid dividends, and essential to the capacity of low- and as offering that type(s) of loan(s)? membership reserves with the Federal moderate-income individuals or • Does the lending test or the Reserve Banks do not have a sufficient geographies to utilize credit or to community development test present a connection to community development sustain economic development, such as, more accurate picture of the to be qualified investments. However, for example, day care operations and job institution’s CRA performance? FHLB member institutions may receive training programs that enable low- or § ll.12(n)—3: Do ‘‘niche CRA consideration as a community moderate-income individuals to work. institutions’’ qualify as limited purpose development service for technical See also Q&As § ll.12(g)(4)(ii)—2; (or wholesale) institutions? assistance they provide on behalf of § ll.12(g)(4)(iii)—3; A3. Generally, no. Institutions that are applicants and recipients of funding § ll.12(g)(4)(iii)—4. in the business of lending to the public, from the FHLB’s Affordable Housing § ll.12(t)—5: Will an institution but specialize in certain types of retail Program. See Q&A § ll.12(i)—3. receive consideration for charitable

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contributions as ‘‘qualified A1. A Federal or State branch of a A2. Yes, depending on their principal investments’’? foreign bank is considered a small amount. Small business loans include A5. Yes, provided they have as their institution if the Federal or State branch loans secured by ‘‘nonfarm primary purpose community has assets less than the asset threshold nonresidential properties,’’ as defined in development as defined in the delineated in 12 CFR ll.12(u)(1) for the Call Report and TFR, in amounts of regulations. A charitable contribution, small institutions. $1 million or less. whether in cash or an in-kind § ll.12(u)(2) Small institution § ll.12(v)—3: Are loans secured by contribution of property, is included in adjustment nonfarm residential real estate to the term ‘‘grant.’’ A qualified investment finance small businesses ‘‘small is not disqualified because an § ll.12(u)(2)—1: How often will the business loans’’? institution receives favorable treatment asset size thresholds for small A3. Applicable to banks filing Call for it (for example, as a tax deduction institutions and intermediate small Reports: Typically not. Loans secured or credit) under the Internal Revenue institutions be changed, and how will by nonfarm residential real estate that Code. these adjustments be communicated? are used to finance small businesses are A1. The asset size thresholds for § ll.12(t)—6: An institution makes not included as ‘‘small business’’ loans ‘‘small institutions’’ and ‘‘intermediate or participates in a community for Call Report purposes unless the small institutions’’ will be adjusted development loan. The institution security interest in the nonfarm annually based on changes to the provided the loan at below-market residential real estate is taken only as an Consumer Price Index. More interest rates or ‘‘bought down’’ the abundance of caution. (See Call Report specifically, the dollar thresholds will interest rate to the borrower. Is the lost Glossary definition of ‘‘Loan Secured by be adjusted annually based on the year- income resulting from the lower interest Real Estate.’’) The agencies recognize to-year change in the average of the rate or buy-down a qualified that many small businesses are financed Consumer Price Index for Urban Wage investment? by loans that would not have been made Earners and Clerical Workers, not or would have been made on less A6. No. The agencies will, however, seasonally adjusted for each twelve- favorable terms had they not been consider the responsiveness, month period ending in November, with secured by residential real estate. If innovativeness, and complexity of the rounding to the nearest million. Any these loans promote community community development loan within changes in the asset size thresholds will development, as defined in the the bounds of safe and sound banking be published in the Federal Register. regulation, they may be considered as practices. Historical and current asset-size ll community development loans. § .12(t)—7: Will the agencies threshold information may be found on Otherwise, at an institution’s option, the consider as a qualified investment the the FFIEC’s Web site at http:// institution may collect and maintain wages or other compensation of an www.ffiec.gov/cra. employee or director who provides data separately concerning these loans assistance to a community development § ll.12(v) Small business loan and request that the data be considered organization on behalf of the § ll.12(v)—1: Are loans to nonprofit in its CRA evaluation as ‘‘Other Secured institution? organizations considered small business Lines/Loans for Purposes of Small A7. No. However, the agencies will loans or are they considered community Business.’’ See also Q&A consider donated labor of employees or development loans? § ll.22(a)(2)—7. directors of a financial institution as a A1. To be considered a small business Applicable to institutions that file community development service if the loan, a loan must meet the definition of TFRs: Possibly, depending how the loan activity meets the regulatory definition ‘‘loan to small business’’ in the is classified for TFR purposes. Loans of ‘‘community development service.’’ instructions in the ‘‘Consolidated secured by nonfarm residential real § ll.12(t)—8: When evaluating a Reports of Conditions and Income’’ (Call estate to finance small businesses may qualified investment, what Report) and ‘‘Thrift Financial Report’’ be included as small business loans consideration will be given for prior- (TFR). In general, a loan to a nonprofit only if they are reported on the TFR as period investments? organization, for business or farm nonmortgage, commercial loans. (See A8. When evaluating an institution’s purposes, where the loan is secured by TFR Q&A No. 62.) Otherwise, loans that qualified investment record, examiners nonfarm nonresidential property and meet the definition of mortgage loans, will consider investments that were the original amount of the loan is for TFR reporting purposes, may be made prior to the current examination, $1 million or less, if a business loan, or classified as mortgage loans. but that are still outstanding. Qualitative $500,000 or less, if a farm loan, would § ll.12(v)—4: Are credit cards factors will affect the weighting given to be reported in the Call Report and TFR issued to small businesses considered both current period and outstanding as a small business or small farm loan. ‘‘small business loans’’? prior-period qualified investments. For If a loan to a nonprofit organization is A4. Credit cards issued to a small example, a prior-period outstanding reportable as a small business or small business or to individuals to be used, investment with a multi-year impact farm loan, it cannot also be considered with the institution’s knowledge, as that addresses assessment area as a community development loan, business accounts are small business community development needs may except by a wholesale or limited loans if they meet the definitional receive more consideration than a purpose institution. Loans to nonprofit requirements in the Call Report or TFR current period investment of a organizations that are not small business instructions. comparable amount that is less or small farm loans for Call Report and § ll.12(x) Wholesale institution responsive to area community TFR purposes may be considered as development needs. community development loans if they § ll.12(x)—1: What factors will the meet the regulatory definition of agencies consider in determining § ll.12(u) Small institution ‘‘community development.’’ whether an institution is in the business § ll.12(u)—1: How are Federal and § ll.12(v)—2: Are loans secured by of extending home mortgage, small State branch assets of a foreign bank commercial real estate considered small business, small farm, or consumer loans calculated for purposes of the CRA? business loans? to retail customers?

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A1. The agencies will consider § ll.21(b)(2) Information maintained association that has made few or no whether: by the institution or obtained from qualified investments due to its limited • The institution holds itself out to community contacts investment authority may still receive a the retail public as providing such § ll.21(b)(2)—1: Will examiners low satisfactory rating under the loans; and investment test if it has a strong lending • consider performance context The institution’s revenues from information provided by institutions? record. extending such loans are significant A1. Yes. An institution may provide § ll.21(b)(5) Institution’s past when compared to its overall examiners with any information it performance and the performance of operations, including off-balance sheet deems relevant, including information similarly situated lenders activities. on the lending, investment, and service § ll.21(b)(5)—1: Can an A wholesale institution may make opportunities in its assessment area(s). institution’s assigned rating be some retail loans without losing its This information may include data on adversely affected by poor past wholesale designation as described the business opportunities addressed by ll performance? above in Q&A § .12(n)—2. lenders not subject to the CRA. A1. Yes. The agencies will consider ll Institutions are not required, however, § .21—Performance tests, an institution’s past performance in its to prepare a formal needs assessment. If standards, and ratings, in general overall evaluation. For example, an an institution provides information to ll institution that received a rating of § .21(a) Performance tests and examiners, the agencies will not expect ‘‘needs to improve’’ in the past may standards information other than what the receive a rating of ‘‘substantial § ll.21(a)—1: How will examiners institution normally would develop to noncompliance’’ if its performance has apply the performance criteria? prepare a business plan or to identify not improved. A1. Examiners will apply the potential markets and customers, § ll.21(b)(5)—2: How will performance criteria reasonably and including low- and moderate-income examiners consider the performance of fairly, in accord with the regulations, persons and geographies in its similarly situated lenders? the examination procedures, and this assessment area(s). The agencies will A2. The performance context section guidance. In doing so, examiners will not evaluate an institution’s efforts to of the regulation permits the disregard efforts by an institution to ascertain community credit needs or performance of similarly situated manipulate business operations or rate an institution on the quality of any lenders to be considered, for example, present information in an artificial light information it provides. as one of a number of considerations in that does not accurately reflect an § ll.21(b)(2)—2: Will examiners evaluating the geographic distribution of institution’s overall record of lending conduct community contact interviews an institution’s loans to low-, performance. as part of the examination process? moderate-, middle-, and upper-income § ll.21(a)—2: Are all community A2. Yes. Examiners will consider geographies. This analysis, as well as development activities weighted equally information obtained from interviews other analyses, may be used, for by examiners? with local community, civic, and example, where groups of contiguous A2. No. Examiners will consider the government leaders. These interviews geographies within an institution’s responsiveness to credit and community provide examiners with knowledge assessment area(s) exhibit abnormally development needs, as well as the regarding the local community, its low penetration. In this regard, the innovativeness and complexity, if economic base, and community performance of similarly situated applicable, of an institution’s development initiatives. To ensure that lenders may be analyzed if such an community development lending, information from local leaders is analysis would provide accurate insight qualified investments, and community considered—particularly in areas where into the institution’s lack of development services. These criteria the number of potential contacts may be performance in those areas. The include consideration of the degree to limited—examiners may use regulation does not require the use of a which they serve as a catalyst for other information obtained through an specific type of analysis under these community development activities. The interview with a single community circumstances. Moreover, no ratio criteria are designed to add a qualitative contact for examinations of more than developed from any type of analysis is element to the evaluation of an one institution in a given market. In linked to any lending test rating. institution’s performance. addition, the agencies may consider (‘‘Innovativeness’’ and ‘‘complexity’’ are information obtained from interviews § ll.22—Lending test not factors in the community conducted by other agency staff and by § ll.22(a) Scope of test development test applicable to the other agencies. In order to augment intermediate small institutions.) contacts previously used by the agencies § ll.22(a)—1: Are there any types of and foster a wider array of contacts, the lending activities that help meet the § ll.21(b) Performance context agencies may share community contact credit needs of an institution’s § ll.21(b)—1: What is the information. assessment area(s) and that may performance context? warrant favorable consideration as ll A1. The performance context is a § .21(b)(4) Institutional capacity activities that are responsive to the broad range of economic, demographic, and constraints needs of the institution’s assessment and institution- and community-specific § ll.21(b)(4)—1: Will examiners area(s)? information that an examiner reviews to consider factors outside of an A1. Credit needs vary from understand the context in which an institution’s control that prevent it from community to community. However, institution’s record of performance engaging in certain activities? there are some lending activities that are should be evaluated. The agencies will A1. Yes. Examiners will take into likely to be responsive in helping to provide examiners with some of this account statutory and supervisory meet the credit needs of many information. The performance context is limitations on an institution’s ability to communities. These activities include: not a formal assessment of community engage in any lending, investment, and • Providing loan programs that credit needs. service activities. For example, a savings include a financial education

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component about how to avoid lending § ll.22(a)(2) Loan originations and and that are not reported as small activities that may be abusive or purchases/other loan data business/small farm loans or reported otherwise unsuitable; § ll.22(a)(2)—1: How are lending under HMDA; and • • An increase to a small business or Establishing loan programs that commitments (such as letters of credit) small farm line of credit if the increase provide small, unsecured consumer evaluated under the regulation? would cause the total line of credit to loans in a safe and sound manner (i.e., A1. The agencies consider lending exceed $1 million, in the case of a small based on the borrower’s ability to repay) commitments (such as letters of credit) business line; or $500,000, in the case and with reasonable terms; only at the option of the institution, • of a small farm line. Offering lending programs, which regardless of examination type. feature reporting to consumer reporting § ll.22(a)(2)—5: Do institutions Commitments must be legally binding receive consideration for originating or agencies, that transition borrowers from between an institution and a borrower loans with higher interest rates and fees purchasing loans that are fully in order to be considered. Information guaranteed? (based on credit risk) to lower-cost about lending commitments will be loans, consistent with safe and sound A5. Yes. For all examination types, used by examiners to enhance their examiners evaluate an institution’s lending practices. Reporting to understanding of an institution’s consumer reporting agencies allows record of helping to meet the credit performance, but will be evaluated needs of its assessment area(s) through borrowers accessing these programs the separately from the loans. the origination or purchase of specified opportunity to improve their credit § ll.22(a)(2)—2: Will examiners types of loans. Examiners do not take histories and thereby improve their review application data as part of the into account whether or not such loans access to competitive credit products; lending test? • are guaranteed. Establishing loan programs with the A2. Application activity is not a § ll.22(a)(2)—6: Do institutions objective of providing affordable, performance criterion of the lending receive consideration for purchasing sustainable, long-term relief, for test. However, examiners may consider loan participations? example, through loan refinancings, this information in the performance A6. Yes. Examiners will consider the restructures, or modifications, to context analysis because this amount of loan participations purchased homeowners who are facing foreclosure information may give examiners insight when evaluating an institution’s record on their primary residences. on, for example, the demand for loans. of helping to meet the credit needs of its Examiners may consider favorably § ll.22(a)(2)—3: May a financial assessment area(s) through the such lending activities, which have institution receive consideration under origination or purchase of specified features augmenting the success and CRA for home mortgage loan types of loans, regardless of examination effectiveness of the small, intermediate modification, extension, and type. As with other loan purchases, small, or large institution’s lending consolidation agreements (MECAs), in examiners will evaluate whether programs. which it obtains home mortgage loans participations in loan purchased, which § ll.22(a)(1) Types of loans from other institutions without actually have been sold and purchased a number considered purchasing or refinancing the home of times, artificially inflate CRA mortgage loans, as those terms have performance. See, e.g., § ll.21(a)—1. § ll.22(a)(1)—1: If a large retail been interpreted under CRA and HMDA, § ll.22(a)(2)—7: How are institution is not required to collect and as implemented by 12 CFR part 203? refinancings of small business loans, report home mortgage data under the A3. Yes. In some states, MECAs, which are secured by a one-to-four HMDA, will the agencies still evaluate which are not considered loan family residence and that have been the institution’s home mortgage lending refinancings because the existing loan reported under HMDA as a refinancing, performance? obligations are not satisfied and evaluated under CRA? A1. Yes. The agencies will sample the replaced, are common. Although these A7. For banks subject to the Call institution’s home mortgage loan files in transactions are not considered to be Report instructions: A loan of $1 million order to assess its performance under purchases or refinancings, as those or less with a business purpose that is the lending test criteria. terms have been interpreted under CRA, secured by a one-to-four family § ll.22(a)(1)—2: When will they do achieve the same results. A residence is considered a small business examiners consider consumer loans as small, intermediate small, or large loan for CRA purposes only if the part of an institution’s CRA evaluation? institution may present information security interest in the residential A2. Consumer loans will be evaluated about its MECA activities with respect property was taken as an abundance of if the institution so elects and has to home mortgages to examiners for caution and where the terms have not collected and maintained the data; an consideration under the lending test as been made more favorable than they institution that elects not to have its ‘‘other loan data.’’ would have been in the absence of the consumer loans evaluated will not be § ll.22(a)(2)—4: In addition to lien. (See Call Report Glossary viewed less favorably by examiners than MECAs, what are other examples of definition of ‘‘Loan Secured by Real one that does. However, if consumer ‘‘other loan data’’? Estate.’’) If this same loan is refinanced loans constitute a substantial majority of A4. Other loan data include, for and the new loan is also secured by a the institution’s business, the agencies example: one-to-four family residence, but only will evaluate them even if the • Loans funded for sale to the through an abundance of caution, this institution does not so elect. The secondary markets that an institution loan is reported not only as a agencies interpret ‘‘substantial majority’’ has not reported under HMDA; refinancing under HMDA, but also as a to be so significant a portion of the • Unfunded loan commitments and small business loan under CRA. (Note institution’s lending activity by number letters of credit; that small farm loans are similarly and dollar volume of loans that the • Commercial and consumer leases; treated.) lending test evaluation would not • Loans secured by nonfarm It is not anticipated that ‘‘double- meaningfully reflect its lending residential real estate, not taken as an reported’’ loans will be so numerous as performance if consumer loans were abundance of caution, that are used to to affect the typical institution’s CRA excluded. finance small businesses or small farms rating. In the event that an institution

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reports a significant number or amount such loans would be reported under which the agencies assess how well an of loans as both home mortgage and HMDA. institution, regardless of examination small business loans, examiners will type, has met the specific performance § ll.22(b) Performance criteria consider that overlap in evaluating the tests and standards in the rule. The institution’s performance and generally § ll.22(b)(1) Lending activity agencies do not expect that simply will consider the ‘‘double-reported’’ § ll.22(b)(1)—1: How will the because a census tract is within an loans as small business loans for CRA agencies apply the lending activity institution’s assessment area(s), the consideration. criterion to discourage an institution institution must lend to that census The origination of a small business or from originating loans that are viewed tract. Rather the agencies will be small farm loan that is secured by a one- favorably under CRA in the institution concerned with conspicuous gaps in to-four family residence is not itself and referring other loans, which loan distribution that are not explained reportable under HMDA, unless the are not viewed as favorably, for by the performance context. Similarly, if purpose of the loan is home purchase or origination by an affiliate? an institution delineated the entire home improvement. Nor is the loan A1. Examiners will review closely county in which it is located as its reported as a small business or small institutions with (1) a small number and assessment area, but could have farm loan if the security interest is not amount of home mortgage loans with an delineated its assessment area as only a taken merely as an abundance of unusually good distribution among low- portion of the county, it will not be caution. Any such loan may be provided and moderate-income areas and low- penalized for lending only in that to examiners as ‘‘other loan data’’ and moderate-income borrowers and (2) portion of the county, so long as that (‘‘Other Secured Lines/Loans for a policy of referring most, but not all, of portion does not reflect illegal Purposes of Small Business’’) for their home mortgage loans to affiliated discrimination or arbitrarily exclude consideration during a CRA evaluation. institutions. If an institution is making low- or moderate-income geographies. See Q&A § ll.12(v)—3. The loans mostly to low- and moderate- The capacity and constraints of an refinancings of such loans would be income individuals and areas and institution, its business decisions about reported under HMDA. referring the rest of the loan applicants how it can best help to meet the needs For savings associations subject to the to an affiliate for the purpose of of its assessment area(s), including those Thrift Financial Reporting instructions: receiving a favorable CRA rating, of low- and moderate-income A loan of $1 million or less with a examiners may conclude that the neighborhoods, and other aspects of the business purpose secured by a one-to- institution’s lending activity is not performance context, are all relevant to four family residence is considered a satisfactory because it has explain why the institution is serving or small business loan for CRA purposes if inappropriately attempted to influence not serving portions of its assessment it is reported as a small business loan the rating. In evaluating an institution’s area(s). for TFR purposes and was not reported lending, examiners will consider § ll.22(b)(2) & (3)—3: Will on the TFR as a mortgage loan (TFR legitimate business reasons for the examiners take into account loans made Instructions for Commercial Loans: allocation of the lending activity. by affiliates when evaluating the Secured). If this same loan is refinanced proportion of an institution’s lending in and the new loan is also secured by a § ll.22(b)(2) & (3) Geographic its assessment area(s)? one-to-four family residence, and was distribution and borrower A3. Examiners will not take into not reported for TFR purposes as a characteristics account loans made by affiliates when mortgage loan, this loan is reported not § ll.22(b)(2) & (3)—1: How do the determining the proportion of an only as a refinancing for HMDA, but is geographic distribution of loans and the institution’s lending in its assessment also reported as a small business loan distribution of lending by borrower area(s), even if the institution elects to under the TFR and CRA. The characteristics interact in the lending have its affiliate lending considered in origination of a small business or small test applicable to either large or small the remainder of the lending test farm loan that is secured by a one-to- institutions? evaluation. However, examiners may four family residence is not reportable A1. Examiners generally will consider consider an institution’s business under HMDA, unless the purpose of the both the distribution of an institution’s strategy of conducting lending through loan is home purchase or home loans among geographies of different an affiliate in order to determine improvement. Nor is the loan reported income levels, and among borrowers of whether a low proportion of lending in as small business or small farm if it was different income levels and businesses the assessment area(s) should adversely reported as a mortgage on the TFR and farms of different sizes. The affect the institution’s lending test report. importance of the borrower distribution rating. OTS does not anticipate that ‘‘double- criterion, particularly in relation to the § ll.22(b)(2) & (3)—4: When will reported’’ loans will be so numerous as geographic distribution criterion, will examiners consider loans (other than to affect the typical institution’s CRA depend on the performance context. For community development loans) made rating. In the event that an institution example, distribution among borrowers outside an institution’s assessment reports a significant number or amount with different income levels may be area(s)? of loans as both home mortgage and more important in areas without A4. Consideration will be given for small business loans, examiners will identifiable geographies of different loans to low- and moderate-income consider that overlap in evaluating the income categories. On the other hand, persons and small business and farm institution’s performance and generally geographic distribution may be more loans outside of an institution’s will consider the ‘‘double-reported’’ important in areas with the full range of assessment area(s), provided the loans as small business loans for CRA geographies of different income institution has adequately addressed the consideration. categories. needs of borrowers within its The origination of a small business or § ll.22(b)(2) & (3)—2: Must an assessment area(s). The agencies will small farm loan that is secured by a one- institution lend to all portions of its apply this consideration not only to to-four family residence should be assessment area? loans made by large retail institutions reported in accordance with Q&A A2. The term ‘‘assessment area’’ being evaluated under the lending test, § ll.12(v)—3. The refinancings of describes the geographic area within but also to loans made by small and

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intermediate small institutions being development lending under the lending themselves. In connection with the evaluated under their respective test applicable to large institutions, may evaluation of an institution’s lending, performance standards. Loans to low- an examiner distinguish among examiners also may give consideration and moderate-income persons and small community development loans on the to related innovations when they businesses and farms outside of an basis of the actual amount of the loan augment the success and effectiveness institution’s assessment area(s), that advances the community of the institution’s lending under its however, will not compensate for poor development purpose? community development loan programs lending performance within the A1. Yes. When evaluating the or, more generally, its lending under its institution’s assessment area(s). institution’s record of community loan programs that address the credit § ll.22(b)(2) & (3)—5: Under the development lending under 12 CFR needs of low- and moderate-income lending test applicable to small, ll.22(b)(4), it is appropriate to give geographies or individuals. For intermediate small, or large institutions, greater weight to the amount of the loan example: how will examiners evaluate home that is targeted to the intended • In connection with a community mortgage loans to middle- or upper- community development purpose. For development loan program, an income individuals in a low- or example, consider two $10 million institution may establish a technical moderate-income geography? projects (with a total of 100 units each) assistance program under which the A5. Examiners will consider these that have as their express primary institution, directly or through third home mortgage loans under the purpose affordable housing and are parties, provides affordable housing performance criteria of the lending test, located in the same community. One of developers and other loan recipients i.e., by number and amount of home these projects sets aside 40 percent of its with financial consulting services. Such mortgage loans, whether they are inside units for low-income residents and the a technical assistance program may, by or outside the financial institution’s other project allocates 65 percent of its itself, constitute a community assessment area(s), their geographic units for low-income residents. An development service eligible for distribution, and the income levels of institution would report both loans as consideration under the service test of the borrowers. Examiners will use $10 million community development the CRA regulations. In addition, the information regarding the financial loans under the 12 CFR ll.42(b)(2) institution’s performance context to aggregate reporting obligation. However, technical assistance may be favorably determine how to evaluate the loans transaction complexity, innovation and considered as an innovation that under these performance criteria. all other relevant considerations being augments the success and effectiveness Depending on the performance context, equal, an examiner should also take into of the related community development examiners could view home mortgage account that the 65 percent project loan program. loans to middle-income individuals in a provides more affordable housing for • In connection with a small business low-income geography very differently. more people per dollar expended. lending program in a low- or moderate- For example, if the loans are for homes Under 12 CFR ll.22(b)(4), the income area and consistent with safe or multifamily housing located in an extent of CRA consideration an and sound lending practices, an area for which the local, state, tribal, or institution receives for its community institution may implement a program Federal government or a community- development loans should bear a direct under which, in addition to providing based development organization has relation to the benefits received by the financing, the institution also contracts developed a revitalization or community and the innovation or with the small business borrowers. Such stabilization plan (such as a Federal complexity of the loans required to a contracting arrangement would not, enterprise community or empowerment accomplish the activity, not simply to standing alone, qualify for CRA zone) that includes attracting mixed- the dollar amount expended on a consideration. However, it may be income residents to establish a particular transaction. By applying all favorably considered as an innovation stabilized, economically diverse lending test performance criteria, a that augments the loan program’s neighborhood, examiners may give more community development loan of a lower success and effectiveness, and improves consideration to such loans, which may dollar amount could meet the credit the program’s ability to serve be viewed as serving the low- or needs of the institution’s community to community development purposes by moderate-income community’s needs as a greater extent than a community helping to promote economic well as serving those of the middle- or development loan with a higher dollar development through support of small upper-income borrowers. If, on the other amount, but with less innovation, business activities and revitalization or hand, no such plan exists and there is complexity, or impact on the stabilization of low- or moderate-income no other evidence of governmental community. geographies. support for a revitalization or ll ll stabilization project in the area and the § .22(b)(5) Innovative or flexible § .22(c) Affiliate lending loans to middle- or upper-income lending practices § ll.22(c)(1) In general borrowers significantly disadvantage or § ll.22(b)(5)—1: What is the range ll primarily have the effect of displacing of practices that examiners may § .22(c)(1)—1: If an institution, low- or moderate-income residents, consider in evaluating the regardless of examination type, elects to examiners may view these loans simply innovativeness or flexibility of an have loans by its affiliate(s) considered, as home mortgage loans to middle- or institution’s lending under the lending may it elect to have only certain upper-income borrowers who happen to test applicable to large institutions? categories of loans considered? reside in a low- or moderate-income A1. In evaluating the innovativeness A1. Yes. An institution may elect to geography and weigh them accordingly or flexibility of an institution’s lending have only a particular category of its in their evaluation of the institution. practices (and the complexity and affiliate’s lending considered. The basic innovativeness of its community categories of loans are home mortgage § ll.22(b)(4) Community development development lending), examiners will loans, small business loans, small farm lending not be limited to reviewing the overall loans, community development loans, § ll.22(b)(4)—1: When evaluating variety and specific terms and and the five categories of consumer an institution’s record of community conditions of the credit products loans (motor vehicle loans, credit card

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loans, home equity loans, other secured made in its assessment area. In addition, unless the securities are booked by the loans, and other unsecured loans). the institution cannot elect to include purchasing institution as a loan. For only those low- and moderate-income example, if an institution purchases § ll.22(c)(2) Constraints on affiliate home mortgage loans made by its stock in a community development lending affiliates and not home mortgage loans corporation (‘‘CDC’’) that primarily lends § ll.22(c)(2)(i) No affiliate may claim to middle- and upper-income in low- and moderate-income areas or to a loan origination or loan purchase if individuals or areas. low- and moderate-income individuals another institution claims the same loan § ll.22(c)(2)(ii)—2: Regardless of in order to promote community origination or purchase examination type, how is this constraint development, the institution may claim applied if an institution’s affiliates are § ll.22(c)(2)(i)—1: Regardless of a pro rata share of the CDC’s loans as also insured depository institutions examination type, how is this constraint community development loans. The subject to the CRA? institution’s pro rata share is based on on affiliate lending applied? A2. Strict application of this A1. This constraint prohibits one its percentage of equity ownership in constraint against ‘‘cherry-picking’’ to the CDC. Q&A § ll.23(b)—1 provides affiliate from claiming a loan origination loans of an affiliate that is also an or purchase claimed by another affiliate. information concerning consideration of insured depository institution covered an equity or equity-type investment However, an institution can count as a by the CRA would produce the under the investment test and both the purchase a loan originated by an anomalous result that the other lending and investment tests. (Note that affiliate that the institution institution would, without its consent, in connection with an intermediate subsequently purchases, or count as an not be able to count its own loans. small institution’s CRA performance origination a loan later sold to an Because the agencies did not intend to evaluation, community development affiliate, provided the same loans are deprive an institution subject to the loans, including pro-rata shares of not sold several times to inflate their CRA of receiving consideration for its community development loans, are value for CRA purposes. For example, own lending, the agencies read this considered only in the community assume that two institutions are constraint slightly differently in cases development test.) affiliated. Bank A originates a loan and involving a group of affiliated § ll.22(d)—2: Regardless of claims it as a loan origination. Bank B institutions, some of which are subject examination type, how will examiners later purchases the loan. Bank B may to the CRA and share the same evaluate loans made by consortia or count the loan as a purchased loan. assessment area(s). In those third parties? The same institution may not count circumstances, an institution that elects A2. Loans originated or purchased by both the origination and purchase. to include all of its mortgage affiliate’s consortia in which an institution Thus, for example, if an institution home mortgage loans in its assessment participates or by third parties in which claims loans made by an affiliated area would not automatically be an institution invests will be considered mortgage company as loan originations, required to include all home mortgage only if they qualify as community the institution may not also count the loans in its assessment area of another development loans and will be loans as purchased loans if it later affiliate institution subject to the CRA. considered only under the community purchases the loans from its affiliate. However, all loans of a particular type development criterion. However, loans See also Q&As § ll.22(c)(2)(ii)—1 and made by any affiliate in the institution’s originated directly on the books of an § ll.22(c)(2)(ii)—2. assessment area(s) must either be institution or purchased by the § ll.22(c)(2)(ii) If an institution elects counted by the lending institution or by institution are considered to have been to have its supervisory agency consider another affiliate institution that is made or purchased directly by the loans within a particular lending subject to the CRA. This reading reflects institution, even if the institution category made by one or more of the the fact that a holding company may, for originated or purchased the loans as a institution’s affiliates in a particular business reasons, choose to transact result of its participation in a loan assessment area, the institution shall different aspects of its business in consortium. These loans would be elect to have the agency consider all different subsidiary institutions. considered under the lending test or loans within that lending category in However, the method by which loans community development test criteria that particular assessment area made by are allocated among the institutions for appropriate to them depending on the all of the institution’s affiliates CRA purposes must reflect actual type of loan and type of examination. business decisions about the allocation § ll.22(d)—3: In some § ll.22(c)(2)(ii)—1: Regardless of of banking activities among the circumstances, an institution may invest examination type, how is this constraint institutions and should not be designed in a third party, such as a community on affiliate lending applied? solely to enhance their CRA evaluations. development bank, that is also an A1. This constraint prohibits ‘‘cherry- insured depository institution and is picking’’ affiliate loans within any one § ll.22(d) Lending by a consortium or thus subject to CRA requirements. If the category of loans. The constraint a third party investing institution requests its requires an institution that elects to § ll.22(d)—1: Will equity and supervisory agency to consider its pro have a particular category of affiliate equity-type investments in a third party rata share of community development lending in a particular assessment area receive consideration under the lending loans made by the third party, as considered to include all loans of that test? allowed under 12 CFR ll.22(d), may type made by all of its affiliates in that A1. If an institution has made an the third party also receive particular assessment area. For example, equity or equity-type investment in a consideration for these loans? assume that an institution has several third party, community development A3. Yes, regardless of examination affiliates, including a mortgage company loans made by the third party may be type, as long as the financial institution that makes loans in the institution’s considered under the lending test. On and the third party are not affiliates. The assessment area. If the institution elects the other hand, asset-backed and debt regulations state, at 12 CFR to include the mortgage company’s securities that do not represent an ll.22(c)(2)(i), that two affiliates may home mortgage loans, it must include equity-type interest in a third party will not both claim the same loan origination all of its affiliates’ home mortgage loans not be considered under the lending test or loan purchase. However, if the

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financial institution and the third party As an initial matter, in making this § ll.23(b) Exclusion are not affiliates, the third party may determination, the agencies would § ll.23(b)—1: Even though the receive consideration for the community consider whether the purpose, mandate, regulations state that an activity that is development loans it originates, and the or function of the fund includes serving considered under the lending or service financial institution that invested in the geographies or individuals located tests cannot also be considered under third party may also receive within the institution’s assessment the investment test, may parts of an consideration for its pro rata share of the area(s) or a broader statewide or regional activity be considered under one test same community development loans area that includes the institution’s and other parts be considered under under 12 CFR ll.22(d). assessment area(s). Typically, another test? § ll.23—Investment test information about where a fund’s A1. Yes, in some instances the nature investments are expected to be made or of an activity may make it eligible for § ll.23(a) Scope of test targeted will be found in the fund’s consideration under more than one of § ll.23(a)—1: May an institution, prospectus, or other documents the performance tests. For example, regardless of examination type, receive provided by the fund prior to or at the certain investments and related support consideration under the CRA time of the institution’s investment, and provided by a large retail institution to regulations if it invests indirectly the institution, at its option, may a CDC may be evaluated under the through a fund, the purpose of which is provide such documentation in lending, investment, and service tests. community development, as that is connection with its CRA evaluation. At Under the service test, the institution defined in the CRA regulations? the institution’s option, written may receive consideration for any community development services that it A1. Yes, the direct or indirect nature documentation provided by fund provides to the CDC, such as service by of the qualified investment does not managers in connection with the an executive of the institution on the affect whether an institution will institution’s investment indicating that CDC’s board of directors. If the receive consideration under the CRA the fund will use its best efforts to institution makes an investment in the regulations because the regulations do invest in a qualifying activity that meets CDC that the CDC uses to make not distinguish between ‘‘direct’’ and the institution’s geographic community development loans, the ‘‘indirect’’ investments. Thus, an requirements also may be used for these institution may receive consideration institution’s investment in an equity purposes. Similarly, at the institution’s under the lending test for its pro-rata fund that, in turn, invests in projects option, information that a fund has share of community development loans that, for example, provide affordable explicitly earmarked its projects or made by the CDC. Alternatively, the housing to low- and moderate-income investments to its investors and their institution’s investment may be individuals, would receive specific assessment area(s) or broader considered under the investment test, consideration as a qualified investment statewide or regional areas that include assuming it is a qualified investment. In under the CRA regulations, provided the the assessment area(s) also may be used addition, an institution may elect to investment benefits one or more of the for these purposes. (If any have a part of its investment considered institution’s assessment area(s) or a documentation that has been provided under the lending test and the broader statewide or regional area(s) at the institution’s option as described remaining part considered under the that includes one or more of the above clearly indicates that the fund investment test. If the investing institution’s assessment area(s). ‘‘double-counts’’ investments, by institution opts to have a portion of its Similarly, an institution may receive earmarking the same dollars or the same investment evaluated under the lending consideration for a direct qualified portions of projects or investments in a test by claiming its pro rata share of the investment in a nonprofit organization particular geography to more than one CDC’s community development loans, that, for example, supports affordable investor, the investment may be the amount of investment considered housing for low- and moderate-income determined not to meet the geographic under the investment test will be offset individuals in the institution’s requirements of the CRA regulations.) In by that portion. Thus, the institution assessment area(s) or a broader addition, at the institution’s option, an would receive consideration under the statewide or regional area(s) that allocation method may be used to investment test for only the amount of includes the institution’s assessment permit the institution to claim a pro-rata its investment multiplied by the area(s). share of each project of the fund. percentage of the CDC’s assets that meet § ll.23(a)—2: In order to receive Nationwide funds are important the definition of a qualified investment. CRA consideration, what information sources of investments for low- and § ll.23(b)—2: If home mortgage may an institution provide that would moderate-income and underserved loans to low- and moderate-income demonstrate that an investment in a communities throughout the country borrowers have been considered under nationwide fund with a primary purpose and can be an efficient vehicle for an institution’s lending test, may the of community development will directly institutions in making qualified institution that originated or purchased or indirectly benefit one or more of the investments that help meet community them also receive consideration under institution’s assessment area(s) or a development needs. Prior to investing in the investment test if it subsequently broader statewide or regional area that such a fund, an institution should purchases mortgage-backed securities includes the institution’s assessment consider reviewing the fund’s that are primarily or exclusively backed area(s)? investment record to see if it is generally by such loans? A2. There are several ways to consistent with the institution’s A2. No. Because the institution demonstrate that the institution’s investment goals and the geographic received lending test consideration for investment in a nationwide fund meets considerations in the regulations. See the loans that underlie the securities, the geographic requirements, and the also Q&As § ll.12(h)—6 and the institution may not also receive agencies will employ appropriate § ll12(h)—7 (additional information consideration under the investment test flexibility in this regard in reviewing about recognition of investments for its purchase of the securities. Of information the institution provides that benefiting an area outside an course, an institution may receive reasonably supports this determination. institution’s assessment area(s).) investment test consideration for

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purchases of mortgage-backed securities With respect to the first criterion, delivering retail banking services, such that are backed by loans to low- and examiners will determine the dollar as ATMs, are considered only to the moderate-income individuals as long as amount of qualified investments by extent that they are effective alternatives the securities are not backed primarily relying on the figures recorded by the in providing needed services to low- or exclusively by loans that the same institution according to generally and moderate-income areas and institution originated or purchased. accepted accounting principles (GAAP). individuals. § ll.24(d)—2: How do examiners § ll.23(e) Performance criteria Although institutions may exercise a range of investment strategies, including evaluate an institution’s activities in § ll.23(e)—1: When applying the short-term investments, long-term connection with Individual four performance criteria of 12 CFR investments, investments that are Development Accounts (IDAs)? ll.23(e), may an examiner distinguish immediately funded, and investments A2. Although there is no standard among qualified investments based on with a binding, up-front commitment IDA program, IDAs typically are deposit how much of the investment actually that are funded over a period of time, accounts targeted to low- and moderate- supports the underlying community institutions making the same dollar income families that are designed to development purpose? amount of investments over the same help them accumulate savings for A1. Yes. By applying all the criteria, number of years, all other performance education or job-training, down- a qualified investment of a lower dollar criteria being equal, would receive the payment and closing costs on a new amount may be weighed more heavily same level of consideration. Examiners home, or start-up capital for a small under the investment test than a will include both new and outstanding business. Once participants have qualified investment with a higher investments in this determination. The successfully funded an IDA, their dollar amount that has fewer qualitative dollar amount of qualified investments personal IDA savings are matched by a enhancements. The criteria permit an also will include the dollar amount of public or private entity. Financial examiner to qualitatively weight certain legally binding commitments recorded institution participation in IDA investments differently or to make other by the institution according to GAAP. programs comes in a variety of forms, appropriate distinctions when The extent to which qualified including providing retail banking evaluating an institution’s record of investments receive consideration, services to IDA account holders, making qualified investments. For however, depends on how examiners providing matching dollars or operating instance, an examiner should take into evaluate the investments under the funds to an IDA program, designing or account that a targeted mortgage-backed remaining three performance criteria— implementing IDA programs, providing security that qualifies as an affordable innovativeness and complexity, consumer financial education to IDA housing issue that has only 60 percent responsiveness, and degree to which the account holders or prospective account of its face value supported by loans to investment is not routinely provided by holders, or other means. The extent of low- or moderate-income borrowers private investors. Examiners also will financial institutions’ involvement in would not provide as much affordable consider factors relevant to the IDAs and the products and services they housing for low- and moderate-income institution’s CRA performance context, offer in connection with the accounts individuals as a targeted mortgage- such as the effect of outstanding long- will vary. Thus, subject to 12 CFR backed security with 100 percent of its term qualified investments, the pay-in ll.23(b), examiners evaluate the face value supported by affordable schedule, and the amount of any cash actual services and products provided housing loans to low- and moderate- call, on the capacity of the institution to by an institution in connection with income borrowers. The examiner should make new investments. IDA programs as one or more of the describe any differential weighting (or following: community development other adjustment), and its basis in the § ll.24—Service test services, retail banking services, Performance Evaluation. See also Q&A § ll.24(d) Performance criteria—retail qualified investments, home mortgage § ll.12(t)—8 for a discussion about banking services loans, small business loans, consumer the qualitative consideration of prior loans, or community development ll period investments. § .24(d)—1: How do examiners loans. See, e.g., Q&A § ll.12(i)—3. § ll.23(e)—2: How do examiners evaluate the availability and Note that all types of institutions may evaluate an institution’s qualified effectiveness of an institution’s systems participate in IDA programs. Their IDA investment in a fund, the primary for delivering retail banking services? activities are evaluated under the purpose of which is community A1. Convenient access to full service performance criteria of the type of development, as defined in the CRA branches within a community is an examination applicable to the particular regulations? important factor in determining the institution. availability of credit and non-credit A2. When evaluating qualified § ll.24(d)(3) Availability and investments that benefit an institution’s services. Therefore, the service test performance standards place primary effectiveness of alternative systems for assessment area(s) or a broader delivering retail banking services statewide or regional area that includes emphasis on full service branches while its assessment area(s), examiners will still considering alternative systems, § ll.24(d)(3)—1: How will look at the following four performance such as automated teller machines examiners evaluate alternative systems criteria: (‘‘ATMs’’). The principal focus is on an for delivering retail banking services? (1) The dollar amount of qualified institution’s current distribution of A1. The regulation recognizes the investments; branches and its record of opening and multitude of ways in which an (2) The innovativeness or complexity closing branches, particularly branches institution can provide services, for of qualified investments; located in low- or moderate-income example, ATMs, banking by telephone (3) The responsiveness of qualified geographies or primarily serving low- or or computer, and bank-by-mail investments to credit and community moderate-income individuals. However, programs. Delivery systems other than development needs; and an institution is not required to expand branches will be considered under the (4) The degree to which the qualified its branch network or operate regulation to the extent that they are investments are not routinely provided unprofitable branches. Under the effective alternatives to branches in by private investors. service test, alternative systems for providing needed services to low- and

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moderate-income areas and individuals. needs of their communities without institution’s qualified investment in a The list of systems in the regulation is losing their exemption from the fund that invests in projects nationwide not intended to be comprehensive. definition of ‘‘bank’’ in the Bank Holding and which has a primary purpose of § ll.24(d)(3)—2: Are debit cards Company Act (the BHCA), as amended community development, as that is considered under the service test as an by the Competitive Equality Banking Act defined in the regulations? alternative delivery system? of 1987 (CEBA)? A1. If examiners find that a wholesale A2. By themselves, no. However, if A1. Although the BHCA restricts or limited purpose institution has debit cards are a part of a larger institutions known as CEBA credit card adequately addressed the needs of its combination of products, such as a banks to credit card operations, a CEBA assessment area(s), they will give comprehensive electronic banking credit card bank can engage in consideration to qualified investments, service, that allows an institution to community development activities as well as community development deliver needed services to low- and without losing its exemption under the loans and community development moderate-income areas and individuals BHCA. A CEBA credit card bank could services, by that institution nationwide. in its community, the overall delivery provide community development system that includes the debit card services and investments without In determining whether an institution feature would be considered an engaging in operations other than credit has adequately addressed the needs of alternative delivery system. card operations. For example, the bank its assessment area(s), examiners will could provide credit card counseling, or consider qualified investments that § ll.24(e) Performance criteria— the financial expertise of its executives, benefit a broader statewide or regional community development services free of charge, to community area that includes the institution’s § ll.24(e)—1: Under what development organizations. In addition, assessment area(s). conditions may an institution receive a CEBA credit card bank could make § ll.25(f) Community development qualified investments, as long as the consideration for community performance rating development services offered by investments meet the guidelines for affiliates or third parties? passive and noncontrolling investments § ll.25(f)—1: Must a wholesale or A1. At an institution’s option, the provided in the BHC Act and the limited purpose institution engage in all agencies will consider services Board’s Regulation Y. Finally, although three categories of community performed by an affiliate or by a third a CEBA credit card bank cannot make development activities (lending, party on the institution’s behalf under any loans other than credit card loans, investment, and service) to perform well the service test if the services provided under 12 CFR ll.25(d)(2) (community under the community development test? enable the institution to help meet the development test—indirect activities), the bank could elect to have part of its A1. No, a wholesale or limited credit needs of its community. Indirect purpose institution may perform well services that enhance an institution’s qualified passive and noncontrolling under the community development test ability to deliver credit products or investments in a third-party lending by engaging in one or more of these deposit services within its community consortium considered as community activities. and that can be quantified may be development lending, provided that the considered under the service test, if consortium’s loans otherwise meet the § ll.26—Small institution those services have not been considered requirements for community performance standards already under the lending or investment development lending. When assessing a test (see Q&A § ll.23(b)—1). For CEBA credit card bank’s CRA § ll.26—1: When evaluating a small example, an institution that contracts performance under the community or intermediate small institution’s with a community organization to development test, examiners will take performance, will examiners consider, provide home ownership counseling to into account the bank’s performance at the institution’s request, retail and low- and moderate-income home buyers context. In particular, examiners will community development loans as part of the institution’s mortgage consider the legal constraints imposed originated or purchased by affiliates, program may receive consideration for by the BHCA on the bank’s activities, as qualified investments made by affiliates, that indirect service under the service part of the bank’s performance context or community development services test. In contrast, donations to a in 12 CFR ll.21(b)(4). provided by affiliates? community organization that offers § ll.25(d) Indirect activities A1. Yes. However, a small institution financial services to low- or moderate- that elects to have examiners consider income individuals may be considered § ll.25(d)—1: How are investments in third party community development affiliate activities must maintain under the investment test, but would sufficient information that the not also be eligible for consideration organizations considered under the community development test? examiners may evaluate these activities under the service test. Services under the appropriate performance performed by an affiliate will be treated A1. Similar to the lending test for retail institutions, investments in third criteria and ensure that the activities are the same as affiliate loans and not claimed by another institution. The investments made in the institution’s party community development organizations may be considered as constraints applicable to affiliate assessment area and may be considered activities claimed by large institutions if the service is not claimed by any other qualified investments or as community development loans or both (provided also apply to small and intermediate institution. See 12 CFR ll.22(c) and small institutions. See Q&As addressing ll.23(c). there is no double counting), at the institution’s option, as described above 12 CFR ll.22(c)(2) and related § ll.25 Community development test in the discussion regarding 12 CFR guidance provided to large institutions for wholesale or limited purpose ll.22(d) and ll.23(b). regarding affiliate activities. Examiners institutions will not include affiliate lending in § ll.25(e) Benefit to assessment calculating the percentage of loans and, § ll.25(a) Scope of test area(s) as appropriate, other lending-related § ll.25(a)—1: How can certain § ll.25(e)—1: How do examiners activities located in an institution’s credit card banks help to meet the credit evaluate a wholesale or limited purpose assessment area.

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§ ll.26(a) Performance criteria considered, ‘‘as appropriate,’’ under the Performance Report (UBPR/UTPR) § ll.26(a)(2) Intermediate small various small institution performance determines the ratio. It is calculated by institutions criteria? dividing the institution’s net loans and A2. ‘‘As appropriate’’ means that leases by its total deposits. The ratio is § ll.26(a)(2)—1: When is an lending-related activities will be found in the Liquidity and Investment institution examined as an intermediate considered when it is necessary to Portfolio section of the UBPR and small institution? determine whether an institution meets UTPR. Examiners will use this ratio to A1. When a small institution has met or exceeds the standards for a calculate an average since the last the intermediate small institution asset satisfactory rating. Examiners will also examination by adding the quarterly threshold delineated in 12 CFR consider other lending-related activities loan-to-deposit ratios and dividing the ll.12(u)(1) for two consecutive at an institution’s request, provided they total by the number of quarters. calendar year-ends, the institution may have not also been considered under the § ll.26(b)(1)—2: How is the be examined under the intermediate community development test applicable ‘‘reasonableness’’ of a loan-to-deposit small institution examination to intermediate small institutions. ratio evaluated? procedures. The regulation does not § ll.26(b)—3: When evaluating a A2. No specific ratio is reasonable in specify an additional lag period between small institution’s lending performance, every circumstance, and each small becoming an intermediate small will examiners consider, at the institution’s ratio is evaluated in light of institution and being examined as an institution’s request, community information from the performance intermediate small institution, as it does development loans originated or context, including the institution’s for large institutions, because an purchased by a consortium in which the capacity to lend, demographic and intermediate small institution is not institution participates or by a third economic factors present in the subject to CRA data collection and party in which the institution has assessment area, and the lending reporting requirements. Institutions invested? opportunities available in the should contact their primary regulator A3. Yes. However, a small institution assessment area(s). If a small for information on examination that elects to have examiners consider institution’s loan-to-deposit ratio schedules. community development loans appears unreasonable after considering this information, lending performance § ll.26(b) Lending test originated or purchased by a consortium or third party must maintain sufficient may still be satisfactory under this § ll.26(b)—1: May examiners information on its share of the criterion taking into consideration the consider, under one or more of the community development loans so that number and the dollar volume of loans performance criteria of the small the examiners may evaluate these loans sold to the secondary market or the institution performance standards, under the small institution performance number and amount and innovativeness lending-related activities, such as criteria. or complexity of community community development loans and § ll.26(b)—4: Under the small development loans and lending-related lending-related qualified investments, institution lending test performance qualified investments. when evaluating a small institution? standards, will examiners consider both § ll.26(b)(1)—3: If an institution A1. Yes. Examiners can consider loan originations and purchases? makes a large number of loans off-shore, ‘‘lending-related activities,’’ including A4. Yes, consistent with the other will examiners segregate the domestic community development loans and assessment methods in the regulation, loan-to-deposit ratio from the foreign lending-related qualified investments, examiners will consider both loans loan-to-deposit ratio? when evaluating the first four originated and purchased by the A3. No. Examiners will look at the performance criteria of the small institution. Likewise, examiners may institution’s net loan-to-deposit ratio for institution performance test. Although consider any other loan data the small the whole institution, without any lending-related activities are specifically institution chooses to provide, adjustments. mentioned in the regulation in including data on loans outstanding, ll connection with only the first three § .26(b)(2) Percentage of lending commitments, and letters of credit. within assessment area(s) criteria (i.e., loan-to-deposit ratio, § ll.26(b)—5: Under the small percentage of loans in the institution’s institution lending test performance § ll.26(b)(2)—1: Must a small assessment area, and lending to standards, how will qualified institution have a majority of its lending borrowers of different incomes and investments be considered for purposes in its assessment area(s) to receive a businesses of different sizes), examiners of determining whether a small satisfactory performance rating? can also consider these activities when institution receives a satisfactory CRA A1. No. The percentage of loans and, they evaluate the fourth criteria— rating? as appropriate, other lending-related geographic distribution of the A5. The small institution lending test activities located in the institution’s institution’s loans. performance standards focus on lending assessment area(s) is but one of the Although lending-related community and other lending-related activities. performance criteria upon which small development activities are evaluated Therefore, examiners will consider only institutions are evaluated. If the under the community development test lending-related qualified investments percentage of loans and other lending applicable to intermediate small for the purpose of determining whether related activities in an institution’s institutions, these activities may also a small institution that is not an assessment area(s) is less than a augment the loan-to-deposit ratio intermediate small institution receives a majority, then the institution does not analysis (12 CFR ll.26(b)(1)) and the satisfactory CRA rating. meet the standards for satisfactory percentage of loans in the intermediate § ll.26(b)(1) Loan-to-deposit ratio performance only under this criterion. small institution’s assessment area § ll.26(b)(1)—1: How is the loan-to- The effect on the overall performance analysis (12 CFR ll.26(b)(2)), if deposit ratio calculated? rating of the institution, however, is appropriate. A1. A small institution’s loan-to- considered in light of the performance § ll.26(b)—2: What is meant by ‘‘as deposit ratio is calculated in the same context, including information appropriate’’ when referring to the fact manner that the Uniform Bank regarding economic conditions; loan that lending-related activities will be Performance Report/Uniform Thrift demand; the institution’s size, financial

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condition, business strategies, and An intermediate small institution has community development needs, and branching network; and other aspects of the flexibility to allocate its resources how the institution’s activities respond the institution’s lending record. among community development loans, to those needs. qualified investments, and community An evaluation of the degree of § ll.26(b)(3) & (4) Distribution of development services in amounts that it responsiveness considers the following lending within assessment area(s) by reasonably determines are most factors: the volume, mix, and qualitative borrower income and geographic responsive to community development aspects of community development location needs and opportunities. Appropriate loans, qualified investments, and § ll.26(b)(3) & (4)—1: How will a levels of each of these activities would community development services. small institution’s performance be depend on the capacity and business Consideration of the qualitative aspects assessed under these lending strategy of the institution, community of performance recognizes that distribution criteria? needs, and number and types of community development activities A1. Distribution of loans, like other opportunities for community sometimes require special expertise or small institution performance criteria, is development. effort on the part of the institution or provide a benefit to the community that considered in light of the performance ll § .26(c)(3) Community development would not otherwise be made available. context. For example, a small institution services is not required to lend evenly (However, ‘‘innovativeness’’ and ll throughout its assessment area(s) or in § .26(c)(3)—1: What will ‘‘complexity,’’ factors examiners examiners consider when evaluating the any particular geography. However, in consider when evaluating a large provision of community development order to meet the standards for institution under the lending, services by an intermediate small satisfactory performance under this investment, and service tests, are not institution? criterion, conspicuous gaps in a small criteria in the intermediate small A1. Examiners will consider not only institutions’ community development institution’s loan distribution must be the types of services provided to benefit adequately explained by performance test.) In some cases, a smaller loan may low- and moderate-income individuals, have more qualitative benefit to a context factors such as lending such as low-cost checking accounts and opportunities in the institution’s community than a larger loan. Activities low-cost remittance services, but also are considered particularly responsive assessment area(s), the institution’s the provision and availability of services product offerings and business strategy, to community development needs if to low- and moderate-income they benefit low- and moderate-income and institutional capacity and individuals, including through branches individuals in low- or moderate-income constraints. In addition, it may be and other facilities located in low- and geographies, designated disaster areas, impracticable to review the geographic moderate-income areas. Generally, the or distressed or underserved distribution of the lending of an presence of branches located in low- nonmetropolitan middle-income institution with very few and moderate-income geographies will geographies. Activities are also demographically distinct geographies help to demonstrate the availability of considered particularly responsive to within an assessment area. If sufficient banking services to low- and moderate- community development needs if they information on the income levels of income individuals. benefit low- or moderate-income individual borrowers or the revenues or geographies. sizes of business borrowers is not § ll.26(c)(4) Responsiveness to available, examiners may use loan size community development needs § ll.26(d) Performance rating as a proxy for estimating borrower § ll.26(c)(4)—1: When evaluating § ll.26(d)—1: How can a small characteristics, where appropriate. an intermediate small institution’s institution that is not an intermediate § ll.26(c) Intermediate small community development record, what small institution achieve an institution community development test will examiners consider when reviewing ‘‘outstanding’’ performance rating? the responsiveness of community A1. A small institution that is not an § ll.26(c)—1: How will the development lending, qualified intermediate small institution that community development test be applied investments, and community meets each of the standards in the flexibly for intermediate small development services to the community lending test for a ‘‘satisfactory’’ rating institutions? development needs of the area? and exceeds some or all of those A1. Generally, intermediate small A1. When evaluating an intermediate standards may warrant an ‘‘outstanding’’ institutions engage in a combination of small institution’s community performance rating. In assessing community development loans, development record, examiners will performance at the ‘‘outstanding’’ level, qualified investments, and community consider not only quantitative measures the agencies consider the extent to development services. An institution of performance, such as the number and which the institution exceeds each of may not simply ignore one or more of amount of community development the performance standards and, at the these categories of community loans, qualified investments, and institution’s option, its performance in development, nor do the regulations community development services, but making qualified investments and prescribe a required threshold for also qualitative aspects of performance. providing services that enhance credit community development loans, In particular, examiners will evaluate availability in its assessment area(s). In qualified investments, and community the responsiveness of the institution’s some cases, a small institution may development services. Instead, based on community development activities in qualify for an ‘‘outstanding’’ the institution’s assessment of light of the institution’s capacity, performance rating solely on the basis of community development needs in its business strategy, the needs of the its lending activities, but only if its assessment area(s), it may engage in community, and the number and types performance materially exceeds the different categories of community of opportunities for each type of standards for a ‘‘satisfactory’’ rating, development activities that are community development activity (its particularly with respect to the responsive to those needs and performance context). Examiners also penetration of borrowers at all income consistent with the institution’s will consider the results of any levels and the dispersion of loans capacity. assessment by the institution of throughout the geographies in its

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assessment area(s) that display income § ll.27(f) Plan content performance under the quantitative variation. An institution with a high § ll.27(f)(1) Measurable goals criteria of the regulations, resulting in a loan-to-deposit ratio and a high higher level of performance rating. See percentage of loans in its assessment § ll.27(f)(1)—1: How should annual also Q&A § ll.26(c)(4)—1 for a area(s), but with only a reasonable measurable goals be specified in a discussion about responsiveness to penetration of borrowers at all income strategic plan? community development needs under levels or a reasonable dispersion of A1. Annual measurable goals (e.g., the community development test loans throughout geographies of number of loans, dollar amount, applicable to intermediate small differing income levels in its assessment geographic location of activity, and institutions. benefit to low- and moderate-income area(s), generally will not be rated § ll.28(a) Ratings in general ‘‘outstanding’’ based only on its lending areas or individuals) must be stated with sufficient specificity to permit the performance. However, the institution’s § ll.28(a)—1: How are institutions public and the agencies to quantify what performance in making qualified with domestic branches in more than performance will be expected. However, investments and its performance in one state assigned a rating? institutions are provided flexibility in providing branches and other services A1. The evaluation of an institution specifying goals. For example, an and delivery systems that enhance that maintains domestic branches in institution may provide ranges of credit availability in its assessment more than one state (‘‘multistate lending amounts in different categories ’’ area(s) may augment the institution’s institution ) will include a written of loans. Measurable goals may also be satisfactory rating to the extent that it evaluation and rating of its CRA record linked to funding requirements of may be rated ‘‘outstanding.’’ of performance as a whole and in each certain public programs or indexed to state in which it has a domestic branch. ll § .26(d)—2: Will a small other external factors as long as these The written evaluation will contain a institution’s qualified investments, mechanisms provide a quantifiable separate presentation on a multistate community development loans, and standard. institution’s performance for each community development services be § ll.27(g) Plan approval metropolitan statistical area and the considered if they do not directly benefit nonmetropolitan area within each state, its assessment area(s)? § ll.27(g)(2) Public participation if it maintains one or more domestic A2. Yes. These activities are eligible § ll.27(g)(2)—1: How will the public branch offices in these areas. This for consideration if they benefit a receive notice of a proposed strategic separate presentation will contain broader statewide or regional area that plan? conclusions, supported by facts and includes a small institution’s A1. An institution submitting a data, on performance under the assessment area(s), as discussed more strategic plan for approval by the performance tests and standards in the fully in Q&As § ll.12(h)—6 and agencies is required to solicit public regulation. The evaluation of a § ll.12(h)—7. comment on the plan for a period of multistate institution that maintains a § ll.27—Strategic plan thirty (30) days after publishing notice domestic branch in two or more states of the plan at least once in a newspaper in a multistate metropolitan area will § ll.27(c) Plans in general of general circulation. The notice should include a written evaluation (containing § ll.27(c)—1: To what extent will be sufficiently prominent to attract the same information described above) the agencies provide guidance to an public attention and should make clear and rating of its CRA record of institution during the development of its that public comment is desired. An performance in the multistate strategic plan? institution may, in addition, provide metropolitan area. In such cases, the notice to the public in any other manner A1. An institution will have an statewide evaluation and rating will be it chooses. opportunity to consult with and provide adjusted to reflect performance in the information to the agencies on a § ll.28—Assigned ratings portion of the state not within the proposed strategic plan. Through this multistate metropolitan statistical area. § ll.28—1: Are innovative lending § ll.28(a)—2: How are institutions process, an institution is provided practices, innovative or complex that operate within only a single state guidance on procedures and on the qualified investments, and innovative assigned a rating? information necessary to ensure a community development services A2. An institution that operates complete submission. For example, the required for a ‘‘satisfactory’’ or within only a single state (‘‘single-state agencies will provide guidance on ‘‘outstanding’’ CRA rating? institution’’) will be assigned a rating of whether the level of detail as set out in A1. No. The performance criterion of its CRA record based on its performance the proposed plan would be sufficient to ‘‘innovativeness’’ applies only under the within that state. In assigning this permit agency evaluation of the plan. lending, investment, and service tests rating, the agencies will separately However, the agencies’ guidance during applicable to large institutions and the present a single-state institution’s plan development and, particularly, community development test applicable performance for each metropolitan area prior to the public comment period, will to wholesale and limited purpose in which the institution maintains one not include commenting on the merits institutions. Moreover, even under these or more domestic branch offices. This of a proposed strategic plan or on the tests, the lack of innovative lending separate presentation will contain adequacy of measurable goals. practices, innovative or complex conclusions, supported by facts and § ll.27(c)—2: How will a joint qualified investments, or innovative data, on the single-state institution’s strategic plan be reviewed if the community development services alone performance under the performance affiliates have different primary Federal will not result in a ‘‘needs to improve’’ tests and standards in the regulation. supervisors? CRA rating. However, under these tests, § ll.28(a)—3: How do the agencies A2. The agencies will coordinate the use of innovative lending practices, weight performance under the lending, review of and action on the joint plan. innovative or complex qualified investment, and service tests for large Each agency will evaluate the investments, and innovative community retail institutions? measurable goals for those affiliates for development services may augment the A3. A rating of ‘‘outstanding,’’ ‘‘high which it is the primary regulator. consideration given to an institution’s satisfactory,’’ ‘‘low satisfactory,’’ ‘‘needs

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to improve,’’ or ‘‘substantial rating as described in the first matrix set second matrix set forth below, which noncompliance,’’ based on a judgment forth below. A large retail institution’s incorporates the rating principles in the supported by facts and data, will be overall rating under the lending, regulation. assigned under each performance test. investment and service tests will then Points will then be assigned to each be calculated in accordance with the

POINTS ASSIGNED FOR PERFORMANCE UNDER LENDING, INVESTMENT AND SERVICE TESTS

Lending Service Investment

Outstanding ...... 12 6 6 High Satisfactory ...... 9 4 4 Low Satisfactory ...... 6 3 3 Needs to Improve ...... 3 1 1 Substantial Noncompliance ...... 0 0 0

COMPOSITE RATING POINT REQUIREMENTS [Add points from three tests]

Rating Total points

Outstanding ...... 20 or over. Satisfactory ...... 11 through 19. Needs to Improve ...... 5 through 10. Substantial Noncompliance ...... 0 through 4.

Note: There is one exception to the measuring the benefits received by a Examiners will determine the effect of Composite Rating matrix. An institution community. An institution’s evidence of illegal credit practices as set may not receive a rating of ‘‘satisfactory’’ performance under these qualitative forth in examination procedures and unless it receives at least ‘‘low criteria may augment the consideration § ll.28(c) of the regulation. satisfactory’’ on the lending test. given to an institution’s performance Violations of other provisions of the Therefore, the total points are capped at under the quantitative criteria of the consumer protection laws generally will three times the lending test score. regulations, resulting in a higher level of not adversely affect an institution’s CRA performance and rating. § ll.28(b) Lending, investment, and rating, but may warrant the inclusion of service test ratings § ll.28(c) Effect of evidence of comments in an institution’s performance evaluation. These § ll.28(b)—1: How is performance discriminatory or other illegal credit practices comments may address the institution’s under the quantitative and qualitative policies, procedures, training programs, performance criteria weighed when § ll.28(c)—1: What is meant by and internal assessment efforts. examiners assign a CRA rating? ‘‘discriminatory or other illegal credit A1. The lending, investment, and practices’’? § ll.29—Effect of CRA performance service tests each contain a number of A1. An institution engages in on applications performance criteria designed to discriminatory credit practices if it § ll.29(a) CRA performance measure whether an institution is discourages or discriminates against effectively helping to meet the credit credit applicants or borrowers on a § ll.29(a)—1: What weight is given needs of its entire community, prohibited basis, in violation, for to an institution’s CRA performance including low- and moderate-income example, of the Fair Housing Act or the examination in reviewing an neighborhoods, in a safe and sound Equal Credit Opportunity Act (as application? manner. Some of these performance implemented by Regulation B). A1. In reviewing applications in criteria are quantitative, such as number Examples of other illegal credit which CRA performance is a relevant and amount, and others, such as the use practices inconsistent with helping to factor, information from a CRA of innovative or flexible lending meet community credit needs include examination of the institution is a practices, the innovativeness or violations of: particularly important consideration. complexity of qualified investments, • The Truth in Lending Act regarding The examination is a detailed and the innovativeness and rescission of certain mortgage evaluation of the institution’s CRA responsiveness of community transactions and regarding disclosures performance by its Federal supervisory development services, are qualitative. and certain loan term restrictions in agency. In this light, an examination is The performance criteria that deal with connection with credit transactions that an important, and often controlling, these qualitative aspects of performance are subject to the Home Ownership and factor in the consideration of an recognize that these loans, qualified Equity Protection Act; institution’s record. In some cases, investments, and community • The Real Estate Settlement however, the examination may not be development services sometimes require Procedures Act regarding the giving and recent, or a specific issue raised in the special expertise and effort on the part accepting of referral fees, unearned fees, application process, such as progress in of the institution and provide a benefit or kickbacks in connection with certain addressing weaknesses noted by to the community that would not mortgage transactions; and examiners, progress in implementing otherwise be possible. As such, the • The Federal Trade Commission Act commitments previously made to the agencies consider the qualitative aspects regarding unfair or deceptive acts or reviewing agency, or a supported of an institution’s activities when practices. allegation from a commenter, is relevant

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to CRA performance under the A1. The rule focuses on the districts political subdivisions for CRA regulation and was not addressed in the distribution and level of an institution’s purposes? examination. In these circumstances, lending, investments, and services A2. No. However, an institution that the applicant should present sufficient rather than on how and why an determines that it predominantly serves information to supplement its record of institution delineated its assessment an area that is smaller than a city, town, performance and to respond to the area(s) in a particular manner. or other political subdivision may substantive issues raised in the Therefore, the agencies will not evaluate delineate as its assessment area the application proceeding. an institution’s delineation of its larger political subdivision and then, in § ll.29(a)—2: What consideration is assessment area(s) as a separate accordance with 12 CFR ll.41(d), given to an institution’s commitments performance criterion. Rather, the adjust the boundaries of the assessment for future action in reviewing an agencies will only review whether the area to include only the portion of the application by those agencies that assessment area delineated by the political subdivision that it reasonably consider such commitments? institution complies with the limitations can be expected to serve. The smaller A2. Commitments for future action set forth in the regulations at area that the institution delineates must are not viewed as part of the CRA record § ll.41(e). consist of entire geographies, may not of performance. In general, institutions § ll.41(a)—2: If an institution elects reflect illegal discrimination, and may cannot use commitments made in the to have the agencies consider affiliate not arbitrarily exclude low- or applications process to overcome a lending, will this decision affect the moderate-income geographies. seriously deficient record of CRA institution’s assessment area(s)? ll performance. However, commitments § .41(d) Adjustments to geographic A2. If an institution elects to have the area(s) for improvements in an institution’s lending activities of its affiliates ll performance may be appropriate to considered in the evaluation of the § .41(d)—1: When may an address specific weaknesses in an institution’s lending, the geographies in institution adjust the boundaries of an otherwise satisfactory record or to which the affiliate lends do not affect assessment area to include only a address CRA performance when a the institution’s delineation of portion of a political subdivision? A1. Institutions must include whole financially troubled institution is being assessment area(s). geographies (i.e., census tracts) in their acquired. § ll.41(a)—3: Can a financial assessment areas and generally should institution identify a specific racial or § ll.29(b) Interested parties include entire political subdivisions. ethnic group rather than a geographic § ll.29(b)—1: What consideration is Because census tracts are the common area as its assessment area? given to comments from interested geographic areas used consistently A3. No, assessment areas must be parties in reviewing an application? nationwide for data collection, the A1. Materials relating to CRA based on geography. The only exception agencies require that assessment areas performance received during the to the requirement to delineate an be made up of whole geographies. If application process can provide assessment area based on geography is including an entire political subdivision valuable information. Written that an institution, the business of would create an area that is larger than comments, which may express either which predominantly consists of the area the institution can reasonably support for or opposition to the serving the needs of military personnel be expected to serve, an institution may, application, are made a part of the or their dependents who are not located but is not required to, adjust the record in accordance with the agencies’ within a defined geographic area, may boundaries of its assessment area to procedures, and are carefully delineate its entire deposit customer include only portions of the political considered in making the agencies’ base as its assessment area. subdivision. For example, this decisions. Comments should be § ll.41(c) Geographic area(s) for adjustment is appropriate if the supported by facts about the applicant’s institutions other than wholesale or assessment area would otherwise be performance and should be as specific limited purpose institutions extremely large, of unusual as possible in explaining the basis for configuration, or divided by significant ll supporting or opposing the application. § .41(c)(1) Generally consist of one geographic barriers (such as a river, These comments must be submitted or more MSAs or metropolitan divisions mountain, or major highway system). within the time limits provided under or one or more contiguous political When adjusting the boundaries of their the agencies’ procedures. subdivisions assessment areas, institutions must not § ll.29(b)—2: Is an institution § ll.41(c)(1)—1: Besides cities, arbitrarily exclude low- or moderate- required to enter into agreements with towns, and counties, what other units of income geographies or set boundaries private parties? local government are political that reflect illegal discrimination. A2. No. Although communications subdivisions for CRA purposes? between an institution and members of § ll.41(e) Limitations on delineation A1. Townships and Indian of an assessment area its community may provide a valuable reservations are political subdivisions method for the institution to assess how for CRA purposes. Institutions should § ll.41(e)(3) May not arbitrarily best to address the credit needs of the be aware that the boundaries of exclude low- or moderate-income community, the CRA does not require townships and Indian reservations may geographies an institution to enter into agreements not be consistent with the boundaries of § ll.41(e)(3)—1: How will with private parties. The agencies do the census tracts (‘‘geographies’’) in the examiners determine whether an not monitor compliance with nor area. In these cases, institutions must institution has arbitrarily excluded low- enforce these agreements. ensure that their assessment area(s) or moderate-income geographies? § ll.41—Assessment area delineation consists only of whole geographies by A1. Examiners will make this adding any portions of the geographies determination on a case-by-case basis § ll.41(a) In general that lie outside the political subdivision after considering the facts relevant to § ll.41(a)—1: How do the agencies to the delineated assessment area(s). the institution’s assessment area evaluate ‘‘assessment areas’’ under the § ll.41(c)(1)—2: Are wards, school delineation. Information that examiners CRA regulations? districts, voting districts, and water will consider may include:

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• Income levels in the institution’s § ll.41(e)(4)—2: May an institution § ll.42—2: Should an institution assessment area(s) and surrounding delineate one assessment area that develop its own program for data geographies; consists of an MSA and two large collection, or will the regulators require • Locations of branches and deposit- counties that abut the MSA but are not a certain format? taking ATMs; adjacent to each other? A2. An institution may use the free • Loan distribution in the A2. As a general rule, an institution’s software that is provided by the FFIEC institution’s assessment area(s) and assessment area should not extend to reporting institutions for data surrounding geographies; substantially beyond the boundary of an collection and reporting or develop its • The institution’s size; MSA. Therefore, the MSA would be a own program. Those institutions that • The institution’s financial separate assessment area, and because develop their own programs may create condition; and the two abutting counties are not a data submission using the File • The business strategy, corporate adjacent to each other and, in this Specifications and Edit Validation Rules structure, and product offerings of the example, extend substantially beyond that have been set forth to assist with institution. the boundary of the MSA, the electronic data submissions. For institution would delineate each county information about specific electronic ll § .41(e)(4) May not extend as a separate assessment area, assuming formatting procedures, contact the CRA substantially beyond an MSA boundary branches or deposit-taking ATMs are Assistance Line at (202) 872–7584 or or beyond a state boundary unless located in each county and the MSA. click on ‘‘How to File’’ at http:// located in a multistate MSA So, in this example, there would be www.ffiec.gov/cra. ll § ll.41(e)(4)—1: What are the three assessment areas. However, if the § .42—3: How should an maximum limits on the size of an MSA and the two counties were in the institution report data on lines of credit? A3. Institutions must collect and assessment area? same CSA, then the institution could report data on lines of credit in the same A1. An institution may not delineate delineate only one assessment area way that they provide data on loan an assessment area extending including them all. But, the institution’s originations. Lines of credit are substantially across the boundaries of an CRA performance in the MSAs and the considered originated at the time the MSA unless the MSA is in a combined non-MSA counties in that assessment line is approved or increased; and an statistical area (CSA)). Although more area would be evaluated using separate increase is considered a new than one MSA in a CSA may be median family incomes and other origination. Generally, the full amount delineated as a single assessment area, relevant information at the MSA and of the credit line is the amount that is an institution’s CRA performance in state, non-MSA level, rather than at the considered originated. In the case of an individual MSAs in those assessment CSA level. increase to an existing line, the amount areas will be evaluated using separate § ll.42—Data collection, reporting, of the increase is the amount that is median family incomes and other and disclosure considered originated and that amount relevant information at the MSA level should be reported. However, consistent rather than at the CSA level. § ll.42—1: When must an with the Call Report and TFR institution collect and report data under An assessment area also may not instructions, institutions would not the CRA regulations? extend substantially across state report an increase to a small business or A1. All institutions except small boundaries unless the assessment area is small farm line of credit if the increase institutions are subject to data collection located in a multistate MSA. An would cause the total line of credit to and reporting requirements. (‘‘Small institution may not delineate a whole exceed $1 million, in the case of a small institution’’ is defined in the agencies’ state as its assessment area unless the business line, or $500,000, in the case CRA regulations at § ll.12(u).) entire state is contained within an MSA. of a small farm line. Of course, Examples describing the data collection These limitations apply to wholesale institutions may provide information requirements of institutions, in and limited purpose institutions as well about such line increases to examiners particular those that have just surpassed as other institutions. as ‘‘other loan data.’’ An institution must delineate separate the asset-size threshold of a small § ll.42—4: Should renewals of lines assessment areas for the areas inside institution, may be found on the FFIEC of credit be collected and/or reported? and outside an MSA if the area served Web site at http://www.ffiec.gov/cra. All A4. Renewals of lines of credit for by the institution’s branches outside the institutions that are subject to the data small business, small farm, consumer, MSA extends substantially beyond the collection and reporting requirements or community development purposes MSA boundary. Similarly, the must report the data for a calendar year should be collected and reported, if institution must delineate separate by March 1 of the subsequent year. applicable, in the same manner as assessment areas for the areas inside The Board of Governors of the Federal renewals of small business or small farm and outside of a state if the institution’s Reserve System processes the reports for loans. See Q&A § ll.42(a)—5. branches extend substantially beyond all of the primary regulators. Data may Institutions that are HMDA reporters the boundary of one state (unless the be submitted on diskette, CD–ROM, or continue to collect and report home assessment area is located in a via Internet e-mail. CRA respondents are equity lines of credit at their option in multistate MSA). In addition, the encouraged to send their data via the accordance with the requirements of 12 institution should also delineate Internet. E-mail a properly encrypted CFR part 203. separate assessment areas if it has CRA file (using the FFIEC software only § ll.42—5: When should merging branches in areas within the same state Internet e-mail export feature) to the institutions collect data? that are widely separate and not at all following e-mail address: A5. Three scenarios of data collection contiguous. For example, an institution [email protected]. Please mail diskette or responsibilities for the calendar year of that has its main office in New York CD–ROM submissions to: Board of a merger and subsequent data reporting City and a branch in Buffalo, New York, Governors of the Federal Reserve responsibilities are described below. and each office serves only the System, Attention: CRA Processing, • Two institutions are exempt from immediate areas around it, should 20th & Constitution Avenue, NW., MS CRA collection and reporting delineate two separate assessment areas. N502, Washington, DC 20551–0001. requirements because of asset size. The

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institutions merge. No data collection is they capture in the Call Report, farm CRA data collection and reporting, required for the year in which the Schedule RC–C, Part II, and in the TFR, it is not necessary to distinguish merger takes place, regardless of the Schedule SB. Small business loans are between the two.) When reporting small resulting asset size. Data collection defined as those whose original business and small farm data, however, would begin after two consecutive years amounts are $1 million or less and that an institution may only report one in which the combined institution had were reported as either ‘‘Loans secured origination (including a renewal or year-end assets at least equal to the by nonfarm or nonresidential real refinancing treated as an origination) small institution asset-size threshold estate’’ or ‘‘Commercial and industrial per loan per year, unless an increase in amount described in 12 CFR loans’’ in Part I of the Call Report or the loan amount is granted. However, a ll.12(u)(1). TFR. demand loan that is merely reviewed • Institution A, an institution § ll.42(a)—2: For loans defined as annually is not reported as a renewal required to collect and report the data, small business loans, what information because the term of the loan has not and Institution B, an exempt institution, should be collected and maintained? been extended. merge. Institution A is the surviving A2. Institutions that are not exempt If an institution increases the amount institution. For the year of the merger, from data collection and reporting are of a small business or small farm loan data collection is required for Institution required to collect and maintain, in a when it extends the term of the loan, it A’s transactions. Data collection is standardized, machine-readable format, should always report the amount of the optional for the transactions of the information on each small business loan increase as a small business or small previously exempt institution. For the originated or purchased for each farm loan origination. The institution following year, all transactions of the calendar year: should report only the amount of the surviving institution must be collected • A unique number or alpha-numeric increase if the original or remaining and reported. symbol that can be used to identify the amount of the loan has already been • Two institutions that each are relevant loan file; reported one time that year. For required to collect and report the data • The loan amount at origination; example, a financial institution makes a merge. Data collection is required for • The loan location; and term loan for $25,000; principal the entire year of the merger and for • An indicator whether the loan was payments have resulted in a present subsequent years so long as the to a business with gross annual outstanding balance of $15,000. In the surviving institution is not exempt. The revenues of $1 million or less. next year, the customer requests an surviving institution may file either a The location of the loan must be additional $5,000, which is approved, consolidated submission or separate maintained by census tract. In addition, and a new note is written for $20,000. submissions for the year of the merger supplemental information contained in In this example, the institution should but must file a consolidated report for the file specifications includes a date report both the $5,000 increase and the subsequent years. associated with the origination or renewal or refinancing of the $15,000 as § ll.42—6: Can small institutions purchase and whether a loan was originations for that year. These two get a copy of the data collection originated or purchased by an affiliate. originations may be reported together as software even though they are not The same requirements apply to small a single origination of $20,000. required to collect or report data? farm loans. § ll.42(a)—6: Does a loan to the A6. Yes. Any institution that is § ll.42(a)—3: Will farm loans need ‘‘fishing industry’’ come under the interested in receiving a copy of the to be segregated from business loans? definition of a small farm loan? software may download it from the A3. Yes. A6. Yes. Instructions for Part I of the FFIEC Web site at http://www.ffiec.gov/ § ll.42(a)—4: Should institutions Call Report and Schedule SB of the TFR cra. For assistance, institutions may call collect and report data on all include loans ‘‘made for the purpose of the CRA Assistance Line at (202) 872– agricultural loans of $500,000 or less at financing fisheries and forestries, 7584 or send an e-mail to origination? including loans to commercial [email protected]. A4. Institutions are to report those fishermen’’ as a component of the § ll.42—7: If a small institution is farm loans that they capture in the Call definition for ‘‘Loans to finance designated a wholesale or limited Report, Schedule RC–C, Part II and agricultural production and other loans purpose institution, must it collect data Schedule SB of the TFR. Small farm to farmers.’’ Part II of Schedule RC–C of that it would not otherwise be required loans are defined as those whose the Call Report and Schedule SB of the to collect because it is a small original amounts are $500,000 or less TFR, which serve as the basis of the institution? and were reported as either ‘‘Loans to definition for small business and small A7. No. However, small institutions finance agricultural production and farm loans in the regulation, capture that are designated as wholesale or other loans to farmers’’ or ‘‘Loans both ‘‘Loans to finance agricultural limited purpose institutions must be secured by farmland’’ in Part I of the production and other loans to farmers’’ prepared to identify those loans, Call Report or TFR. and ‘‘Loans secured by farmland.’’ investments, and services to be § ll.42(a)—5: Should institutions § ll.42(a)—7: How should an evaluated under the community collect and report data about small institution report a home equity line of development test. business and small farm loans that are credit, part of which is for home refinanced or renewed? improvement purposes and part of § ll.42(a) Loan information required A5. An institution should collect which is for small business purposes? to be collected and maintained information about small business and A7. When an institution originates a § ll.42(a)—1: Must institutions small farm loans that it refinances or home equity line of credit that is for collect and report data on all renews as loan originations. (A both home improvement and small commercial loans of $1 million or less refinancing generally occurs when the business purposes, the institution has at origination? existing loan obligation or note is the option of reporting the portion of the A1. No. Institutions that are not satisfied and a new note is written, home equity line that is for home exempt from data collection and while a renewal refers to an extension improvement purposes as a home reporting are required to collect and of the term of a loan. However, for improvement loan under HMDA. report only those commercial loans that purposes of small business and small Examiners would consider that portion

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of the line when they evaluate the post office box number or a rural route § ll.42(a)(2)—2: How should an institution’s home mortgage lending. and box number? institution collect data about multiple When an institution refinances a home A10. Prudent banking practices and loan originations to the same business? equity line of credit into another home Bank Secrecy Act regulations dictate A2. If an institution makes multiple equity line of credit, HMDA reporting that institutions know the location of originations to the same business, the continues to be optional. If the their customers and loan collateral. loans should be collected and reported institution opts to report the refinanced Further, Bank Secrecy Act regulations as separate originations rather than line, the entire amount of the line would specifically state that a post office box combined and reported as they are on be reported as a refinancing and is not an acceptable address. Therefore, the Call Report or TFR, which reflect examiners will consider the entire institutions typically will know the loans outstanding, rather than refinanced line when they evaluate the actual location of their borrowers or originations. However, if institutions institution’s home mortgage lending. loan collateral beyond an address make multiple originations to the same If an institution that has originated a consisting only of a post office box. business solely to inflate artificially the home equity line of credit for both home number or volume of loans evaluated for Many borrowers have street addresses improvement and small business CRA lending performance, the agencies in addition to rural route and box purposes (or if an institution that has may combine these loans for purposes numbers. Institutions should ask their refinanced such a line into another line) of evaluation under the CRA. borrowers to provide the street address chooses not to report a home § ll.42(a)(2)—3: How should an of the main business facility or farm or improvement loan (or a refinancing) institution collect data pertaining to the location where the loan proceeds under HMDA, and if the line meets the credit cards issued to small businesses? otherwise will be applied. Moreover, in regulatory definition of a ‘‘community A3. If an institution agrees to issue many cases in which the borrower’s development loan,’’ the institution credit cards to a business’s employees, address consists only of a rural route should collect and report information all of the credit card lines opened on a number, the institution knows the on the entire line as a community particular date for that single business location (i.e., the census tract) of the development loan. If the line does not should be reported as one small borrower or loan collateral. Once the qualify as a community development business loan origination rather than institution has this information loan, the institution has the option of reporting each individual credit card available, it should assign the census collecting and maintaining (but not line, assuming the criteria in the ‘‘small tract to that location (geocode) and reporting) the entire line of credit as business loan’’ definition in the report that information as required ‘‘Other Secured Lines/Loans for regulation are met. The credit card under the regulation. Purposes of Small Business.’’ program’s ‘‘amount at origination’’ is the § ll.42(a)—8: When collecting small However, if an institution cannot sum of all of the employee/business business and small farm data for CRA determine a rural borrower’s street credit cards’ credit limits opened on a purposes, may an institution collect and address, and does not know the census particular date. If subsequently issued report information about loans to small tract, the institution should report the credit cards increase the small business businesses and small farms located borrower’s state, county, MSA or credit line, the added amount is outside the United States? metropolitan division, if applicable, and reported as a new origination. ‘‘NA,’’ for ‘‘not available,’’ in lieu of a A8. At an institution’s option, it may § ll.42(a)(3) The loan location collect data about small business and census tract code. § ll.42(a)(3)—1: Which location small farm loans located outside the § ll.42(a)(2) Loan amount at should an institution record if a small United States; however, it cannot report origination business loan’s proceeds are used in a this data because the CRA data § ll.42(a)(2)—1: When an variety of locations? collection software will not accept data A1. The institution should record the institution purchases a small business concerning loan locations outside the loan location by either the location of or small farm loan, in whole or in part, United States. the small business borrower’s which amount should the institution § ll.42(a)—9: Is an institution that headquarters or the location where the collect and report—the original amount has no small farm or small business greatest portion of the proceeds are of the loan or the amount at purchase? loans required to report under CRA? applied, as indicated by the borrower. A9. Each institution subject to data A1. When collecting and reporting reporting requirements must, at a information on purchased small § ll.42(a)(4) Indicator of gross annual minimum, submit a transmittal sheet, business and small farm loans, revenue definition of its assessment area(s), and including loan participations, an § ll.42(a)(4)—1: When indicating a record of its community development institution collects and reports the whether a small business borrower had loans. If the institution does not have amount of the loan at origination, not at gross annual revenues of $1 million or community development loans to the time of purchase. This is consistent less, upon what revenues should an report, the record should be sent with with the Call Report’s and TFR’s use of institution rely? ‘‘0’’ in the community development loan the ‘‘original amount of the loan’’ to A1. Generally, an institution should composite data fields. An institution determine whether a loan should be rely on the revenues that it considered that has not purchased or originated any reported as a ‘‘loan to a small business’’ in making its credit decision. For small business or small farm loans or a ‘‘loan to a small farm’’ and in which example, in the case of affiliated during the reporting period would not loan size category a loan should be businesses, such as a parent corporation submit the composite loan records for reported. When assessing the volume of and its subsidiary, if the institution small business or small farm loans. small business and small farm loan considered the revenues of the entity’s § ll.42(a)—10: How should an purchases for purposes of evaluating parent or a subsidiary corporation of the institution collect and report the lending test performance under CRA, parent as well, then the institution location of a loan made to a small however, examiners will evaluate an would aggregate the revenues of both business or farm if the borrower institution’s activity based on the corporations to determine whether the provides an address that consists of a amounts at purchase. revenues are $1 million or less.

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Alternatively, if the institution the agencies expect them to collect and loan, where should it be reported? Can considered the revenues of only the rely upon the borrowers’ gross annual FHA, VA, and SBA loans be reported as entity to which the loan is actually revenue for purposes of CRA. The CRA community development loans? extended, the institution should rely regulations similarly do not require A2. Except for multifamily affordable solely upon whether gross annual institutions to verify revenue amounts; housing loans, which may be reported revenues are above or below $1 million thus, institutions may rely on the gross by retail institutions both under HMDA for that entity. However, if the annual revenue amount provided by as home mortgage loans and as institution considered and relied on borrowers in the ordinary course of community development loans, in order revenues or income of a cosigner or business. If an institution does not to avoid double counting, retail guarantor that is not an affiliate of the collect gross annual revenue institutions must report loans that meet borrower, such as a sole proprietor, the information for its small business and the definition of ‘‘home mortgage loan,’’ institution should not adjust the small farm borrowers, the institution ‘‘small business loan,’’ or ‘‘small farm borrower’s revenues for reporting should enter the code ‘‘revenues not loan’’ only in those respective categories purposes. known.’’ (See Q&A § ll.42(a)(4)—2.) even if they also meet the definition of § ll.42(a)(4)—2: If an institution ‘‘community development loan.’’ As a that is not exempt from data collection § ll.42(b) Loan information required practical matter, this is not a and reporting does not request or to be reported disadvantage for institutions evaluated consider revenue information to make § ll.42(b)(1) Small business and small under the lending, investment, and the credit decision regarding a small farm loan data service tests because any affordable business or small farm loan, must the housing mortgage, small business, small ll institution collect revenue information § .42(b)(1)—1: For small business farm, or consumer loan that would in connection with that loan? and small farm loan information that is otherwise meet the definition of A2. No. In those instances, the collected and maintained, what data ‘‘community development loan’’ will be institution should enter the code should be reported? considered elsewhere in the lending indicating ‘‘revenues not known’’ on the A1. Each institution that is not test. Any of these types of loans that individual loan portion of the data exempt from data collection and occur outside the institution’s collection software or on an internally reporting is required to report in assessment area can receive developed system. Loans for which the machine-readable form annually by consideration under the borrower institution did not collect revenue March 1 the following information, characteristic criteria of the lending test. information may not be included in the aggregated for each census tract in See Q&A § ll.22(b)(2) & (3)—4. loans to businesses and farms with gross which the institution originated or Limited purpose and wholesale annual revenues of $1 million or less purchased at least one small business or institutions that meet the size threshold when reporting this data. small farm loan during the prior year: for reporting purposes also must report • § ll.42(a)(4)—3: What gross revenue The number and amount of loans loans that meet the definitions of home should an institution use in determining originated or purchased with original mortgage, small business, or small farm the gross annual revenue of a start-up amounts of $100,000 or less; loans in those respective categories. business? • The number and amount of loans However, these institutions must also A3. The institution should use the originated or purchased with original report any loans from those categories actual gross annual revenue to date amounts of more than $100,000 but less that meet the regulatory definition of (including $0 if the new business has than or equal to $250,000; ‘‘community development loan’’ as had no revenue to date). Although a • The number and amount of loans community development loans. There is start-up business will provide the originated or purchased with original no double counting because wholesale institution with pro forma projected amounts of more than $250,000 but not and limited purpose institutions are not revenue figures, these figures may not more than $1 million, as to small subject to the lending test and, accurately reflect actual gross revenue business loans, or $500,000, as to small therefore, are not evaluated on their and, therefore, should not be used. farm loans; and level and distribution of home mortgage, § ll.42(a)(4)—4: When indicating • To the extent that information is small business, small farm, and the gross annual revenue of small available, the number and amount of consumer loans. business or small farm borrowers, do loans to businesses and farms with gross § ll.42(b)(2)—3: When the primary institutions rely on the gross annual annual revenues of $1 million or less purpose of a loan is to finance an revenue or the adjusted gross annual (using the revenues the institution affordable housing project for low- or revenue of their borrowers? considered in making its credit moderate-income individuals, but, for A4. Institutions rely on the gross decision). example, only 40 percent of the units in annual revenue, rather than the adjusted question will actually be occupied by § ll.42(b)(2) Community development gross annual revenue, of their small individuals or families with low or loan data business or small farm borrowers when moderate incomes, should the entire indicating the revenue of small business § ll.42(b)(2)—1: What information loan amount be reported as a or small farm borrowers. The purpose of about community development loans community development loan? this data collection is to enable must institutions report? A3. It depends. As long as the primary examiners and the public to judge A1. Institutions subject to data purpose of the loan is a community whether the institution is lending to reporting requirements must report the development purpose as described in small businesses and small farms or aggregate number and amount of Q&A § ll.12(h)—8, the full amount of whether it is only making small loans to community development loans the institution’s loan should be larger businesses and farms. originated and purchased during the included in its reporting of aggregate The regulation does not require prior calendar year. amounts of community development institutions to request or consider § ll.42(b)(2)—2: If a loan meets the lending. Even though the entire amount revenue information when making a definition of a home mortgage, small of the loan is reported, as noted in Q&A loan; however, if institutions do gather business, or small farm loan AND § ll.22(b)(4)—1, examiners may make this information from their borrowers, qualifies as a community development qualitative distinctions among

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community development loans on the § ll.42(b)(3) Home mortgage loans borrower’s income when making a basis of the extent to which the loan § ll.42(b)(3)—1: Must institutions credit decision, it need not verify the advances the community development that are not required to collect home income for purposes of data purpose. mortgage loan data by the HMDA collect maintenance. ll In addition, if an institution that home mortgage loan data for purposes § .42(c)(1)(iv)—2: May an reports CRA data elects to request of the CRA? institution list ‘‘0’’ in the income field on consideration for loans that provide A1. No. If an institution is not consumer loans made to employees mixed-income housing where only a required to collect home mortgage loan when collecting data for CRA purposes portion of the loan has community data by the HMDA, the institution need as the institution would be permitted to development as its primary purpose, not collect home mortgage loan data do under HMDA? such as in connection with a under the CRA. Examiners will sample A2. Yes. ll development that has a mixed-income these loans to evaluate the institution’s § .42(c)(1)(iv)—3: When collecting housing component or an affordable home mortgage lending. If an institution the gross annual income of consumer housing set-aside required by federal, wants to ensure that examiners consider borrowers, do institutions collect the state, or local government, the all of its home mortgage loans, the gross annual income or the adjusted institution must report only the pro rata institution may collect and maintain gross annual income of the borrowers? A3. Institutions collect the gross dollar amount of the portion of the loan data on these loans. that provides affordable housing to low- annual income, rather than the adjusted § ll.42(c) Optional data collection or moderate-income individuals. The gross annual income, of consumer and maintenance pro rata dollar amount of the total borrowers. The purpose of income data activity will be based on the percentage § ll.42(c)(1) Consumer loans collection in connection with consumer loans is to enable examiners to of units that are affordable. See Q&A § ll.42(c)(1)—1: What are the data § ll.12(h)—8 for a discussion of determine the distribution, particularly requirements regarding consumer loans? in the institution’s assessment area(s), of ‘‘primary purpose’’ of community A1. There are no data reporting the institution’s consumer loans, based development describing the distinction requirements for consumer loans. on borrower characteristics, including between the types of loans that would Institutions may, however, opt to collect the number and amount of consumer be reported in full and those for which and maintain data on consumer loans. If loans to low-, moderate-, middle-, and only the pro rata amount would be an institution chooses to collect upper-income borrowers, as determined reported. information on consumer loans, it may § ll.42(b)(2)—4: When an on the basis of gross annual income. collect data for one or more of the The regulation does not require institution purchases a participation in following categories of consumer loans: institutions to request or consider a community development loan, which motor vehicle, credit card, home equity, income information when making a amount should the institution report— other secured, and other unsecured. If loan; however, if institutions do gather the entire amount of the credit an institution collects data for loans in this information from their borrowers, originated by the lead lender or the a certain category, it must collect data the agencies expect them to collect the amount of the participation purchased? for all loans originated or purchased borrowers’ gross annual income for within that category. The institution A4. The institution reports only the purposes of CRA. The CRA regulations must maintain these data separately for amount of the participation purchased similarly do not require institutions to each category for which it chooses to as a community development loan. verify income amounts; thus, collect data. The data collected and However, the institution uses the entire institutions may rely on the gross amount of the credit originated by the maintained should include for each loan: annual income amount provided by lead lender to determine whether the borrowers in the ordinary course of original credit meets the definition of a • A unique number or alpha-numeric symbol that can be used to identify the business. ‘‘loan to a small business,’’ ‘‘loan to a § ll.42(c)(1)(iv)—4: Whose income small farm,’’ or ‘‘community relevant loan file; • does an institution collect when a development loan.’’ For example, if an The loan amount at origination or purchase; consumer loan is made to more than institution purchases a $400,000 • one borrower? participation in a business credit that The loan location; and • The gross annual income of the A4. An institution that chooses to has a community development purpose, borrower that the institution considered collect and maintain information on and the entire amount of the credit in making its credit decision. consumer loans collects the gross originated by the lead lender is over $1 Generally, guidance given with annual income of all primary obligors million, the institution would report respect to data collection of small for consumer loans, to the extent that $400,000 as a community development business and small farm loans, the institution considered the income of loan. including, for example, guidance the obligors when making the decision § ll.42(b)(2)—5: Should institutions regarding collecting loan location data, to extend credit. Primary obligors collect and report data about and whether to collect data in include co-applicants and co-borrowers, community development loans that are connection with refinanced or renewed including co-signers. An institution refinanced or renewed? loans, will also apply to consumer does not, however, collect the income of A5. Yes. Institutions should collect loans. guarantors on consumer loans, because information about community guarantors are only secondarily liable ll development loans that they refinance § .42(c)(1)(iv) Income of borrower for the debt. or renew as loan originations. § ll.42(c)(1)(iv)—1: If an institution ll Community development loan does not consider income when making § .42(c)(2) Other loan data refinancings and renewals are subject to an underwriting decision in connection § ll.42(c)(2)—1: Schedule RC–C, the reporting limitations that apply to with a consumer loan, must it collect Part II of the Call Report does not allow refinancings and renewals of small income information? banks to report loans for commercial business and small farm loans. See Q&A A1. No. Further, if the institution and industrial purposes that are secured § ll.42(a)—5. routinely collects, but does not verify, a by residential real estate, unless the

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security interest in the nonfarm area(s) that it is electing to consider. If institution must update the description residential real estate is taken only as the affiliate is not required by HMDA to on a quarterly basis. an abundance of caution. (See Q&A report home mortgage loans, the § ll.43(b) Additional information § ll.12(v)—3.) Loans extended to institution must provide sufficient data available to the public small businesses with gross annual concerning the affiliate’s home mortgage revenues of $1 million or less may, loans for the examiners to apply the § ll.43(b)(1) Institutions other than however, be secured by residential real performance tests. small institutions estate. May a bank collect this ll § ll.43(b)(1)—1: Must an institution information to supplement its small § .43—Content and availability of public file that elects to have affiliate lending business lending data at the time of considered include data on this lending examination? § ll.43(a) Information available to the in its public file? A1. Yes. If these loans promote public A1. Yes. The lending data to be community development, as defined in ll contained in an institution’s public file the regulation, the bank should collect § .43(a)(1) Public comments related covers the lending of the institution’s and report information about the loans to an institution’s CRA performance affiliates, as well as of the institution as community development loans. § ll.43(a)(1)—1: What happens to itself, considered in the assessment of Otherwise, at the bank’s option, it may comments received by the agencies? the institution’s CRA performance. An collect and maintain data concerning A1. Comments received by a Federal institution that has elected to have loans, purchases, and lines of credit financial supervisory agency will be on mortgage loans of an affiliate considered extended to small businesses and file at the agency for use by examiners. must include either the affiliate’s secured by nonfarm residential real Those comments are also available to HMDA Disclosure Statements for the estate for consideration in the CRA the public unless they are exempt from two prior years or the parts of the evaluation of its small business lending. disclosure under the Freedom of Disclosure Statements that relate to the A bank may collect this information as Information Act. institution’s assessment area(s), at the ‘‘Other Secured Lines/Loans for § ll.43(a)(1)—2: Is an institution institution’s option. Purposes of Small Business’’ in the required to respond to public § ll.43(b)(1)—2: May an institution individual loan data. This information comments? retain its CRA disclosure statement in should be maintained at the bank but A2. No. All institutions should review electronic format in its public file, rather should not be submitted for central comments and complaints carefully to than printing a hard copy of the CRA reporting purposes. determine whether any response or § ll.42(c)(2)—2: Must an institution other action is warranted. A small disclosure statement for retention in its collect data on loan commitments and institution subject to the small public file? letters of credit? institution performance standards is A2. Yes, if the institution can readily A2. No. Institutions are not required specifically evaluated on its record of print out its CRA disclosure statement to collect data on loan commitments taking action, if warranted, in response from an electronic medium (e.g., CD, and letters of credit. Institutions may, to written complaints about its DVD, or Internet Web site) when a however, provide for examiner performance in helping to meet the consumer requests the public file. If the consideration information on letters of credit needs in its assessment area(s) (12 request is at a branch other than the credit and commitments. CFR ll.26(b)(5)). For all institutions, main office or the one designated § ll.42(c)(2)—3: Are commercial responding to comments may help to branch in each state that holds the and consumer leases considered loans foster a dialogue with members of the complete public file, the institution for purposes of CRA data collection? community or to present relevant should provide the CRA disclosure A3. Commercial and consumer leases information to an institution’s Federal statement in a paper copy, or in another are not considered small business or financial supervisory agency. If an format acceptable to the requestor, small farm loans or consumer loans for institution responds in writing to a within five calendar days, as required purposes of the data collection letter in the public file, the response by 12 CFR ll.43(c)(2)(ii). requirements in 12 CFR ll.42(a) & must also be placed in that file, unless § ll.43(c) Location of public (c)(1). However, if an institution wishes the response reflects adversely on any information to collect and maintain data about person or placing it in the public file leases, the institution may provide this violates a law. § ll.43(c)—1: What is an data to examiners as ‘‘other loan data’’ institution’s ‘‘main office’’? § ll.43(a)(2) CRA performance under 12 CFR ll.42(c)(2) for A1. An institution’s main office is the evaluation consideration under the lending test. main, home, or principal office as § ll.43(a)(2)—1: May an institution designated in its charter. § ll.42(d) Data on affiliate lending include a response to its CRA § ll.43(c)—2: May an institution § ll.42(d)—1: If an institution elects performance evaluation in its public maintain a copy of its public file on an to have an affiliate’s home mortgage file? intranet or the Internet? lending considered in its CRA A1. Yes. However, the format and A2. Yes, an institution may keep all evaluation, what data must the content of the evaluation, as transmitted or part of its public file on an intranet institution make available to examiners? by the supervisory agency, may not be or the Internet, provided that the A1. If the affiliate is a HMDA reporter, altered or abridged in any manner. In institution maintains all of the the institution must identify those loans addition, an institution that received a information, either in paper or reported by its affiliate under 12 CFR less than satisfactory rating during its electronic form, that is required in part 203 (Regulation C, implementing most recent examination must include § ll.43 of the regulations. An HMDA). At its option, the institution in its public file a description of its institution that opts to keep part or all may provide examiners with either the current efforts to improve its of its public file on an intranet or the affiliate’s entire HMDA Disclosure performance in helping to meet the Internet must follow the rules in 12 CFR Statement or just those portions credit needs of its entire community. ll.43(c)(1) and (2) as to what covering the loans in its assessment See 12 CFR ll.43(b)(5). The information is required to be kept at a

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main office and at a branch. The calendar quarter determinative of applicable to lending activity, institution also must ensure that the whether an institution will be examined geographic distribution, and borrower information required to be maintained in that quarter? characteristics within the assessment at a main office and branch, if kept A2. No. The agencies attempt to area. The institution may compensate electronically, can be readily determine as accurately as possible for such weak performance by downloaded and printed for any which institutions will be examined exceptionally strong performance in member of the public who requests a during the upcoming calendar quarter. community development lending in its hard copy of the information. However, whether an institution’s name assessment area or a broader statewide § ll.44—Public notice by institutions appears on the published list does not or regional area that includes its conclusively determine whether the assessment area. § ll.44—1: Are there any placement institution will be examined during that APPENDIX B to Part ll—CRA Notice or size requirements for an institution’s quarter. The agencies may need to defer public notice? a planned examination or conduct an APPENDIX B to Part ll—1: What A1. The notice must be placed in the unforeseen examination because of agency information should be added to institution’s public lobby, but the size scheduling difficulties or other the CRA notice form? and placement may vary. The notice circumstances. A1. The following information should should be placed in a location and be of be added to the form: a sufficient size that customers can APPENDIX A to Part ll—Ratings easily see and read it. OCC-supervised institutions only: For § ll.45—Publication of planned APPENDIX A to Part ll—1: Must an community banks, the address of the examination schedule institution’s performance fit each aspect deputy comptroller of the district in § ll.45—1: Where will the agencies of a particular rating profile in order to which the institution is located should publish the planned examination receive that rating? be inserted in the appropriate blank. schedule for the upcoming calendar A1. No. Exceptionally strong These addresses can be found at http:// quarter? performance in some aspects of a www.occ.gov. For banks supervised A1. The agencies may use the Federal particular rating profile may under the large bank program, insert Register, a press release, the Internet, or compensate for weak performance in ‘‘Large Bank Supervision, 250 E Street, other existing agency publications for others. For example, a retail institution SW., Washington, DC 20219–0001.’’ For disseminating the list of the institutions other than an intermediate small banks supervised under the mid-size/ scheduled for CRA examinations during institution that uses non-branch credit card bank program, insert ‘‘Mid- the upcoming calendar quarter. delivery systems to obtain deposits and Size and Credit Card Bank Supervision, Interested parties should contact the to deliver loans may have almost all of 250 E Street, SW., Washington, DC appropriate Federal financial its loans outside the institution’s 20219–0001.’’ supervisory agency for information on assessment area. Assume that an OCC-, FDIC-, and Board-supervised how the agency is publishing the examiner, after consideration of institutions: ‘‘Officer in Charge of planned examination schedule. performance context and other Supervision’’ is the title of the § ll.45—2: Is inclusion on the list of applicable regulatory criteria, concludes responsible official at the appropriate institutions that are scheduled to that the institution has weak Federal Reserve Bank. undergo CRA examinations in the next performance under the lending criteria INDEX

Keyword Q&A

Affiliate lending ...... § ll.22(b)(2) & (3)—3 § ll.22(c)(1)—1 § ll.22(c)(2)(i)—1 § ll.22(c)(2)(ii)—1 § ll.22(c)(2)(ii)—2 § ll.26—1 § ll.41(a)—2 § ll.42(d)—1 § ll.43(b)(1)—1 Affiliates ...... § ll.12(a)—1 § ll.22(d)—3 § ll.24(e)—1 Affordable housing ...... § ll.12(g)—1 § ll.12(g)—2 § ll.12(g)(1)—1 Agreements, private ...... § ll.29(b)—2 Alternative delivery systems ...... § ll.24(d)—1 § ll.24(d)(3)—1 § ll.24(d)(3)—2 Applications, corporate ...... § ll.29(a)—1 § ll.29(a)—2 § ll.29(b)—1 Assessment areas ...... § ll.22(b)(2) & (3)—2 § ll.22(b)(2) & (3)—3 § ll.41(a)—1 § ll.41(a)—2 § ll.41(a)—3 § ll.41(c)(1)—1

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INDEX—Continued

Keyword Q&A

§ ll.41(c)(1)—2 § ll.41(d)—1 § ll.41(e)(3)—1 § ll.41(e)(4)—1 § ll.41(e)(4)—2 Assessment area, benefit to ...... § ll.12(g)—4 § ll.12(h)—6 Assets ...... § ll.12(u)—1 § ll.12(u)(2)—1 ATMs ...... § ll.12(f)—1 § ll.24(d)—1 § ll.24(d)(3)—1 Borrower characteristics ...... § ll.22(b)(2) & (3)—1 Branch ...... § ll.12(f)—1 § ll.12(f)—2 § ll.28(a)—1 Brokerage ...... § ll.12(l)—2 Capital investments ...... § ll.12(g)—4 CEBA credit card banks ...... § ll.25(a)—1 Charitable contributions or activities ...... § ll.12(i)—2 § ll.12(t)—5 Child care services ...... § ll.12(g)—1 Commercial loans ...... § ll.12(v)—2 § ll.42(a)—1 Commitments ...... § ll.22(a)(2)—1 § ll.22(a)(2)—4 § ll.29(a)—2 § ll.42(c)(2)—2 Community contact interviews ...... § ll.21(b)(2)—2 Community development ...... § ll.12(g)—1 § ll.12(g)(1)—1 § ll.12(g)(3)—1 § ll.12(g)(4)—1 § ll.12(h)—5 § ll.12(h)—8 § ll.12(t)—5 Community development activities ...... § ll.12(g)—2 § ll.12(g)(4)—2 § ll.21(a)—2 Community development loan ...... § ll.12(h)—1 § ll.12(h)—2 § ll.12(h)—3 § ll.12(h)—4 § ll.12(h)—5 § ll.12(h)—6 § ll.12(h)—7 § ll.12(h)—8 § ll.12(t)—6 § ll.12(v)—1 § ll.22(b)(4)—1 § ll.22(d)—2 § ll.23(b)—1 § ll.26—1 § ll.26(b)—3 § ll.26(c)—1 § ll.26(d)—2 § ll.42(b)(2)—1 § ll.42(b)(2)—2 § ll.42(b)(2)—3 § ll.42(b)(2)—4 § ll.42(b)(2)—5 § ll.42(c)(2)—1 Community development service ...... § ll.12(h)—6 § ll.12(h)—7 § ll.12(h)—8 § ll.12(i)—1 § ll.12(i)—2 § ll.12(i)—3 § ll.12(l)—2 § ll.12(t)—7 § ll.12(v)—3 § ll.23(b)—1

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INDEX—Continued

Keyword Q&A

§ ll.24(e)—1 § ll.26—1 § ll.26(c)—1 § ll.26(c)(3)—1 § ll.26(d)—2 Community development test for intermediate small institutions ...... § ll.26(b)—1 § ll.26(c)—1 § ll.26(c)(3)—1 § ll.26(c)(4)—1 § ll.28—1 Community development test for wholesale and limited purpose institutions ...... § ll.25(d)—1 § ll.25(f)—1 Community services ...... § ll.12(g)—2 § ll.12(g)(2)—1 § ll.12(t)—4 Complexity ...... § ll.21(a)—2 § ll.22(b)(5)—1 § ll.23(e)—2 § ll.28—1 Consortia ...... § ll.22(d)—2 § ll.26(b)—3 Consumer loan ...... § ll.12(h)—2 § ll.12(j)—1 § ll.12(j)—2 § ll.12(x)—1 § ll.22(a)(1)—2 § ll.42(c)(1)—1 § ll.42(c)(1)(iv)—1 § ll.42(c)(1)(iv)—2 § ll.42(c)(1)(iv)—3 § ll.42(c)(1)(iv)—4 CRA disclosure statement ...... § ll.43(b)(1)—2 Credit cards ...... § ll.12(h)—4 § ll.12(v)—4 § ll.42(a)(2)—3 Credit union, low-income ...... § ll.12(g)—4 § ll.12(t)—4 Data collection ...... § ll.42—1 § ll.42—2 § ll.42—4 § ll.42—5 § ll.42—6 § ll.42—7 § ll.42(a)—1 § ll.42(a)—2 § ll.42(a)—4 § ll.42(a)—5 § ll.42(a)—8 § ll.42(a)—10 § ll.42(a)(2)—1 § ll.42(a)(2)—2 § ll.42(a)(2)—3 § ll.42(a)(4)—2 § ll.42(a)(4)—4 § ll.42(b)(2)—5 § ll.42(b)(3)—1 § ll.42(c)(1)—1 § ll.42(c)(1)(iv)—1 § ll.42(c)(1)(iv)—2 § ll.42(c)(1)(iv)—3 § ll.42(c)(1)(iv)—4 § ll.42(c)(2)—1 Data reporting ...... § ll.42—1 § ll.42—3 § ll.42—4 § ll.42(a)—1 § ll.42(a)—4 § ll.42(a)—5 § ll.42(a)—8 § ll.42(a)—9 § ll.42(a)—10 § ll.42(a)(2)—1

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INDEX—Continued

Keyword Q&A

§ ll.42(b)(1)—1 § ll.42(b)(2)—1 § ll.42(b)(2)—2 § ll.42(b)(2)—3 § ll.42(b)(2)—4 § ll.42(b)(2)—5 Debit cards ...... § ll.24(d)(3)—2 Designated disaster area ...... § ll.12(g)(4)—2 § ll.12(g)(4)(ii)—1 § ll.12(g)(4)(ii)—2 Distressed nonmetropolitan middle-income geography ...... § ll.12(g)(4)—2 § ll.12(g)(4)(iii)—1 § ll.12(g)(4)(iii)—2 § ll.12(g)(4)(iii)—3 Economic development ...... § ll.12(g)—1 § ll.12(g)—2 § ll.12(g)(3)—1 Education, financial literacy ...... § ll.12(i)—3 § ll.22(a)—1 Educational services ...... § ll.12(g)—1 Employees’ charitable activities ...... § ll.12(i)—2 Employees’ income ...... § ll.42(c)(1)(iv)—2 Environmental hazards ...... § ll.12(h)—1 Examination schedule ...... § ll.45—1 § ll.45—2 Federal branch ...... § ll.12(u)—1 Federal Home Loan Bank ...... § ll.12(t)—3 Federal Reserve Bank membership reserves ...... § ll.12(t)—3 Financial services, provision of ...... § ll.12(i)—1 Fisheries ...... § ll.42(a)—6 Flexibility ...... § ll.12(g)—3 § ll.22(b)(5)—1 Foreclosure prevention program ...... § ll.12(g)(4)(i)—1 § ll.12(i)—3 § ll.22(a)—1 Forestries ...... § ll.42(a)—6 Geographic distribution ...... § ll.22(b)(2) & (3)—1 Geography ...... § ll.12(g)(4)(iii)—1 § ll.41(d)—1 § ll.41(e)(3)—1 Guaranteed loans ...... § ll.22(a)(2)—5 Guarantor ...... § ll.42(c)(1)(iv)—4 Health services ...... § ll.12(g)—1 High cost area ...... § ll.12(g)—3 HMDA reporting ...... § ll.12(j)—2 § ll.12(l)—2 § ll.22(a)(1)—1 § ll.22(a)(2)—7 § ll.42(a)—7 § ll.42(b)(3)—1 Home equity line of credit ...... § ll.12(j)—2 § ll.42(a)—7 Home equity loan ...... § ll.12(j)—1 Home mortgage lending ...... § ll.22(a)(1)—1 § ll.42(d)—1 Home mortgage loan ...... § ll.12(h)—2 § ll.12(h)—3 § ll.12(j)—2 § ll.12(l)—1 § ll.12(l)—2 § ll.12(x)—1 § ll.22(b)(2) & (3)—5 § ll.23(b)—2 § ll.42(b)(2)—2 § ll.42(b)(3)—1 Illegal credit practices ...... § ll.28(c)—1 Income ...... § ll.42(c)(1)(iv)—1 § ll.42(c)(1)(iv)—2 § ll.42(c)(1)(iv)—3 § ll.42(c)(1)(iv)—4 Income level ...... § ll.12(m)—1 Indirect investments ...... § ll.23(a)—1

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INDEX—Continued

Keyword Q&A

Individual development accounts (IDAs) ...... § ll.12(i)—3 § ll.24(d)—2 Innovativeness ...... § ll.21(a)—2 § ll.22(b)(5)—1 § ll.23(e)—2 § ll.28—1 Institutional capacity and constraints ...... § ll.21(b)(4)—1 Intermediate small institution ...... § ll.12(h)—3 § ll.12(u)(2)—1 § ll.26(a)(2)—1 Internet/intranet ...... § ll.43(b)(1)—2 § ll.43(c)—2 Investment authority ...... § ll.12(t)—1 Leases ...... § ll.22(a)(2)—4 § ll.42(c)(2)—3 Lending activity ...... § ll.22(b)(1)—1 Lending distribution ...... § ll.22(b)(2) & (3)—1 § ll.22(b)(2) & (3)—2 § ll.22(b)(2) & (3)—3 § ll.26(b)(3) & (4)—1 Lending within assessment area ...... § ll.26(b)(2)—1 Letters of credit ...... § ll.22(a)(2)—1 § ll.22(a)(2)—4 § ll.42(c)(2)—2 Limited purpose institution ...... § ll.12(n)—1 § ll.12(n)—2 § ll.12(n)—3 § ll.42—7 § ll.42(b)(2)—2 Lines of credit ...... § ll.42—3 § ll.42—4 Loan amount ...... § ll.42(a)—2 § ll.42(a)(2)—1 Loan application activity ...... § ll.22(a)(2)—2 Loan location ...... § ll.42(a)—2 § ll.42(a)—10 § ll.42(a)(3)—1 Loan originations, multiple ...... § ll.42(a)(2)—2 Loan participations ...... § ll.12(g)—4 § ll.22(a)(2)—6 § ll.42(b)(2)—4 Loan production office (LPO) ...... § ll.12(f)—2 Loans, outside-assessment area ...... § ll.22(b)(2) & (3)—4 Loan-to-deposit ratio ...... § ll.26(b)(1)—1 § ll.26(b)(1)—2 § ll.26(b)(1)—3 Main office ...... § ll.43(c)—1 Measurable goals ...... § ll.27(f)(1)—1 MECAs ...... § ll.22(a)(2)—3 § ll.22(a)(2)—4 Merging institutions ...... § ll.42—5 Minority-owned financial institution ...... § ll.12(g)—4 § ll.12(t)—4 Mixed-income housing ...... § ll.12(h)—8 § ll.42(b)(2)—3 Mobile branch ...... § ll.12(f)—1 Mortgage-backed securities ...... § ll.12(t)—2 § ll.23(b)—2 Multi-purpose loan ...... § ll.12(j)—3 Municipal bonds ...... § ll.12(t)—2 Nationwide fund ...... § ll.23(a)—2 § ll.25(e)—1 New Markets Tax Credit Community Development Entity ...... § ll.12(g)(3)—1 § ll.12(h)—1 § ll.12(t)—4 New Markets Venture Capital Company ...... § ll.12(g)(3)—1 Niche institution ...... § ll.12(n)—3 Nonprofit organization ...... § ll.12(v)—1 Other loan data ...... § ll.22(a)(2)—4 § ll.42(c)(2)—1 Past performance ...... § ll.21(b)(5)—1 Performance context ...... § ll.21(b)—1

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INDEX—Continued

Keyword Q&A

§ ll.21(b)(2)—1 § ll.21(b)(2)—2 § ll.21(b)(4)—1 § ll.21(b)(5)—1 § ll.21(b)(5)—2 § ll.22(a)(2)—2 § ll.23(e)—2 § ll.26(c)(4)—1 Performance criteria ...... § ll.21(a)—1 § ll.23(e)—1 § ll.23(e)—2 § ll.28(b)—1 Performance evaluation ...... § ll.43(a)(2)—1 Performance rating ...... § ll.26(d) ¥1 § ll.28—1 § ll.28(a)—1 § ll.28(a)—2 § ll.28(a)—3 § ll.28(b)—1 § ll.28(c)—1 APPENDIX A to Part ll—1 Political subdivision ...... § ll.41(c)(1)—1 § ll.41(c)(1)—2 § ll.41(d)—1 Primary purpose ...... § ll.12(g)—3 § ll.12(h)—8 § ll.12(t)—5 Public comment ...... § ll.27(g)(2)—1 § ll.29(b)—1 § ll.43(a)(1)—1 § ll.43(a)(1)—2 Public file ...... § ll.43(a)(1)—2 § ll.43(a)(2)—1 § ll.43(b)(1)—1 § ll.43(b)(1)—2 § ll.43(c)—2 Public notice ...... § ll.27(g)(2)—1 § ll.44—1 APPENDIX B to Part ll—1 Qualified investment ...... § ll.12(h)—6 § ll.12(h)—7 § ll.12(h)—8 § ll.12(t)—2 § ll.12(t)—3 § ll.12(t)—4 § ll.12(t)—5 § ll.12(t)—6 § ll.12(t)—7 § ll.12(t)—8 § ll.23(a)—1 § ll.23(b)—1 § ll.23(b)—2 § ll.23(a)—2 § ll.23(e)—1 § ll.23(e)—2 § ll.26—1 § ll.26(b)—5 § ll.26(c)—1 § ll.26(d)—2 Qualitative factors ...... § ll.12(g)(3)—1 § ll.12(t)—8 § ll.21(a)—2 § ll.22(b)(4)—1 § ll.22(b)(5)—1 § ll.23(e)—1 § ll.23(e)—2 § ll.26(c)(4)—1 § ll.28(b)—1 Ratings matrix ...... § ll.28(a)—3 Refinancings ...... § ll.22(a)(2)—7 § ll.42(a)—5 § ll.42(b)(2)—5

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INDEX—Continued

Keyword Q&A

Regional area ...... § ll.12(h)—7 Remote service facility (RSF) ...... § ll.12(f)—1 Renewals ...... § ll.42—4 § ll.42(a)—5 § ll.42(b)(2)—5 Responsiveness ...... § ll.21(a)—2 § ll.22(a)—1 § ll.23(e)—2 § ll.26(c)(4)—1 § ll.28—1 Retail banking services ...... § ll.12(l)—2 § ll.24(d)—1 Revenue ...... § ll.42(a)(4)—1 § ll.42(a)(4)—2 § ll.42(a)(4)—3 § ll.42(a)(4)—4 Revitalize or stabilize ...... § ll.12(g)—1 § ll.12(g)—2 § ll.12(g)(4)—2 § ll.12(g)(4)(i)—1 § ll.12(g)(4)(ii)—2 § ll.12(g)(4)(iii)—3 § ll.12(g)(4)(iii)—4 § ll.12(h)—5 SBA 504 Certified Development Company program ...... § ll.12(h)—1 SBIC or SBDC ...... § ll.12(g)(3)—1 § ll.12(t)—4 Similarly situated lenders ...... § ll.21(b)(5)—2 Small business loan ...... § ll.12(h)—2 § ll.12(v)—1 § ll.12(v)—2 § ll.12(v)—3 § ll.12(v)—4 § ll.12(x)—1 § ll.22(a)(2)—7 § ll.42(a)—2 § ll.42(a)—3 § ll.42(a)—5 § ll.42(a)—8 § ll.42(a)—10 § ll.42(a)(2)—1 § ll.42(a)(2)—3 § ll.42(a)(3)—1 § ll.42(a)(4)—1 § ll.42(a)(4)—2 § ll.42(b)(2)—2 § ll.42(c)(2)—1 Small farm loan ...... § ll.12(h)—2 § ll.12(v)—1 § ll.12(x)—1 § ll.42(a)—2 § ll.42(a)—3 § ll.42(a)—4 § ll.42(a)—5 § ll.42(a)—6 § ll.42(a)—8 § ll.42(a)—10 § ll.42(a)(2)—1 § ll.42(a)(4)—2 § ll.42(b)(2)—2 Small institution ...... § ll.12(u)—1 § ll.12(u)(2)—1 § ll.26(b)—1 § ll.42—1 § ll.42—6 § ll.42—7 Small institution performance standards ...... § ll.26—1 § ll.26(b)—1 § ll.26(b)—2 § ll.26(b)—3 § ll.26(b)—4 § ll.26(b)—5

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INDEX—Continued

Keyword Q&A

§ ll.26(b)(3) & (4)—1 § ll.26(d)¥1 § ll.26(d)—2 Social services ...... § ll.12(g)—1 Software for data collection and reporting ...... § ll.42—2 § ll.42—6 Special purpose institution ...... §§ ll.11(c)(3) & 563e.11(c)(2)—1 §§ ll.11(c)(3) & 563e.11(c)(2)—2 State branch ...... § ll.12(u)—1 Strategic plan ...... § ll.27(c)—1 § ll.27(c)—2 § ll.27(f)(1)—1 § ll.27(g)(2)—1 Subsidiary ...... § ll.12(a)—1 Third-party investments ...... § ll.22(d)—1 § ll.22(d)—2 § ll.22(d)—3 § ll.25(d)—1 § ll.26(b)—3 Underserved nonmetropolitan middle-income geography ...... § ll.12(g)(4)—2 § ll.12(g)(4)(iii)—1 § ll.12(g)(4)(iii)—2 § ll.12(g)(4)(iii)—4 Wholesale institution ...... § ll.12(n)—2 § ll.12(n)—3 § ll.12(x)—1 § ll.42—7 § ll.42(b)(2)—2 Women-owned financial institutions ...... § ll.12(g)—4 § ll.12(t)—4

End of text of the Interagency Dated: January 27, 2010. Federal Deposit Insurance Corporation. Questions and Answers John C. Dugan, Robert E. Feldman, Comptroller of the Currency. Executive Secretary. By order of the Board of Governors of the Dated: February 12, 2010. Federal Reserve System, March 2, 2010. By the Office of Thrift Supervision. Jennifer J. Johnson, John E. Bowman, Secretary of the Board. Acting Director. Dated at Washington, DC, this 18th day of [FR Doc. 2010–4903 Filed 3–10–10; 8:45 am] February, 2010. BILLING CODE 4810–33–P, 6210–01–P, 6714–01–P, 6720–01–P

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