The Community Reinvestment Act (CRA) is intended to encourage depository institutions help meet the credit needs of communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe sound banking operations. It was enacted by Congress 1977 (12 USC 2901) implemented Regulations 12 CFR Parts 25, 228, 345, 563e. were revised 1995 2005.

The CRA requires that each insured depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. is taken into account considering an application for deposit facilities, including mergers and acquisitions. examinations are conducted by federal agencies responsible supervising institutions: Board Governors Reserve System (FRB), Insurance Corporation (FDIC), Office Comptroller Currency (OCC), Thrift Supervision (OTS).

The agencies, through the FFIEC, have established interagency examination procedures for following types of institutions: Small Institutions, Intermediate Large Retail Limited Purpose and Wholesale Institutions under Strategic Plans. five different correspond to alternative evaluation methods provided in CRA regulations are designed respond basic differences institutions’ structures operations. All reflect intent regulation establish performance-based examinations that complete accurate but, maximum extent possible, mitigate compliance burden institutions. There also instructions writing public evaluations; template each institution type is Section XII.

Small Institutions have a streamlined assessment method. The regulations contain only five performance criteria under the small bank lending test:

1. The institution’s loan-to-deposit ratio adjusted for seasonal variation and, as appropriate, other lending related activities such as secondary market participation, community development loans or qualified investments;
2. The percentage of loans and other lending-related activities located in the institution’s assessment area(s);
3. The distribution of lending among borrowers of different income levels and businesses and farms of different sizes;
4. The distribution of lending among geographies of different income levels; and
5. The institution’s record of taking action, if warranted, in response to written complaints about its CRA performance.

Small institutions are eligible for a rating of Outstanding, as well as Satisfactory. An examiner may conclude that an institution’s performance so exceeds the standards for a Satisfactory rating under the five core criteria that it merits a rating of Outstanding. In addition, at the institution’s option, the examiner will consider the institution’s performance in making qualified investments and in providing services that enhance credit availability in its assessment area(s) in order to determine whether the institution merits an Outstanding rating.

In carrying out their examination responsibilities, examiners should exercise judgment and common sense in deciding how much material to review what steps are necessary reach an accurate conclusion. For example, if institution’s assessment area(s) is comprised of only a few homogenous geographies, geographic analysis loans within the may be unnecessary. Or, institution has done determine where, whom, it making its assist itself business efforts, able validate then use rather than conduct detailed own. other words, when evaluating performance criteria, always consider available, reliable information.

Similarly, if an institution’s loan-to-deposit ratio appears low, the examination procedures ask the examiner to evaluate the institution’s lending-related activities, such as loan sales and community development lending and investments to determine if they materially supplement its lending performance as reflected in its loan-to-deposit ratio. However, such an analysis may not be necessary or a less extensive analysis may be sufficient if the loan-to-deposit ratio is high.

Examination Procedures for Small Institutions Examination Scope

1. For institutions with more than one assessment area, identify assessment areas for full scope review. In making those selections, review prior CRA performance evaluations, available community contact materials, and reported lending data and demographic data on each assessment area. Consider factors such as:
1. The lending opportunities in the different assessment areas;
2. The level of the institution’s lending activity in the different assessment areas, including low- and moderate-income areas, designated disaster areas, or distressed or underserved nonmetropolitan middleincome geographies designated by the Agencies ² based on (a) rates of poverty, unemployment, and population loss, or (b) population size, density, and dispersion; ³
3. The number of other institutions in the different assessment areas and the importance of the institution under examination in serving the different areas, particularly any areas with relatively few other providers of financial services;
4. The existence of apparent anomalies in the reported HMDA data for any particular assessment area(s);
5. The length of time since the assessment area(s) was last examined using a full scope review;
6. The institution’s prior CRA performance in different assessment areas;
7. Examiners’ knowledge of the same or similar assessment areas; and
8. Comments from the public regarding the institution’s CRA performance.
2. For interstate institutions, a rating must be assigned for each state where the institution has a branch and for each multi-state metropolitan statistical area (MSA) or metropolitan division (MD) where the institution has branches in two or more states that comprise that multistate MSA/MD. Select one or more assessment areas in each state for examination using these procedures.

1. Review standardized worksheets and other agency information sources to obtain relevant demographic, economic and loan data, to the extent available, for each assessment area under review.
2. Obtain for review the Consolidated Reports of Condition (Call Reports), Uniform Bank Performance Reports (UBPR), annual reports, supervisory reports, and prior CRA evaluations of the institution under examination. Review financial information and the prior CRA evaluations of institutions of similar size that serve the same or similar assessment area(s).
3. Consider any information the institution may provide on its local community and economy, its business strategy, its lending capacity, or that otherwise assists in the evaluation of the institution.
4. Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution. Contact local community, governmental or economic development representatives to update or supplement this information. Refer to the Community Contact Procedures for more detail.
5. Review the institution’s public file for any comments received by the institution or the agency since the last CRA performance evaluation for information that assists in the evaluation of the institution.
6. Document the performance context information gathered for use in evaluating the institution’s performance.

Assessment Area

1. Review the institution’s stated assessment area(s) to ensure that it:
   1. Consists of one or more MSAs/MDs or contiguous political subdivisions (e.g., counties, cities, or towns);
   2. Includes the geographies where the institution has its main office, branches, and deposit-taking ATMs, as well as the surrounding geographies in which the institution originated or purchased a substantial portion of its loans;
   3. Consists only of whole census tracts;
   4. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is located in a multi-state MSA/MD;
   5. Does not reflect illegal discrimination; and
   6. Does not arbitrarily exclude any low- or moderateincome area(s), taking into account the institution’s size, branching structure, and financial condition.
2. If an institution’s assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers.
3. If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Performance Criteria
Loan-to-Deposit Analysis

1. From data contained in Call Reports or UBPRs, calculate the average loan-to-deposit ratio since the last examination by adding the quarterly loan-to-deposit ratios and dividing by the number of quarters.
2. Evaluate whether the institution’s average loan-todeposit ratio is reasonable in light of information from the performance context including, as applicable, the institution’s capacity to lend, the capacity of other similarly-situated institutions to lend in the assessment area(s), demographic and economic factors present in the assessment area(s), and the lending opportunities available in the institution’s assessment area(s).
3. If the loan to deposit ratio does not appear reasonable in light of the performance context, consider the number and the dollar volume of loans sold to the secondary market, or the innovativeness or complexity of community development loans and qualified investments to assess the extent to which these activities compensate for a low loan-to-deposit ratio or supplement the institution’s lending performance as reflected in its loan-to-deposit ratio.
4. Discuss the preliminary findings in this section with management.
5. Summarize in workpapers conclusions regarding the institution’s loan-to-deposit ratio.

Comparison of Credit Extended Inside and Outside of the Assessment Area(s)

1. If available, review HMDA data, automated loan reports, and any other reports that may have been generated by the institution to analyze the extent of lending inside and outside of the assessment area(s). If a report generated by the institution is used, test the accuracy of the output.
2. If loan reports or data analyzing lending inside and outside of the assessment area(s) are not available or comprehensive, or if their accuracy cannot be verified, use sampling guidelines to select a sample of loans originated, purchased or committed to calculate the percentage (by number and dollar amount) located within the assessment area(s).
3. If the percentage of loans or other lending related activities in the assessment area is less than a majority, then the institution does not meet the standards for "Satisfactory" under this performance criterion. In this case, consider information from the performance context, such as information about economic conditions, loan demand, the institution’s size, financial condition, branching network, and business strategies when determining the effect of not meeting the standards for satisfactory for this criterion on the overall rating for the institution.
4. Discuss the preliminary findings in this section with management.
5. Summarize in workpapers conclusions regarding the institution’s level of lending or other lending related activities inside and outside of its assessment area(s).

Distribution of Credit Within the Assessment Area(s)

1. Determine whether the number and income distribution of geographies in the assessment area(s) are sufficient for a meaningful analysis of the geographic distribution of the institution’s loans in its assessment area(s).
2. If a geographic distribution analysis of the institution’s loans would be meaningful and the necessary geographic information (street address or census tract numbers) is collected by the institution in the ordinary course of its business, determine the distribution of the institution’s loans in its assessment area(s) among low-, moderate-, middle-, and upper-income geographies. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
3. If a geographic analysis of loans in the assessment area(s) is performed, identify groups of geographies, by income categories, in which there is little or no loan penetration. Note that institutions are not expected to lend in every geography.
4. To the extent information about borrower income (individuals) or revenues (businesses) is collected by the institution in the ordinary course of its business, determine the distribution of loans in the assessment area(s) by borrower income and by business revenues. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
5. Identify categories of borrowers by income or business revenue for which there is little or no loan penetration.
6. If an analysis of the distribution of loans among geographies of different income levels would not be meaningful (e.g., very few geographies in the assessment area(s)) or an analysis of lending to borrowers of different income or revenues could not be performed (e.g., income data are not collected for certain loans), consider possible proxies to use for analysis of the institution’s distribution of credit. Possibilities include analyzing geographic distribution by street address rather than geography (if data are available and the analysis would be meaningful) or analyzing the distribution by loan size as a proxy for income or revenues of the borrower.
7. If there are categories of low penetration, form conclusions about the reasons for that low penetration. Consider available information from the performance context, including:
   
   1. Information about the institution’s size, branch network, financial condition, supervisory restrictions (if any) and prior CRA record;
   2. Information from discussions with management, loan officers, and members of the community;
   3. Information about economic conditions, particularly in the assessment area(s);
   4. Information about demographic or other characteristics of particular geographies that could affect loan demand, such as the existence of a prison or college; and
   5. Information about other lenders serving the same or similar assessment area(s).
8. Discuss the preliminary findings in this section with management.
9. Summarize in workpapers conclusions concerning the geographic distribution of loans and the distribution of loans by borrower characteristics in the institution’s assessment area(s).

Review of Complaints

1. Review all complaints relating to the institution’s CRA performance received by the institution (these should all be contained in the institution’s public file) and those that were received by its supervisory agency.
2. If there were any complaints, evaluate the institution’s record of taking action, if warranted, in response to written complaints about its CRA performance.
3. If there were any complaints, discuss the preliminary findings in this section with management.
4. If there were any complaints, summarize in workpapers conclusions regarding the institution’s record of taking action, if warranted, in response to written complaints about its CRA performance. Include the total number of complaints and resolutions with examples that illustrate the nature, responsiveness to, and resolution of, the complaints.

Investments and Services (at the institution’s option to enhance a "Satisfactory" rating)

1. If the institution chooses, review its performance in making qualified investments and providing branches and other services and delivery systems that enhance credit availability in its assessment area(s). Performance with respect to qualified investments and services may be used to enhance an institution’s overall rating of "Satisfactory", but cannot be used to lower a rating that otherwise would have been assigned.
2. To evaluate the institution’s performance in making qualified investments that enhance credit availability in its assessment area(s), consider:
   1. The dollar amount of qualified investments, by type and location;
   2. The impact of those investments on the institution’s assessment area(s); and
   3. The innovativeness or complexity of the investments.
3. To evaluate the institution’s record of providing branches and other services and delivery systems that enhance credit availability in its assessment area(s), consider:
   1. The number of branches and ATMs located in the institution’s assessment area(s);
   2. The number of branches and ATMs located within, or that are readily accessible to, low- and moderateincome geographies compared to those located in, or readily accessible to middle- and upper-income geographies;
   3. The type and level of service(s) offered at branches and ATMs and alternative delivery systems; and
   4. The institution’s record of opening and closing branches.

Ratings

1. Group the analyses of the assessment areas examined by MSA ⁴ and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas that are in that MSA.
2. Summarize conclusions about the institution’s performance in each MSA and the nonmetropolitan portion of each state in which an assessment area received a full scope review. If two or more assessment areas in an MSA or in the nonmetropolitan portion of a state received full scope reviews, weigh the different assessment areas considering such factors as:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The lending opportunities in each;
3. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
3. For assessment areas in MSAs and nonmetropolitan areas that were not examined using the full scope procedures, consider facts and data related to the institution’s lending to ensure that performance in those assessment areas is not inconsistent with the conclusions based on the assessment areas that received full scope examinations.
4. For institutions operating in only one multi-state MSA or one state, assign one of the four preliminary ratings -- "Satisfactory", "Outstanding", "Needs to Improve", and "Substantial Noncompliance" -- in accordance with step 6 below. To determine the relative significance of each MSA and nonmetropolitan area to the institution’s preliminary rating, consider:
   1. The significance of the institution’s activities in each compared to the institution’s overall activities;
   2. The lending opportunities in each;
   3. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and
   4. Demographic and economic conditions in each.
5. For other institutions, assign one of the four preliminary ratings – "Satisfactory", "Outstanding", "Needs to Improve", and "Substantial Noncompliance" -- for each state in which the institution has at least one branch and for each multi-state MSA in which the institution has branches in two or more states in accordance with step #6 below. To determine the relative significance of each MSA and the nonmetropolitan area on the institution’s preliminary state rating, consider:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The lending opportunities in each;
3. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
6. Consult the Small Institution Ratings Matrix and information in workpapers to assign a preliminary rating of:
1. "Satisfactory" if the institution’s performance meets each of the standards for a satisfactory rating or if exceptionally strong performance with respect to some of the standards compensates for weak performance in others;
2. "Needs to Improve" or "Substantial Noncompliance" if the institution’s performance fails to meet the standards for "Satisfactory" performance. Whether a rating is "Needs to Improve" or "Substantial Noncompliance" will depend upon the degree to which the institution’s performance has failed to meet the standards for a "Satisfactory" rating; or
3. "Outstanding" if the institution meets the rating descriptions and standards for "Satisfactory" for each of the five core criteria, and materially exceeds the standards for "Satisfactory" in some or all of the criteria to the extent that an outstanding rating is warranted, or if the institution’s performance with respect to the five core criteria generally exceeds "Satisfactory" and its performance in making qualified investments and providing branches and other services and delivery systems in the assessment area(s) supplement its performance under the five core criteria sufficiently to warrant an overall rating of "Outstanding".
7. For an institution with branches in more than one state or multi-state MSA, assign a preliminary rating to the institution as a whole taking into account the institution’s record in different states or multi-state MSAs by considering:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The lending opportunities in each;
3. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
8. Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s overall CRA rating or, if applicable, its CRA rating in any state or multi-state MSA. ⁵
If evidence of discrimination or other illegal credit practices in any geography by the institution, or in any assessment area by any affiliate whose loans have been considered as part of the institution’s lending performance, was found, consider:
1. The nature, extent, and strength of the evidence of the practices;
2. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices;
3. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and
4. Any other relevant information.
9. Assign a final rating for the institution as a whole and, if applicable, each state in which the institution has at least one branch and each multi-state MSA in which it has branches in two or more states, considering:
1. The institution’s preliminary rating; and
2. Any evidence of discriminatory or other illegal credit practices (see #8 above).
10. Discuss conclusions with management.
11. Write an evaluation of the institution’s performance for the examination report and the public evaluation.
12. Prepare recommendations for a supervisory strategy and for matters that require attention or follow-up activities.

Public File Checklist

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files should be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations, its branching structure and changes to it since its last examination, complaints about the institution’s compliance with the public file requirements, and any other relevant information.
2. In any review of the public file undertaken, determine, as needed, whether branches display an accurate public notice in their lobbies, a complete public file is available in the institution’s main office and at least one branch in each state, and the public file available in the main office and in a branch in each state contains:
1. All written comments from the public relating to the institution’s CRA performance and responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution);
2. The institution’s most recent CRA Public Performance Evaluation;
3. A map of each assessment area showing its boundaries and, on the map or in a separate list, the geographies contained within the assessment area;
4. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, and their street addresses and geographies;
5. The HMDA Disclosure Statement for the prior two calendar years, if applicable;
6. The institution’s loan-to-deposit ratio for each quarter of the prior calendar year;
7. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating during its most recent CRA examination; and
8. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services among locations.
3. In any branch review undertaken, determine whether the branch provides the most recent public evaluation and a list of services available at the branch or a description of material differences from the services generally available at the institution’s other branches.

Public Notice
Determine that the appropriate CRA public notice is displayed as required by § 345.44.

CRA Ratings Matrix — Small Institutions
Characteristic	Outstanding	Satisfactory	Needs to Improve	Substantial Noncompliance
Loan-to-Deposit Ratio	The loan-to-deposit ratio is more than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.	The loan-to-deposit ratio is reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.	The loan-to-deposit ratio is less than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.	The loan-to-deposit ratio is unreasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.
Assessment Area(s) Concentration	A substantial majority of loans and other lending related activities are in the institution’s assessment area(s).	A majority of loans and other lending related activities are in the institution’s assessment area(s).	A majority of loans and other lending related activities are outside the institution’s assessment area(s)	A substantial majority of loans and other lending related activities are outside the institution’s assessment area(s)
Geographic Distribution of Loans	The geographic distribution of loans reflects excellent dispersion throughout the assessment area(s).	The geographic distribution of loans reflects reasonable dispersion throughout the assessment area(s).	The geographic distribution of loans reflects poor dispersion throughout the assessment area(s).	The geographic distribution of loans reflects very poor dispersion throughout the assessment area(s).
Borrower’s Profile	The distribution of borrowers reflects, given the demographics of the assessment area(s), excellent penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.	The distribution of borrowers reflects, given the demographics of the assessment area(s), reasonable penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.	The distribution of borrowers reflects, given the demographics of the assessment area(s), poor penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.	The distribution of borrowers reflects, given the demographics of the assessment area(s), very poor penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.
Response to Substantiated Complaints	The institution has taken noteworthy, creative action in response to substantiated complaints about its performance in meeting assessment area credit needs.	The institution has taken appropriate action in response to substantiate complaints about its performance in meeting assessment area credit needs.	The institution has taken inadequate action in response to substantiated complaints about its performance in meeting assessment area credit needs.	The institution is unresponsive to substantiated complaints about its performance in meeting assessment area credit needs.
Investments	The institution’s investment record enhances credit availability in its assessment area.	N/A	N/A	N/A
Services	The institution’s record of providing branches, ATMs, loan production offices, and/or other services and delivery systems enhances credit availability in its assessment area(s).	N/A	N/A	N/A

On July 19, 2005, the FDIC, FRB, and OCC jointly approved amendments to the CRA regulations which took effect on September 1, 2005. Among the revisions to the regulations, "intermediate small banks" are defined under §345.12 (u) as small banks with assets of at least $250 million as of December 31 of both of the prior two calendar years and less than $1 billion as of December 31 of either of the prior two calendar years (these asset figures may be adjusted annually). These banks are evaluated under two tests: the small bank lending test and a community development test.

Intermediate small institutions are not required to collect and report CRA loan data for small business, small farm, and community development loans. Nevertheless, the CRA regulations continue to allow small institutions, including intermediate small institutions, to opt for an evaluation under the (large bank) lending, investment, and service tests, provided the data is collected and reported.

To evaluate the distribution of loans under intermediate small bank procedures, examiners should review loan files, bank reports, or any other information or analyses a bank may provide. To evaluate community development loans, investments, and services under the intermediate small bank community development test, examiners will review (1) any information a bank may provide, including the results of any assessment of community development needs or opportunities if conducted by the bank, and (2) performance context information obtained by examiners from community, government, civic or other sources.

Intermediate Small Institution Examination Procedures
Examination Scope
For institutions (interstate and intrastate) with more than one assessment area, identify assessment areas for a full scope review. A full scope review is accomplished when examiners complete all of the procedures for an assessment area. For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate MSA/MD, must be reviewed using the full scope examination procedures.

1. To identify assessment areas for full scope review, review prior CRA performance evaluations, available community contact materials, and reported lending data and demographic data on each assessment area. Consider factors such as:
1. The retail lending and community development opportunities in the different assessment areas, particularly areas where the need for credit and community development activities is significant;
2. The level of the institution’s activity in the different assessment areas, including in low- and moderateincome areas, designated disaster areas, or distressed or underserved non-metropolitan middle-income geographies designated by the Agencies ⁶ based on (a) rates of poverty, unemployment, and population loss or (b) population size, density, and dispersion; ⁷
3. The number of other institutions in the different assessment areas and the importance of the institution under examination in serving the different areas, particularly any areas with relatively few other providers of financial services;
4. The existence of apparent anomalies in the reported data for any particular assessment area(s);
5. The length of time since the assessment area(s) was last examined using a full scope review;
6. The institution’s prior CRA performance in different assessment areas;
7. Examiners’ knowledge of the same or similar assessment areas; and
8. Comments from the public regarding the institution’s CRA performance.
2. Select one or more assessment areas in each state, and one or more assessment areas in any multi-state MSA, for examination using these procedures. This is required because for interstate institutions, a rating must be assigned for each state where the institution has a branch and for each multi-state MSA/MD where the institution has branches in two or more states that comprise that MSA/MD.

Performance Context

1. Review standardized worksheets and other agency information sources to obtain relevant demographic, economic, and loan data, to the extent available, for each assessment area under review.
2. Obtain for review the Consolidated Reports of Condition (Call Reports), Uniform Bank Performance Reports (UBPRs), annual reports, supervisory reports, and prior CRA evaluations of the institution under examination to help understand the institution’s ability and capacity, including any limitations imposed by size, financial condition, or statutory, regulatory, economic or other constraints, to respond to safe and sound opportunities in the assessment area(s) for retail loans, and community development loans, qualified investments and community development services development loans, qualified investments and community development services.
3. Discuss with the institution, and consider, any information the institution may provide about its local community and economy, including community development needs and opportunities, its business strategy, its lending capacity, or information that otherwise assists in the evaluation of the institution
4. Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution. Contact local community, governmental or economic development representatives to update or supplement this information. Refer to the Community Contact Procedures for more detail.
5. Review any comments received by the institution or the agency since the last CRA examination.
6. By reviewing the public evaluations and other financial data, determine whether any similarly situated institutions (in terms of size, financial condition, product offerings, and business strategy) serve the same or similar assessment area(s) and would provide relevant and accurate information for evaluating the institution’s CRA performance. Consider, for example, whether the information could help identify:
1. Lending and community development opportunities available in the institution’s assessment area(s) that are compatible with the institution’s business strategy and consistent with safe and sound banking practices;
2. Constraints affecting the opportunities to make safe and sound retail loans, community development loans, qualified investments, and community development services compatible with the institution’s business strategy in the assessment area(s); and
3. Successful CRA-related product offerings or activities utilized by other lenders serving the same or similar assessment area(s).
7. Document the performance context information, particularly community development needs and opportunities, gathered for use in evaluating the institution’s performance.

Assessment Area

1. Review the institution’s stated assessment area(s) to ensure that it:
1. Consists of one or more MSAs/MDs or contiguous political subdivisions (e.g., counties, cities, or towns);
2. Includes the geographies where the institution has its main office, branches, and deposit-taking ATMs, as well as the surrounding geographies in which the institution originated or purchased a substantial portion of its loans;
3. Consists only of whole census tracts;
4. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is located in a multistate MSA/MD;
5. Does not reflect illegal discrimination; and
6. Does not arbitrarily exclude any low- or moderateincome area(s), taking into account the institution’s size, branching structure, and financial condition.
2. If an institution’s assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers.
3. If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Intermediate Small Institution Lending Test Performance Criteria
Loan-to-Deposit Analysis

1. From data contained in Call Reports or UBPRs, calculate the average loan-to-deposit ratio since the last examination by adding the quarterly loan-to-deposit ratios and dividing by the number of quarters.
2. Evaluate whether the institution’s average loan-todeposit ratio is reasonable in light of information from the performance context including, as applicable, the institution’s capacity to lend, the capacity of other similarly situated institutions to lend in the assessment area(s), demographic and economic factors present in the assessment area(s), and the lending opportunities available in the institution’s assessment area(s).
3. If the loan-to-deposit ratio does not appear reasonable in light of the performance context, consider whether the number and the dollar amount of loans sold to the secondary market compensate for a low loan-to-deposit ratio or supplement the institution’s lending performance.
4. Summarize in work papers conclusions regarding the institution’s loan-to-deposit ratio.

Comparison of Credit Extended Inside and Outside of the Assessment Area(s)

1. If available, review HMDA data, automated loan reports, and any other reports that may have been generated by the institution to analyze the extent of lending inside and outside of the assessment area(s). If a report generated by the institution is used, test the accuracy of the output.
2. If loan reports or data analyzing lending inside and outside of the assessment area(s) are not available or comprehensive, or if their accuracy cannot be verified, use sampling guidelines to select a sample of loans originated, purchased or committed to calculate the percentage (by number and dollar volume) located within the assessment area(s).
3. If the percentage of loans or other lending related activities in the assessment area is less than a majority, then the institution does not meet the standards for "Satisfactory" under this performance criterion. In this case, consider information from the performance context, such as information about economic conditions, loan demand, the institution’s size, financial condition, branching network, and business strategies when determining the effect of not meeting the standards for satisfactory for this criterion on the overall rating for the institution.
4. Summarize in work papers conclusions regarding the institution’s level of lending or other lending related activities inside and outside of its assessment area(s).

Distribution of Credit within the Assessment Area(s)

1. Determine whether the number and income distribution of geographies in the assessment area(s) are sufficient for a meaningful analysis of the geographic distribution of the institution’s loans in its assessment area(s).
2. If a geographic distribution analysis of the institution’s loans would be meaningful and the necessary geographic information (street address or census tract number) is collected by the institution in the ordinary course of its business, determine the distribution of the institution’s loans in its assessment area(s) among low-, moderate-, middle-, and upper-income geographies. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
3. If a geographic analysis of loans in the assessment area(s) is performed, identify groups of geographies, by income categories, in which there is little or no loan penetration. Note that institutions are not expected to lend in every geography.
4. To the extent information about borrower income (individuals) or revenues (businesses) is collected by the institution in the ordinary course of its business, determine the distribution of loans in the assessment area(s) by borrower income and by business revenues. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).
5. Identify categories of borrowers by income or business revenue for which there is little or no loan penetration.
6. If an analysis of the distribution of loans among geographies of different income levels would not be meaningful (e.g., very few geographies in the assessment area(s)) or an analysis of lending to borrowers of different income or revenues could not be performed (e.g., income data are not collected for certain loans), consider possible proxies to use for analysis of the institution’s distribution of credit. Possibilities include analyzing geographic distribution by street address rather than geography (if data are available and the analysis would be meaningful) or analyzing the distribution by loan size as a proxy for income or revenue of the borrower.
7. If there are categories of low penetration, form conclusions about the reasons for that low penetration. Consider available information from the performance context, including:
1. Information about the institution’s size, branch network, financial condition, supervisory restrictions (if any) and prior CRA record;
2. Information from discussions with management, loan officers, and members of the community;
3. Information about economic conditions, particularly in the assessment area(s);
4. Information about demographic or other characteristics of particular geographies that could affect loan demand, such as the existence of a prison or college; and
5. Information about other lenders serving the same or similar assessment area(s).
8. Summarize in work papers conclusions concerning the geographic distribution of loans and the distribution of loans by borrower characteristics in the institution’s assessment area(s).

Review of Complaints

1. Review all complaints relating to the institution’s CRA performance received by the institution (these should all be contained in the institution’s public file) and those that were received by its supervisory agency.
2. If there were any complaints, evaluate the institution’s record of taking action, if warranted, in response to written complaints about its CRA performance.
3. If there were any complaints, discuss the preliminary findings in this section with management.
4. If there were any complaints, discuss the preliminary findings in this section with management.
5. Discuss the preliminary findings in the lending test section with management.

Intermediate Small Institution Community Development Test
An institution should appropriately assess the needs in its community, engage in different types of community development activities based on those needs and the isntesptist uttoi oanp’ps lcya iptas cities, and take reasonable community development resources strategically to meet those needs. The flexibility inherent in the community development test allows intermediate small institutions to focus on meeting the substance of community needs through these activities. Examiners will consider the results of any assessment by the institution of community needs along with information from community, government, civic, and other sources to gain a working knowledge of community needs.

1. Identify the number and amount of the institution’s community development loans, qualified investments, and community development services. Obtain this information through discussions with management, HMDA data collected by the institution, as applicable; investment portfolios; any other relevant financial records; and materials available to the public. Include, at the institution’s option:
1. Community development loans, qualified investments, and community development services provided by affiliates, if they are not claimed by any other institution; and
2. Community development lending by consortia or third parties.
2. Review community development loans, qualified investments, and community development services to verify that they qualify as community development.
3. If the institution participates in community development lending by consortia or third parties, or claims activities provided by affiliates, review records provided to the institution by the consortia or third parties or affiliates to ensure that the community development loans claimed by the institution do not account for more than the institution’s share (based on the level of its participation or investment) of the total loans originated by the consortium or third party.
4. Considering the institution’s capacity and constraints and other information obtained through the performance context review, form conclusions about:
1. The number and amount of community development loans and qualified investments;
2. The extent to which the institution provides community development services, including the provision and availability of services to low- and moderate-income people, including through branches and other facilities in low- and moderate-income areas;
3. The responsiveness to the opportunities for community development lending, qualified investments, and community development services, considering:
1. The results of any assessment of community development needs and opportunities provided by the institution;
2. The examiner’s review of performance context information from community, government, civic, and other sources; and
3. Whether the amount and combination of community development loans, qualified investments, and community development services, along with their qualitative aspects, are responsive to community needs and opportunities.
5. Summarize conclusions regarding the institution’s community development performance and retain in the work papers.

Overall Intermediate Small Institution CRA Rating

1. Group the analyses of the assessment areas examined by MSA ⁸and non-MSA areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas that are in that MSA.
2. Summarize conclusions about the institution’s performance in each MSA and the non-MSA portion of each state in which an assessment area received a full scope review. If two or more assessment areas in an MSA or in the non- MSA portion of a state received full scope reviews, weigh the different assessment areas considering such factors as:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The retail lending and community development opportunities in each;
3. The importance of the institution in providing loans and community development activities to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
3. For assessment areas in MSAs and non-MSA areas that were not examined using these procedures, consider facts and data related to the institution’s lending and community development activities to ensure that performance in those assessment areas is not inconsistent with the conclusions based on the assessment areas which received full scope reviews.
4. For institutions operating in only one multi-state MSA or one state, assign one of the four preliminary ratings – "Satisfactory," "Outstanding," "Needs to Improve," or "Substantial Noncompliance" -- in accordance with step 6 below. To determine the relative significance of each MSA and non-MSA area to the institution’s preliminary rating, consider:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The retail lending and community development opportunities in each;
3. The importance of the institution to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
5. For other institutions, assign one of the four preliminary ratings -- "Satisfactory," "Outstanding," "Needs to Improve," or "Substantial Noncompliance" -- for each state in which the institution has at least one branch and for each multi-state MSA in which the institution has branches in two or more states in accordance with step #6 below. To determine the relative significance of each MSA and the non-MSA area on the institution’s preliminary state rating, consider:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The retail lending and community development opportunities in each;
3. The importance of the institution in each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
6. Consult the intermediate small institution ratings matrices (lending and community development) and information in work papers to assign a preliminary rating of:
1. "Satisfactory" if the institution’s performance is rated as "Satisfactory" in each test.
2. "Needs to Improve" or "Substantial Noncompliance," depending upon the degree to which the institution’s performance has failed to meet the standards for a "Satisfactory" rating on a test; or
3. "Outstanding" if the institution is rated an "Outstanding" on both tests; or "Outstanding" on one test and the extent to which the institution meets or exceeds the "Satisfactory" criteria on the other test.
7. For an institution with branches in more than one state or multi-state MSA, assign a preliminary rating to the institution as a whole taking into account the institution’s record in different states or multi-state MSAs by considering:
1. The significance of the institution’s activities in each compared to the institution’s overall activities;
2. The retail lending and community development opportunities in each;
3. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.

Community Development Test Ratings Matrix— Intermediate Small Institutions
Outstanding	Satisfactory	Needs to Improve	Substantial Noncompliance
The institution’s community development performance demonstrates excellent responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).	The institution’s community development performance demonstrates adequate responsiveness to the community development needs of its assessment area(s) through community development loans, qualified investments, and community development services as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).	The institution’s community development performance demonstrates poor responsiveness to the community development needs of its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).	The institution’s community development performance demonstrates very poor responsiveness to the community development needs of its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).





8. Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices should lower the institution’s overall CRA rating or, if applicable, its CRA rating in any state or multi-state MSA. If evidence of discrimination or other illegal credit practices in any geography by the institution, or in any assessment area by any affiliate whose loans were considered as part of the institution’s lending performance, was found, consider:
1. The nature, extent, and strength of the evidence of the practices;
2. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices;
3. Any corrective action that the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and
4. Any other relevant information.
9. Assign a final rating for the institution as a whole and, if applicable, each state in which the institution has at least one branch and each multi-state MSA in which it has branches in two or more states, considering:
1. The institution’s preliminary rating; and
2. Any evidence of discriminatory or other illegal credit practices.
10. Discuss conclusions with management.
11. Write an evaluation of the institution’s performance for the examination report and the public evaluation.
12. Prepare recommendations for a supervisory strategy and for matters that require attention or follow-up activities.

Public File Checklist

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files should be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations, its branching structure and changes to it since its last examination, complaints about the institution’s compliance with the public file requirements, and any other relevant information.
2. In any review of the public file undertaken, determine whether branches display an accurate public notice in their lobbies, a complete public file is available in the institution’s main office and at least one branch in each state, and the public file(s) in the main office and in each state contain:
1. All written comments from the public relating to the institution’s CRA performance and any responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution);
2. The institution’s most recent CRA Performance Evaluation;
3. A map of each assessment area showing its boundaries and, on the map or in a separate list, the geographies contained within the assessment area;
4. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, their street addresses and geographies;
5. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services between those locations;
6. The institution’s loan-to-deposit ratio for each quarter of the prior calendar year;
7. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating during its most recent CRA examination; and
8. HMDA Disclosure Statements for the prior two calendar years for the institution and for each nondepository affiliate the institution has elected to include in assessment of its CRA record, if applicable.
3. In any branch review undertaken, determine whether the branch provides the most recent public evaluation and a list of services generally available at its branches and a description of any material differences in the availability or cost of services at the branch (or a list of services available at the branch).

Public Notice
Determine that the appropriate CRA public notice is displayed as required by § 345.44.

The large institution performance criteria – the Lending, Investment, and Service Tests – cover all institutions with assets of $1 billion or more (as of December 31 of both of the prior two calendar years) unless they requested designation and received approval as wholesale or limited-purpose institutions or have been approved for evaluation under a strategic plan.

As under the streamlined small institution procedures, examiners are expected to exercise judgment and common sense to minimize the burden imposed by the examination process, consistent with a complete and accurate assessment of performance. Therefore, for example, examiners may be able to use economic and demographic data analyzed in an examination of an institution in examinations of other institutions serving the same or similar assessment areas. Community contacts may also be combined to cover more than one institution in a given market. In cases where an institution has analyzed its CRA performance, examiners may use those analyses, after verifying their accuracy and reliability, and should supplement those analyses when questions are raised. Examiners should consider any performance related information offered by an institution, and should request information called for by examination procedures.

Large institutions are required to collect and report certain loan data relative to small business, small farm, and community development loans. The existence of those data in automated form will permit examiners to conduct much of the necessary analysis prior to the on-site examination and thereby reduce any disruptions caused by the presence of examiners at the institution.

Examination Procedures for Large Institutions
Examination Scope
For institutions (interstate and intrastate) with more than one assessment area, identify assessment areas for a full scope review. A full scope review is accomplished when examiners complete all of the procedures for an assessment area. For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate metropolitan statistical area/metropolitan division (MSA/MD), must be reviewed using the full scope examination procedures.

1. Review prior CRA performance evaluations, available community contact materials, HMDA and CRA performance data including the institution’s lending, investment, and service activities by assessment area, the lending of other lenders in those markets, and demographic information from those markets.
2. Select assessment areas for full scope review by considering the factors below.
1. The lending, investment, and service opportunities in the different assessment areas, particularly areas where the need for bank credit, investments and services is significant;
2. The level of the institution’s lending, investment, and service activity in the different assessment areas, including in low- and moderate-income areas, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies designated by the Agencies ⁹ based on (a) rates of poverty, unemployment, and population loss or (b) population size, density, and dispersion; ¹⁰
3. The number of other institutions in the different assessment areas and the importance of the institution under examination in serving the different areas, particularly any areas with relatively few other providers of financial services;
4. Comments and feedback received from community groups and the public regarding the institution’s CRA performance;
5. The size of the population;
6. The existence of apparent anomalies in the reported CRA or HMDA data for any particular assessment area(s);
7. The length of time since the assessment area(s) was last examined using a full scope review;
8. The institution’s prior CRA performance in different assessment areas;
9. Examiners’ knowledge of the same or similar assessment areas; and
10. Issues raised during CRA examinations of other institutions and prior community contacts in the institution’s assessment areas or similar assessment
    areas.

Performance Context

1. Review standardized worksheets and other agency information sources to obtain relevant demographic, economic, and loan data, to the extent available, for each assessment area under review. Compare the data to similar data for the MSA/MD, county, or state to determine how any similarities or differences will help in evaluating lending, investment, and service opportunities and community and economic conditions in the assessment area. Also consider whether the area has housing costs that are particularly high given area median income.
2. Obtain for review the Consolidated Reports of Condition (Call Reports), annual reports, supervisory reports, and prior CRA evaluations of the institution under examination to help understand the institution’s ability and capacity, including any limitations imposed by size, financial condition, or statutory, regulatory, economic or other constraints, to respond to safe and sound opportunities in the assessment area(s) for retail loans, and community development loans, investments and services.
3. Discuss with the institution, and consider, any information the institution may provide about its local community and economy, including community development needs and opportunities, its business strategy, its lending capacity, or information that otherwise assists in the evaluation of the institution.
4. Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution. Contact local community, governmental or economic development representatives to update or supplement this information. Refer to the Community Contact Procedures for more detail.
5. Review the institution’s public file and any comments received by the institution or the agency since the last CRA performance evaluation for information that assists in the evaluation of the institution.
6. By reviewing public evaluations and other financial data, determine whether any similarly situated institutions (in terms of size, financial condition, product offerings, and business strategy) serve the same or similar assessment area(s) and would provide relevant and accurate information for evaluating the institution’s CRA performance. Consider, for example, whether the information could help identify:
1. Lending and community development opportunities available in the institution’s assessment area(s) that are compatible with the institution’s business strategy and consistent with safe and sound banking practices;
2. Constraints affecting the opportunities to make safe and sound retail loans, community development loans, qualified investments and community development services compatible with the institution’s business strategy in the assessment area(s); and
3. Successful CRA-related product offerings or activities utilized by other lenders serving the same or similar assessment area(s).
7. Document the performance context information, particularly community development needs and opportunities, gathered for use in evaluating the institution’s performance.

Assessment Area

1. Review the institution’s stated assessment area(s) to ensure that it:
1. Consists of one or more MSAs/MDs or contiguous political subdivisions (i.e., counties, cities, or towns);
2. Includes the geographies where the institution has its main office, branches, and deposit-taking ATMs, as well as the surrounding geographies in which the institution originated or purchased a substantial portion of its loans;
3. Consists only of whole census tracts;
4. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is in a multi-state MSA/MD;
5. Does not reflect illegal discrimination; and
6. Does not arbitrarily exclude any low- or moderateincome area(s) taking into account the institution’s size, branching structure, and financial condition.
2. If the assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers.
3. If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Lending, Investment, and Service Tests for Large Retail Institutions
Lending Test

1. Identify the institution’s loans to be evaluated by reviewing:
1. The most recent HMDA and CRA Disclosure Statements, the interim HMDA LAR, and any interim CRA loan data collected by the institution;
2. A sample of consumer loans if consumer lending represents a substantial majority of the institution’s business so that an accurate conclusion concerning the institution’s lending record could not be reached without a review of consumer loans; and
3. Any other information the institution chooses to provide, such as small business loans secured by non-farm residential real estate, home equity loans not reported for HMDA, unfunded commitments, any information on loans outstanding, and loan distribution analyses conducted by or for the institution, including any explanations for identified concerns or actions taken to address them.
2. Test a sample of loan files to verify the accuracy of data collected and/or reported by the institution. In addition, ensure that:
1. Affiliate loans reported by the institution are not also attributed to the lending record of another affiliate subject to CRA. This can be accomplished by requesting the institution to identify how loans are attributed and how it ensures that all the loans within a given lending category (e.g., small business loans, home purchase loans, motor vehicle, credit card, home equity, other secured, and other unsecured loans) in a particular assessment area are reported for all of the institution’s affiliates if the institution elects to count any affiliate loans;
2. Loans reported as community development loans (including those originated or purchased by consortia or third parties) meet the definition of community development loans. Determine whether community development loans benefit the institution’s assessment area(s) or a broader statewide or regional area that includes the institution’s assessment area(s). Except for multi-family loans, ensure that community development loans have not also been reported by the institution or an affiliate as HMDA, small business or farm, or consumer loans. Review records provided to the institution by consortia or third parties or affiliates to ensure that the amount of the institution’s third party or consortia or affiliate lending does not account for more than the institution’s percentage share (based on the level of its participation or investment) of the total loans originated by the consortia, third parties, or affiliates; and
3. All consumer loans in a particular loan category have been included when the institution collects and maintains the data for one or more loan categories and has elected to have the information evaluated.
3. Identify the volume, both in number and dollar amount, of each type of loan being evaluated that the institution has made or purchased within its assessment area. Evaluate the institution’s lending volume considering the institution’s resources and business strategy and other information from the performance context, such as population, income, housing, and business data. Note whether the institution conducts certain lending activities in the institution and other activities in an affiliate in a way that could inappropriately influence an evaluation of borrower or geographic distribution.
4. Review any analyses prepared by or for and offered by the institution for insight into the reasonableness of the institution’s geographic distribution of lending. Test the accuracy of the data and determine if the analyses are reasonable. If areas of low or no penetration were identified, review explanations and determine whether action was taken to address disparities, if appropriate.
5. Supplement with an independent analysis of geographic distribution as necessary. As applicable, determine the extent to which the institution is serving geographies in each income category and whether there are conspicuous gaps unexplained by the performance context. Conclusions should recognize that institutions are not required to lend in every geography. The analysis should consider:
1. (Excluding affiliate lending) the number, dollar amount, and percentage of the institution’s loans located within any of its assessment areas, as well as the number, dollar amount, and percentage of the institution’s loans located outside any of its assessment areas;
2. The number, dollar amount, and percentage of each type of loan in the institution’s portfolio in each geography, and in each category of geography (low-, moderate-, middle-, and upper-income);
3. The number of geographies penetrated in each income category, as determined in step (b), and the total number of geographies in each income category within the assessment area(s);
4. The number and dollar amount of its home purchase, home refinancing, and home improvement loans, respectively in each geography compared to the number of one-to-four family owner-occupied units in each geography;
5. The number and dollar amount of multi-family loans in each geography compared to the number of multifamily structures in each geography;
6. The number and dollar amount of small business and farm loans in each geography compared to the number of small businesses/farms in each geography; and
7. Whether any gaps exist in lending activity for each income category, by identifying groups of contiguous geographies that have no loans or those with low penetration relative to the other geographies.
6. If there are groups of contiguous geographies within the institution’s assessment area with abnormally low penetration, the examiner may determine if an analysis of the institution’s performance compared to other lenders for home mortgage loans (using reported HMDA data) and for small businesses and small farm loans (using data provided by lenders subject to CRA) would provide an insight into the institution’s lack of performance in those areas. This analysis is not required, but may provide insight if:
1. The reported loan category is substantially related to the institution’s business strategies;
2. The area under analysis substantially overlaps the institution’s assessment area(s);
3. The analysis includes a sufficient number and volume of transactions, and an adequate number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s); and
4. The assessment area data is free from anomalies that can cause distortions such as dominant lenders that are not subject to the CRA, a lender that dominates a part of an area used in calculating the overall lending, or there is an extraordinarily high level of performance, in the aggregate, by lenders in the institution’s assessment area(s).
7. Using the analysis from step #6, form a conclusion as to whether the institution’s abnormally low penetration in certain areas should constitute a negative consideration under the geographic distribution performance criteria of the lending test by considering:
1. The institution’s share of reported loans made in low- and moderate-income geographies versus its share of reported loans made in middle- and upper-income geographies within the assessment area(s);
2. The number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s);
3. The reasons for penetration of these areas by other lenders, if any, and the lack of penetration by the institution being examined developed through discussions with management and the community contact process;
4. The institution’s ability to serve the subject area in light of (i) the demographic characteristics, economic condition, credit opportunities and demand; and (ii) the institution’s business strategy and its capacity and constraints;
5. The degree to which penetration by the institution in the subject area in a different reported loan category compensates for the relative lack of penetration in the subject area; and
6. The degree to which penetration by the institution in other low- and moderate-income geographies within the assessment area(s) in reported loan categories compensates for the relative lack of penetration in the subject area.
8. Review any analyses prepared by or for and offered by the institution for insight into the reasonableness of the institution’s distribution of lending by borrower characteristics. Test the accuracy of the data and determine if the analyses are reasonable. If areas of low or no penetration were identified, review explanations and determine whether action was taken to address disparities, if appropriate.
9. Supplement with an independent analysis of the distribution of the institution’s lending within the assessment area by borrower characteristics as necessary and applicable. Consider factors such as:
1. The number, dollar amount, and percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper-income borrowers;
2. The percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper-income borrowers compared to the percentage of the population within the assessment area who are low-, moderate-, middle-, and upper-income;
3. The number and dollar amount of small loans originated to businesses or farms by loan size of less than $100,000; at least $100,000 but less than $250,000; and at least $250,000 but less than or equal to $1,000,000;
4. The number and amount of the small loans to businesses or farms that had annual revenues of less than $1 million compared to the total reported number and amount of small loans to businesses or farms; and
5. If the institution adequately serves borrowers within the assessment area(s), whether the distribution of the institution’s lending outside of the assessment area based on borrower characteristics would enhance the
10. If the institution adequately serves borrowers within the assessment area(s), whether the distribution of the institution’s lending outside of the assessment area based on borrower characteristics would enhance the
1. The extent to which community development lending opportunities have been available to the institution;
2. The institution’s responsiveness to the opportunities for community development lending; and
3. The extent of leadership the institution has demonstrated in community development lending.
11. Evaluate whether the institution’s performance under the lending test is enhanced by offering innovative loan products or products with more flexible terms to meet the credit needs of low-and moderate-income individuals or geographies. Consider:
1. The degree to which the loans serve low- and moderateincome creditworthy borrowers in new ways or loans serve groups of creditworthy borrowers not previously served by the institution; and
2. The success of each product, including number and dollar amount of loans originated during the review period.
12. Discuss with management the preliminary findings in this section.
13. Summarize your conclusions regarding the institution’s lending performance under the following criteria:
1. Lending activity;
2. Geographic distribution;
3. Borrower characteristics;
4. Community development lending; and
5. Use of innovative or flexible lending practices.
14. Prepare comments for the public evaluation and the examination report.

Investment Test

1. Identify qualified investments by reviewing the institution’s investment portfolio, and at the institution’s option, its affiliate’s investment portfolio. As necessary, obtain a prospectus, or other information that describes the investment(s). This review should encompass qualified investments that were made since the previous examination (including those that have been sold or have matured) and may consider qualified investments made prior to the previous examination still outstanding. Also consider qualifying grants, donations, or in-kind contributions of property since the last examination that are for community development purposes.
2. Evaluate investment performance by determining:
1. Whether the investments benefit the institution’s assessment area(s) or a broader statewide or regional geographic area that includes the institution’s assessment area(s);
2. Whether the investments have been considered under the lending and service tests;
3. Whether an affiliate’s investments, if considered, have been claimed by another institution;
4. The dollar amount of investments made to entities that are in or serve the assessment area, in relation to the institution’s capacity and constraints, and assessment area characteristics and needs;
5. The use of any innovative or complex investments, in particular those that are not routinely provided by other investors; and
6. The degree to which investments serve low- and moderate-income areas or individuals, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies, and are responsive to available opportunities for qualified investments.
3. Discuss with management the preliminary findings in this section.
4. Summarize conclusions about the institution’s investment performance after considering:
1. The number and dollar amount of qualified investments;
2. The innovativeness and complexity of qualified investments;
3. The degree to which these types of investments are not routinely provided by other private investors; and
4. The responsiveness of qualified investments to available opportunities.
5. Write comments for the public evaluation and the examination report.

Service Test
Retail Banking Services

1. Determine from information available in the institution’s Public File:
1. The distribution of the institution’s branches among low-, moderate-, middle-, and upper-income geographies in the institution’s assessment area(s); and
2. The distribution of the institution’s branches among low-, moderate-, middle-, and upper-income geographies in the institution’s assessment area(s); and
2. Obtain the institution’s explanation for any material
   differences in the hours of operations of, or services
   available at, branches within low-, moderate-, middle-, and
   upper-income geographies in the institution’s assessment
   area(s).
3. Evaluate the institution’s record of opening and closing branch offices since the previous examination and information that could indicate whether changes have had a positive or negative effect, particularly on low- and moderate-income geographies or individuals.
4. Evaluate the accessibility and use of alternative systems for delivering retail banking services, (e.g., proprietary and non-proprietary ATMs, loan production offices (LPOs), banking by telephone or computer, and bank-at-work or by mail programs) in low- and moderate-income geographies and to low- and moderate-income individuals.
5. Assess the quantity, quality and accessibility of the institution’s service-delivery systems provided in low-, moderate-, middle-, and upper-income geographies. Consider the degree to which services are tailored to the convenience and needs of each geography (e.g., extended business hours, including weekends, evenings or by appointment, providing bi-lingual services in specific geographies, etc.).

Community Development Services

6. Identify the institution’s community development services, including at the institution’s option, services through affiliates, through discussions with management and a review of materials available from the public. Determine whether the services:
1. Qualify under the definition of community development services;
2. Benefit the assessment area(s) or a broader statewide or regional area encompassing the institution’s assessment area(s); and
3. If provided by affiliates of the institution, are not claimed by other affiliated institutions.
7. Evaluate in light of information gathered through the performance context procedures:
1. The extent of community development services offered and used;
2. Their innovativeness, including whether they serve low- or moderate-income customers in new ways or serve groups of customers not previously served; and
3. The degree to which they serve low- or moderateincome areas or individuals and their responsiveness to available opportunities for community development services.
8. Discuss with management the preliminary findings.
9. Summarize conclusions about the institution’s system for delivering retail banking and community development services, considering:
1. The distribution of branches among low-, moderate-, middle-, and upper-income geographies;
2. The institution’s record of opening and closing branches, particularly branches located in low- or moderate-income geographies or primarily serving low- or moderate-income individuals;
3. The availability and effectiveness of alternative systems for delivering retail banking services;
4. The extent to which the institution provides community development services;
5. The innovativeness and responsiveness of community development services; and
6. The range and accessibility of services provided in low-, moderate-, middle-, and upper-income geographies.
10. Write comments for the public evaluation and the examination report.

Ratings

1. Group the analyses of the assessment areas examined by MSA ¹¹ and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multistate MSA, group the assessment areas that are in that multistate MSA.
2. Summarize conclusions regarding the institution’s performance in each MSA and nonmetropolitan portion of each state in which an assessment area was examined using these procedures. If two or more assessment areas in an MSA or in a nonmetropolitan portion of a state were examined using these procedures, determine the relative significance of the institution’s performance in each assessment area by considering:
1. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to the institution’s overall activities;
2. The lending, investment, and service opportunities in each;
3. The significance of the institution’s lending, qualified investments, and lending-related services for each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
3. Evaluate the institution’s performance in those assessment area(s) not selected for examination using the full scope procedures.
1. Revisit the demographic and lending, investment, and service data considered in scoping the examination. Also, consider the institution’s operations (branches, lending portfolio mix, etc.) in the assessment area;
2. Through a review of the public file(s), consider any services that are customized to the assessment area; and
3. Consider any other information provided by the institution (e.g., CRA self-assessment) regarding its performance in the area.
4. For MSAs, and the nonmetropolitan portion of the state, where one or more assessment areas were examined using the full scope procedures, ensure that performance in the assessment areas not examined using the full scope procedures is consistent with the conclusions based on the assessment areas examined in step 2, above. Select one of the following options for inclusion in the public evaluation:
1. The institution’s [lending, investment, service] performance in [the assessment area/these assessment areas] is consistent with the institution’s [lending, investment, service] performance in the assessment areas within [the MSA/non-metropolitan portion of the state] that were reviewed using the examination procedures; and
2. The institution’s [lending/investment/service] performance in [the assessment area/these assessment areas] [exceeds/is below] the [lending/investment/ service] performance in the assessment areas within [the MSA/nonmetropolitan portion of the state] that were reviewed using the examination; however, it does not change the conclusion for the [MSA/ nonmetropolitan portion of the state].
5. For MSA, and nonmetropolitan portions of the state, where no assessment area was examined using the full scope procedures, form a conclusion regarding the institution’s lending, investment, and service performance in the assessment area(s). When there are several assessment areas in the MSA, or the nonmetropolitan portion of the state, form a conclusion regarding the institution’s performance in the MSA, or the nonmetropolitan portion of the state. Determine the relative significance of the institution’s performance in each assessment area within the MSA, or the nonmetropolitan portion of the state, by considering:
1. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to the institution’s overall activities; and
2. Demographic and economic conditions in each. Also, select one of the following options for inclusion in the public evaluation:
1. The institution’s [lending, investment, service] performance in [the assessment area/these assessment areas] is consistent with the institution’s [lending, investment, service] performance [overall/ in the state]; and
2. The institution’s [lending/investment/service] performance in [the assessment area/these assessment areas] [exceeds/is below] the [lending/investment/service] performance for the [institution/state], however, it does not change the [institution’s/state] rating.
6. To determine the relative significance of each MSA and nonmetropolitan area to the institution’s overall performance (institutions operating in one state) or statewide or multistate MSA performance (institutions operating in more that one state), consider:
1. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to the institution’s overall activities;
2. The lending, investment, and service opportunities in each;
3. The significance of the institution’s lending, qualified investments, and lending-related services for each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
7. Using the Component Test Ratings chart below, assign component ratings that reflect the institution’s lending, investment, and service performance. In the case of an institution with branches in just one state, one set of component ratings will be assigned to the institution. In the case of an institution with branches in two or more states and multistate MSAs, component ratings will be assigned for each state or multistate MSA reviewed.

Component Test Ratings	Points for Lending	Points for Investment	Points for Service
Outstanding	12 points	6 points	6 points
High Satisfactory	9 points	4 points	4 points
Low Satisfactory	6 points	3 points	3 points
Needs to Improve	3 points	1 points	1 points
Substanial Noncompliance	0 points	0 points	0 points





8. Assign a preliminary composite rating for the institutions operating in only one state and a preliminary rating for each state or multistate MSA reviewed for institutions operating in more than one state. In assigning the rating, sum the numerical values of the component test ratings for the lending, investment and service tests and refer to the chart, below. No institution, however, may receive an assigned rating of "Satisfactory" or higher unless it receives a rating of at least "Low Satisfactory" on the lending test. In addition, an institution’s assigned rating can be no more than three times the score on the lending test.

Composite Rating	Points Needed
Outstanding	20 points or over
Satisfactory	11 through 19 points
Needs to Improve	5 through 10 points
Substanial Noncompliance	0 through 4 points





9. Consider an institution’s past performance if the prior rating was "Needs to Improve." If the poor performance has continued, an institution could be considered for a "Substantial Noncompliance" rating.
10. For institutions with branches in more than one state or multistate MSA, assign a preliminary overall rating. To determine the relative importance of each state and multistate MSA to the institution’s overall rating, consider:
1. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to the institution’s overall activities;
2. The lending, investment, and service opportunities in each;
3. The significance of the institution’s lending, qualified investments, and lending-related services for each, particularly in light of the number of other institutions and the extent of their activities in each; and
4. Demographic and economic conditions in each.
11. Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s preliminary overall CRA rating, or the preliminary CRA rating for a state or multistate MSA. ¹² If evidence of discrimination or other illegal credit practices by the institution in any geography, or in any assessment area by any affiliate whose loans have been considered as part of the bank’s lending performance, was found, consider the following:
1. The nature, extent, and strength of the evidence of the practices;
2. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices;
3. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and
4. Any other relevant information.
12. Assign final overall rating to the institution, considering the preliminary rating and any evidence of discriminatory or other illegal credit practices, and discu