[Federal Register: May 4, 1995 (Volume 60, Number 86)]
[Rules and Regulations ]               
[Page 22155-22223]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 22155]]

_______________________________________________________________________

Part III

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Part 25

Federal Reserve System

12 CFR Part 228

Federal Deposit Insurance Corporation

12 CFR Part 345

Department of the Treasury

Office of Thrift Supervision

12 CFR Part 563e

Federal Reserve System

12 CFR Part 203

_______________________________________________________________________

Community Reinvestment Act Regulations and Home Mortgage Disclosure; 
Final Rules

[[Page 22156]]

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket No. 95-07]
RIN 1557-AB32

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R-0822]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AB27

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563e

[Docket No. 95-72]
RIN 1550-AA69

FEDERAL RESERVE SYSTEM

12 CFR Part 203

Community Reinvestment Act Regulations

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS).

ACTION: Joint final rule.

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SUMMARY: The OCC, Board, FDIC, and OTS, (collectively, the Federal 
financial supervisory agencies or agencies) are amending their 
regulations concerning the Community Reinvestment Act (CRA). The 
agencies published a joint notice of proposed rulemaking on this issue 
on December 21, 1993 (1993 proposal) and again on October 7, 1994 (1994 
proposal). This final rule reflects comments received on both proposals 
and the agencies' further internal considerations.
   The purpose of the CRA regulations is to establish the framework 
and criteria by which the agencies assess an institution's record of 
helping to meet the credit needs of its community, including low- and 
moderate-income neighborhoods, consistent with safe and sound 
operations, and to provide that the agencies' assessment shall be taken 
into account in reviewing certain applications.
   The final rule seeks to emphasize performance rather than process, 
to promote consistency in evaluations, and to eliminate unnecessary 
burden. As compared to the 1993 and 1994 proposals, the final rule 
reduces recordkeeping and reporting requirements and makes other 
modifications and clarifications.

EFFECTIVE DATES: This joint rule is effective July 1, 1995, except 12 
CFR 25.3 through 25.7 and 25.51, 12 CFR 228.3 through 228.7 and 228.51, 
12 CFR 345.3 through 345.7 and 345.51, and 12 CFR 563e.3 through 563e.7 
and 563e.51 are removed effective July 1, 1997.

FOR FURTHER INFORMATION CONTACT:
   OCC: Stephen M. Cross, Deputy Comptroller for Compliance, (202) 
874-5216; or Matthew Roberts, Director, Community and Consumer Law 
Division, (202) 874-5750, Office of the Comptroller of the Currency, 
250 E Street, SW., Washington, DC 20219.
   Board: Glenn E. Loney, Associate Director, Division of Consumer and 
Community Affairs, (202) 452-3585; Robert deV. Frierson, Assistant 
General Counsel, Legal Division, (202) 452-3711; or Leonard N. Chanin, 
Managing Counsel, Division of Consumer and Community Affairs, (202) 
452-3667, Board of Governors of the Federal Reserve System, 20th Street 
and Constitution Avenue, NW., Washington, DC 20551.
   FDIC: Bobbie Jean Norris, Chief, Fair Lending Section, Division of 
Compliance and Consumer Affairs, (202) 942-3090; Robert W. Mooney, Fair 
Lending Specialist, Division of Compliance and Consumer Affairs, (202) 
942-3092; or Ann Hume Loikow, Counsel, Regulation and Legislation 
Section, Legal Division, (202) 898-3796, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429.
   OTS: Timothy R. Burniston, Assistant Director for Compliance 
Policy, (202) 906-5629; Theresa A. Stark, Program Analyst, Compliance 
Policy, (202) 906-7054; or Lewis A. Segall, Senior Attorney, 
Regulations and Legislation Division, Chief Counsel's Office, (202) 
906-6648, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.

SUPPLEMENTARY INFORMATION:

Introduction

   The Federal financial supervisory agencies jointly are amending 
their regulations implementing the CRA (12 U.S.C. 2901 et seq.). The 
amended regulations will, when fully effective, replace the existing 
regulations in their entirety.
   The CRA is designed to encourage regulated financial institutions 
to help meet the credit needs of their entire communities, including 
low- and moderate-income neighborhoods, consistent with safe and sound 
operations. Despite the CRA's notable successes in improving access to 
credit, banks and savings and loan institutions, as well as community 
and consumer groups, maintain that its full potential has not been 
realized, in large part because regulatory compliance efforts have 
focused on process rather than performance.
   In accordance with a request from the President, the Federal 
financial supervisory agencies have undertaken a comprehensive effort 
to reform their standards for evaluating compliance with CRA 
requirements. The final rule implements this reform effort by 
substituting a new system that evaluates institutions based on their 
actual performance in helping to meet their communities' credit needs.

Background

   In 1977, the Congress enacted the CRA to encourage banks and 
thrifts to help meet the credit needs of their entire communities, 
including low- and moderate-income neighborhoods, consistent with safe 
and sound lending practices. In the CRA, the Congress found that:
   ``(1) regulated financial institutions are required by law to 
demonstrate that their deposit facilities serve the convenience and 
needs of the communities in which they are chartered to do business;
   (2) the convenience and needs of communities include the need for 
credit as well as deposit services; and
   (3) regulated financial institutions have continuing and 
affirmative obligation[s] to help meet the credit needs of the local 
communities in which they are chartered.''

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

   The CRA has come to play an increasingly important role in 
improving access to credit in communities--both rural and urban--across 
the country. Under the impetus of the CRA, many banks and thrifts 
opened new branches, provided expanded services, and made substantial 
commitments to increase lending to all segments of society.
   Despite these successes, the CRA examination system has been 
criticized. Financial institutions have indicated that policy guidance 
from the agencies on the CRA is unclear and that examination standards 
are applied inconsistently. Financial institutions [[Page 22157]] have 
also stated that the CRA examination process encourages them to 
generate excessive paperwork at the expense of providing loans, 
services, and investments to their communities.
   Community, consumer, and other groups have agreed with the industry 
that there are inconsistencies in CRA evaluations and that current 
examinations overemphasize process and underemphasize performance. 
Community and consumer groups also have criticized the agencies for 
failing aggressively to penalize banks and thrifts for poor 
performance.
   Noting that the CRA examination process could be improved, 
President Clinton requested in July 1993 that the Federal financial 
supervisory agencies reform the CRA regulatory system. The President 
asked the agencies to consult with the banking and thrift industries, 
Congressional leaders, and leaders of community-based organizations 
across the country to develop new CRA regulations and examination 
procedures that ``replace paperwork and uncertainty with greater 
performance, clarity, and objectivity.''
   Specifically, the President asked the agencies to refocus the CRA 
examination system on more objective, performance-based assessment 
standards that minimize compliance burden while stimulating improved 
performance. He also asked the agencies to develop a well-trained corps 
of examiners who would specialize in CRA examinations. The President 
requested that the agencies promote consistency and even-handedness, 
improve CRA performance evaluations, and institute more effective 
sanctions against institutions with consistently poor performance.
   To implement the President's initiative, the four agencies held a 
series of seven public hearings across the country in 1993. At those 
hearings, the agencies heard from over 250 witnesses. Nearly 50 others 
submitted written statements. The preamble to the 1993 proposal 
reviewed the results of those hearings.

The 1993 Proposal

   The agencies published proposed revisions to their CRA regulations 
on December 21, 1993. The 1993 proposal (58 FR 67466) would have 
eliminated the twelve assessment factors in the present CRA regulations 
and substituted a more performance-based evaluation system. Under the 
1993 proposal, the agencies would have evaluated institutions based on 
their actual lending, service, and investment performance rather than 
on how well they conducted their needs assessments, documented their 
community outreach, and implemented other procedural requirements of 
the existing regulations.
   Generally, large retail institutions would have been evaluated 
based on some combination of lending, service, and investment tests. 
Institutions would have been required to report data on the basis of 
the geographic distribution of applications, denials, originations, and 
purchases of loans. Small banks and thrifts could have elected to be 
evaluated under a streamlined method that would not have required them 
to report this data. Every institution also could have elected to have 
its performance evaluated on the basis of a pre-approved strategic 
plan.
   All banks and thrifts would have been assigned one of four 
statutorily mandated CRA ratings (12 U.S.C. 2906(b)(2)). However, five 
ratings would have been used for the lending, service, and investment 
tests, with the satisfactory category split into low satisfactory and 
high satisfactory.
   Collectively, the agencies received over 6,700 comment letters on 
the 1993 proposal. As a general matter, the vast majority of commenters 
expressed support for the agencies' goal of developing more objective, 
performance-based assessment standards that minimize burden while 
stimulating improved performance. However, many expressed concern over 
aspects of the 1993 proposal that they viewed as allocating credit to 
particular kinds of borrowers. After considering the comments, the 
agencies published a second proposal on October 7, 1994, which 
responded to many of the suggestions in the comments on the 1993 
proposal, including concerns about credit allocation, while preserving 
the 1993 proposal's goal of emphasizing performance over process.

The 1994 Proposal

   The 1994 proposal (59 FR 51232) retained the principles and 
structure underlying the 1993 proposal but made significant changes to 
the details in order to respond to many of the specific concerns raised 
in the comment letters. As in the 1993 proposal, the 1994 proposal 
would have replaced the existing regulations' twelve assessment factors 
with a performance-based evaluation system. The 1994 proposal retained, 
but modified, the lending, investment, and service tests for large 
retail institutions; the streamlined evaluation for small institutions; 
an alternative evaluation for limited purpose and wholesale 
institutions; and the pre-approved strategic plan option available to 
all institutions.
   The 1993 proposal had been criticized because of certain objective 
criteria in the proposal (including market share, a presumptively 
reasonable loan to deposit ratio, loan mix, investment to capital 
ratios, and the number of branches readily accessible to low- and 
moderate-income geographies) which were intended to respond to concerns 
about the need for more objective standards for evaluating compliance 
with CRA requirements. Many commenters viewed these criteria as calling 
for credit allocation, although the agencies did not intend this 
result. The 1994 proposal removed these criteria from the regulatory 
language and substituted a broader range of qualitative and 
quantitative criteria. A system for evaluating compliance with CRA 
should not eliminate examiner judgment, even if completely objective 
criteria consistently applied were achievable. Preservation of examiner 
judgment to take into account the unique characteristics and needs of 
an institution's community and the institution's own capacity and 
relevant constraints are essential for a workable rule.
   At the same time, consistency in evaluations, reduction in the 
burden of compliance, and emphasis on performance are fully consistent 
with assuring a measure of examiner judgment. The 1994 proposal would 
have provided a balance between objective analysis and subjective 
judgment through a series of examiner decisions relying on detailed 
data measuring an institution's actual lending, service and investment 
performance. In order to minimize unnecessary subjectivity, the 
agencies provided guidance as to the standards that examiners would 
have applied in making the required judgments.
   Compared to the 1993 proposal, the 1994 proposal would have reduced 
data reporting burdens by streamlining reporting requirements. The one 
significant new reporting requirement was the collection and reporting 
of information on the race and gender of small business and farm 
borrowers. The agencies proposed this provision to respond to concerns 
that the 1993 proposal did not give enough weight to the fair lending 
aspect of an institution's CRA performance.
   In order to take into account community characteristics and needs, 
the 1994 proposal would have made explicit the context in which the 
tests and standards would have been applied to individual institutions. 
In a specific effort to reduce burden, the preamble indicated that the 
agencies, rather than institutions, would have collected and 
[[Page 22158]] developed the information needed to provide this 
``assessment context.''
   The 1994 proposal also modified the rating process from the 1993 
proposal. For large retail institutions, in calculating the assigned 
rating, the revised proposal would have given primacy to lending 
performance, but an institution's performance on the service and 
investment tests also would have been reflected in the assigned rating. 
The rating process for small institutions similarly would have given 
primacy to lending performance, and would have provided guidance on how 
the agencies would have considered service and investment performance. 
For all institutions, evidence of discriminatory or other illegal 
credit practices would have adversely affected the evaluation of an 
institution's performance. In addition, an appendix to the 1994 
proposal included rating profiles to guide the assessments.
   The 1994 proposal revised and clarified other important features of 
the 1993 proposal. It provided more detail as to how the proposed 
strategic plan option would operate in practice. Wholesale and limited 
purpose institutions were made subject to a community development test, 
which would have incorporated both community development lending and 
community development services in addition to qualified investments. 
Also, the agencies revised the definition of service area to include 
the local areas around an institution's deposit facilities in which it 
has significant lending activity and all other areas equally distant 
from such facilities.

Overview of Comments on the 1994 Proposal

   Collectively, the agencies received over 7,200 comment letters on 
the 1994 proposal. The agencies received comment letters from 
individuals, representatives of bank and thrift institutions, consumer 
and community groups, members of Congress, state, local, and tribal 
governments, and others, as shown in the following table.

                                          Table of Comments Received                                           
----------------------------------------------------------------------------------------------------------------
                                  Letters from                                                                 
                                 banks, thrifts   Letters from    Letters from                                 
            Agency                  and their     consumer and     government     Letters from        Total    
                                      trade         community       entities         others                    
                                  associations       groups                                                    
----------------------------------------------------------------------------------------------------------------
OCC.............................             669             839              39             672           2,219
Board...........................             607             832              12             482           1,933
FDIC............................           1,007             788              32             237           2,064
OTS.............................             261             623              24             173           1,081
----------------------------------------------------------------------------------------------------------------

   The agencies reviewed and considered all of these comments in 
writing the final rule. The section-by-section analysis of the final 
rule discusses these comments in greater detail. As a general matter, 
the vast majority of commenters expressed support for the agencies' 
goal of developing more objective, performance-based assessment 
standards that minimize burden while stimulating improved performance. 
Many commenters believed that, under the existing CRA regulations, the 
agencies focus too closely on documentation of CRA performance and too 
little on actual performance. Some commenters felt the present 
documentation requirements are overly burdensome. Many commenters also 
supported the agencies' goal of ensuring consistency and evenhandedness 
among the agencies in CRA evaluations, without including specific 
criteria that might be viewed as allocating credit to specific 
borrowers. Commenters supported enhanced CRA examiner training to 
increase consistency. Although most commenters generally supported the 
agencies' goals in amending their CRA regulations, many expressed 
concern over certain aspects of the 1994 proposal.

The Final Rule

Review of Comments on the 1994 Proposal and Responses

   The final rule retains, to a significant extent, the principles and 
structure underlying the 1993 and 1994 proposals, but makes important 
changes to some details in order to respond to concerns raised in the 
comment letters and further agency consideration. The following 
discussion describes by topic the ways in which the agencies addressed 
commenters' concerns. The discussion also describes important technical 
modifications included in the final rule.

Enforcement Authority

   The agencies have removed two provisions found in both the 1993 and 
1994 proposals that engendered considerable comment. These provisions 
were the community reinvestment obligation, which stated that banks and 
thrifts have a specific affirmative obligation to help meet the credit 
needs of their communities, and the enforcement provision, which 
provided for penalties against banks and thrifts with ``substantial 
noncompliance'' ratings using the agencies' general enforcement powers 
under 12 U.S.C. 1818. Substantial comment was received both in favor 
of, and in opposition to, these provisions. Based on further analysis 
of their statutory authority, the agencies have removed these 
provisions.
   Consistent with the statute, the final rule provides that an 
institution's CRA rating reflects its record of helping to meet the 
credit needs of its entire community. The agencies will take into 
account an institution's record when evaluating various types of 
applications, such as applications for branches, office relocations, 
mergers, consolidations, and purchase and assumption transactions, and 
may deny or condition an application on the basis of the institution's 
record.

Scope

   The scope of the final rule does not differ appreciably from the 
scope of the current CRA regulations or the 1993 and 1994 proposals. 
The agencies historically have excluded from CRA coverage certain 
special purpose institutions, such as banker's banks, that are not 
organized to grant credit to the public in the ordinary course of 
business. These institutions continue to be treated as special purpose 
banks in the final rule and are excluded from coverage. Several 
commenters were concerned that the definition of banker's bank in the 
1994 proposal may not have conformed with that found in 12 U.S.C. 24 
(Seventh), as modified by the Interstate Banking Efficiency Act of 1994 
(IBEA). Therefore, the final rule references the definition of 
``banker's [[Page 22159]] bank'' found in 12 U.S.C. 24 (Seventh). The 
rule also specifies that institutions that provide only cash management 
controlled disbursement services are excluded from CRA coverage. In 
addition, the final rule provides for the CRA's applicability to 
foreign institutions consistent with the IBEA and prior agency 
interpretations.

Definitions
   Many of the definitions in the 1994 proposal remain the same in the 
final rule or have been adjusted only for purposes of clarity, with no 
change in substance. The agencies did, however, change some definitions 
substantively.
   Assessment area. The agencies replaced the term ``service area'' in 
the 1994 proposal with ``assessment area'' in the final rule for the 
reasons explained in the discussion of assessment area.
   ATM and branch. The agencies changed the definitions of ATM and 
branch to eliminate the requirement that an ATM or a branch be at a 
fixed site. This change means that staffed mobile offices that are 
licensed as branches will be considered ``branches'' under the final 
rule and that mobile ATMs will be considered ``ATMs.'' This change may 
affect the delineation of an institution's assessment area(s) because 
the assessment area(s) must include the geographies in which the 
institution has its main office, branches and deposit-taking ATMs. 
Including mobile branches and ATMs in defining an assessment area 
ensures that an institution that uses these means in an area not 
otherwise served by the institution will be evaluated on its success in 
helping to meet the credit needs of the area. Including mobile branches 
in the definition of ``branch'' will also affect evaluation of an 
institution's service to its community because the ``service test'' 
evaluates the distribution of an institution's branches and the 
institution's history of opening and closing branches. In the revised 
Part 345, the FDIC uses the term ``remote service facility'' instead of 
``ATM'' to conform with the terminology used in its regulations.
   Community development. The 1994 proposal did not provide a separate 
definition of ``community development,'' although the term was used in 
defining community development loans and services and qualified 
investments. Several commenters requested further guidance on the scope 
of activities that would qualify. Some commenters were concerned that, 
without further specification, the regulation might permit an overly 
broad range of activities to be considered favorably as supporting 
community development. Others were concerned that the definition might 
be too narrow.
   The final rule separately defines community development to mean: 
(1) Affordable housing (including multifamily rental housing) for low- 
or moderate-income individuals; (2) community services targeted to low- 
or moderate-income individuals; (3) activities that promote economic 
development by financing businesses or farms that meet the size 
eligibility standards of 13 CFR 121.802(a)(2) or have gross annual 
revenues of $1 million or less; or (4) activities that revitalize or 
stabilize low- or moderate-income geographies.
   The definition of community development restricts qualifying 
activities to those that promote community welfare, while recognizing 
that community welfare can be promoted in diverse ways. For example, a 
number of commenters, representing both the industry and community and 
consumer groups, stated that the requirement in the 1994 proposal that 
community development loans and services and qualified investments meet 
``community economic development needs'' inappropriately limited 
community development to efforts that meet ``economic'' needs. The 
final rule does not contain this limitation, and community development 
includes community- or tribal-based child care, educational, health, or 
social services targeted to low- or moderate-income persons or services 
that revitalize or stabilize low- or moderate-income geographies.
   In response to comments, the definition clarifies the small 
businesses and farms that the agencies intend to cover. The section of 
the definition that discusses activities that promote economic 
development by financing small businesses and farms refers to 13 CFR 
121.802(a)(2), the size limitations for the Small Business 
Administration's Small Business Investment Company and Development 
Company programs, as well as the $1 million gross annual revenues 
threshold used for lending test analysis.
   Several commenters stated that community development should require 
benefit to low- and moderate-income areas. However, narrowing the focus 
to only these areas would ignore some of the beneficial purposes of 
community development lending for low- and moderate-income individuals. 
Under the rule, community development includes activities outside of 
low- and moderate-income areas if the activities provide affordable 
housing for, or community services targeted to, low- or moderate-income 
individuals or if they promote economic development by financing small 
businesses and farms. Activities that create, retain, or improve jobs 
for low- or moderate-income persons to stabilize or revitalize low- or 
moderate-income areas also qualify as community development, even if 
the activities are not located in low- or moderate-income areas.
   The final rule also requires that, in order to be community 
development loans or services or qualified investments, activities must 
have community development as their primary purpose. Activities not 
designed for the express purpose of revitalizing or stabilizing low- or 
moderate-income areas, providing affordable housing for, or community 
services targeted to, low- or moderate-income persons, or promoting 
economic development by financing small businesses and farms are not 
eligible. The fact that an activity provides indirect or short-term 
benefits to low- or moderate-income persons does not make the activity 
community development. Thus, a loan for upper-income housing in a 
distressed area would not qualify simply on the basis of the indirect 
benefit to low- or moderate-income persons from construction jobs or 
the increase in the local tax base that supports enhanced services to 
low- and moderate-income area residents.
   The final rule removes the requirement in the 1994 proposal that 
community development loans and services and qualified investments 
primarily benefit low- or moderate-income persons or small businesses 
or farms. This requirement is unnecessary because the definitions of 
community development loan and service and qualified investment in the 
final rule require that community development be the primary purpose of 
the activities.
   Community development loan. The agencies have amended the 
definition of ``community development loan'' as described in the 
discussion of ``community development'' and in several other ways to 
respond to commenters' concerns.
   First, many commenters objected to the requirement in the 1994 
proposal that community development loans meet needs ``not being met by 
the private market.'' Some commenters pointed out that financial 
institutions are part of the private market so, if financial 
institutions make the loans, the needs addressed by the loans will, as 
a matter of course, be met by the private market. To respond to these 
comments, the agencies removed this [[Page 22160]] qualifier from the 
definition of a community development loan.
   Second, some commenters expressed confusion about the extent to 
which the definition of ``community development loan'' in the 1994 
proposal would have differed for wholesale and limited purpose 
institutions. The agencies amended the definition of ``community 
development loan'' in the final rule to clarify the two ways in which a 
``community development loan'' differs for wholesale and limited 
purpose institutions. First, wholesale and limited purpose institutions 
may consider loans as community development loans wherever they are 
located, if the institutions have otherwise adequately addressed the 
credit needs in their assessment area(s). This different treatment 
accounts for the fact that wholesale and limited purpose institutions 
typically draw their resources from, and serve areas well beyond, their 
immediate communities. Second, a wholesale or limited purpose 
institution may consider loans reported as home mortgage, small 
business, small farm or consumer loans to be community development 
loans. Institutions subject to the lending test may not consider loans 
reported in those categories to be community development loans, unless 
the loans are multifamily dwelling loans. This different treatment 
recognizes that the rule does not separately assess wholesale and 
limited purpose institutions on these reported loans.
   Some commenters also urged that the agencies permit wholesale and 
limited purpose institutions to include as a community development loan 
any loan that primarily benefits low- or moderate-income individuals 
regardless of the loan's effect on community development. The lending 
test evaluates an institution's performance in making home mortgage, 
small business, small farm, and consumer loans based on the geographic 
distribution of loans to borrowers of different incomes, not on the 
basis of the total number and dollar amount of loans to low- and 
moderate-income borrowers. Because the community development test does 
not consider borrower distribution, but only loan amount and volume, 
crediting any loan that benefits low- and moderate-income individuals 
could significantly inflate performance under this test. Therefore, the 
final rule does not incorporate the suggested change.
   Other commenters urged that institutions that are not wholesale or 
limited purpose institutions have the option of treating a home 
mortgage, small business, or small farm loan as a community development 
loan if it would otherwise qualify. The agencies have not done so. For 
retail institutions, the community development loan category permits 
consideration of loans that do not meet the definitions of home 
mortgage, small business or small farm loans but deserve favorable 
consideration in a CRA assessment. Loans that do meet the definitions 
of home mortgage, small business and small farm loans are more 
appropriately evaluated based on the criteria provided for these loans 
in the lending test.
   Some commenters requested that retail institutions receive 
favorable consideration for community development loans outside their 
assessment areas. Under the final rule, an institution that is not a 
wholesale or limited purpose institution may receive favorable 
consideration for a community development loan that benefits a broader 
statewide or regional area that includes the institution's assessment 
area(s). This approach maintains a balance between the broader purposes 
of community development lending and the focus of CRA on meeting the 
credit needs of an institution's local community. As previously noted, 
because of their different operational focus, wholesale and limited 
purpose institutions receive consideration for community development 
loans made outside this broader area if they have adequately addressed 
credit needs within the area.1

   \1\Examples of community development loans include, but are not 
limited to, loans to: borrowers for affordable housing 
rehabilitation and construction, including construction and 
permanent financing of multifamily rental property serving low- and 
moderate-income persons; not-for-profit organizations serving 
primarily low- and moderate-income housing or other community 
development needs; borrowers in support of community facilities in 
low- and moderate-income areas or that are targeted to low- and 
moderate-income individuals; and financial intermediaries including, 
but not limited to, Community Development Financial Institutions 
(CDFIs), Community Development Corporations (CDCs), minority- and 
women-owned financial institutions, and low-income or community 
development credit unions that primarily lend or facilitate lending 
in low- and moderate-income areas or to low- and moderate-income 
individuals in order to promote community development. Other 
examples include loans to: local, state, and tribal governments for 
community development activities; and loans to finance environmental 
clean-up or redevelopment of an industrial site as part of an effort 
to revitalize the low- or moderate-income community in which the 
property is located.
   Community development service. The definition of ``community 
development service'' has been moved to the definition section of the 
rule for clarity. The definition has been conformed to the definitions 
of ``community development loan'' and ``qualified investment'' by 
removing the reference to ``needs not being met by the private market'' 
for the reasons described in the discussion of ``community development 
loan.'' In addition, community development services are required to be 
related to the provision of financial services. For example, service on 
the board of directors of an organization that promotes credit 
availability or affordable housing meets this requirement. Providing 
technical assistance in the financial services field to community-based 
groups, local, or tribal government agencies, or intermediaries that 
help to meet the credit needs of low- and moderate-income individuals 
or small businesses and farms is also related to the provision of 
financial services. By contrast, general participation by bank or 
thrift employees in community activities that do not take advantage of 
the employee's technical or financial expertise would not qualify. 
Although an admirable civic contribution, such employee participation 
is not sufficiently related to the provision of financial services to 
meet the purposes of CRA. As mentioned in the preamble to the 1994 
proposal, electronic benefits transfer and point-of-sale terminal 
systems that are designed to improve access, such as by decreasing 
costs, for low- or moderate-income individuals would receive favorable 
consideration.2

   \2\Examples of community development services include, among 
other things: providing technical expertise for not-for-profit, 
tribal or government organizations serving low- and moderate-income 
housing needs or economic revitalization and development; lending 
executives to organizations facilitating affordable housing 
construction and rehabilitation or development of affordable 
housing; providing credit counseling, home buyers counseling, home 
maintenance counseling, and/or financial planning to promote 
community development and affordable housing; school savings 
programs; and other financial services the primary purpose of which 
is community development, such as low-cost or free government check 
cashing.
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   Consumer loan. The definition of ``consumer loan'' remains 
substantially the same as in the 1994 proposal. As in the 1994 
proposal, a consumer loan must be extended to one or more individuals 
for household, family, or other personal expenditures. However, as 
proposed in 1994, the definition would have mirrored the definition of 
consumer loan in the Consolidated Report of Condition and Income (Call 
Report) or Thrift Financial Report (TFR) in an effort to reduce 
potential regulatory burden. The Call Report and TFR definitions 
exclude loans secured by real estate and loans used to purchase or 
carry securities. Many industry commenters objected to these 
exclusions. Commenters were particularly concerned that home equity 
loans that do not fall within the [[Page 22161]] definition of home 
improvement loans reportable under HMDA would not have been considered 
consumer loans under the proposed rule. The definition of consumer loan 
in the final rule no longer uses the definition in the Call Report or 
TFR. As a result, home equity loans that are not reportable under HMDA 
are consumer loans if they otherwise meet the definition. However, the 
agencies have clarified in the final rule that consumer loans do not 
include home mortgage, small business, or small farm loans. These loans 
are considered separately under the lending test so treating them also 
as consumer loans would result in double-counting.
   The final rule contains definitions for five categories of consumer 
loans: motor vehicle loans, credit card loans, home equity loans, other 
secured consumer loans, and other unsecured consumer loans. These 
definitions reflect the fact that the final rule permits an institution 
to elect evaluation of its consumer lending on a product-by-product 
basis.
   Home mortgage loan. In the 1994 proposal's definition of ``home 
mortgage loan,'' the agencies referred to the HMDA and its implementing 
regulations. Some commenters pointed out that the Board has refined the 
definition of home mortgage loan in its HMDA regulations (12 CFR Part 
203). These commenters indicated it would be preferable and, perhaps, 
less confusing if the agencies referred only to the Board's HMDA 
regulations, rather than to both the HMDA and the regulations. The 
agencies have amended the definition of ``home mortgage loan'' in the 
final rule accordingly. Under the final rule, a home mortgage loan 
means a ``home improvement loan'' or a ``home purchase loan'' as these 
terms are defined in 12 CFR Part 203. This definition includes 
multifamily dwelling loans and refinancings of home improvement and 
home purchase loans.
   Income level. The income level definitions under the 1994 proposal 
would have included adjustments to reflect high-cost areas and family 
size. A number of commenters suggested that, although these adjustments 
would make the income definitions more accurate, the value of the 
increased accuracy would be outweighed by the complication and burden 
associated with the use of adjusted figures. Other commenters pointed 
out that HMDA disclosure statements, which are used, in part, to 
evaluate CRA performance, do not employ the adjustments. Some 
commenters strongly supported the use of adjusted area median income, 
especially in high-cost communities. However, the flexibility of the 
performance standards allows examiners to account in their evaluations 
under the tests for conditions in high-cost communities, such as a 
shortage of credit for moderate-income persons or areas. In addition, 
the flexibility in the requirement that community development loans, 
community development services, and qualified investments have as their 
``primary'' purpose community development allows examiners to account 
for conditions in high-cost areas. Therefore, the definitions of income 
level in the final rule are based upon area median income without 
adjustments. In addition, the definition of ``area median income'' for 
rural areas has been simplified and uses only the statewide non-
metropolitan median rather than the higher of county median or the 
statewide figure.
   Limited purpose institution and wholesale institution. A number of 
industry commenters suggested that ``nonbank banks'' permitted under 
the Competitive Equality Banking Act (12 U.S.C. 1843(f)) (CEBA banks) 
should automatically be considered limited purpose institutions. These 
institutions operate under a variety of different business plans and 
legal constraints and include retail and wholesale banks, credit card 
banks, and industrial loan companies. CEBA banks may legally engage in 
different activities, depending on which activities a particular bank 
engaged in as of March 1, 1987. A uniform treatment of these 
institutions is therefore not practicable. The final rule provides the 
necessary flexibility to assess the CRA performance of these 
institutions and does not require any institution to engage in 
proscribed activities. Some of these institutions could be designated 
as wholesale or limited purpose institutions on a case-by-case basis. 
Further, the final rule permits the agencies to take into account any 
legal constraints placed on an institution in assessing performance. As 
in the case of thrifts, adjustments can be made in the ratings profiles 
to reflect the legal constraints imposed on the activities of CEBA 
banks.
   Other commenters requested more guidance on incidental lending 
activities that wholesale and limited purpose institutions could engage 
in without losing their special designation. Wholesale institutions may 
engage in some retail lending without losing their designation if this 
activity is incidental and done on an accommodation basis. Similarly, a 
limited purpose institution continues to meet the narrow product line 
requirement if it provides other types of loans on an infrequent basis.
   Qualified investment. The definition of ``qualified investment'' 
has been moved to the definition section for clarity and changed to 
reflect the new definition of ``community development'' and to respond 
to comments. The agencies have removed the requirement that a qualified 
investment must address community development needs ``not being met by 
the private market.'' Instead, in evaluating performance, the agencies 
will give greater weight to qualified investments that are not 
routinely provided by private investors.
   The 1994 proposal clearly permitted consideration of investments in 
organizations that make qualified investments, and the final rule is 
unmodified in this respect. Some commenters asked that qualified 
investments be required to benefit low- or moderate-income areas or 
required to benefit either low- or moderate-income people or areas. The 
agencies rejected these suggestions for the reasons noted in the 
discussion of ``community development.''
   The final rule clarifies specific aspects of qualified investments 
proposed in the 1994 proposal that raised issues in the comments. For 
example, the explicit reference to investments in credit unions has 
been removed to clarify that no special treatment for these 
institutions was intended under the investment test. Deposits and 
membership shares in any financial institution that otherwise meet the 
criteria discussed earlier for treatment as a qualified investment 
qualify under the investment test. In addition, although some comments 
suggested otherwise, Federal Home Loan Bank stock does not have a 
sufficient connection to community development to be considered a 
qualified investment.
   The use of the term ``standard'' mortgage backed securities in the 
preamble to the 1994 proposal was ambiguous and should be clarified to 
mean ``untargeted'' mortgage backed securities. Untargeted mortgage 
backed securities and untargeted municipal bonds are not qualified 
investments because their primary purpose is not community development. 
Investments in municipal bonds designed primarily to finance community 
development generally are qualified investments and need not be 
housing-related. Housing-related municipal bonds must primarily address 
affordable housing (including multifamily rental housing) needs in 
order to qualify.
   The term ``grants'' in the final rule includes in-kind 
contributions of property to community development organizations. 
Grants do not automatically have less weight than 
[[Page 22162]] investments, but the weight accorded a grant is 
determined under the performance criteria in the investment test.\3\

   \3\Examples of qualified investments include, but are not 
limited to, investments, grants, deposits or shares: in or to 
financial intermediaries (including, but not limited to CDFIs, CDCs, 
minority- and women-owned financial institutions, and low-income or 
community development credit unions) that primarily lend or 
facilitate lending in low- and moderate-income areas or to low- and 
moderate-income individuals in order to promote community 
development, such as a CDFI that promotes economic development on an 
Indian reservation; in support of organizations engaged in 
affordable housing rehabilitation and construction, including 
multifamily rental housing; in support of organizations promoting 
economic development by financing small businesses, including Small 
Business Investment Companies (SBICs) and specialized SBICs; to 
support or develop facilities that promote community development in 
low- and moderate-income areas for low- and moderate-income 
individuals, such as day care facilities; in projects eligible for 
low-income housing tax credits; in state and municipal obligations 
that specifically support affordable housing or other community 
development; to not-for-profit organizations serving low- and 
moderate-income housing or other community development needs, such 
as home-ownership counseling, home maintenance counseling, credit 
counseling, and other financial services education; and in or to 
organizations supporting activities essential to the capacity of 
low- and moderate-income individuals or geographies to utilize 
credit or to sustain economic development.
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   Small institution. Under the 1994 proposal, institutions would have 
been considered small institutions if they had total assets of less 
than $250 million and were either independent institutions or 
affiliates of holding companies with less than $250 million in total 
assets. This definition of ``small institution'' received numerous 
comments. Industry commenters generally believed that the asset level 
for holding companies should be raised or eliminated entirely, although 
some indicated that the $250 million asset level for small institutions 
would be satisfactory. Some commenters representing institutions with 
assets below $250 million affiliated with a larger holding company 
indicated that their institutions typically operated independently from 
the holding company in complying with CRA obligations. They stated that 
it would be unfair for them to be evaluated under the assessment tests 
for a larger institution merely because of their ownership structure. 
On the other hand, community and consumer groups often commented that 
small institutions should not be treated differently, or that only 
institutions with fewer than $50 million in assets should be considered 
small institutions for purposes of the CRA rule.
   The final rule modifies the definition of ``small institution'' in 
light of these comments. In the final rule, for any independent 
institution to be considered a small institution, it must have total 
assets of less than $250 million. Moreover, an institution with total 
assets of less than $250 million that is owned by a holding company 
would be considered a small institution if the total bank and thrift 
assets of its holding company are less than $1 billion. The agencies 
were persuaded that some smaller holding companies may be unable to 
provide support to their subsidiary banks and thrifts for CRA 
compliance. Larger holding companies have the ability to provide 
support to their subsidiary banks and thrifts, so small institutions 
owned by these holding companies will not be unfairly burdened by 
evaluation under the lending, investment, and service tests used in the 
assessments of larger institutions. The choice of the $1 billion level 
reflects the weight of the comments that suggested raising the asset 
level and the agencies' judgment regarding the size at which a holding 
company should be expected to support the compliance activities of its 
bank and thrift subsidiaries. The agencies estimate that this change 
will add only a limited number of institutions, with average assets of 
about $100 million, to those eligible under the small bank performance 
standards.
   Many commenters also asked the agencies to clarify the date on 
which the determination will be made whether an institution is a small 
institution. The agencies have amended the definition of ``small 
institution'' to clarify that an institution will be considered a small 
institution throughout any calendar year if, as of December 31 of 
either of the prior two calendar years, the total assets of the 
institution (and, if applicable, its holding company) fell below the 
asset limits set out earlier for a small institution. This definition 
ensures some stability in whether an institution is classified as a 
small institution and minimizes the chance that an institution's status 
will change repeatedly from year to year. The definition also ensures 
that institutions that exceed the asset limits have adequate time to 
prepare to meet the requirements applicable to larger institutions.
   Small business loan and small farm loan. The agencies made no 
substantive changes to the definitions of ``small business loan'' and 
``small farm loan.'' The final rule cross-references the Call Reports 
and TFR definitions rather than restating the substance of the 
definitions as the 1994 proposal would have done. The definitions are 
based on the size of the loans. Some commenters urged that the 
definitions be based on the asset size of the business or the farm, as 
was originally proposed in 1993. The agencies have concluded that, 
although defining small business and small farm loans by the size of 
the loan may not be as precise as definitions based on business or farm 
asset size, following the approach used in the Call Report and TFR will 
appreciably reduce the burden of compliance for institutions and their 
borrowers. Also, the Call Report and TFR definitions minimize the need 
for institutions to collect additional information. The danger of 
inaccuracy is limited, because loan size roughly correlates with the 
size of a business or farm borrower. Furthermore, the agencies have 
retained the proposed requirement that institutions indicate whether a 
small business or small farm loan is to a business or farm with gross 
annual revenues of $1 million or less. This requirement will provide 
additional information to identify loans to small entities.
   Several commenters requested that the agencies clarify whether the 
definitions of small business and small farm loans include loans made 
to nonprofit organizations as described in the Internal Revenue Code at 
26 U.S.C. 501(c)(3). Loans made to nonprofit organizations are included 
to the same extent they are included under the Call Report and TFR 
definitions of small business and small farm loans. Loans to nonprofits 
that are reported as small business or small farm loans cannot also be 
reported as community development loans, except by wholesale and 
limited purpose institutions.

Performance Tests, Standards and Ratings in General

   Several changes have been made to the section of the 1994 proposal 
on assessment tests, standards, and ratings. As an initial matter, the 
terms ``performance tests,'' ``performance standards,'' and 
``performance criteria'' have been substituted for the terms 
``assessment tests,'' ``assessment standards,'' and ``assessment 
criteria'' to reflect more accurately the final rule's focus on 
performance rather than process. The agencies have also changed the 
term ``assessment context'' to ``performance context'' because the 
latter term better describes the role of this information in the CRA 
evaluation process.
   Performance context. An institution's performance under the tests 
and standards in the rule is judged in the context of information about 
the institution, its community, its competitors, and its peers. 
Examiners will consider the following information, as appropriate, in 
order to assist in [[Page 22163]] understanding the context in which 
the institution's performance should be evaluated: (1) The economic and 
demographic characteristics of the assessment area(s); (2) lending, 
investment, and service opportunities in the assessment area(s); (3) 
the institution's product offerings and business strategy; (4) the 
institution's capacity and constraints; (5) the prior performance of 
the institution and, in appropriate circumstances, the performance of 
similarly situated institutions; and (6) other relevant information. 
The final rule clarifies that a proposed strategic plan will also be 
evaluated in the same context. However, all of the factors described in 
the performance context would not necessarily apply to each strategic 
plan. In this regard, the performance of similarly situated lenders 
would not generally be appropriate for evaluating future goals under a 
strategic plan.
   Under the 1994 proposal, the assessment context would have included 
examiner-developed information on the credit needs of an institution's 
service area. Many commenters interpreted the proposal to mean that the 
agencies would prepare a detailed needs assessment for each 
institution's service area(s). Several bank and thrift commenters 
criticized such a role for the agencies, reasoning that institutions 
know their communities far better than a regulatory agency, and that 
agency-prepared assessments would lead to credit allocation. Some 
community organization commenters, while more supportive of the concept 
of agency prepared needs assessments, were concerned that the proposal 
might imply that institutions did not need to make an effort to know 
their communities' credit needs, but could instead look to the agencies 
for that determination.
   The agencies did not intend to suggest that an agency-developed 
needs assessment would prescribe the credit needs an institution must 
address. Instead, the examiner-developed information on credit needs 
was intended to help inform the examiner's judgment about the 
institution's record of performance. Institutions are in the better 
position to know their communities, and it is neither appropriate nor 
feasible for the agencies to prepare a detailed assessment of the 
credit needs of an institution's community. Thus, under the final rule 
the agencies will analyze the information an institution maintains on 
the credit needs of its community along with relevant information 
available from other sources. At the same time, the final rule does not 
establish a requirement that each institution prepare a ``needs 
assessment'' to be evaluated by the examiner as urged in some comments 
provided by financial institutions and community organizations.
   Under the final rule, the agencies will neither prepare a formal 
assessment of community credit needs nor evaluate an institution on its 
efforts to ascertain community credit needs. Instead, the agencies will 
request any information that the institution has developed on lending, 
investment, and service opportunities in its assessment area(s). The 
agencies will not expect more information than what the institution 
normally would develop to prepare a business plan or to identify 
potential markets and customers, including low- and moderate-income 
persons and geographies in its assessment area(s). This information 
from the institution will be considered along with information from 
community, government, civic and other sources to enable the examiner 
to gain a working knowledge of the institution's community. In response 
to comments, the final rule also clarifies that information about 
lending, investment, and service opportunities in an institution's 
assessment area will, where appropriate, be obtained from tribal 
governments, as well as from other sources.
   Statutory limits on investment authority. Several thrift commenters 
had concerns about the application of the investment test to thrift 
institutions because of their limited investment authority. Rather than 
providing a blanket exemption from the investment test, the final rule 
modifies the ``capacity and constraints'' section of the performance 
context to clarify that examiners should consider an institution's 
investment authority in evaluating performance under the investment 
test. A thrift that has few or no qualified investments may still be 
considered to be performing adequately under the investment test if, 
for example, the institution is particularly effective in responding to 
the community's credit needs through community development lending 
activities.
   Safety and soundness. The CRA requires the agencies to assess an 
institution's record of helping to meet the credit needs of its entire 
community, consistent with the safe and sound operation of the 
institution. A number of industry commenters were concerned that the 
1994 proposal would not have stressed the importance of the safety and 
soundness of an institution's operation to the same extent as the CRA 
statute or the current regulations. These commenters responded 
primarily to the omission of a statement in the 1993 proposal that the 
CRA does not require any institution to make loans or investments that 
are expected to result in losses or are otherwise inconsistent with 
safe and sound operations. The agencies did not intend by this omission 
to encourage unprofitable or otherwise unsafe and unsound practices. 
The agencies firmly believe that institutions can and should expect 
lending and investments encouraged by the CRA to be profitable. The 
final rule explicitly reflects this belief and addresses the importance 
of safety and soundness considerations in several sections and in the 
ratings appendix. The agencies assess an institution's record of 
helping to meet community credit needs with careful attention to the 
constraints imposed by safety and soundness. As in other areas of bank 
and thrift operations, unsafe and unsound practices are viewed 
unfavorably. The ratings appendix specifically states: ``The bank's 
overall performance, however, must be consistent with safe and sound 
banking practices. * * *''
   Flexible underwriting approaches. The final rule states that the 
agencies permit and encourage an institution's use of flexible 
underwriting approaches to facilitate lending to low- and moderate-
income individuals and areas, but only if consistent with safe and 
sound operations. This is consistent with, and clarifies, language in 
the 1994 proposal. Some commenters urged that the rule expressly 
identify particular types of areas or borrowers covered by this 
provision. Mentioning particular types of borrowers or areas in the 
regulatory text is unnecessary and inconsistent with the principle of 
evaluating each institution and its community based on their 
characteristics, capacity, and needs. However, certain borrowers or 
areas, such as Native Americans residing in Indian country, may face 
difficulties obtaining credit that could warrant special consideration. 
The efforts of lenders that utilize innovative or flexible methods, in 
a safe and sound manner, to address these or other unusual underwriting 
issues are recognized under the lending test.

The Lending Test

   The lending test in the final rule is substantially similar to the 
1994 proposal. However, there are some significant changes in response 
to the comments.
   Consideration of originations and purchases. The 1994 proposal 
would [[Page 22164]] have evaluated home mortgage lending based on HMDA 
data, which is based on loan originations and purchases. However, the 
proposal would have required institutions to collect, report, and be 
evaluated on loans outstanding for other types of loans. The agencies 
took this approach in an effort to reduce burden on the industry, 
because institutions must already report loans outstanding on Call 
Reports and TFRs.
   The vast majority of commenters who addressed this issue (almost 
exclusively industry commenters) stated that use of originations would 
provide a substantially more accurate picture of actual lending 
activity, because current activity would not be obscured by past 
activity and the data would reflect seasonal variations and sale of 
loans in the secondary market. Moreover, using originations rewards, 
rather than penalizes, institutions for selling loans on the secondary 
market, which frees up capital for additional lending and increases 
credit availability. The commenters did not support the premise that 
use of originations would be more burdensome than using loans 
outstanding. Because institutions would have to collect and report 
additional information on each loan for CRA purposes, using loans 
outstanding would not significantly decrease burden. The bulk, if not 
all, of the burden reduction would be achieved by using the Call Report 
and TFR definitions. The final rule therefore uses originations and 
purchases, instead of loans outstanding, for all types of loans.
   Lines of credit are considered originated at the time the line is 
approved or increased; and an increase is considered a new origination. 
Generally, the full amount of the credit line (or in the case of an 
increase in an existing line, the amount of the increase) is the amount 
that is considered originated. Although some lines of credit may be for 
both home improvement and other purposes, only the amount that is 
considered to be for home improvement purposes is reported as a home 
improvement loan under HMDA. Lines of credit should be considered in 
assessing an institution's lending activity in all applicable loan 
types. Therefore, where a portion of a line of credit is reported under 
HMDA and another portion meets the definition either of a ``small 
business loan'' or a ``consumer loan,'' the full amount of the line of 
credit should be reported as a small business loan or collected as a 
consumer loan, as appropriate, and the agencies will also consider as a 
home mortgage loan the portion of the credit line that is reported 
under HMDA.
   The final rule contains an option for lenders also to provide data 
on loans outstanding, which may, in certain circumstances, enhance an 
examiner's understanding of an institution's performance. Institutions 
may also provide for examiner consideration information on letters of 
credit and commitments, as well as any other loan information. The 
language of the lending test (and the definition of ``community 
development loan'') has been adjusted as appropriate to reflect these 
changes.
   Consumer loan evaluation. Under the 1994 proposal, consumer lending 
would have been evaluated under the lending test only if an institution 
elected to have it evaluated and provided the necessary loan data. 
Thus, the 1994 proposal would have permitted an institution that is 
primarily a consumer lender not to be evaluated on a substantial 
portion of its business if it so chose. Under these circumstances, 
meaningful evaluation of certain institutions might have been very 
difficult. The final rule, therefore, changes the treatment of consumer 
lending. Under the rule, if a substantial majority of an institution's 
business is consumer lending, this lending is evaluated in the lending 
test. The rule does not impose any reporting requirements for consumer 
lending, however. If an examiner determines that a substantial portion 
of an institution's business is consumer lending, and the institution 
has not elected to provide consumer loan data, the examiner will 
evaluate consumer lending by analyzing an appropriate sample of the 
institution's consumer loan portfolio. In addition, this aspect of the 
final rule does not affect the evaluation of a limited purpose bank, 
because the bank will be evaluated under the community development 
test, not the lending test.
   The 1994 proposal would have required that institutions provide 
information on all consumer loans if they choose to provide information 
on any consumer loans. The agencies included this requirement because 
they were concerned that, otherwise, an institution might provide 
information only on those consumer products that would reflect well on 
the institution's CRA performance and would choose not to provide 
information on those products that would reflect poorly.
   Many industry commenters stated that the prospect of reporting all 
their consumer loan information was so burdensome that they would not 
report any information. On the other hand, consumer and community 
groups commented that, if consumer lending is to be considered in CRA 
at all, consumer loan reporting should be mandatory. After considering 
these comments, the agencies have decided to permit institutions to 
provide information on one or more categories (motor vehicle, credit 
card, home equity, other secured, and other unsecured) of consumer 
loans.
   Although an institution may have some opportunity to mask poor 
performance or otherwise inappropriately influence its CRA evaluation 
through selective provision of data, this opportunity will be limited 
by the provision in the final rule requiring an institution to maintain 
data on all loans in the category or categories in which it seeks to be 
evaluated. For example, if an institution provides information on its 
credit card lending, it would have to provide information on all its 
credit card lending, although it need not provide information on its 
motor vehicle lending. Furthermore, under the final rule, if an 
institution is a substantial consumer lender, the agencies will 
evaluate its consumer lending in appropriate categories regardless of 
whether the institution reports data for those categories.
   Relative weight of different lending categories. The 1994 proposal 
explicitly stated that home mortgage, small business, and small farm 
lending (and consumer lending if it was considered) would have been 
weighted to reflect the relative importance of the categories to the 
institution's overall business. The proposal also stated that community 
development lending would have been weighted to reflect the 
characteristics and needs of an institution's assessment area(s), the 
capacity and constraints of the institution, and the opportunities 
available for this lending. Several commenters expressed concern about 
the lack of certainty in these provisions; some also believed that 
community development lending would have received excessive weight. 
However, a fixed formula for the relative weight of different 
categories would require a determination that some categories of 
lending are uniformly more important than others, when the appropriate 
weight depends on the specific institution and its community. The 
agencies have removed the discussion of the relative weight assigned to 
different lending categories because examiners will determine the 
appropriate weight based on the performance context.
   Lending activity criterion. The lending test in the 1994 proposal, 
unlike the current CRA regulations, did not specifically consider the 
volume of lending activity--the number and amount of home mortgage, 
small business, small farm, and consumer loans located in the 
institution's [[Page 22165]] assessment area(s). Experience under the 
current regulations has demonstrated that this criterion can be useful 
in assessing performance. Therefore, based on further internal agency 
considerations, the final rule contains a lending activity performance 
criterion. This criterion encourages an institution that does not 
itself engage in the categories of lending evaluated under the lending 
test to seek designation as a wholesale or limited purpose institution 
so that the institution's CRA performance can be evaluated under 
criteria appropriate to the institution. The criterion also creates a 
disincentive for institutions to try to influence inappropriately the 
evaluation of their CRA performance by conducting activities viewed 
favorably under CRA in the institution and other activities in an 
affiliate. An institution's performance on the lending activity 
criterion will be assessed taking into account the information 
described in the section of the preamble discussing the performance 
context, including the institution's business strategy regarding the 
lending conducted by the institution itself and the lending conducted 
by affiliates.
   Market share analysis. Many commenters, particularly community and 
consumer groups, suggested that the market share evaluation of the 1993 
proposal be reinstated or that the agencies substitute an alternative 
objective ratio to serve as the linchpin for an institution's lending 
test rating. Other commenters, particularly those representing the 
industry, opposed using any market share analysis. In the agencies' 
opinion, the 1994 proposal struck the appropriate balance between 
objective performance measures and subjective judgments. A single, 
standardized set of performance evaluation tools is not appropriate 
because of the variety of institutions and the differences among the 
communities that they serve. The public evaluation prepared by the 
agencies will explain the data and analytic tools used to evaluate the 
institution.
   The geographic distribution of an institution's loans remains a 
component of the lending test. One element of the geographic 
distribution analysis, both in the 1994 proposal and in the final rule, 
is the amount of lending to low-, moderate-, middle- and upper-income 
geographies. As part of the performance context, examiners would 
consider, among other considerations described earlier in this 
preamble, the performance of other similarly-situated lenders. In this 
regard, examiners would use market share and other analyses to assist 
in evaluating the geographic distribution of an institution's lending 
where such analyses would provide accurate insight. However, the final 
rule does not require examiners to use any single type of analysis, and 
would not link a particular market share ratio, or any ratio, with a 
particular lending test rating.
   Proportion of lending within assessment areas. Under the final 
rule, as under the 1994 proposal, another component of the geographic 
distribution criterion is the proportion of total loans made in an 
institution's assessment area(s). Some commenters believed that this 
criterion is inappropriate; they noted that safety and soundness 
considerations require an institution to lend to a geographically 
dispersed area. This criterion is a consideration under the existing 
CRA rules and has proved over the years to be one useful indicator of 
the degree to which an institution is focused on serving its local 
community. Moreover, the agencies believe the criterion encourages an 
institution to draw its assessment area broadly enough to allow the 
dispersion of its lending and distribution of its loans among 
geographies of different income levels. Therefore, the agencies 
retained the provision unchanged in the final rule.
   Dispersion. The third component of the geographic distribution 
criterion of the lending test is the dispersion of the institution's 
lending activity. The 1994 proposal would have assessed the degree of 
dispersion ``throughout'' an institution's assessment area(s). For 
clarification, the word ``throughout'' has been changed to ``in'' in 
the final rule. The agencies will still examine the entire assessment 
area; however, an institution is not expected to lend evenly throughout 
or to every geography in its assessment area. Rather, an institution's 
lending pattern should not exhibit conspicuous gaps that are not 
adequately explained by the performance context.
   Borrower distribution. The lending test also considers the 
distribution of an institution's loans among borrowers of different 
income levels and businesses of different sizes. Favorable 
consideration is given for loans to low- and moderate-income persons 
and small businesses and farm loans outside of the institution's 
assessment area, provided that the institution has adequately served 
borrowers within its assessment area. The importance of this criterion, 
particularly in relation to the geographic distribution criterion, will 
depend on the performance context. For example, borrower distribution 
may be more important in rural areas or in assessment areas without 
identifiable geographies of different income categories; geographic 
distribution may be more important in urban areas and assessment areas 
with the full range of geographies of different income categories.
   Some commenters recommended that the lending test evaluate an 
institution's record of lending to different racial and ethnic groups 
and to women. The final rule does not incorporate this suggestion. The 
appropriate inquiry regarding service to particular racial or ethnic 
groups and men and women is whether the institution is operating in a 
non-discriminatory manner. Therefore, in arriving at an institution's 
assigned rating, the agencies consider whether there is evidence of 
discrimination in violation of the Fair Housing Act or Equal Credit 
Opportunity Act, or evidence of other illegal credit practices.
   Innovative or flexible lending practices. The final rule, like the 
1994 proposal, assesses an institution's use of innovative or flexible 
lending practices in a safe and sound manner to address the credit 
needs of low- and moderate-income individuals or geographies. An 
innovative practice is one that serves low- and moderate-income 
creditworthy borrowers in new ways or serves groups of creditworthy 
borrowers not previously served by the institution. Both innovative 
practices and flexible practices are favorably considered. Although a 
practice ceases to be innovative if its use is widespread, it may 
nonetheless receive consideration if it is a flexible practice. An 
institution need not provide lending data connected with a practice in 
order to receive consideration. For example, an examiner could consider 
an institution's secured credit card program as a flexible lending 
practice even though the institution has not provided its credit card 
loan data for evaluation under the other criteria of the lending test.
   Compliance with private commitments. Some commenters suggested 
that, in the lending test, the agencies should consider the extent to 
which an institution has fulfilled lending agreements that the 
institution has made with third parties. The final rule does not 
incorporate this suggestion. The CRA requires the agencies to assess an 
institution's record of helping to meet the credit needs of its 
community, not to enforce privately negotiated agreements. Therefore, 
an institution's record of fulfilling these types of agreements is not 
an appropriate CRA performance criterion.
   Affiliate lending. The 1994 proposal would have permitted 
consideration of affiliate lending at an institution's option or if the 
agency determined that [[Page 22166]] the affiliate's activity is 
integral to the institution's business. Many industry commenters 
opposed consideration of affiliate lending except at the institution's 
option on the ground that consideration without the institution's 
consent may be equivalent to extending CRA coverage to affiliates that 
may not be subject to the statute. Some community and consumer groups 
supported consideration of affiliate activity and urged that the 
regulatory language be strengthened to require the agencies to take 
affiliate lending into account under certain circumstances. In the 
final rule, affiliate lending is considered only at the election of the 
institution, except with regard to the lending activity criterion, 
where, as described earlier, it will provide context for the assessment 
in order to discourage an institution from inappropriately influencing 
an evaluation of its CRA performance by conducting activities that 
would be viewed unfavorably in an affiliate. The agencies also received 
comments that the phrase ``integral to the institution's business'' in 
the proposal was unclear. The final rule does not use this phrase.
   The other limitations on consideration of affiliate lending 
contained in the 1994 proposal have been retained in the final rule. 
However, the limitation against double-counting of loans has been 
modified to clarify that an institution can count as a purchase a loan 
originated by an affiliate, or count as an origination a loan sold to 
an affiliate, provided the same loans are not sold several times to 
inflate their value for CRA purposes.
   The agencies have added language to the final rule to clarify that 
affiliate lending is not considered in evaluating the proportion of 
total lending made within an institution's assessment area(s). The 
agencies also wish to clarify that if an institution elects to have the 
lending activities of its affiliates considered in the evaluation of 
the institution's lending, the geographies served by the affiliate's 
lending activities do not affect the institution's delineation of 
assessment area(s).
   Furthermore, the final rule would not change the existing 
supervisory authority of the agencies over institutions and their 
affiliates. Therefore, although lending by affiliates may be treated as 
lending by an institution, this treatment for CRA purposes will not 
permit a regulatory agency to examine any institution or its affiliate 
if it does not otherwise have such authority.
   Direct and indirect lending. Many consumer and community groups 
expressed concern that the 1994 proposal did not adequately emphasize 
direct lending by the institution as compared to indirect lending 
carried out through consortia and third parties. Other commenters, 
particularly from the industry, urged a return to the provisions of the 
1993 proposal that would have treated direct and indirect lending as 
interchangeable. The final rule clarifies that loans originated or 
purchased by third parties and consortia in which an institution 
participates or invests may only be considered if they qualify as 
community development loans and may only be considered under the 
community development lending criterion. Indirect loans will not affect 
an institution's performance under the other four lending test 
criteria. Under the final rule, direct lending performance is an 
essential element of an institution's CRA performance.
   Some commenters requested clarification whether an institution is 
required to participate directly in making or funding each loan that is 
made through a consortium or third party in order for the loan to be 
considered under the community development lending criterion of the 
lending test. An institution need not directly participate in the 
making or funding of consortia- and third party-loans for the loans to 
be considered (subject to the constraints set out in the rule) under 
the community development lending criterion, provided the loans meet 
the definition of community development loan. Loans originated directly 
on the books of the institution or purchased by the institution are 
considered to have been made directly by the institution, even if the 
institution originated or purchased the loans as a result of its 
participation in a loan consortium.

Investment Test

   The 1994 proposal would have focused on the dollar amount of an 
institution's qualified investments, the innovativeness and complexity 
of the qualified investments and their responsiveness to the credit and 
economic development needs of the community. The 1994 proposal also 
would have clarified that the investment test considers all qualified 
investments benefitting a broader statewide or regional area that 
included an institution's assessment area. Most of the comments on the 
investment test concerned the definition of qualified investment and 
have been discussed earlier in the preamble.
   Limited investment authority. One group of commenters representing 
institutions with statutory constraints on their authority to make this 
type of investment maintained that reliance on an investment test in 
assigning a CRA rating could unfairly stigmatize their CRA performance. 
As previously discussed, the final rule has modified the performance 
context for CRA evaluations to account for financial institutions with 
limited investment authority. These modifications would permit an 
institution with limited authority to make investments to receive a low 
satisfactory rating under the investment test, although it has made few 
or no qualified investments, if the institution has a strong lending 
record, thereby preventing potential anomalies in the CRA performance 
ratings.
   Disposition of branch premises. To implement the statutory 
requirement in 12 U.S.C. 2907(a), the final rule specifies that a 
donation, sale on favorable terms or rent-free occupancy of a branch 
(in whole or in part) in a predominantly minority neighborhood to any 
minority- or women-owned depository institution is a qualifying 
investment. Similar disposition of branch premises to a financial 
institution with a primary mission of promoting community development 
is also a qualified investment.
Service Test

   Compared to the 1993 proposal, the service test in the 1994 
proposal would have reduced the significance in the CRA performance 
evaluation of an institution's full service, ``brick and mortar'' 
branch structure by elevating the consideration given to alternative 
systems for delivering retail banking services (e.g., ATMs, mobile 
branches, loan production offices, or banking-by-telephone or banking-
by-computer). In this regard, the provision of retail banking services 
would have been evaluated on the basis of an institution's: (1) 
Distribution of branches and ATMs among low-, moderate-, middle-, and 
upper-income areas; (2) record of opening and closing branches and 
ATMs; (3) range of services to low-, moderate-, middle-, and upper-
income areas; and (4) efforts to make alternative delivery systems 
responsive to the needs of low- and moderate-income areas and 
individuals. In addition, the extent to which an institution provided 
innovative and responsive community development services would also 
have been considered under the service test. The final rule retains the 
essential structure and elements of the test as proposed but makes some 
modifications.
   Relative weight of branches and alternative delivery systems. The 
overwhelming majority of community and consumer group commenters stated 
[[Page 22167]] that the 1994 proposal placed too little emphasis on the 
location of an institution's full service branches in evaluating 
performance under the service test. Many of those commenters also were 
concerned that the proposed service test would have erroneously equated 
ATMs with full service branches. On the other hand, several industry 
commenters commended the proposal's recognition that full service 
branches should not be the determining factor under the service test as 
consistent with the trend in the industry toward the use of alternative 
service delivery systems.
   The final rule responds to these issues by adjusting the balance of 
the service performance evaluation in favor of full-service branches 
while still considering alternative systems. In this regard, references 
to ATMs in the criteria for evaluating the distribution of an 
institution's branches have been removed, and conforming changes have 
been made in the ratings appendix. These changes signify a recognition 
that convenient access to full-service branches within a community is 
an important factor in determining the availability of credit and non-
credit services. The focus of the service test, however, remains on an 
institution's current distribution of branches, and the test does not 
require an institution to expand its branch network or operate 
unprofitable branches.
   The final rule emphasizes that alternative systems for delivering 
retail banking services, such as ATMs, are to be considered only to the 
extent that they are effective alternatives in providing needed 
services to low- and moderate-income areas and individuals. 
Furthermore, network ATMs owned by other institutions do not receive 
the same consideration in an institution's evaluation as ATMs owned by 
or operated exclusively for that institution.
   An institution's branches and other service delivery systems need 
not be accessible to every part of an institution's assessment area. 
However, the service delivery systems should not exhibit conspicuous 
gaps in accessibility, particularly to low- or moderate-income areas or 
individuals, unless the gaps are adequately explained by the 
performance context.
   Other issues. The final rule conforms the community development 
services component of the service test to that of the investment test 
by giving consideration to community development services that benefit 
a broader statewide or regional area encompassing an institution's 
assessment area.
   Some of the specific suggestions in the comments were not 
implemented in the final rule. For example, the rule does not require 
institutions to provide basic banking services or low-cost checking 
accounts, because the CRA permits institutions substantial leeway to 
determine the specific policies and programs that help meet credit 
needs in their communities. In addition, the final rule does not 
evaluate the effectiveness of service performance on the basis of 
deposit growth. This measurement is not clearly related to helping to 
meet the credit needs of the community and could necessitate burdensome 
coding of deposit accounts on a geographic basis. Finally, debit cards 
are not a retail credit delivery system, and therefore the agencies 
have not included debit cards in the list of examples of alternative 
delivery systems for retail services.

Community Development Test

   The performance of wholesale and limited purpose institutions would 
have been evaluated in the 1994 proposal separately under the community 
development test. This test would have focused on the record of these 
institutions in helping to meet credit needs through community 
development lending, qualified investments, and community development 
services. The 1994 proposal also would have required wholesale or 
limited purpose institutions to serve a designated local area and would 
have placed limits on consideration of activities outside this 
designated area. The final rule maintains the community development 
test with some changes.
   Request for designation as a wholesale or limited purpose 
institution. In response to comments on the 1994 proposal, the final 
rule provides more detail on the process by which an institution is 
designated wholesale or limited purpose. An institution that seeks 
designation as wholesale or limited purpose must file a request in 
writing at least three months prior to the proposed effective date of 
the designation. If the designation is approved, it remains in effect 
until the institution requests revocation of the designation or until 
one year after the agency notifies the institution that the agency has 
revoked the designation on its own initiative. Thus, once an 
institution has received a designation, the institution need not 
reapply before each CRA examination.
   Benefit to assessment area. Many commenters, including both 
industry and some community group commenters, maintained that the 
limitations placed on considering out-of-assessment area activities 
were too restrictive and did not account for the broader business 
strategies and operations of wholesale and limited purpose 
institutions, which often serve communities on a nationwide basis.
   The final rule removes the specific limitation that community 
development activities outside an institution's assessment area be 
considered only up to the amount of activities within the institution's 
assessment area. Under the final rule, the agencies consider all 
activities that benefit the institution's assessment area(s) or a 
broader statewide or regional area that includes the assessment 
area(s). In addition, other activities receive full consideration as 
long as the institution has adequately addressed the needs of its 
assessment area.
   Technical changes and clarifications. The final rule clarifies that 
investments in third party community development organizations may be 
treated either as qualified investments or as community development 
loans (with the institution receiving credit for a pro rata share of 
the loans made by the third party, at the institution's option). In 
addition, the agencies note that a wholesale or limited purpose 
institution need not engage in all three categories of activities 
considered under the community development test but can perform well 
under the test by engaging in one or more of these categories. 
Technical changes have also been made to conform with the 
modifications, previously discussed, to the definition of community 
development loans, the definitions of wholesale and limited purpose 
institutions, and the focus of lending performance assessments on 
originations and purchases rather than loans outstanding.

Small Institution Performance Standards

   The small institution performance standards have been retained in 
the final rule essentially as proposed in 1994, except for the change 
in the eligibility threshold described earlier. As a technical matter, 
the final rule has been changed to clarify that an institution that was 
a small institution as of the end of the prior calendar year is 
examined as a small institution.
   Many commenters, predominantly representing community organizations 
but also including some larger institutions, stated that the 
streamlined approach would amount to a de facto exemption from CRA for 
small institutions. Other commenters, predominantly representing the 
industry, supported the proposal for streamlined examinations and an 
exemption from new data collection and [[Page 22168]] reporting. Many 
commenters representing the industry stated that data collection may 
place a greater relative burden on smaller institutions than larger 
institutions due to limitations in staff and financial resources. After 
considering the comments, the agencies have decided not to change 
materially the smaller institution performance standards. Examinations 
of small banks and thrifts will be streamlined and will not require the 
periodic reporting of new data. Examinations will be meaningful and 
will not be implemented as de facto exemptions.
   Performance criteria. The 1994 proposal provided that to determine 
whether a small institution's CRA record is satisfactory, the agencies 
would consider the institution's loan-to-deposit ratio, adjusted for 
seasonal variation and, as appropriate, other lending-related 
activities, such as loan originations for sale to the secondary 
markets, community development loans or qualified investments. This 
provision of the 1994 proposal responded to concerns following the 1993 
proposal that institutions that package and sell their loans would be 
disadvantaged when compared to portfolio lenders by a strict loan-to-
deposit ratio test. This provision of the 1994 proposal has been 
retained in the final rule. Evaluations will also take into account the 
institution's size, financial condition, and the credit needs of its 
assessment area.
   The final rule also requires consideration of the proportion of the 
institution's total lending made to borrowers in its assessment area. 
The agencies will take into account local lending and investment 
opportunities in assessing this criterion.
   In addition, the agencies will evaluate the distribution of loans 
and lending-related activities among individuals of different income 
levels and businesses and farms of different sizes. Where appropriate, 
the agencies will also evaluate the geographic distribution of loans in 
the institution's assessment area, including low- and moderate-income 
geographies. Contrary to the concerns expressed by some commenters, 
however, a small institution is not expected to lend evenly throughout 
its service area; rather, loan distribution will be evaluated within 
the context of an institution's capacity to lend, local economic 
conditions, and lending opportunities in the assessment area.
   The agencies also will evaluate whether an institution has taken 
appropriate action, as warranted, in response to written complaints 
about the institution's performance in helping to meet the credit needs 
of its assessment area(s). Some commenters suggested that complaints 
resolved satisfactorily for the complainant not be considered in the 
evaluation. The agencies will consider those complaints, but their 
satisfactory resolution will be a favorable element in an evaluation. 
Other commenters expressed concern that the agencies might not 
adequately consider bona fide complaints from community members. 
However, the agencies intend to consider all CRA complaints in the 
course of an examination. Therefore, this criterion is retained in the 
final rule as proposed.
   Elements of outstanding performance. Some commenters requested a 
clarification of the circumstances under which a small institution 
could earn an ``outstanding'' rating. Others urged that some 
flexibility be provided to consider a range of activities that enhance 
credit availability and promote community development. Under the final 
rule, in addition to determining whether an institution has exceeded 
some or all of the standards for a satisfactory rating, the agencies 
will consider a small institution's investment and service performance 
based on the broad range of investment and service activities discussed 
in the rule for other institutions.

Strategic Plan

   The provisions of the strategic plan in the 1994 proposal have been 
adopted largely as proposed, with some changes.
   The 1994 proposal provided that, as an alternative to being rated 
under the lending, service, and investment tests, or the small 
institution performance standards, a bank or thrift could submit to its 
supervisory agency for approval a strategic plan developed with 
community input detailing how the institution proposed to meet its CRA 
obligation. The 1994 proposal made clear that an institution would not 
be assessed under a plan unless the plan had been approved by its 
supervisory agency. To facilitate examinations of institutions with 
approved plans, the final rule clarifies that an institution is only 
evaluated under a plan if the plan is in effect and if the institution 
has operated under an approved plan (although not necessarily the 
particular plan currently in effect) for at least one year. Affiliates 
may prepare joint plans. The final rule permits activities to be 
allocated among affiliated institutions at the institutions' option, 
provided that the same activities are not considered for more than one 
institution. This change was made in response to comments requesting 
greater flexibility and increased opportunities for affiliated 
institutions sharing the same assessment area(s) to work together to 
help meet the credit needs of their communities and, in particular, in 
low- and moderate-income areas.
   Public participation. The final rule retains the public 
participation provisions in the 1994 proposal. The final rule requires 
an institution informally to seek suggestions from the public while 
developing a plan. Once the institution has developed a plan, it must 
publish notice of the plan and solicit written public comment for at 
least 30 days. In order to avoid unduly lengthening the plan approval 
process, the final rule does not extend the minimum comment period. 
After the comment period, the institution shall submit the plan to its 
regulator, along with any written comments received. If the plan was 
revised in light of the comments received, the institution shall also 
submit the plan in the form released for public comment. The agencies 
have added in the final rule a requirement that an institution submit 
with its plan a description of its informal efforts to seek suggestions 
from members of the public. As under the 1994 proposal, the final rule 
states that a plan will be approved if the agency fails to act on it 
within 60 days after submission, unless the agency extends the review 
period for good cause.
   Because of the importance of constructive community involvement in 
the plan process, the agencies have not changed in the final rule the 
amount of public participation required. Requiring an institution to 
seek informal suggestions in formulating a plan, and then to solicit 
formal comment before submitting a plan to the agency, encourages 
consultation between an institution and its community, including local 
government, community leaders, the public and tribal governments. There 
is no need for a further comment period after the institution submits 
its proposed plan to the agency because such a comment period could 
undermine the direct communication and consultation between an 
institution and its community that is most beneficial to the process.
   Several comments appeared to misunderstand why the strategic plan 
provides for comment from the public. The strategic plan option 
provides institutions an opportunity to tailor their CRA objectives to 
the needs of their community and their capacity and expertise. Several 
industry comments were concerned that under the strategic plan option, 
community organizations would play an inappropriate role in an 
[[Page 22169]] institution's operations. However, the purpose of the 
consultation is for the institution to develop the fullest possible 
information about the needs of its community and how these needs might 
be met. The institution nevertheless makes all decisions regarding how 
it plans to help meet those needs. In reviewing the public 
participation, the agencies will not consider whether community 
organizations unanimously support the plan, but whether the institution 
made an appropriate investigation to determine the needs of its 
community, and whether the goals of the plan serve those needs.
   As a technical clarification, the final rule provides that an 
institution may impose a reasonable charge for copying or mailing a 
plan but may not charge for reviewing the plan.
   Assessment of performance under the plan. Under the final rule, as 
under the 1994 proposal, the agencies will generally rate an 
institution's performance under an approved plan solely in relation to 
goals set out in the plan. An institution has the option, however, to 
elect in its plan to be subject to the standard tests should it fail to 
meet substantially its ``satisfactory'' goals under the plan. The final 
rule makes this election clear. An institution operating under an 
approved plan would, during the period of the plan, not be subject to 
assessment under the standard tests, unless the institution so chose. 
In considering whether an institution has substantially met plan goals, 
an agency will give consideration to circumstances beyond the 
institution's control, such as economic conditions, that have affected 
its ability to perform.
   Confidential information. A number of industry commenters indicated 
that the possibility of public disclosure of confidential information 
presented a major disincentive to their use of the strategic plan 
alternative. In response to similar comments on the 1993 proposal, the 
1994 proposal would have permitted institutions to submit additional 
information to the relevant agency on a confidential basis. The final 
rule includes this provision, which adequately addresses 
confidentiality concerns.
   Data collection and reporting responsibilities. Despite industry 
comments to the contrary, the final rule provides that approval of a 
plan does not affect an institution's data collection responsibilities. 
These data are useful to the agencies in assessing overall lending in 
communities, and would also be of value to the public. Since the 
institution's plan will be in its public file, the public will have the 
appropriate context in which to evaluate the lending data.

Assigned Ratings

   In the final rule, as under the 1994 proposal, an institution will 
be assigned one of the four assigned ratings required by the statute: 
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or 
``substantial noncompliance.'' (12 U.S.C. 2906(b)(2)) For institutions 
that are evaluated under the community development test for wholesale 
or limited purpose institutions, the small institution performance 
standards, or an approved strategic plan, the rating on these tests 
will be the institution's assigned rating with adjustment for any 
evidence of discrimination. Retail institutions that are evaluated 
under the lending, investment and service tests will be assigned a 
rating based upon the assigned rating principles and the matrix that 
implements these principles, also with adjustment for any evidence of 
discrimination.
   Ratings principles and matrix. A number of comments discussed the 
principles and methodology by which an assigned rating would be given 
to retail institutions evaluated under the lending, investment and 
service tests. The 1994 proposal set forth five principles that 
governed the assignment of this rating. The methodology for calculating 
the assigned rating was described in Appendix A. The proposal would 
have required that an institution's rating on the lending test count 
for at least 50 percent of its assigned rating. Furthermore, an 
institution would have been required to achieve a ``satisfactory'' 
rating on the lending test in order to receive an assigned rating of 
``satisfactory.'' In addition, the 1994 proposal would have allowed 
investment and service performance to raise a institution's assigned 
rating if it had earned at least a ``satisfactory'' rating on the 
lending test. Poor performance on either the investment or service test 
also could have negatively affected an institution's assigned rating. 
The proposal would have required the agencies to adjust ratings for all 
institutions, regardless of which test the agencies used to evaluate 
their performance, to take into consideration evidence of 
discriminatory or other illegal credit practices. Finally, an 
institution that otherwise would have received a ``needs to improve'' 
rating would have been rated as ``substantial noncompliance'' if it 
received no better than a ``needs to improve'' rating on each of its 
two previous examinations.
   Commenters generally supported the 1994 proposal's emphasis on 
lending performance, but a number were concerned about several 
apparently anomalous ratings that would have resulted from applying the 
rating principles and the matrix in the appendix. Several commenters, 
particularly community groups, were concerned that an institution could 
receive an assigned rating of ``satisfactory'' even if it received a 
rating of ``substantial noncompliance'' on both the investment and 
service tests, if its rating on the lending test was at least a ``high 
satisfactory.'' In addition, an institution with a rating of 
``substantial noncompliance'' on either the service or investment test 
could get an ``outstanding'' composite rating if its rating on the 
lending and the third test was ``outstanding.'' These commenters 
suggested revising the rating principles and matrix to avoid these 
anomalous results.
   After considering the comments, the agencies have revised the final 
rule to eliminate these anomalies. The agencies eliminated the 
principle that an ``outstanding'' rating on the lending test and either 
the service or investment test would mean an ``outstanding'' assigned 
rating even if the rating on the third test was ``substantial 
noncompliance.'' The agencies also eliminated the principle that an 
institution's rating on the lending test would count for at least 50 
percent of its assigned rating. This change does not alter the 
agencies' emphasis on the primacy of lending when evaluating CRA 
performance, because no institution may receive an assigned rating of 
``satisfactory'' unless it receives a rating of at least ``low 
satisfactory'' on the lending test.
   In light of the comments, the matrix that sets forth the 
methodology for aggregating an institution's scores on the lending, 
service and investment tests to arrive at an assigned rating has also 
been revised. The number of points to be given for each rating on the 
lending, service and investment tests remains unchanged as shown in the 
following table.

                                                                                                               
[[Page 22170]]
------------------------------------------------------------------------
        Component test ratings            Lending   Service  Investment
------------------------------------------------------------------------
Outstanding.............................        12         6          6 
High Satisfactory.......................         9         4          4 
Low Satisfactory........................         6         3          3 
Needs to Improve........................         3         1          1 
Substantial Noncompliance...............         0         0          0 
------------------------------------------------------------------------

 The number of points needed to achieve each of the four composite 
assigned ratings has been modified slightly, as shown in the following 
table, to remove the anomalies discussed earlier.

------------------------------------------------------------------------
               Points                     Composite assigned rating    
------------------------------------------------------------------------
20 or over...........................  Outstanding.                     
11 through 19........................  Satisfactory.                    
5 through 10.........................  Needs to Improve.                
0 through 4..........................  Substantial Noncompliance.       
------------------------------------------------------------------------

   To ensure that an institution does not receive an assigned rating 
of ``satisfactory'' unless it receives a rating of at least ``low 
satisfactory'' on the lending test, an institution's assigned rating 
will be calculated using three times the lending test score if the 
institution's point total exceeds three times the lending test score.
   The agencies have removed the matrix from Appendix A. This change 
will allow the agencies some flexibility in adjusting the matrix to 
prevent any other unintended anomalies that may be found during the 
examination process. If the agencies change the matrix in the future, 
the new matrix will be published for information, but not necessarily 
for comment, in the Federal Register.
   Automatic downgrade of third ``needs to improve'' rating. The 
agencies have also removed the requirement that an institution's CRA 
rating be downgraded automatically from ``needs to improve'' to 
``substantial noncompliance'' if it received no better than a ``needs 
to improve'' rating on each of its two previous examinations. Even 
though the automatic downgrading has been eliminated in the final rule, 
the agencies will consider an institution's past performance in its 
overall evaluation. If the poor performance continues, an institution 
could be rated ``substantial noncompliance'' if prior ratings were 
``needs to improve'' and the institution has not made efforts to 
improve its performance.
   Weight of service test. Some consumer groups urged that an 
institution be required to get at least a ``low satisfactory'' on the 
service test in order to get an assigned rating of ``satisfactory'' or 
better. The agencies considered this suggestion, but decided that 
because the CRA's focus is on helping to meet a community's credit 
needs, it would be inappropriate to impose this requirement. However, 
the changes to the ratings principles and matrix increase the weight of 
both the service and investment tests.
   High satisfactory and low satisfactory ratings. Some commenters 
found confusing the use of a ``high'' and ``low'' satisfactory rating 
on the lending, service and investment tests and only a 
``satisfactory'' on the assigned rating. Because a wide range of 
performance may be rated as satisfactory, the agencies decided to keep 
the five ratings on the underlying tests, even though the assigned 
ratings are limited to the four statutory ratings. This will permit the 
agencies, banks and thrifts, and their customers to recognize the 
stronger performances on the lending, investment, and service tests of 
those institutions that are doing a very good, but not quite 
outstanding, job of helping to meet the credit needs of their 
communities.
Effect of CRA Performance on Applications

   The CRA requires the agencies to consider an institution's CRA 
performance record when considering an application by the institution 
to establish a deposit facility. The statute defines applications for a 
deposit facility as including applications for a Federal financial 
institution charter or FDIC deposit insurance, applications to 
establish or relocate a branch or home office, and applications for 
mergers, consolidations, or the purchase of assets or assumption of 
liabilities of a regulated financial institution. The 1994 proposal 
provided that in considering an institution's application for a deposit 
facility, the agencies would consider the institution's CRA performance 
and take into account any views expressed by interested parties 
submitted in accordance with the applicable agency's rules and 
procedures. The proposal also stated that an institution's record of 
CRA performance could provide a basis for approving, denying, or 
conditioning approval of an application.
   A number of comments from financial institutions asked the agencies 
to create a ``safe harbor'' from CRA protests for banks with good CRA 
ratings that apply to establish a deposit facility. Some commenters 
suggested that a ``safe harbor'' would provide an incentive to achieve 
an outstanding rating. Community and consumer groups, on the other 
hand, opposed any sort of safe harbor from CRA protests.
   The agencies have consistently recognized that materials relating 
to CRA performance received during the applications process can and do 
provide relevant and valuable information. The agencies also continue 
to believe, as provided in the Interagency Policy Statement Regarding 
the Community Reinvestment Act, that information from an examination is 
a particularly important consideration in the applications process 
because it represents the on-site evaluation of an institution's CRA 
performance by its primary Federal regulator. The final rule implements 
without change the balance given in the 1994 proposal between CRA 
performance ratings and material information presented through public 
comment in the applications process.
   The agencies noted in the preamble to the 1993 proposal that the 
frequency with which the agencies will examine an institution will 
depend in part on its record of performance. A similar discussion was 
inadvertently omitted from the 1994 proposal. Examination frequency 
will be based, in part, on an institution's record of performance. This 
policy combines an efficient use of agency resources with an incentive 
for good performance.

Assessment Area Delineation

   As a result of numerous comments received on this issue, the final 
rule makes several changes to the definition of service area in the 
1994 proposal.
   Assessment area. The CRA requires the agencies to assess an 
institution's record of helping to meet the credit needs of its local 
community. The assessment area as defined in the final rule represents 
the community within which the agencies assess an institution's record 
of CRA performance.
   As noted earlier in the preamble, in the final rule, the term 
``assessment area'' replaces the term ``service area,'' which was used 
in the 1993 and 1994 proposals. The agencies believe the term 
``assessment area'' more accurately [[Page 22171]] describes the 
geographic area within which the specific performance criteria in the 
rule will be assessed. Based on the continuing criticisms of the 
``delineated community'' in the current regulation and the ``service 
area'' in both the 1993 and 1994 proposals, the agencies have decided 
to place a different emphasis on the institution's specific delineation 
and the methods used by the institution to establish that delineation. 
The agencies do not expect that, simply because a census tract or block 
numbering area is within an institution's assessment area, the 
institution must lend to that census tract or block numbering area. The 
capacity and constraints of the institution, its business decisions 
about how it can best help to meet the needs of its assessment area, 
including those of low- and moderate-income neighborhoods, and other 
aspects of the performance context, would be relevant to explain why 
the institution is not serving portions of the assessment area(s).
   The rule also clarifies that an institution's delineation of its 
assessment area(s) is not separately evaluated as an aspect of CRA 
performance, although the delineation will be reviewed for compliance 
with the assessment area requirements of the rule. If, for example, an 
institution delineated the entire county in which it is located as its 
assessment area but could have delineated its assessment area as only a 
portion of the county, it will not be penalized for lending only in 
that portion of the county, so long as that portion does not reflect 
illegal discrimination or arbitrarily exclude low- or moderate-income 
geographies.
   Assessment area boundaries. The 1994 proposal would have prohibited 
a financial institution, other than a wholesale or limited purpose 
institution, from delineating a service area that extends substantially 
across boundaries of a metropolitan statistical area (MSA) or state 
boundaries, unless the service area was located in a multistate MSA. 
Further, the proposal would have prohibited an institution's service 
area from reflecting illegal discrimination or arbitrarily excluding 
low- and moderate-income geographies (taking into account the 
institution's size and financial condition).
   The final rule states that an institution shall not delineate an 
assessment area extending substantially across the boundaries of a 
consolidated metropolitan statistical area (CMSA). An institution shall 
delineate separate assessment areas for the areas inside and outside 
the CMSA and for different CMSAs. The 1994 proposal expressed these 
limitations in terms of MSAs rather than CMSAs. The change in the final 
rule has been made to address a technical shortcoming in the 1994 
proposal, but does not change its substance. The final rule retains the 
provision from both the 1993 and 1994 proposals that an assessment area 
not extend substantially across state boundaries unless the assessment 
area is located in a multistate MSA. The final rule applies these 
limitations to wholesale and limited purpose institutions as well as 
other institutions because of changes made to the community development 
test.
   To simplify the process of delineating an assessment area, the 
final rule encourages institutions to establish assessment area 
boundaries that coincide with the boundaries of one or more MSAs or one 
or more contiguous political subdivisions, such as counties, cities, or 
towns. An institution is permitted, but is not required, to adjust the 
boundaries of its assessment area(s) so as to include only the portion 
of a political subdivision it reasonably can be expected to serve. This 
provision gives institutions some flexibility in their delineations, 
particularly in the case of an area that would otherwise be extremely 
large, of unusual configuration, or divided by significant geographic 
barriers. As with the 1994 proposal, however, such adjustments may not 
arbitrarily exclude low- and moderate-income geographies from the 
institution's assessment area(s). For purposes of assessment area 
delineation, an institution should use the MSA and CMSA boundaries in 
effect on January 1 of the calendar year in which the institution is 
making the delineation.
   Equidistance principle. The 1994 proposal would have adopted the 
effective lending territory principle from the current regulations in 
slightly modified form. The 1994 proposal would have explicitly linked 
an institution's CRA obligations to the areas around its branches and 
deposit-taking ATMs, rather than its other non-deposit taking offices. 
The service area delineated by the institution would have had to 
include all geographies around its branches in which the institution 
originated or had outstanding during the previous year a significant 
number and amount of home mortgage, small business and small farm, and 
consumer loans and any other geographies equidistant from its branches 
and deposit-taking ATMs.
   The final rule eliminates the equidistance principle as a required 
part of the delineation of an assessment area. This change provides 
institutions greater flexibility in their delineations. Several 
commenters suggested that, in certain circumstances, the equidistance 
requirement could be inappropriate, because institutions do not 
routinely serve areas that are uniformly equidistant from their 
deposit-taking offices. The final rule retains the requirement that an 
assessment area not arbitrarily exclude low- or moderate-income 
geographies.
   Wholesale and limited purpose institutions. The final rule requires 
that the assessment area(s) for a wholesale or limited purpose 
institution must generally consist of one or more MSAs or one or more 
contiguous political subdivisions in which the institution has its main 
office, branches, and deposit-taking ATMs. This requirement is 
substantively consistent with the 1994 proposed delineation of service 
area for wholesale and limited purpose institutions, but the final rule 
differs from the 1994 proposal in two ways. First, the final rule 
specifies that the assessment area must generally consist of one or 
more MSAs or contiguous political subdivisions; the 1994 proposal would 
have required the institution to delineate ``an area or areas around 
its offices.'' Second, the assessment area has been modified to conform 
to changes made to the scope of the community development test. The 
community development test permits consideration of community 
development activities that are outside of an institution's assessment 
area, but that are in a broader statewide or regional area that 
includes the institution's assessment area. As a result, an institution 
need not delineate a statewide or regional, rather than local, 
assessment area in order to receive consideration for these activities.
   Use of assessment area. In response to comments indicating concern 
that examiners might modify the area delineated by the institution, the 
final rule explicitly provides that the agencies will use the 
assessment area delineated by the institution, unless they determine 
that the assessment area does not comply with the requirements for 
assessment areas set forth in the final rule. If the assessment area 
fails to comply with the rule's requirements, the examiner will 
designate an area that does comply and will use that area in evaluating 
the institution's performance.
   Technical changes and clarifications. The final rule includes other 
technical changes to provide clarification. For example, some 
commenters interpreted the use of the phrase ``significant number and 
amount of loans'' in the 1994 proposal to have a different meaning than 
the phrase ``substantial portion of its loans'' in the current 
[[Page 22172]] regulations. The agencies did not intend a different 
meaning and have used the wording from the current regulations in the 
final rule. In addition, changes in the final rule reflect the rule's 
shift in focus from loans outstanding to originations and the different 
circumstances under which the lending test considers consumer loans.

Data Collection and Reporting

   In the final rule, the agencies continued their efforts to 
streamline data collection and reporting requirements in response to 
comments concerning potential burden. The final rule simplifies data 
requirements and eliminates Appendix C.
   Application of data collection provisions to small institutions and 
wholesale and limited purpose institutions. The 1994 proposal would not 
have applied small business and farm loan and community development 
loan data requirements to small institutions. Some commenters 
criticized the exemption from data collection and reporting 
requirements for small institutions because only a subset of data would 
actually be collected, restricting the regulators' ability accurately 
to assess the overall performance of institutions in helping to meet 
credit needs. These commenters stated that the benefits of collecting 
the data across the industry outweighed the associated burden. However, 
the burden on small institutions would be significant and the benefit 
less than the commenters assert. Therefore, the final rule does not 
subject a small institution to additional data collection and reporting 
requirements. The volume of originations of loans other than home 
mortgage loans in a small institution will generally be small enough 
that an examiner can view a substantial sampling of loans without 
advance collection and reporting of information by the institution. In 
addition, although small institutions are large in number, they have a 
relatively small percentage of the total assets of the industry.
   An institution that was a small institution during the prior 
calendar year but is no longer a small institution would be subject to 
data collection and maintenance requirements but not data reporting 
requirements. The data reporting requirements do not apply because the 
institution would not have collected the data to report. The 
institution would be subject to data reporting requirements in the year 
following the first year for which it was required to collect data, 
provided the institution does not qualify as a small institution at the 
time the data must be reported.
   The 1994 proposal would have required large wholesale and limited 
purpose institutions to collect and report data. Some commenters urged 
that wholesale and limited purpose institutions be exempt from data 
collection and reporting. The final rule does not include an exemption. 
The data are necessary for the agencies to determine whether the 
institutions initially qualify and continue to remain qualified for 
treatment as wholesale or limited purpose institutions. The data also 
will be helpful in understanding the context in which the performance 
of other institutions should be evaluated.
   Collection and reporting of originations and purchases rather than 
loans outstanding. For the reasons stated in the discussion of the 
lending test earlier in the preamble, the final rule requires reporting 
of and evaluation based on originations and purchases for all 
categories of loans. Institutions still have the option to provide data 
on loans outstanding, which examiners would consider to round out the 
picture of lending performance.
   Community development loan reporting. The community development 
loan reporting provisions in the final rule have been modified to 
reflect the decision to rely on originations and purchases. 
Institutions, except small institutions and institutions that were 
small institutions during the prior calendar year, are required to 
report to their primary regulator annually on March 1 the aggregate 
number and aggregate amount of community development loans originated 
and purchased during the prior calendar year. The agencies will include 
this information in the CRA Disclosure Statements that they prepare for 
each institution, and which an institution shall place in its public 
file within three days of receipt.
   Some commenters requested reporting and disclosure of more detailed 
information on community development loans, including a breakdown by 
location and purpose of the loan. The agencies did not adopt these 
suggestions because the additional burden would outweigh the potential 
usefulness of more specific data. In assessing an institution's 
performance under the lending or community development test, examiners 
will review actual community development loan files to determine the 
complexity and innovativeness of the loans and their responsiveness to 
credit and community development needs. Examiners will discuss the 
community development loans reviewed in the public portion of the 
institution's CRA performance evaluation. The discussion will include 
the nature and location (if relevant) of the activities supported by 
the loans reviewed.
   Consumer loan collection and maintenance. In the final rule, as in 
the 1994 proposal, data collection and maintenance are optional for 
consumer loans, and there are no reporting requirements. As described 
in the discussion of the lending test earlier in the preamble, an 
institution may provide data on one or more categories of consumer 
loans, such as motor vehicle loans, and not on others. However, if an 
institution provides data for any loan in a category, it is required to 
provide data for all loans in the category. For each loan category for 
which an institution elects to provide data, the data must include for 
each loan in the category originated or purchased since the last CRA 
examination: (1) the amount at origination or purchase, (2) the loan 
location, and (3) the gross annual income of the borrower that the 
institution considered in making the credit decision. If the 
institution does not consider income in making an underwriting 
decision, it need not collect income information. Further, if the 
institution routinely collects, but does not verify, a borrower's 
income when making a credit decision, it need not verify the income for 
purposes of data maintenance. The location of the loan must be 
maintained by census tract or block numbering area.
   Reporting of loan information outside assessment areas and outside 
MSAs. Some commenters asked that institutions not be required to report 
small business and small farm loans located outside their assessment 
areas or outside MSAs. The agencies have not made this change in the 
final rule. The data on lending in rural areas provide important 
information on how well institutions are serving rural communities 
where they have branches. The data are also necessary for the lending 
test assessment criterion that evaluates the degree to which an 
institution's lending is inside its assessment area. Finally, the 
lending data provide information that assists examiners in 
understanding the context in which the performance of other 
institutions should be evaluated. The commenters that opposed reporting 
of small business and small farm loans outside their assessment areas 
or outside MSAs also generally opposed the proposed change to require 
institutions that are not small institutions and are subject to HMDA to 
report the location of applications and originations of home mortgage 
loans outside the MSAs in which the [[Page 22173]] institutions have 
offices. The agencies have adopted the proposed change despite these 
objections for the same reasons that the agencies did not change the 
final rule for collecting of small business and small farm loans 
outside MSAs or assessment areas. Conforming amendments to Regulation C 
(HMDA) have been adopted by the Board.
   Race and gender information on small business borrower not 
required. The 1994 proposal would have required each institution, other 
than a small institution, to collect and report data on the race and 
gender of small business and small farm borrowers. This provision, 
which was the most frequently addressed issue in the comments, was 
proposed in order to support the fair lending component of the CRA 
assessment. The agencies have removed this proposed requirement from 
the final rule.
   Many commenters, including virtually every community or consumer 
group that addressed the issue, supported the provision. These 
commenters believed that the information was critical to determine 
whether discrimination was occurring in small business and small farm 
lending. The commenters noted the value of HMDA data on race and gender 
in monitoring home mortgage lending. Nearly every industry comment 
opposed the collection as proposed. These commenters stated that the 
requirement was burdensome and the data, as proposed to be collected 
and reported, would be of limited utility. They asserted that reporting 
institutions would be at a competitive disadvantage because small 
institutions and non-financial institution lenders not only would not 
be required to collect and report the information but actually would be 
prohibited from doing so (because of the Board's Regulation B, 
implementing the Equal Credit Opportunity Act). Some commenters also 
questioned the relevance of the race and gender data to CRA. A few 
industry commenters endorsed collection of race and gender data, 
provided it was done through Regulation B. A larger number opposed 
collection, but believed that, if the agencies concluded the data were 
necessary, collection should be required under Regulation B.
   The agencies have removed the proposed requirement from the final 
rule. Although the agencies believe that fair lending performance is 
directly relevant to CRA performance, they recognize the anomaly of 
requiring some institutions to collect and report information that 
other lenders are prohibited from collecting. Therefore, they believe 
that it is more appropriate to address the issue of race and gender 
data in fair lending regulations that apply equally to all lenders.
   Small business data collection, maintenance, and reporting 
generally. In response to industry comments regarding the burden 
associated with the small business and small farm loan data 
requirements, the final rule streamlines the data collection, 
maintenance and reporting. The agencies have replaced loan-by-loan 
reporting using loan registers with aggregate reporting by census 
tract.
   The 1994 proposal would have required lenders to indicate whether 
small business borrowers had gross annual revenues $1 million or less. 
Some commenters suggested that the requirement be eliminated because 
they believed it was burdensome and unnecessary. The final rule retains 
the requirement. The burden of collecting this information is minimal, 
because $1 million is already used in the Board's Regulation B as a 
threshold for certain requirements related to adverse action 
notifications and record retention. Therefore, many institutions 
already have a reason to track business and farm loans based on this 
revenue figure.
   The information on the revenue size of business and farm borrowers 
is useful because, in combination with loan amount information, it will 
enable the agencies to make accurate judgments about the size of 
businesses and farms receiving reported loans. Some commenters 
questioned whether an institution should report the revenue of the 
entity to which the loan is actually extended or of its parent 
corporation if the entity is a subsidiary. An institution should report 
the revenues that the institution considered in making its credit 
decision.
   Some commenters asked that the agencies require collection and 
reporting of data on applications and denials. The agencies did not 
adopt this suggestion. The small business lending process is generally 
far less formal than the consumer or home mortgage lending process. 
Sometimes institutions do not require written applications for small 
business loans; when they do, applications often come after potential 
problems have been addressed in informal discussions. Because the 
agencies do not believe information on applications and denials would 
be particularly helpful, the final rule does not require collection or 
reporting of information on small business and small farm applications 
and denials. Instead, institutions are required to report all small 
business and small farm loans that they originate or purchase.
   Under the final rule, each covered institution is required to 
collect and maintain in a standardized, machine readable format the 
following information on each small business loan originated or 
purchased since the prior CRA examination: (1) amount at origination; 
(2) location; and (3) an indicator whether the loan was to a business 
with $1 million or less in gross annual revenues. The location of the 
loan must be maintained by census tract or block numbering area.
   Each covered institution is required to report in machine-readable 
form annually on March 1 the following information, aggregated for each 
census tract/block numbering area in which the institution made at 
least one small business or small farm loan during the prior calendar 
year: (1) number and amount of loans with original amounts of $100,000 
or less; (2) number and amount of loans with original amounts of more 
than $100,000 but less than or equal to $250,000; (3) number and amount 
of loans with original amounts of more than $250,000; and (4) number 
and amount of loans to businesses and farms with gross annual revenues 
of $1 million or less (using the revenues the institution considered in 
making its credit decision).
   Need for data collection and reporting. Some commenters continued 
to question the validity and propriety of any data collection and 
reporting for larger institutions. As discussed earlier, the agencies 
have significantly reduced the data collection and reporting from that 
originally proposed, and where feasible the rule relies on existing 
data collections. However, the rule continues to provide for some 
additional data collection and reporting by larger institutions. In a 
performance-based CRA process, these requirements are necessary to 
permit the agencies to carry out their statutory obligation to examine 
and assess institutions' CRA records and to prepare the public sections 
of CRA performance evaluations. The emphasis on actual performance 
responds to the nearly universal criticism that current CRA 
examinations rely too heavily on documentation of an institution's 
policies, procedures and community contacts rather than lending. While 
the agencies recognize that the collection of data regarding lending 
activity will impose burden on many institutions, the final rule has 
been tailored to rely primarily on data readily available to or already 
collected by institutions in order to minimize the collection burden. 
In addition, the burden of collecting actual loan performance data will 
be offset somewhat by the elimination of requirements under the current 
CRA [[Page 22174]] evaluation scheme that institutions document 
policies, procedures, and CRA contacts. Finally, the agencies will 
prescribe a standardized format for data maintenance and reporting and 
make available software to facilitate data maintenance and reporting.
   Disclosure of small business and small farm loan data. Under the 
1994 proposal, every large institution would have been required to 
include in its public file the following information on small business 
loans: (1) the number and amount of loans in low-, moderate-, middle- 
and upper-income census tracts; (2) a list of each census tract with at 
least one loan; (3) the number and amount of loans inside the 
institution's service areas and outside the institution's service 
areas; (4) the number and amount of loans to businesses with gross 
annual revenues of $1 million or less; (5) the number and amount of 
loans to minority-owned businesses; and (6) the number and amount of 
loans to women-owned businesses. The proposal did not provide that the 
agencies would make any aggregate data available to the public.
   The vast majority of consumer and community group commenters 
maintained that the public disclosure provisions of the 1994 proposal 
were not sufficient. They asked that small business loan data be made 
available to the public in a HMDA-like format for individual 
institutions and in aggregated form. They asked that, at a minimum, 
data be available to the public on an aggregate and institution-by-
institution basis by individual census tract, including for each census 
tract the number and volume of loans. Otherwise, the public would not 
be able to judge how an institution is performing in one low-income 
neighborhood as compared to another and, without incurring unreasonable 
cost, would not be able to compare the performance of one institution 
with the performance of another. The commenters also expressed concern 
about the agencies' using certain data to evaluate institutions but not 
making the data available to the public. Industry commenters generally 
opposed detailed data collection and reporting requirements as 
burdensome.
   Census tract-by-census tract information provides the most detailed 
information to the public. However, some commenters were concerned that 
disclosure at this level for each institution might invade the privacy 
of small business and small farm borrowers, could reveal protected 
business information, might erroneously signal an expectation that an 
institution lend in each census tract in its assessment area(s), and 
might lead to misinterpretation of the data.
   Based on these considerations, under the final rule, the agencies, 
rather than the institutions, will prepare disclosure statements in 
order to reduce burden on the industry. The agencies will prepare 
annually individual CRA Disclosure Statements for each reporting 
institution and aggregate disclosure statements for each MSA and the 
non-MSA portion of each state. The agencies will make both the 
individual and the aggregate disclosure statements available to the 
public at central depositories.
   The aggregate disclosure statements will indicate, for each 
geography, the number and amount of small business and small farm loans 
originated or purchased by all reporting institutions, except that the 
agencies may adjust the form of the disclosure if necessary, because of 
special circumstances, to protect the privacy of a borrower or the 
competitive position of an institution.
   The disclosure statements for the individual institutions will be 
prepared on a state-by-state basis and will contain for each county 
(and each assessment area smaller than a county) with a population of 
500,000 or fewer in which the institution reported a small business or 
small farm loan: (1) The number and amount of small business and small 
farm loans located in low-, moderate-, middle-, and upper-income census 
tracts or block numbering areas; (2) a list of each census tract or 
block numbering area in the county or assessment area grouped according 
to whether the geography is low-, moderate-, middle-, or upper income; 
(3) a list of each census tract or block numbering area in which the 
institution reported a small business or small farm loan; and (4) the 
number and amount of small business and small farm loans to businesses 
and farms with gross annual revenues of $1 million or less. For each 
county (and each assessment area smaller than a county) with a 
population greater than 500,000, the number and amount of small 
business and small farm loans will be provided for geographies grouped 
according to whether the median income of the geography relative to the 
area median income is less than 10 percent, 10 or more but less than 20 
percent, 20 or more but less than 30 percent, 30 or more but less than 
40 percent, 40 or more but less than 50 percent, 50 or more but less 
than 60 percent, 60 or more but less than 70 percent, 70 or more but 
less than 80 percent, 80 or more but less than 90 percent, 90 or more 
but less than 100 percent, 100 or more but less than 110 percent, 110 
or more but less than 120 percent, or 120 percent or more.
   The disclosure statements will also contain information on the 
number and amount of loans inside each and outside any assessment area 
of the institution and the institution's community development loan 
information. The disclosure statements will include affiliate lending 
if the institution reported the affiliate lending for consideration in 
its assessment.
   An institution itself no longer has to prepare information on small 
business and small farm lending or community development lending to 
place in its public file. Instead, each institution is required to put 
its CRA Disclosure Statement in its public file within three days of 
receipt of the statement from its regulator.
   List of geographies in assessment area and map of each assessment 
area. The 1994 proposal also would have required each institution to 
report (and include in its public file) a list of the geographies the 
institution considers to be within its assessment area and a map of 
each assessment area showing its geographies. Several industry comments 
suggested that this requirement was overly burdensome and that either a 
map or a list of the geographies in the assessment area(s) be reported 
but not both. Under the final rule, institutions would only report the 
list of geographies in each assessment area, and small institutions or 
institutions that were small during the prior calendar year would not 
have to report at all. In addition, the agencies have changed the 
reporting date to March 1 to provide a uniform date for reporting of 
information required under the final rule.
   All institutions would still have to include a map of each 
assessment area in the public file because the agencies believe a list 
of census tract numbers is likely not to be useful to many members of 
the public. To reduce burden, the final rule clarifies that the map 
itself need not show the geographies. The geographies may be identified 
on the map; alternatively, if the institution provides a separate list 
of the geographies contained in the area, the map may need to show only 
the boundaries of the area.

Public File

   Other aspects of the public file requirements have also been 
amended to provide more clarity and to respond to the criticism that 
the requirements in the 1994 proposal were burdensome.
   List of branches, ATMs, and services. The 1994 proposal would have 
required the public file to include a list of the 
[[Page 22175]] institution's branches and ATMs, their street addresses, 
and geographies; a list of branches and ATMs opened or closed by the 
institution during the current and each of the prior two calendar 
years, their street addresses, and geographies; and a list of services 
offered at the institution's branches and ATMs. Many industry 
commenters stated that these requirements were extremely burdensome, 
particularly the list of services offered at the branches. Much of this 
information is central to the institution's performance under the 
service test, and the public should have access to it. The final rule 
therefore retains the requirement that the public file include a list 
of services offered at the branches as well as the requirement that the 
file include a list of the branches, their street addresses, and 
geographies and a list of branches opened and closed during the current 
and prior two calendar years.
   However, the final rule does not require institutions to list ATMs 
by street address or geography. Nor does the final rule require that 
institutions provide a list of ATMs that have been opened or closed in 
the current or prior two years. This change reduces burden on an 
institution in trying to keep the public file current because ATMs may 
be opened and closed more frequently than branches. This change is also 
consistent with other changes that clarify that the agencies do not 
consider ATMs as equivalent to branches in providing services to the 
community.
   Small business, small farm, consumer, and community development 
loan data. The 1994 proposal would have required institutions that were 
not small institutions (and small institutions that elected to be 
evaluated under the lending, investment, and service tests) to include 
data collected or reported to the agencies for each of the prior two 
calendar years in their public file. The 1994 proposal would not have 
required public disclosure of data if it might reasonably be expected 
to disclose the identity of the borrower because of the small number of 
loans made in particular geographies or to particular groups of 
borrowers.
   Institutions will no longer have to compile information on small 
business, small farm, and community development loans for inclusion in 
their public files. As described earlier, the information regarding 
these loans that continues to be relevant under the final rule will be 
contained in the institution's CRA Disclosure Statement prepared by the 
agencies.
   Institutions that elect to have any portion of their consumer 
lending portfolios considered under the lending test will be required 
to provide in the public file information on the number and amount of 
consumer loans to
low-, moderate-, middle- and upper-income borrowers and census tracts, 
as well as information on the number and amount of consumer loans 
located both inside and outside of the institution's assessment area.
   The final rule also removes the exception to providing data in the 
public file that might reasonably be expected to disclose the identity 
of the borrower. Because of changes to data disclosure in the final 
rule, the agencies believe that a privacy exception is not necessary 
for the individual CRA Disclosure Statements. As described earlier, the 
agencies will take privacy concerns into account in preparing aggregate 
disclosure statements.
   Inclusion of comments received. The 1994 proposal would have 
required an institution to include in the public file all signed, 
written comments that it received from the public for the past two 
years. A few industry commenters did not perceive a need to keep 
correspondence related to complaints that have been satisfactorily 
resolved. The agencies have not made a change in response to these 
comments because, as discussed earlier, satisfactorily resolved 
comments are relevant to assessment of the institution's performance. 
The final rule removes the requirement that written comments be signed 
in order to be included in the public file, because all written 
comments should be considered even if the commenter wishes to remain 
anonymous. Of course, the response appropriate to a comment may well 
vary depending on whether the commenter has provided his or her name.
   Loan-to-deposit ratio for small institutions. The 1994 proposal 
would have required small institutions to include in the public file 
their loan-to-deposit ratios computed at the end of the most recent 
calendar year. Many small institutions requested that the public file 
requirement for loan-to-deposit ratio information be expanded to 
include loan-to-deposit ratios for each quarter, or alternatively, that 
an annual average loan-to-deposit ratio be placed in the file in order 
to better convey seasonal fluctuations in lending to the public. In 
accordance with the comments, the final rule requires a small 
institution to place annually in the public file the loan-to-deposit 
ratio at the end of each quarter of the prior calendar year.
   Public file location and number of copies. The 1994 proposal would 
have required that institutions maintain a complete copy of the public 
file at the home office. At least one branch office in each assessment 
area would have been required to have the HMDA Disclosure Statement and 
any materials from the public file relating to that assessment area 
available to the public. In addition, if a request for the public file 
was made at a branch office that did not maintain the file, the 
institution would have been required to make a complete copy of the 
file for that assessment area available for review at the branch within 
five days at no cost. An institution could have imposed reasonable 
copying and mailing charges if a member of the public requested copies 
of information in the file.
   Industry commenters maintained that the requirement to keep 
multiple copies of the public file was extremely burdensome, 
particularly given the large amount of information in the file. These 
commenters suggested that only one public file should be required.
   Under the final rule, an institution need maintain only one copy of 
its public file in each state in which it has its main office or a 
branch. The final rule provides that each institution shall make 
available to the public for inspection upon request and at no cost the 
information in the file at the main office and, if the institution is 
an interstate institution, at one branch office in each state. At each 
branch, an institution shall provide its public evaluation and a list 
of services provided at the branch. The institution shall also make all 
information in the public file relating to the assessment area in which 
the branch is located available for review at the branch within five 
calendar days of a request to review the file. These changes reduce the 
burden associated with the maintenance of public files at a branch in 
each assessment area while making it easier for the public to access 
the file at any branch. They also reflect the statutory provisions of 
the IBEA requiring separate written evaluations for each state in which 
an interstate institution operates.
   Additional clarifications. Some commenters requested the agencies 
to specify a date on which the public file information should be 
updated. The final rule provides that the public file be updated as of 
April 1 of each year unless the rule specifies another time for a 
particular element, such as the CRA Disclosure Statement. The final 
rule also clarifies that contents of the public file can be 
supplemented with any other information the institution deems 
appropriate. The final rule further clarifies that lending data 
contained in the public file relate to lending not only by the 
institution, but [[Page 22176]] also its affiliates, if the lending by 
affiliates is considered in the assessment of the institution.

Transition

   The 1994 proposal would have established a transition period from 
July 1, 1995, to July 1, 1996. Institutions subject to data collection 
and reporting requirements would have been required to begin collecting 
home mortgage, small business, and consumer loan data on July 1, 1995. 
Assessments under the proposed standards would have begun July 1, 1996. 
However, small institutions would have had the opportunity to be 
examined, at their option, under the small institution assessment 
method anytime after July 1, 1995. Anytime on or after July 1, 1995, an 
institution could have elected to submit for approval a strategic plan, 
and examinations under approved strategic plans would have begun July 
1, 1996.
   Many industry commenters requested that the transition period be 
lengthened to provide institutions with more time to develop procedures 
for satisfying the data collection requirements. Also, some of these 
commenters recommended against implementing the data collection 
requirements on July 1, because they believed that data collected for a 
half year would not be useful. Moreover, some industry commenters asked 
that data collection begin on January 1, to fall in line with other 
materials that are maintained on a calendar-year basis.
   In light of these comments and the fact that the implementation 
dates set forth in the 1994 proposal reflected anticipated publication 
of the final rule in January 1995, the data collection requirements set 
forth in the final rule will become effective January 1, 1996. The 
reporting requirements will become effective January 1, 1997. 
Evaluations under the lending, investment, service, and community 
development tests will begin July 1, 1997, in order to allow the 
agencies to use the newly reported data. However, evaluations under the 
small bank performance standards, which do not utilize new data, will 
begin January 1, 1996. In addition, beginning January 1, 1996, any 
institution may submit a strategic plan for approval or elect to be 
examined under the revised performance tests, if the institution 
provides the necessary data.
   An institution that elects evaluation under the lending, 
investment, and service tests before July 1, 1997, must provide, in 
machine readable form, data on small business and small farm loans and 
community development loans for the twelve month period preceding the 
examination. The institution must also provide, in machine readable 
form, the location of home mortgage loans located outside MSAs in which 
the institution has an office (or outside any MSA) for that period. If 
the institution elects evaluation of any category of consumer loans, 
the institution must also provide consumer loan data, in machine 
readable form, for that category for that period. An institution that 
seeks evaluation under the community development test must apply for 
designation as a wholesale or limited purpose bank three months prior 
to its examination and must provide data on community development loans 
for the twelve months prior to the examination. All institutions 
evaluated under the revised tests and standards or under an approved 
strategic plan before July 1, 1997, must delineate their assessment 
areas in accordance with the provisions of the final rule.

CRA Notice

   The 1994 proposal would have made minor changes to the notice 
requirements set forth in the 1993 proposal. The term ``head office'' 
was changed to ``main office'' for clarity. Within the notice, the 
statement of what is included in the CRA performance file would have 
been expanded to describe more accurately the contents of the file. The 
final rule makes additional changes to reflect changes in the public 
file provisions.

Multiple Assessment Areas

   The 1994 proposal did not address how institutions with multiple 
assessment areas would be examined or how performance in different 
assessment areas would affect the overall rating. The agencies received 
comments expressing a broad range of opinions regarding the examination 
treatment and assessment of institutions with multiple assessment 
areas. Several community group commenters stated that ``sampling'' 
among assessment areas was unacceptable, while an industry organization 
suggested an elaborate sampling procedure. Other commenters proposed 
that certain assessment area characteristics, such as the percentage of 
the institution's deposits or assets in the assessment area, should 
determine the weight that performance in that assessment area should 
have on the overall rating of the institution. Other commenters were 
concerned that such proposals could mean that rural assessment areas 
would not be given appropriate consideration in the examination 
process.
   The agencies continue to believe that the examination treatment of 
multiple assessment areas is best left for examination procedures, 
rather than stated in regulatory text. Whether an institution has one 
assessment area or several, the examiner must have an adequate factual 
basis on which to assess an institution's record of performance, and 
the overall rating must be fair and appropriate. These objectives do 
not necessarily require that an agency examine an institution's 
performance in every assessment area in the same way or that the rule 
state how performance in different assessment areas is aggregated. Just 
as a single mathematical calculation cannot determine performance in an 
assessment area, so the appropriate treatment of multiple assessment 
areas cannot be reduced to a formula.
   The agencies note that the IBEA amended the provisions of the CRA 
regarding written evaluations, and the examination procedures will be 
consistent with those requirements.

Written Evaluations

   Although the 1994 proposal did not directly address the content of 
the written performance evaluations required by the CRA statute, some 
commenters did. These commenters focused on whether the agencies would 
disclose an institution's ratings on the lending, investment, and 
service tests to the institution and to the public.
   The agencies jointly will issue guidelines for the contents and 
disclosure of written evaluations prepared under the final rule, and 
these guidelines will implement the IBEA amendments regarding written 
evaluations. To address the issue raised in the comments, the agencies 
envision that these guidelines will provide that an institution's 
ratings on the different tests in the rule be disclosed both to the 
institution and, as part of the public section of the written 
evaluation, to the public. A guiding principle of the CRA reform effort 
has been to clarify for all concerned the basis for an institution's 
rating, and the disclosure of ratings will provide essential 
information regarding the assessment of an institution's performance. 
Contrary to the claim raised in some comments, neither the use of five 
ratings, nor the disclosure of those ratings to the public, conflicts 
with the statutory mandate that the agencies use four ratings in 
assessing the overall performance of an institution.

Appeals

   Many commenters requested that the agencies establish an 
interagency appeals process. The final rule does not adopt this 
suggestion. Each agency has a process under which an institution 
[[Page 22177]] can appeal its CRA rating. The agencies have recently 
reviewed and modified, as necessary, their appeals processes pursuant 
to the Community Development and Regulatory Improvement Act of 1994. In 
light of the recent review, the agencies do not believe that it is 
necessary to adopt an interagency appeals process in the final rule.

Additional Interagency Initiatives

   In addition to this rulemaking, the agencies will work together to 
improve training for examiners, to increase interagency efforts to 
apply standards consistently and reliably, and to minimize unnecessary 
compliance burden. These efforts will focus on producing a CRA 
assessment process that imposes fewer burdens on institutions yet 
yields better results for the local communities in which they are 
chartered to do business.
   The agencies have also agreed to conduct a full review of the final 
rule in the year 2002, five years after the rule is fully implemented. 
This review will be conducted to determine whether the rule has been 
effective in achieving the goals of the final rule, including 
emphasizing performance rather than process, promoting consistency in 
evaluations, and eliminating unnecessary burden. Any regulatory changes 
that are determined to be necessary to improve the rule's effectiveness 
will be made at that time.

Paperwork Reduction Act

   OCC: The collections of information contained in this final rule 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the requirements of the Paperwork Reduction Act of 
1980 (44 U.S.C. 3504(h)) under control number 1557-0160.
   The estimated annual burden per respondent varies, depending on 
individual circumstances, from 2 hours for a small bank required to 
perform only recordkeeping, to 280 hours for a large bank required to 
perform all elements in part 25, with an estimated average burden of 
18.5 hours.
   The collections of information in this final rule are in 12 CFR 
25.25, 25.27, 25.29, 25.41, 25.42, and 25.43.
   Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to Legislative 
and Regulatory Activities Division, Attention: 1557-0160, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219, 
and to the Office of Management and Budget, Paperwork Reduction Project 
(1557-0160), Washington, DC 20503.
   Board: In accordance with section 3507 of the Paperwork Reduction 
Act of 1980 (44 U.S.C. Ch. 35; 5 CFR 1320.13), the proposed information 
collection was reviewed by the Board under the authority delegated to 
the Board by the Office of Management and Budget after consideration of 
the comments received during the public comment period.
   The collections of information in this rule are in 12 CFR 228.25, 
228.27, 228.41, 228.42, and 228.43. This information is required to 
evidence the efforts of State member banks in helping to meet the 
credit needs of their entire communities, including low- and moderate-
income areas. This information will be used to assess State member bank 
performance in satisfying the credit needs of their communities and in 
evaluating certain applications.
   The estimated annual burden per respondent/recordkeeper varies from 
2 to 280 hours, depending on individual circumstances, with an 
estimated average of 17 hours. There will be an estimated 969 
recordkeepers, averaging 16 hours. Among those will be an estimated 274 
respondents, responsible for an additional average of 4 hours of 
reporting burden. These estimates include a prediction that five 
percent of respondents/recordkeepers will keep or submit optional data.
   Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to Secretary, 
Board of Governors of the Federal Reserve System, 20th and C Streets, 
NW., Washington, DC 20551; and to the Office of Management and Budget, 
Paperwork Reduction Project (7100-0247), Washington, DC 20503.
   FDIC: The collections of information contained in this final rule 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the requirements of the Paperwork Reduction Act of 
1980 (44 U.S.C. 3504(h)) under control number 3064-0092.
   The estimated annual burden per respondent varies, depending on 
individual circumstances, from 2 hours for a small bank required to 
perform only recordkeeping, to 280 hours for a large bank required to 
perform all elements in part 345, with an estimated average burden of 
12 hours.
   The collections of information in this final rule are in 12 CFR 
345.25, 345.27, 345.29, 345.41, 345.42, and 345.43.
   Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Office 
of Management and Budget, Paperwork Reduction Project (3604-0092), 
Washington, DC 20503, with copies of such comments to be sent to Steven 
F. Hanft, Office of the Executive Secretary, room F-453, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.
   OTS: The collections of information contained in this final rule 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the requirements of the Paperwork Reduction Act of 
1980 (44 U.S.C. 3504(h)) under control number 1550-0012.
   The estimated annual burden per respondent varies, depending on 
individual circumstances, from 2 hours for a small savings association 
required to perform only recordkeeping, to 214 hours for a large 
savings association required to perform all elements in part 563e, with 
an estimated average burden of 16 hours.
   The collections of information in this final rule are in 12 CFR 
563e.25, 563e.27, 563e.29, 563e.41, 563e.42, and 563e.43.
   Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Office 
of Management and Budget, Paperwork Reduction Project (1550-0012), 
Washington, DC 20503, with copies to the Office of Thrift Supervision, 
1700 G Street, NW., Washington, DC 20552.

Regulatory Flexibility Act

   The agencies concluded that the 1994 proposal, if adopted as a 
final rule, would not have a significant economic impact on a 
substantial number of small banks and thrifts and invited comment on 
this determination. In response to comments received, the agencies have 
conducted an analysis under The Regulatory Flexibility Act (5 U.S.C. 
601-612, the ``Act'').
   The Act requires an agency to take certain considerations into 
account when a rule will have a significant economic impact on a 
substantial number of small entities. Two of the three requirements of 
a final regulatory flexibility analysis (5 U.S.C. 604)--(1) a succinct 
statement of the need for and the objectives of the rule, and (2) a 
summary of the issues raised by the public comments, the agency's 
assessment of the issues, and a statement of the changes made in the 
final rule in response to the comments--are discussed earlier in the 
preamble. The third requirement is for a description of the 
alternatives the agency considered to the rule being adopted that were 
designed to minimize the effect on small entities subject to the rule 
and why, if applicable, they were rejected. [[Page 22178]] 
   The agencies have carefully considered the effects of the final 
rule on small entities and the alternatives available to mitigate its 
potential burdens. The final rule provides separate, less burdensome 
treatment for small institutions, which are defined as institutions 
with total assets of $250 million or less that are either independent 
or are affiliates of a holding company with banking and thrift assets 
of less than $1 billion. The rule contains a specific small institution 
performance evaluation that relies on simplified criteria, to account 
for the operational differences between large and small institutions. 
Small institutions are also not subject to the data collection and 
reporting provisions in the rule for large institutions.
   The agencies believe that the rule has minimized the burden on 
small institutions, while still enabling the agencies to fulfill their 
statutory mandate to examine the CRA record of these institutions. 
Although exempting small institutions from evaluation under the CRA 
would eliminate any possible burden imposed by the final rule, the CRA 
does not provide an exemption for small institutions.
   Some small institutions would continue to be subject to the same 
potential burdens imposed on large institutions if they were affiliates 
in a holding company with banking and thrift assets of more than $1 
billion. The agencies have rejected the alternative of eliminating the 
holding company limitation altogether in order to prevent holding 
companies from manipulating the asset size of their institutions to 
qualify for the small institution treatment.
   However, by raising the holding company asset limit from $250 
million in the 1994 proposal to $1 billion in the final rule, the 
agencies have sought to mitigate any unfairness and unnecessary burden 
resulting from the holding company limitation. The agencies selected a 
higher asset level for the holding company limitation in recognition 
that smaller holding companies may be unable to provide the necessary 
support for the CRA activities of their small institution subsidiaries. 
The agencies anticipate that larger holding companies under the final 
rule would be capable of supporting the CRA activities of their 
subsidiary small institutions.

Executive Order 12866
   OCC and OTS: The OCC and OTS have determined that this document is 
a significant regulatory action because of the legal and policy issues 
it raises. Because of the significance of the rule, the OCC and OTS 
will review its effectiveness in achieving the goals of the CRA prior 
to and in preparation for the full CRA regulatory review in the year 
2002, discussed earlier.

Unfunded Mandates Reform Act of 1995

   OCC and OTS: Section 202 of the Unfunded Mandates Reform Act of 
1995, signed into law on March 22, 1995, provides that before 
promulgating certain rulemakings, covered agencies must prepare a 
written statement containing a cost/benefit analysis. Under section 
205, before promulgating any rule for which a written statement is 
required under section 202, covered agencies must identify and consider 
a reasonable number of regulatory alternatives, and from those 
alternatives, select the least costly, most cost-effective, or least 
burdensome one that achieves the objective of the rulemaking.
   In promulgating this rulemaking, the Federal financial supervisory 
agencies considered a wide range of alternatives described in notices 
of proposed rulemaking published in 1993 and 1994. In addition to the 
comments that the agencies received in response to the notices of 
proposed rulemaking, the agencies conducted a series of seven public 
hearings across the country in 1993, at which hundreds of witnesses 
commented and others provided written statements. Although the OCC and 
OTS have determined that they are not required to prepare a written 
statement under section 202 or to make a finding under section 205, 
they conclude that, on balance, this final rule provides the most cost-
effective and least burdensome alternative to achieve the objectives of 
the rule, consistent with statutory requirements.

List of Subjects

12 CFR Part 25

   Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements.

12 CFR Part 228

   Banks, Banking, Community development, Credit, Federal Reserve 
System, Investments, Reporting and recordkeeping requirements.

12 CFR Part 345

   Banks, Banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 563e

   Community development, Credit, Investments, Reporting and 
recordkeeping requirements, Savings associations.

Authority and Issuance

Office of the Comptroller of the Currency

12 CFR Chapter I

   For the reasons outlined in the joint preamble, the Office of the 
Comptroller of the Currency amends 12 CFR chapter I as set forth below:

PART 25--COMMUNITY REINVESTMENT ACT REGULATIONS

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

   Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 
215a, 481, 1814, 1816, 1828(c), and 2901 through 2907.

   2. Part 25 is amended by adding Subparts A through D and Appendices 
A and B to read as follows:

Subpart A--General

Sec.
25.11  Authority, purposes, and scope.
25.12  Definitions.

Subpart B--Standards for Assessing Performance

25.21  Performance tests, standards, and ratings, in general.
25.22  Lending test.
25.23  Investment test.
25.24  Service test.
25.25  Community development test for wholesale or limited purpose 
banks.
25.26  Small bank performance standards.
25.27  Strategic plan.
25.28  Assigned ratings.
25.29  Effect of CRA performance on applications.

Subpart C--Records, Reporting, and Disclosure Requirements

25.41  Assessment area delineation.
25.42  Data collection, reporting, and disclosure.
25.43  Content and availability of public file.
25.44  Public notice by banks.
25.45  Publication of planned examination schedule.

Subpart D--Transition Rules

25.51  Transition rules.

Appendix A to Part 25--Ratings

Appendix B to Part 25--CRA Notice

Subpart A--General

Sec. 25.11  Authority, purposes, and scope.

   (a) Authority and OMB control number--(1) Authority. The authority 
for this part is 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 215a, 
481, 1814, 1816, 1828(c), and 2901 through 2907.
   (2) OMB control number. The information collection requirements 
contained in this part were approved by the Office of Management and 
Budget [[Page 22179]] under the provisions of 44 U.S.C. 3501 et seq. 
and have been assigned OMB control number 1557-0160.
   (b) Purposes. In enacting the Community Reinvestment Act (CRA), the 
Congress required each appropriate Federal financial supervisory agency 
to assess an institution's record of helping to meet the credit needs 
of the local communities in which the institution is chartered, 
consistent with the safe and sound operation of the institution, and to 
take this record into account in the agency's evaluation of an 
application for a deposit facility by the institution. This part is 
intended to carry out the purposes of the CRA by:
   (1) Establishing the framework and criteria by which the Office of 
the Comptroller of the Currency (OCC) assesses a bank's record of 
helping to meet the credit needs of its entire community, including 
low- and moderate-income neighborhoods, consistent with the safe and 
sound operation of the bank; and
   (2) Providing that the OCC takes that record into account in 
considering certain applications.
   (c) Scope--(1)General. This part applies to all banks except as 
provided in paragraphs (c)(2) and (c)(3) of this section.
   (2) Federal branches and agencies. (i) This part applies to all 
insured Federal branches and to any Federal branch that is uninsured 
that results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
   (ii) Except as provided in paragraph (c)(2)(i) of this section, 
this part does not apply to Federal branches that are uninsured, 
limited Federal branches, or Federal agencies, as those terms are 
defined in part 28 of this chapter.
   (3) Certain special purpose banks. This part does not apply to 
special purpose banks that do not perform commercial or retail banking 
services by granting credit to the public in the ordinary course of 
business, other than as incident to their specialized operations. These 
banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and 
banks that engage only in one or more of the following activities: 
providing cash management controlled disbursement services or serving 
as correspondent banks, trust companies, or clearing agents.

Sec. 25.12  Definitions.

   For purposes of this part, the following definitions apply:
   (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term ``control'' has 
the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company 
is under common control with another company if both companies are 
directly or indirectly controlled by the same company.
   (b) Area median income means:
   (1) The median family income for the MSA, if a person or geography 
is located in an MSA; or
   (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
   (c) Assessment area means a geographic area delineated in 
accordance with Sec. 25.41.
   (d) Automated teller machine (ATM) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
bank at which deposits are received, cash dispersed, or money lent.
   (e) Bank means a national bank (including a Federal branch as 
defined in part 28 of this chapter) with Federally insured deposits, 
except as provided in Sec. 25.11(c).
   (f) Branch means a staffed banking facility authorized as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
business or nonprofit organization.
   (g) CMSA means a consolidated metropolitan statistical area as 
defined by the Director of the Office of Management and Budget.
   (h) Community development means:
   (1) Affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals;
   (2) Community services targeted to low- or moderate-income 
individuals;
   (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of 13 CFR 
121.802(a)(2) or have gross annual revenues of $1 million or less; or
   (4) Activities that revitalize or stabilize low- or moderate-income 
geographies.
   (i) Community development loan means a loan that:
   (1) Has as its primary purpose community development; and
   (2) Except in the case of a wholesale or limited purpose bank:
   (i) Has not been reported or collected by the bank or an affiliate 
for consideration in the bank's assessment as a home mortgage, small 
business, small farm, or consumer loan, unless it is a multifamily 
dwelling loan (as described in Appendix A to Part 203 of this title); 
and
   (ii) Benefits the bank's assessment area(s) or a broader statewide 
or regional area that includes the bank's assessment area(s).
   (j) Community development service means a service that:
   (1) Has as its primary purpose community development;
   (2) Is related to the provision of financial services; and
   (3) Has not been considered in the evaluation of the bank's retail 
banking services under Sec. 25.24(d).
   (k) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
   (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
   (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec. 226.2 of this 
title;
   (3) Home equity loan, which is a consumer loan secured by a 
residence of the borrower;
   (4) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
   (5) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
   (l) Geography means a census tract or a block numbering area 
delineated by the United States Bureau of the Census in the most recent 
decennial census.
   (m) Home mortgage loan means a ``home improvement loan'' or a 
``home purchase loan'' as defined in Sec. 203.2 of this title.
   (n) Income level includes:
   (1) Low-income, which means an individual income that is less than 
50 percent of the area median income, or a median family income that is 
less than 50 percent, in the case of a geography.
   (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income, or 
a median family income that is at least 50 and less than 80 percent, in 
the case of a geography.
   (3) Middle-income, which means an individual income that is at 
least 80 percent and less than 120 percent of the area median income, 
or a median family income that is at least 80 and less than 120 
percent, in the case of a geography.
   (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income, or a median family income 
that is 120 [[Page 22180]] percent or more, in the case of a geography.
   (o) Limited purpose bank means a bank that offers only a narrow 
product line (such as credit card or motor vehicle loans) to a regional 
or broader market and for which a designation as a limited purpose bank 
is in effect, in accordance with Sec. 25.25(b).
   (p) Loan location. A loan is located as follows:
   (1) A consumer loan is located in the geography where the borrower 
resides;
   (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
   (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
   (q) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
   (r) MSA means a metropolitan statistical area or a primary 
metropolitan statistical area as defined by the Director of the Office 
of Management and Budget.
   (s) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
   (t) Small bank means a bank that, as of December 31 of either of 
the prior two calendar years, had total assets of less than $250 
million and was independent or an affiliate of a holding company that, 
as of December 31 of either of the prior two calendar years, had total 
banking and thrift assets of less than $1 billion.
   (u) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (v) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (w) Wholesale bank means a bank that is not in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers, and for which a designation as a wholesale bank is 
in effect, in accordance with Sec. 25.25(b).

Subpart B--Standards for Assessing Performance

Sec. 25.21  Performance tests, standards, and ratings, in general.

   (a) Performance tests and standards. The OCC assesses the CRA 
performance of a bank in an examination as follows:
   (1) Lending, investment, and service tests. The OCC applies the 
lending, investment, and service tests, as provided in Secs. 25.22 
through 25.24, in evaluating the performance of a bank, except as 
provided in paragraphs (a)(2), (a)(3), and (a)(4) of this section.
   (2) Community development test for wholesale or limited purpose 
banks. The OCC applies the community development test for a wholesale 
or limited purpose bank, as provided in Sec. 25.25, except as provided 
in paragraph (a)(4) of this section.
   (3) Small bank performance standards. The OCC applies the small 
bank performance standards as provided in Sec. 25.26 in evaluating the 
performance of a small bank or a bank that was a small bank during the 
prior calendar year, unless the bank elects to be assessed as provided 
in paragraphs (a)(1), (a)(2), or (a)(4) of this section. The bank may 
elect to be assessed as provided in paragraph (a)(1) of this section 
only if it collects and reports the data required for other banks under 
Sec. 25.42.
   (4) Strategic plan. The OCC evaluates the performance of a bank 
under a strategic plan if the bank submits, and the OCC approves, a 
strategic plan as provided in Sec. 25.27.
   (b) Performance context. The OCC applies the tests and standards in 
paragraph (a) of this section and also considers whether to approve a 
proposed strategic plan in the context of:
   (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a bank's assessment area(s);
   (2) Any information about lending, investment, and service 
opportunities in the bank's assessment area(s) maintained by the bank 
or obtained from community organizations, state, local, and tribal 
governments, economic development agencies, or other sources;
   (3) The bank's product offerings and business strategy as 
determined from data provided by the bank;
   (4) Institutional capacity and constraints, including the size and 
financial condition of the bank, the economic climate (national, 
regional, and local), safety and soundness limitations, and any other 
factors that significantly affect the bank's ability to provide 
lending, investments, or services in its assessment area(s);
   (5) The bank's past performance and the performance of similarly 
situated lenders;
   (6) The bank's public file, as described in Sec. 25.43, and any 
written comments about the bank's CRA performance submitted to the bank 
or the OCC; and
   (7) Any other information deemed relevant by the OCC.
   (c) Assigned ratings. The OCC assigns to a bank one of the 
following four ratings pursuant to Sec. 25.28 and Appendix A of this 
part: ``outstanding''; ``satisfactory''; ``needs to improve''; or 
``substantial noncompliance'' as provided in 12 U.S.C. 2906(b)(2). The 
rating assigned by the OCC reflects the bank's record of helping to 
meet the credit needs of its entire community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of the bank.
   (d) Safe and sound operations. This part and the CRA do not require 
a bank to make loans or investments or to provide services that are 
inconsistent with safe and sound operations. To the contrary, the OCC 
anticipates banks can meet the standards of this part with safe and 
sound loans, investments, and services on which the banks expect to 
make a profit. Banks are permitted and encouraged to develop and apply 
flexible underwriting standards for loans that benefit low- or 
moderate-income geographies or individuals, only if consistent with 
safe and sound operations.

Sec. 25.22  Lending test.

   (a) Scope of test. (1) The lending test evaluates a bank's record 
of helping to meet the credit needs of its assessment area(s) through 
its lending activities by considering a bank's home mortgage, small 
business, small farm, and community development lending. If consumer 
lending constitutes a substantial majority of a bank's business, the 
OCC will evaluate the bank's consumer lending in one or more of the 
following categories: motor vehicle, credit card, home equity, other 
secured, and other unsecured loans. In addition, at a bank's option, 
the OCC will evaluate one or more categories of consumer lending, if 
the bank has collected and maintained, as required in Sec. 25.42(c)(1), 
the data for each category that the bank elects to have the OCC 
evaluate.
   (2) The OCC considers originations and purchases of loans. The OCC 
will also consider any other loan data the bank may choose to provide, 
including [[Page 22181]] data on loans outstanding, commitments and 
letters of credit.
   (3) A bank may ask the OCC to consider loans originated or 
purchased by consortia in which the bank participates or by third 
parties in which the bank has invested only if the loans meet the 
definition of community development loans and only in accordance with 
paragraph (d) of this section. The OCC will not consider these loans 
under any criterion of the lending test except the community 
development lending criterion.
   (b) Performance criteria. The OCC evaluates a bank's lending 
performance pursuant to the following criteria:
   (1) Lending activity. The number and amount of the bank's home 
mortgage, small business, small farm, and consumer loans, if 
applicable, in the bank's assessment area(s);
   (2) Geographic distribution. The geographic distribution of the 
bank's home mortgage, small business, small farm, and consumer loans, 
if applicable, based on the loan location, including:
   (i) The proportion of the bank's lending in the bank's assessment 
area(s);
   (ii) The dispersion of lending in the bank's assessment area(s); 
and
   (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the bank's assessment area(s);
   (3) Borrower characteristics. The distribution, particularly in the 
bank's assessment area(s), of the bank's home mortgage, small business, 
small farm, and consumer loans, if applicable, based on borrower 
characteristics, including the number and amount of:
   (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;
   (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
   (iii) Small business and small farm loans by loan amount at 
origination; and
   (iv) Consumer loans, if applicable, to low-, moderate-, middle-, 
and upper-income individuals;
   (4) Community development lending. The bank's community development 
lending, including the number and amount of community development 
loans, and their complexity and innovativeness; and
   (5) Innovative or flexible lending practices. The bank's use of 
innovative or flexible lending practices in a safe and sound manner to 
address the credit needs of low- or moderate-income individuals or 
geographies.
   (c) Affiliate lending. (1) At a bank's option, the OCC will 
consider loans by an affiliate of the bank, if the bank provides data 
on the affiliate's loans pursuant to Sec. 25.42.
   (2) The OCC considers affiliate lending subject to the following 
constraints:
   (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
   (ii) If a bank elects to have the OCC consider loans within a 
particular lending category made by one or more of the bank's 
affiliates in a particular assessment area, the bank shall elect to 
have the OCC consider, in accordance with paragraph (c)(1) of this 
section, all the loans within that lending category in that particular 
assessment area made by all of the bank's affiliates.
   (3) The OCC does not consider affiliate lending in assessing a 
bank's performance under paragraph (b)(2)(i) of this section.
   (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the bank 
participates or by a third party in which the bank has invested:
   (1) Will be considered, at the bank's option, if the bank reports 
the data pertaining to these loans under Sec. 25.42(b)(2); and
   (2) May be allocated among participants or investors, as they 
choose, for purposes of the lending test, except that no participant or 
investor:
   (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; 
or
   (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
   (e) Lending performance rating. The OCC rates a bank's lending 
performance as provided in Appendix A of this part.

Sec. 25.23  Investment test.

   (a) Scope of test. The investment test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) through 
qualified investments that benefit its assessment area(s) or a broader 
statewide or regional area that includes the bank's assessment area(s).
   (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.
   (c) Affiliate investment. At a bank's option, the OCC will 
consider, in its assessment of a bank's investment performance, a 
qualified investment made by an affiliate of the bank, if the qualified 
investment is not claimed by any other institution.
   (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the bank 
that is located in a predominantly minority neighborhood to a minority 
depository institution or women's depository institution (as these 
terms are defined in 12 U.S.C. 2907(b)) will be considered as a 
qualified investment.
   (e) Performance criteria. The OCC evaluates the investment 
performance of a bank pursuant to the following criteria:
   (1) The dollar amount of qualified investments;
   (2) The innovativeness or complexity of qualified investments;
   (3) The responsiveness of qualified investments to credit and 
community development needs; and
   (4) The degree to which the qualified investments are not routinely 
provided by private investors.
   (f) Investment performance rating. The OCC rates a bank's 
investment performance as provided in Appendix A of this part.

Sec. 25.24  Service test.

   (a) Scope of test. The service test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) by analyzing 
both the availability and effectiveness of a bank's systems for 
delivering retail banking services and the extent and innovativeness of 
its community development services.
   (b) Area(s) benefitted. Community development services must benefit 
a bank's assessment area(s) or a broader statewide or regional area 
that includes the bank's assessment area(s).
   (c) Affiliate service. At a bank's option, the OCC will consider, 
in its assessment of a bank's service performance, a community 
development service provided by an affiliate of the bank, if the 
community development service is not claimed by any other institution.
   (d) Performance criteria--retail banking services. The OCC 
evaluates the availability and effectiveness of a bank's systems for 
delivering retail banking services, pursuant to the following criteria:
   (1) The current distribution of the bank's branches among low-,
moderate-, middle-, and upper-income geographies;
   (2) In the context of its current distribution of the bank's 
branches, the bank's record of opening and closing branches, 
particularly branches located in low- or moderate-income geographies or 
primarily serving low- or moderate-income individuals;
   (3) The availability and effectiveness of alternative systems for 
delivering [[Page 22182]] retail banking services (e.g., ATMs, ATMs not 
owned or operated by or exclusively for the bank, banking by telephone 
or computer, loan production offices, and bank-at-work or bank-by-mail 
programs) in low- and moderate-income geographies and to low- and 
moderate-income individuals; and
   (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
   (e) Performance criteria--community development services. The OCC 
evaluates community development services pursuant to the following 
criteria:
   (1) The extent to which the bank provides community development 
services; and
   (2) The innovativeness and responsiveness of community development 
services.
   (f) Service performance rating. The OCC rates a bank's service 
performance as provided in Appendix A of this part.

Sec. 25.25  Community development test for wholesale or limited purpose 
banks.

   (a) Scope of test. The OCC assesses a wholesale or limited purpose 
bank's record of helping to meet the credit needs of its assessment 
area(s) under the community development test through its community 
development lending, qualified investments, or community development 
services.
   (b) Designation as a wholesale or limited purpose bank. In order to 
receive a designation as a wholesale or limited purpose bank, a bank 
shall file a request, in writing, with the OCC, at least three months 
prior to the proposed effective date of the designation. If the OCC 
approves the designation, it remains in effect until the bank requests 
revocation of the designation or until one year after the OCC notifies 
the bank that the OCC has revoked the designation on its own 
initiative.
   (c) Performance criteria. The OCC evaluates the community 
development performance of a wholesale or limited purpose bank pursuant 
to the following criteria:
   (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development 
loan data provided by the bank, such as data on loans outstanding, 
commitments, and letters of credit), qualified investments, or 
community development services;
   (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to which the investments are not routinely provided by private 
investors; and
   (3) The bank's responsiveness to credit and community development 
needs.
   (d) Indirect activities. At a bank's option, the OCC will consider 
in its community development performance assessment:
   (1) Qualified investments or community development services 
provided by an affiliate of the bank, if the investments or services 
are not claimed by any other institution; and
   (2) Community development lending by affiliates, consortia and 
third parties, subject to the requirements and limitations in 
Sec. 25.22(c) and (d).
   (e) Benefit to assessment area(s)--(1) Benefit inside assessment 
area(s). The OCC considers all qualified investments, community 
development loans, and community development services that benefit 
areas within the bank's assessment area(s) or a broader statewide or 
regional area that includes the bank's assessment area(s).
   (2) Benefit outside assessment area(s). The OCC considers the 
qualified investments, community development loans, and community 
development services that benefit areas outside the bank's assessment 
area(s), if the bank has adequately addressed the needs of its 
assessment area(s).
   (f) Community development performance rating. The OCC rates a 
bank's community development performance as provided in Appendix A of 
this part.

Sec. 25.26  Small bank performance standards.

   (a) Performance criteria. The OCC evaluates the record of a small 
bank, or a bank that was a small bank during the prior calendar year, 
of helping to meet the credit needs of its assessment area(s) pursuant 
to the following criteria:
   (1) The bank's loan-to-deposit ratio, adjusted for seasonal 
variation and, as appropriate, other lending-related activities, such 
as loan originations for sale to the secondary markets, community 
development loans, or qualified investments;
   (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
   (3) The bank's record of lending to and, as appropriate, engaging 
in other lending-related activities for borrowers of different income 
levels and businesses and farms of different sizes;
   (4) The geographic distribution of the bank's loans; and
   (5) The bank's record of taking action, if warranted, in response 
to written complaints about its performance in helping to meet credit 
needs in its assessment area(s).
   (b) Small bank performance rating. The OCC rates the performance of 
a bank evaluated under this section as provided in Appendix A of this 
part.

Sec. 25.27  Strategic plan.

   (a) Alternative election. The OCC will assess a bank's record of 
helping to meet the credit needs of its assessment area(s) under a 
strategic plan if:
   (1) The bank has submitted the plan to the OCC as provided for in 
this section;
   (2) The OCC has approved the plan;
   (3) The plan is in effect; and
   (4) The bank has been operating under an approved plan for at least 
one year.
   (b) Data reporting. The OCC's approval of a plan does not affect 
the bank's obligation, if any, to report data as required by 
Sec. 25.42.
   (c) Plans in general.--(1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the OCC will evaluate the bank's 
performance.
   (2) Multiple assessment areas. A bank with more than one assessment 
area may prepare a single plan for all of its assessment areas or one 
or more plans for one or more of its assessment areas.
   (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
   (d) Public participation in plan development. Before submitting a 
plan to the OCC for approval, a bank shall:
   (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
   (2) Once the bank has developed a plan, formally solicit public 
comment on the plan for at least 30 days by publishing notice in at 
least one newspaper of general circulation in each assessment area 
covered by the plan; and
   (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of 
the bank in any assessment area covered by the plan and provide copies 
of the plan upon request for a reasonable fee to cover copying and 
mailing, if applicable.
   (e) Submission of plan. The bank shall submit its plan to the OCC 
at least three months prior to the proposed effective date of the plan. 
The bank shall also [[Page 22183]] submit with its plan a description 
of its informal efforts to seek suggestions from members of the public, 
any written public comment received, and, if the plan was revised in 
light of the comment received, the initial plan as released for public 
comment.
   (f) Plan content.--(1) Measurable goals. (i) A bank shall specify 
in its plan measurable goals for helping to meet the credit needs of 
each assessment area covered by the plan, particularly the needs of 
low- and moderate-income geographies and low- and moderate-income 
individuals, through lending, investment, and services, as appropriate.
   (ii) A bank shall address in its plan all three performance 
categories and, unless the bank has been designated as a wholesale or 
limited purpose bank, shall emphasize lending and lending-related 
activities. Nevertheless, a different emphasis, including a focus on 
one or more performance categories, may be appropriate if responsive to 
the characteristics and credit needs of its assessment area(s), 
considering public comment and the bank's capacity and constraints, 
product offerings, and business strategy.
   (2) Confidential information. A bank may submit additional 
information to the OCC on a confidential basis, but the goals stated in 
the plan must be sufficiently specific to enable the public and the OCC 
to judge the merits of the plan.
   (3) Satisfactory and outstanding goals. A bank shall specify in its 
plan measurable goals that constitute ``satisfactory'' performance. A 
plan may specify measurable goals that constitute ``outstanding'' 
performance. If a bank submits, and the OCC approves, both 
``satisfactory'' and ``outstanding'' performance goals, the OCC will 
consider the bank eligible for an ``outstanding'' performance rating.
   (4) Election if satisfactory goals not substantially met. A bank 
may elect in its plan that, if the bank fails to meet substantially its 
plan goals for a satisfactory rating, the OCC will evaluate the bank's 
performance under the lending, investment, and service tests, the 
community development test, or the small bank performance standards, as 
appropriate.
   (g) Plan approval.--(1) Timing. The OCC will act upon a plan within 
60 calendar days after the OCC receives the complete plan and other 
material required under paragraph (d) of this section. If the OCC fails 
to act within this time period, the plan shall be deemed approved 
unless the OCC extends the review period for good cause.
   (2) Public participation. In evaluating the plan's goals, the OCC 
considers the public's involvement in formulating the plan, written 
public comment on the plan, and any response by the bank to public 
comment on the plan.
   (3) Criteria for evaluating plan. The OCC evaluates a plan's 
measurable goals using the following criteria, as appropriate:
   (i) The extent and breadth of lending or lending-related 
activities, including, as appropriate, the distribution of loans among 
different geographies, businesses and farms of different sizes, and 
individuals of different income levels, the extent of community 
development lending, and the use of innovative or flexible lending 
practices to address credit needs;
   (ii) The amount and innovativeness, complexity, and responsiveness 
of the bank's qualified investments; and
   (iii) The availability and effectiveness of the bank's systems for 
delivering retail banking services and the extent and innovativeness of 
the bank's community development services.
   (h) Plan amendment. During the term of a plan, a bank may request 
the OCC to approve an amendment to the plan on grounds that there has 
been a material change in circumstances. The bank shall develop an 
amendment to a previously approved plan in accordance with the public 
participation requirements of paragraph (c) of this section.
   (i) Plan assessment. The OCC approves the goals and assesses 
performance under a plan as provided for in Appendix A of this part.

Sec. 25.28  Assigned ratings.

   (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the OCC assigns to a bank a rating of ``outstanding,'' 
``satisfactory,'' ``needs to improve,'' or ``substantial 
noncompliance'' based on the bank's performance under the lending, 
investment and service tests, the community development test, the small 
bank performance standards, or an approved strategic plan, as 
applicable.
   (b) Lending, investment, and service tests. The OCC assigns a 
rating for a bank assessed under the lending, investment, and service 
tests in accordance with the following principles:
   (1) A bank that receives an ``outstanding'' rating on the lending 
test receives an assigned rating of at least ``satisfactory'';
   (2) A bank that receives an ``outstanding'' rating on both the 
service test and the investment test and a rating of at least ``high 
satisfactory'' on the lending test receives an assigned rating of 
``outstanding''; and
   (3) No bank may receive an assigned rating of ``satisfactory'' or 
higher unless it receives a rating of at least ``low satisfactory'' on 
the lending test.
   (c) Effect of evidence of discriminatory or other illegal credit 
practices. Evidence of discriminatory or other illegal credit practices 
adversely affects the OCC's evaluation of a bank's performance. In 
determining the effect on the bank's assigned rating, the OCC considers 
the nature and extent of the evidence, the policies and procedures that 
the bank has in place to prevent discriminatory or other illegal credit 
practices, any corrective action that the bank has taken or has 
committed to take, particularly voluntary corrective action resulting 
from self-assessment, and other relevant information.

Sec. 25.29  Effect of CRA performance on applications.
   (a) CRA performance. Among other factors, the OCC takes into 
account the record of performance under the CRA of each applicant bank 
in considering an application for:
   (1) The establishment of a domestic branch;
   (2) The relocation of the main office or a branch;
   (3) Under the Bank Merger Act (12 U.S.C. 1828(c)), the merger or 
consolidation with or the acquisition of assets or assumption of 
liabilities of an insured depository institution; and
   (4) The conversion of an insured depository institution to a 
national bank charter.
   (b) Charter application. An applicant (other than an insured 
depository institution) for a national bank charter shall submit with 
its application a description of how it will meet its CRA objectives. 
The OCC takes the description into account in considering the 
application and may deny or condition approval on that basis.
   (c) Interested parties. The OCC takes into account any views 
expressed by interested parties that are submitted in accordance with 
the OCC's procedures set forth in part 5 of this chapter in considering 
CRA performance in an application listed in paragraphs (a) and (b) of 
this section.
   (d) Denial or conditional approval of application. A bank's record 
of performance may be the basis for denying or conditioning approval of 
an application listed in paragraph (a) of this section.
   (e) Insured depository institution. For purposes of this section, 
the term ``insured depository institution'' has the 
[[Page 22184]] meaning given to that term in 12 U.S.C. 1813.

Subpart C--Records, Reporting, and Disclosure Requirements

Sec. 25.41  Assessment area delineation.

   (a) In general. A bank shall delineate one or more assessment areas 
within which the OCC evaluates the bank's record of helping to meet the 
credit needs of its community. The OCC does not evaluate the bank's 
delineation of its assessment area(s) as a separate performance 
criterion, but the OCC reviews the delineation for compliance with the 
requirements of this section.
   (b) Geographic area(s) for wholesale or limited purpose banks. The 
assessment area(s) for a wholesale or limited purpose bank must consist 
generally of one or more MSAs (using the MSA boundaries that were in 
effect as of January 1 of the calendar year in which the delineation is 
made) or one or more contiguous political subdivisions, such as 
counties, cities, or towns, in which the bank has its main office, 
branches, and deposit-taking ATMs.
   (c) Geographic area(s) for other banks. The assessment area(s) for 
a bank other than a wholesale or limited purpose bank must:
   (1) Consist generally of one or more MSAs (using the MSA boundaries 
that were in effect as of January 1 of the calendar year in which the 
delineation is made) or one or more contiguous political subdivisions, 
such as counties, cities, or towns; and
   (2) Include the geographies in which the bank has its main office, 
its branches, and its deposit-taking ATMs, as well as the surrounding 
geographies in which the bank has originated or purchased a substantial 
portion of its loans (including home mortgage loans, small business and 
small farm loans, and any other loans the bank chooses, such as those 
consumer loans on which the bank elects to have its performance 
assessed).
   (d) Adjustments to geographic area(s). A bank may adjust the 
boundaries of its assessment area(s) to include only the portion of a 
political subdivision that it reasonably can be expected to serve. An 
adjustment is particularly appropriate in the case of an assessment 
area that otherwise would be extremely large, of unusual configuration, 
or divided by significant geographic barriers.
   (e) Limitations on the delineation of an assessment area. Each 
bank's assessment area(s):
   (1) Must consist only of whole geographies;
   (2) May not reflect illegal discrimination;
   (3) May not arbitrarily exclude low- or moderate-income 
geographies, taking into account the bank's size and financial 
condition; and
   (4) May not extend substantially beyond a CMSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a bank serves a geographic area that extends substantially 
beyond a state boundary, the bank shall delineate separate assessment 
areas for the areas in each state. If a bank serves a geographic area 
that extends substantially beyond a CMSA boundary, the bank shall 
delineate separate assessment areas for the areas inside and outside 
the CMSA.
   (f) Banks serving military personnel. Notwithstanding the 
requirements of this section, a bank whose business predominantly 
consists of serving the needs of military personnel or their dependents 
who are not located within a defined geographic area may delineate its 
entire deposit customer base as its assessment area.
   (g) Use of assessment area(s). The OCC uses the assessment area(s) 
delineated by a bank in its evaluation of the bank's CRA performance 
unless the OCC determines that the assessment area(s) do not comply 
with the requirements of this section.

Sec. 25.42  Data collection, reporting, and disclosure.

   (a) Loan information required to be collected and maintained. A 
bank, except a small bank, shall collect, and maintain in machine 
readable form (as prescribed by the OCC) until the completion of its 
next CRA examination, the following data for each small business or 
small farm loan originated or purchased by the bank:
   (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (2) The loan amount at origination;
   (3) The loan location; and
   (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.
   (b) Loan information required to be reported. A bank, except a 
small bank or a bank that was a small bank during the prior calendar 
year, shall report annually by March 1 to the OCC in machine readable 
form (as prescribed by the OCC) the following data for the prior 
calendar year:
   (1) Small business and small farm loan data. For each geography in 
which the bank originated or purchased a small business or small farm 
loan, the aggregate number and amount of loans:
   (i) With an amount at origination of $100,000 or less;
   (ii) With amount at origination of more than $100,000 but less than 
or equal to $250,000;
   (iii) With an amount at origination of more than $250,000; and
   (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank considered in making 
its credit decision);
   (2) Community development loan data. The aggregate number and 
aggregate amount of community development loans originated or 
purchased; and
   (3) Home mortgage loans. If the bank is subject to reporting under 
part 203 of this title, the location of each home mortgage loan 
application, origination, or purchase outside the MSAs in which the 
bank has a home or branch office (or outside any MSA) in accordance 
with the requirements of part 203 of this title.
   (c) Optional data collection and maintenance.--(1) Consumer loans. 
A bank may collect and maintain in machine readable form (as prescribed 
by the OCC) data for consumer loans originated or purchased by the bank 
for consideration under the lending test. A bank may maintain data for 
one or more of the following categories of consumer loans: motor 
vehicle, credit card, home equity, other secured, and other unsecured. 
If the bank maintains data for loans in a certain category, it shall 
maintain data for all loans originated or purchased within that 
category. The bank shall maintain data separately for each category, 
including for each loan:
   (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (ii) The loan amount at origination or purchase;
   (iii) The loan location; and
   (iv) The gross annual income of the borrower that the bank 
considered in making its credit decision.
   (2) Other loan data. At its option, a bank may provide other 
information concerning its lending performance, including additional 
loan distribution data.
   (d) Data on affiliate lending. A bank that elects to have the OCC 
consider loans by an affiliate, for purposes of the lending or 
community development test or an approved strategic plan, shall 
collect, maintain, and report for those loans the data that the bank 
would have collected, maintained, and reported pursuant to paragraphs 
(a), (b), and (c) of this section had the loans been originated or 
purchased by the bank. For home mortgage loans, the bank shall also be 
prepared to identify the home [[Page 22185]] mortgage loans reported 
under part 203 of this title by the affiliate.
   (e) Data on lending by a consortium or a third party. A bank that 
elects to have the OCC consider community development loans by a 
consortium or third party, for purposes of the lending or community 
development tests or an approved strategic plan, shall report for those 
loans the data that the bank would have reported under paragraph (b)(2) 
of this section had the loans been originated or purchased by the bank.
   (f) Small banks electing evaluation under the lending, investment, 
and service tests. A bank that qualifies for evaluation under the small 
bank performance standards but elects evaluation under the lending, 
investment, and service tests shall collect, maintain, and report the 
data required for other banks pursuant to paragraphs (a) and (b) of 
this section.
   (g) Assessment area data. A bank, except a small bank or a bank 
that was a small bank during the prior calendar year, shall collect and 
report to the OCC by March 1 of each year a list for each assessment 
area showing the geographies within the area.
   (h) CRA Disclosure Statement. The OCC prepares annually for each 
bank that reports data pursuant to this section a CRA Disclosure 
Statement that contains, on a state-by-state basis:
   (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the bank 
reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-
, and upper-income geographies;
   (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the 
bank reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 
or more but less than 20 percent, 20 or more but less than 30 percent, 
30 or more but less than 40 percent, 40 or more but less than 50 
percent, 50 or more but less than 60 percent, 60 or more but less than 
70 percent, 70 or more but less than 80 percent, 80 or more but less 
than 90 percent, 90 or more but less than 100 percent, 100 or more but 
less than 110 percent, 110 or more but less than 120 percent, and 120 
percent or more;
   (ii) A list grouping each geography in the county or assessment 
area according to whether the median income in the geography relative 
to the area median income is less than 10 percent, 10 or more but less 
than 20 percent, 20 or more but less than 30 percent, 30 or more but 
less than 40 percent, 40 or more but less than 50 percent, 50 or more 
but less than 60 percent, 60 or more but less than 70 percent, 70 or 
more but less than 80 percent, 80 or more but less than 90 percent, 90 
or more but less than 100 percent, 100 or more but less than 110 
percent, 110 or more but less than 120 percent, and 120 percent or 
more;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the bank and the number 
and amount of small business and small farm loans located outside the 
assessment area(s) reported by the bank; and
   (4) The number and amount of community development loans reported 
as originated or purchased.
   (i) Aggregate disclosure statements. The OCC, in conjunction with 
the Board of Governors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation, and the Office of Thrift Supervision, 
prepares annually, for each MSA (including an MSA that crosses a state 
boundary) and the non-MSA portion of each state, an aggregate 
disclosure statement of small business and small farm lending by all 
institutions subject to reporting under this part or parts 228, 345, or 
563e of this title. These disclosure statements indicate, for each 
geography, the number and amount of all small business and small farm 
loans originated or purchased by reporting institutions, except that 
the OCC may adjust the form of the disclosure if necessary, because of 
special circumstances, to protect the privacy of a borrower or the 
competitive position of an institution.
   (j) Central data depositories. The OCC makes the aggregate 
disclosure statements, described in paragraph (i) of this section, and 
the individual bank CRA Disclosure Statements, described in paragraph 
(h) of this section, available to the public at central data 
depositories. The OCC publishes a list of the depositories at which the 
statements are available.

Sec. 25.43  Content and availability of public file.

   (a) Information available to the public. A bank shall maintain a 
public file that includes the following information:
   (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's performance in helping to meet community credit needs, 
and any response to the comments by the bank, if neither the comments 
nor the responses contain statements that reflect adversely on the good 
name or reputation of any persons other than the bank or publication of 
which would violate specific provisions of law;
   (2) A copy of the public section of the bank's most recent CRA 
Performance Evaluation prepared by the OCC. The bank shall place this 
copy in the public file within 30 business days after its receipt from 
the OCC;
   (3) A list of the bank's branches, their street addresses, and 
geographies;
   (4) A list of branches opened or closed by the bank during the 
current year and each of the prior two calendar years, their street 
addresses, and geographies;
   (5) A list of services (including hours of operation, available 
loan and deposit products, and transaction fees) generally offered at 
the bank's branches and descriptions of material differences in the 
availability or cost of services at particular branches, if any. At its 
option, a bank may include information regarding the availability of 
alternative systems for delivering retail banking services (e.g., ATMs, 
ATMs not owned or operated by or exclusively for the bank, banking by 
telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs);
   (6) A map of each assessment area showing the boundaries of the 
area and identifying the geographies contained within the area, either 
on the map or in a separate list; and
   (7) Any other information the bank chooses.
   (b) Additional information available to the public.--(1) Banks 
other than small banks. A bank, except a small bank or a bank that was 
a small bank [[Page 22186]] during the prior calendar year, shall 
include in its public file the following information pertaining to the 
bank and its affiliates, if applicable, for each of the prior two 
calendar years:
   (i) If the bank has elected to have one or more categories of its 
consumer loans considered under the lending test, for each of these 
categories, the number and amount of loans:
   (A) To low-, moderate-, middle-, and upper-income individuals;
   (B) Located in low-, moderate-, middle-, and upper-income census 
tracts; and
   (C) Located inside the bank's assessment area(s) and outside the 
bank's assessment area(s); and
   (ii) The bank's CRA Disclosure Statement. The bank shall place the 
statement in the public file within three business days of its receipt 
from the OCC.
   (2) Banks required to report Home Mortgage Disclosure Act (HMDA) 
data. A bank required to report home mortgage loan data pursuant part 
203 of this title shall include in its public file a copy of the HMDA 
Disclosure Statement provided by the Federal Financial Institutions 
Examination Council pertaining to the bank for each of the prior two 
calendar years. In addition, a bank that elected to have the OCC 
consider the mortgage lending of an affiliate for any of these years 
shall include in its public file the affiliate's HMDA Disclosure 
Statement for those years. The bank shall place the statement(s) in the 
public file within three business days after its receipt.
   (3) Small banks. A small bank or a bank that was a small bank 
during the prior calendar year shall include in its public file:
   (i) The bank's loan-to-deposit ratio for each quarter of the prior 
calendar year and, at its option, additional data on its loan-to-
deposit ratio; and
   (ii) The information required for other banks by paragraph (b)(1) 
of this section, if the bank has elected to be evaluated under the 
lending, investment, and service tests.
   (4) Banks with strategic plans. A bank that has been approved to be 
assessed under a strategic plan shall include in its public file a copy 
of that plan. A bank need not include information submitted to the OCC 
on a confidential basis in conjunction with the plan.
   (5) Banks with less than satisfactory ratings. A bank that received 
a less than satisfactory rating during its most recent examination 
shall include in its public file a description of its current efforts 
to improve its performance in helping to meet the credit needs of its 
entire community. The bank shall update the description quarterly.
   (c) Location of public information. A bank shall make available to 
the public for inspection upon request and at no cost the information 
required in this section as follows:
   (1) At the main office and, if an interstate bank, at one branch 
office in each state, all information in the public file; and
   (2) At each branch:
   (i) A copy of the public section of the bank's most recent CRA 
Performance Evaluation and a list of services provided by the branch; 
and
   (ii) Within five calendar days of the request, all the information 
in the public file relating to the assessment area in which the branch 
is located.
   (d) Copies. Upon request, a bank shall provide copies, either on 
paper or in another form acceptable to the person making the request, 
of the information in its public file. The bank may charge a reasonable 
fee not to exceed the cost of copying and mailing (if applicable).
   (e) Updating. Except as otherwise provided in this section, a bank 
shall ensure that the information required by this section is current 
as of April 1 of each year.

Sec. 25.44  Public notice by banks.

   A bank shall provide in the public lobby of its main office and 
each of its branches the appropriate public notice set forth in 
Appendix B of this part. Only a branch of a bank having more than one 
assessment area shall include the bracketed material in the notice for 
branch offices. Only a bank that is an affiliate of a holding company 
shall include the next to the last sentence of the notices. A bank 
shall include the last sentence of the notices only if it is an 
affiliate of a holding company that is not prevented by statute from 
acquiring additional banks.

Sec. 25.45  Publication of planned examination schedule.

   The OCC publishes at least 30 days in advance of the beginning of 
each calendar quarter a list of banks scheduled for CRA examinations in 
that quarter.

Subpart D--Transition Rules

Sec. 25.51  Transition rules.

   (a) Effective date. Sections of this part become applicable over a 
period of time in accordance with the schedule set forth in paragraph 
(c) of this section.
   (b) Data collection and reporting; strategic plan; performance 
tests and standards. (1) Data collection and reporting. (i) On January 
1, 1996, the data collection requirements set forth in Sec. 25.42 
(except Sec. 25.42 (b) and (g)) become applicable.
   (ii) On January 1, 1997, the data reporting requirements set forth 
in Sec. 25.42 (b) and (g) become applicable.
   (2) Small banks. Beginning January 1, 1996, the OCC evaluates banks 
that qualify for the small bank performance standards described in 
Sec. 25.26 under that section.
   (3) Strategic plan. Beginning January 1, 1996, a bank that elects 
to be evaluated under an approved strategic plan pursuant to Sec. 25.27 
may submit its strategic plan to the OCC for approval.
   (4) Other performance tests. (i) Beginning January 1, 1996, a bank 
may elect to be evaluated under the pertinent revised performance tests 
described in Secs. 25.22, 25.23, 25.24, and 25.25, if the bank provides 
the necessary data to permit evaluation.
   (ii) Beginning July 1, 1997, the OCC evaluates all banks under the 
pertinent revised performance tests.
   (c) Schedule. (1) On July 1, 1995, Secs. 25.11, 25.12, 25.29, and 
25.51 become applicable, and Secs. 25.1, 25.2, 25.8 and 25.101 expire.
   (2) On January 1, 1996, Sec. 25.41 and the pertinent provisions of 
Subpart B of this part will apply to banks that elect to be evaluated 
under Secs. 25.22 through 25.25, banks that submit for approval 
strategic plans under Sec. 25.27, and banks that qualify for the small 
bank performance standards described in Sec. 25.26.
   (3) On January 1, 1996, Secs. 25.42 (except Sec. 25.42 (b) and (g)) 
and 25.45 become applicable.
   (4) On January 1, 1997, Secs. 25.41 and 25.42 (b) and (g) become 
applicable.
   (5) On July 1, 1997, Secs. 25.21 through 25.28, 25.43, and 25.44 
become applicable, and Secs. 25.3 through 25.7, and 25.51 expire.

Appendix A to Part 25--Ratings

   (a) Ratings in general. (1) In assigning a rating, the OCC 
evaluates a bank's performance under the applicable performance 
criteria in this part, in accordance with Sec. 25.21, and 
Sec. 25.28, which provides for adjustments on the basis of evidence 
of discriminatory or other illegal credit practices.
   (2) A bank's performance need not fit each aspect of a 
particular rating profile in order to receive that rating, and 
exceptionally strong performance with respect to some aspects may 
compensate for weak performance in others. The bank's overall 
performance, however, must be consistent with safe and sound banking 
practices and generally with the appropriate rating profile as 
follows.
   (b) Banks evaluated under the lending, investment, and service 
tests. (1) Lending performance rating. The OCC assigns each bank's 
lending performance one of the five following ratings. 
[[Page 22187]] 
   (i) Outstanding. The OCC rates a bank's lending performance 
``outstanding'' if, in general, it demonstrates:
   (A) Excellent responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A substantial majority of its loans are made in its 
assessment area(s);
   (C) An excellent geographic distribution of loans in its 
assessment area(s);
   (D) An excellent distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An excellent record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Extensive use of innovative or flexible lending practices in 
a safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It is a leader in making community development loans.
   (ii) High satisfactory. The OCC rates a bank's lending 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) Good responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A high percentage of its loans are made in its assessment 
area(s);
   (C) A good geographic distribution of loans in its assessment 
area(s);
   (D) A good distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A good record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made a relatively high level of community development 
loans.
   (iii) Low satisfactory. The OCC rates a bank's lending 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) Adequate responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) An adequate percentage of its loans are made in its 
assessment area(s);
   (C) An adequate geographic distribution of loans in its 
assessment area(s);
   (D) An adequate distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An adequate record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Limited use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made an adequate level of community development 
loans.
   (iv) Needs to improve. The OCC rates a bank's lending 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) Poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A small percentage of its loans are made in its assessment 
area(s);
   (C) A poor geographic distribution of loans, particularly to 
low- or moderate-income geographies, in its assessment area(s);
   (D) A poor distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Little use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made a low level of community development loans.
   (v) Substantial noncompliance. The OCC rates a bank's lending 
performance as being in ``substantial noncompliance'' if, in 
general, it demonstrates:
   (A) A very poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A very small percentage of its loans are made in its 
assessment area(s);
   (C) A very poor geographic distribution of loans, particularly 
to low- or moderate-income geographies, in its assessment area(s);
   (D) A very poor distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) A very poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) No use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made few, if any, community development loans.
   (2) Investment performance rating. The OCC assigns each bank's 
investment performance one of the five following ratings.
   (i) Outstanding. The OCC rates a bank's investment performance 
``outstanding'' if, in general, it demonstrates:
   (A) An excellent level of qualified investments, particularly 
those that are not routinely provided by private investors, often in 
a leadership position;
   (B) Extensive use of innovative or complex qualified 
investments; and
   (C) Excellent responsiveness to credit and community development 
needs.
   (ii) High satisfactory. The OCC rates a bank's investment 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) A significant level of qualified investments, particularly 
those that are not routinely provided by private investors, 
occasionally in a leadership position;
   (B) Significant use of innovative or complex qualified 
investments; and
   (C) Good responsiveness to credit and community development 
needs.
   (iii) Low satisfactory. The OCC rates a bank's investment 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) An adequate level of qualified investments, particularly 
those that are not routinely provided by private investors, although 
rarely in a leadership position;
   (B) Occasional use of innovative or complex qualified 
investments; and
   (C) Adequate responsiveness to credit and community development 
needs. 
   (iv) Needs to improve. The OCC rates a bank's investment 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) A poor level of qualified investments, particularly those 
that are not routinely provided by private investors;
   (B) Rare use of innovative or complex qualified investments; and
   (C) Poor responsiveness to credit and community development 
needs.
   (v) Substantial noncompliance. The OCC rates a bank's investment 
performance as being in ``substantial noncompliance'' if, in 
general, it demonstrates:
   (A) Few, if any, qualified investments, particularly those that 
are not routinely provided by private investors;
   (B) No use of innovative or complex qualified investments; and
   (C) Very poor responsiveness to credit and community development 
needs.
   (3) Service performance rating. The OCC assigns each bank's 
service performance one of the five following ratings.
   (i) Outstanding. The OCC rates a bank's service performance 
``outstanding'' if, in general, the bank demonstrates:
   (A) Its service delivery systems are readily accessible to 
geographies and individuals of [[Page 22188]] different income 
levels in its assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has improved the accessibility of its delivery 
systems, particularly in low- or moderate-income geographies or to 
low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
are tailored to the convenience and needs of its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It is a leader in providing community development services.
   (ii) High satisfactory. The OCC rates a bank's service 
performance ``high satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are accessible to geographies 
and individuals of different income levels in its assessment 
area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has not adversely affected the accessibility of 
its delivery systems, particularly in low- and moderate-income 
geographies and to low- and moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides a relatively high level of community development 
services.
   (iii) Low satisfactory. The OCC rates a bank's service 
performance ``low satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are reasonably accessible to 
geographies and individuals of different income levels in its 
assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has generally not adversely affected the 
accessibility of its delivery systems, particularly in low- and 
moderate-income geographies and to low- and moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides an adequate level of community development 
services.
   (iv) Needs to improve. The OCC rates a bank's service 
performance ``needs to improve'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to portions of its assessment area(s), particularly to low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has adversely affected the accessibility its 
delivery systems, particularly in low- or moderate-income 
geographies or to low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that inconveniences its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides a limited level of community development 
services.
   (v) Substantial noncompliance. The OCC rates a bank's service 
performance as being in ``substantial noncompliance'' if, in 
general, the bank demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to significant portions of its assessment area(s), particularly to 
low- or moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has significantly adversely affected the 
accessibility of its delivery systems, particularly in low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that significantly inconveniences its assessment 
area(s), particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides few, if any, community development services.
   (c) Wholesale or limited purpose banks. The OCC assigns each 
wholesale or limited purpose bank's community development 
performance one of the four following ratings.
   (1) Outstanding. The OCC rates a wholesale or limited purpose 
bank's community development performance ``outstanding'' if, in 
general, it demonstrates:
   (i) A high level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Extensive use of innovative or complex qualified 
investments, community development loans, or community development 
services; and
   (iii) Excellent responsiveness to credit and community 
development needs in its assessment area(s).
   (2) Satisfactory. The OCC rates a wholesale or limited purpose 
bank's community development performance ``satisfactory'' if, in 
general, it demonstrates:
   (i) An adequate level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Occasional use of innovative or complex qualified 
investments, community development loans, or community development 
services; and
   (iii) Adequate responsiveness to credit and community 
development needs in its assessment area(s).
   (3) Needs to improve. The OCC rates a wholesale or limited 
purpose bank's community development performance as ``needs to 
improve'' if, in general, it demonstrates:
   (i) A poor level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Rare use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Poor responsiveness to credit and community development 
needs in its assessment area(s).
   (4) Substantial noncompliance. The OCC rates a wholesale or 
limited purpose bank's community development performance in 
``substantial noncompliance'' if, in general, it demonstrates:
   (i) Few, if any, community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) No use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Very poor responsiveness to credit and community 
development needs in its assessment area(s).
   (d) Banks evaluated under the small bank performance standards. 
The OCC rates the performance of each bank evaluated under the small 
bank performance standards as follows:
   (1) Eligibility for a satisfactory rating. The OCC rates a 
bank's performance ``satisfactory'' if, in general, the bank 
demonstrates:
   (i) A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's size, financial condition, the credit 
needs of its assessment area(s), and taking into account, as 
appropriate, lending-related activities such as loan originations 
for sale to the secondary markets and community development loans 
and qualified investments;
   (ii) A majority of its loans and, as appropriate, other lending-
related activities are in its assessment area(s);
   (iii) A distribution of loans to and, as appropriate, other 
lending related-activities for individuals of different income 
levels (including low- and moderate-income individuals) and 
businesses and farms of different sizes that is reasonable given the 
demographics of the bank's assessment area(s);
   (iv) A record of taking appropriate action, as warranted, in 
response to written complaints, if any, about the bank's performance 
in helping to meet the credit needs of its assessment area(s); and
   (v) A reasonable geographic distribution of loans given the 
bank's assessment area(s).
   (2) Eligibility for an outstanding rating. A bank that meets 
each of the standards for a ``satisfactory'' rating under this 
paragraph and exceeds some or all of those standards may warrant 
consideration for an overall rating of ``outstanding.'' In assessing 
whether a bank's performance is ``outstanding,'' the OCC considers 
the extent to which the bank exceeds each of the performance 
standards for a ``satisfactory'' rating and its performance in 
making qualified investments and its performance in providing 
branches and other services and delivery systems that 
[[Page 22189]] enhance credit availability in its assessment 
area(s).
   (3) Needs to improve or substantial noncompliance ratings. A 
bank also may receive a rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standards for a ``satisfactory'' 
rating.
   (e) Strategic plan assessment and rating--(1) Satisfactory 
goals. The OCC approves as ``satisfactory'' measurable goals that 
adequately help to meet the credit needs of the bank's assessment 
area(s).
   (2) Outstanding goals. If the plan identifies a separate group 
of measurable goals that substantially exceed the levels approved as 
``satisfactory,'' the OCC will approve those goals as 
``outstanding.''
   (3) Rating. The OCC assesses the performance of a bank operating 
under an approved plan to determine if the bank has met its plan 
goals:
   (i) If the bank substantially achieves its plan goals for a 
satisfactory rating, the OCC will rate the bank's performance under 
the plan as ``satisfactory.''
   (ii) If the bank exceeds its plan goals for a satisfactory 
rating and substantially achieves its plan goals for an outstanding 
rating, the OCC will rate the bank's performance under the plan as 
``outstanding.''
   (iii) If the bank fails to meet substantially its plan goals for 
a satisfactory rating, the OCC will rate the bank as either ``needs 
to improve'' or ``substantial noncompliance,'' depending on the 
extent to which it falls short of its plan goals, unless the bank 
elected in its plan to be rated otherwise, as provided in 
Sec. 25.27(f)(4).

Appendix B to Part 25--CRA Notice

   (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the 
Comptroller of the Currency evaluates our record of helping to meet 
the credit needs of this community consistent with safe and sound 
operations. The Comptroller also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the Comptroller; and comments received from 
the public relating to our performance in helping to meet community 
credit needs, as well as our responses to those comments. You may 
review this information today.
   At least 30 days before the beginning of each quarter, the 
Comptroller publishes a nationwide list of the banks that are 
scheduled for CRA examination in that quarter. This list is 
available from the Deputy Comptroller (address). You may send 
written comments about our performance in helping to meet community 
credit needs to (name and address of official at bank) and Deputy 
Comptroller (address). Your letter, together with any response by 
us, will be considered by the Comptroller in evaluating our CRA 
performance and may be made public.
   You may ask to look at any comments received by the Deputy 
Comptroller. You may also request from the Deputy Comptroller an 
announcement of our applications covered by the CRA filed with the 
Comptroller. We are an affiliate of (name of holding company), a 
bank holding company. You may request from the (title of responsible 
official), Federal Reserve Bank of ________ (address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.
   (b) Notice for branch offices.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the 
Comptroller of the Currency evaluates our record of helping to meet 
the credit needs of this community consistent with safe and sound 
operations. The Comptroller also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA evaluation, prepared by the 
Comptroller, and a list of services provided at this branch. You may 
also have access to the following additional information, which we 
will make available to you at this branch within five calendar days 
after you make a request to us: (1) A map showing the assessment 
area containing this branch, which is the area in which the 
Comptroller evaluates our CRA performance in this community; (2) 
information about our branches in this assessment area; (3) a list 
of services we provide at those locations; (4) data on our lending 
performance in this assessment area; and (5) copies of all written 
comments received by us that specifically relate to our CRA 
performance in this assessment area, and any responses we have made 
to those comments. If we are operating under an approved strategic 
plan, you may also have access to a copy of the plan.
   [If you would like to review information about our CRA 
performance in other communities served by us, the public file for 
our entire bank is available at (name of office located in state), 
located at (address).]
   At least 30 days before the beginning of each quarter, the 
Comptroller publishes a nationwide list of the banks that are 
scheduled for CRA examination in that quarter. This list is 
available from the Deputy Comptroller (address). You may send 
written comments about our performance in helping to meet community 
credit needs to (name and address of official at bank) and Deputy 
Comptroller (address). Your letter, together with any response by 
us, will be considered by the Comptroller in evaluating our CRA 
performance and may be made public.
   You may ask to look at any comments received by the Deputy 
Comptroller. You may also request from the Deputy Comptroller an 
announcement of our applications covered by the CRA filed with the 
Comptroller. We are an affiliate of (name of holding company), a 
bank holding company. You may request from the (title of responsible 
official), Federal Reserve Bank of ________ (address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.

Secs. 25.1, 25.2, 25.8, and 25.101, and the undesignated center heading 
preceding Sec. 25.101  [Removed]

   3. Sections 25.1, 25.2, 25.8 and 25.101 and the undesignated center 
heading preceding Sec. 25.101 are removed effective July 1, 1995.

Secs. 25.3, 25.4, 25.5, 25.6, 25.7, and Subpart D  [Removed]

   4. Sections 25.3, 25.4, 25.5, 25.6, and 25.7 and subpart D, 
consisting of Sec. 25.51, are removed effective July 1, 1997.

   Dated: April 19, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System

12 CFR CHAPTER II

   For the reasons outlined in the joint preamble, the Board of 
Governors of the Federal Reserve System amends 12 CFR chapter II as set 
forth below:

PART 228--COMMUNITY REINVESTMENT (REGULATION BB)

   1. The authority citation for part 228 is revised to read as 
follows:

   Authority: 12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and 
2901 et seq.

   2. Part 228 is amended by adding Subparts A through D and 
Appendices A and B to read as follows:

Subpart A--General

Sec.
228.11  Authority, purposes, and scope.
228.12  Definitions.

Subpart B--Standards for Assessing Performance

228.21  Performance tests, standards, and ratings, in general.
228.22  Lending test.
228.23  Investment test.
228.24  Service test.
228.25  Community development test for wholesale or limited purpose 
banks.
228.26  Small bank performance standards.
228.27  Strategic plan.
228.28  Assigned ratings.
228.29  Effect of CRA performance on applications.

Subpart C--Records, Reporting, and Disclosure Requirements

228.41  Assessment area delineation.
228.42  Data collection, reporting, and disclosure.
228.43  Content and availability of public file. [[Page 22190]] 
228.44  Public notice by banks.
228.45  Publication of planned examination schedule.

Subpart D--Transition Rules

228.51  Transition rules.

Appendix A to Part 228--Ratings

Appendix B to Part 228--CRA Notice
Subpart A--General

Sec. 228.11  Authority, purposes, and scope.

   (a) Authority. The Board of Governors of the Federal Reserve System 
(the Board) issues this part to implement the Community Reinvestment 
Act (12 U.S.C. 2901 et seq.) (CRA). The regulations comprising this 
part are issued under the authority of the CRA and under the provisions 
of the United States Code authorizing the Board:
   (1) To conduct examinations of State-chartered banks that are 
members of the Federal Reserve System (12 U.S.C. 325);
   (2) To conduct examinations of bank holding companies and their 
subsidiaries (12 U.S.C. 1844); and
   (3) To consider applications for:
   (i) Domestic branches by State member banks (12 U.S.C. 321);
   (ii) Mergers in which the resulting bank would be a State member 
bank (12 U.S.C. 1828(c));
   (iii) Formations of, acquisitions of banks by, and mergers of, bank 
holding companies (12 U.S.C. 1842); and
   (iv) The acquisition of savings associations by bank holding 
companies (12 U.S.C. 1843).
   (b) Purposes. In enacting the CRA, the Congress required each 
appropriate Federal financial supervisory agency to assess an 
institution's record of helping to meet the credit needs of the local 
communities in which the institution is chartered, consistent with the 
safe and sound operation of the institution, and to take this record 
into account in the agency's evaluation of an application for a deposit 
facility by the institution. This part is intended to carry out the 
purposes of the CRA by:
   (1) Establishing the framework and criteria by which the Board 
assesses a bank's record of helping to meet the credit needs of its 
entire community, including low- and moderate-income neighborhoods, 
consistent with the safe and sound operation of the bank; and
   (2) Providing that the Board takes that record into account in 
considering certain applications.
   (c) Scope--(1) General. This part applies to all banks except as 
provided in paragraph (c)(3) of this section.
   (2) Foreign bank acquisitions. This part also applies to an 
uninsured State branch (other than a limited branch) of a foreign bank 
that results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)). The terms 
``State branch'' and ``foreign bank'' have the same meanings as in 
section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101 
et seq.); the term ``uninsured State branch'' means a State branch the 
deposits of which are not insured by the Federal Deposit Insurance 
Corporation; the term ``limited branch'' means a State branch that 
accepts only deposits that are permissible for a corporation organized 
under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.).
   (3) Certain special purpose banks. This part does not apply to 
special purpose banks that do not perform commercial or retail banking 
services by granting credit to the public in the ordinary course of 
business, other than as incident to their specialized operations. These 
banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and 
banks that engage only in one or more of the following activities: 
providing cash management controlled disbursement services or serving 
as correspondent banks, trust companies, or clearing agents.

Sec. 228.12  Definitions.

   For purposes of this part, the following definitions apply:
   (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term ``control'' has 
the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company 
is under common control with another company if both companies are 
directly or indirectly controlled by the same company.
   (b) Area median income means:
   (1) The median family income for the MSA, if a person or geography 
is located in an MSA; or
   (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
   (c) Assessment area means a geographic area delineated in 
accordance with Sec. 228.41.
   (d) Automated teller machine (ATM) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
bank at which deposits are received, cash dispersed, or money lent.
   (e) Bank means a State member bank as that term is defined in 
section 3(d)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(d)(2)), except as provided in Sec. 228.11(c)(3), and includes an 
uninsured State branch (other than a limited branch) of a foreign bank 
described in Sec. 228.11(c)(2).
   (f) Branch means a staffed banking facility approved as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
business or nonprofit organization.
   (g) CMSA means a consolidated metropolitan statistical area as 
defined by the Director of the Office of Management and Budget.
   (h) Community development means:
   (1) Affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals;
   (2) Community services targeted to low- or moderate-income 
individuals;
   (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of 13 CFR 
121.802(a)(2) or have gross annual revenues of $1 million or less; or
   (4) Activities that revitalize or stabilize low- or moderate-income 
geographies.
   (i) Community development loan means a loan that:
   (1) Has as its primary purpose community development; and
   (2) Except in the case of a wholesale or limited purpose bank:
   (i) Has not been reported or collected by the bank or an affiliate 
for consideration in the bank's assessment as a home mortgage, small 
business, small farm, or consumer loan, unless it is a multifamily 
dwelling loan (as described in Appendix A to Part 203 of this chapter); 
and
   (ii) Benefits the bank's assessment area(s) or a broader statewide 
or regional area that includes the bank's assessment area(s).
   (j) Community development service means a service that:
   (1) Has as its primary purpose community development;
   (2) Is related to the provision of financial services; and
   (3) Has not been considered in the evaluation of the bank's retail 
banking services under Sec. 228.24(d).
   (k) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
   (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
   (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec. 226.2 of this 
chapter; [[Page 22191]] 
   (3) Home equity loan, which is a consumer loan secured by a 
residence of the borrower;
   (4) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
   (5) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
   (l) Geography means a census tract or a block numbering area 
delineated by the United States Bureau of the Census in the most recent 
decennial census.
   (m) Home mortgage loan means a ``home improvement loan'' or a 
``home purchase loan'' as defined in Sec. 203.2 of this chapter.
   (n) Income level includes:
   (1) Low-income, which means an individual income that is less than 
50 percent of the area median income, or a median family income that is 
less than 50 percent, in the case of a geography.
   (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income, or 
a median family income that is at least 50 and less than 80 percent, in 
the case of a geography.
   (3) Middle-income, which means an individual income that is at 
least 80 percent and less than 120 percent of the area median income, 
or a median family income that is at least 80 and less than 120 
percent, in the case of a geography.
   (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income, or a median family income 
that is 120 percent or more, in the case of a geography.
   (o) Limited purpose bank means a bank that offers only a narrow 
product line (such as credit card or motor vehicle loans) to a regional 
or broader market and for which a designation as a limited purpose bank 
is in effect, in accordance with Sec. 228.25(b).
   (p) Loan location. A loan is located as follows:
   (1) A consumer loan is located in the geography where the borrower 
resides;
   (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
   (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
   (q) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
   (r) MSA means a metropolitan statistical area or a primary 
metropolitan statistical area as defined by the Director of the Office 
of Management and Budget.
   (s) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
   (t) Small bank means a bank that, as of December 31 of either of 
the prior two calendar years, had total assets of less than $250 
million and was independent or an affiliate of a holding company that, 
as of December 31 of either of the prior two calendar years, had total 
banking and thrift assets of less than $1 billion.
   (u) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (v) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (w) Wholesale bank means a bank that is not in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers, and for which a designation as a wholesale bank is 
in effect, in accordance with Sec. 228.25(b).

Subpart B--Standards for Assessing Performance

Sec. 228.21  Performance tests, standards, and ratings, in general.

   (a) Performance tests and standards. The Board assesses the CRA 
performance of a bank in an examination as follows:
   (1) Lending, investment, and service tests. The Board applies the 
lending, investment, and service tests, as provided in Secs. 228.22 
through 228.24, in evaluating the performance of a bank, except as 
provided in paragraphs (a)(2), (a)(3), and (a)(4) of this section.
   (2) Community development test for wholesale or limited purpose 
banks. The Board applies the community development test for a wholesale 
or limited purpose bank, as provided in Sec. 228.25, except as provided 
in paragraph (a)(4) of this section.
   (3) Small bank performance standards. The Board applies the small 
bank performance standards as provided in Sec. 228.26 in evaluating the 
performance of a small bank or a bank that was a small bank during the 
prior calendar year, unless the bank elects to be assessed as provided 
in paragraphs (a)(1), (a)(2), or (a)(4) of this section. The bank may 
elect to be assessed as provided in paragraph (a)(1) of this section 
only if it collects and reports the data required for other banks under 
Sec. 228.42.
   (4) Strategic plan. The Board evaluates the performance of a bank 
under a strategic plan if the bank submits, and the Board approves, a 
strategic plan as provided in Sec. 228.27.
   (b) Performance context. The Board applies the tests and standards 
in paragraph (a) of this section and also considers whether to approve 
a proposed strategic plan in the context of:
   (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a bank's assessment area(s);
   (2) Any information about lending, investment, and service 
opportunities in the bank's assessment area(s) maintained by the bank 
or obtained from community organizations, state, local, and tribal 
governments, economic development agencies, or other sources;
   (3) The bank's product offerings and business strategy as 
determined from data provided by the bank;
   (4) Institutional capacity and constraints, including the size and 
financial condition of the bank, the economic climate (national, 
regional, and local), safety and soundness limitations, and any other 
factors that significantly affect the bank's ability to provide 
lending, investments, or services in its assessment area(s);
   (5) The bank's past performance and the performance of similarly 
situated lenders;
   (6) The bank's public file, as described in Sec. 228.43, and any 
written comments about the bank's CRA performance submitted to the bank 
or the Board; and
   (7) Any other information deemed relevant by the Board.
   (c) Assigned ratings. The Board assigns to a bank one of the 
following four ratings pursuant to Sec. 228.28 and Appendix A of this 
part: ``outstanding''; ``satisfactory''; ``needs to improve''; or 
``substantial noncompliance'' as provided in 12 U.S.C. 2906(b)(2). The 
rating assigned by the Board reflects the bank's record of helping to 
meet the credit needs of its entire community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of the bank.
   (d) Safe and sound operations. This part and the CRA do not require 
a bank to make loans or investments or to provide services that are 
inconsistent with safe and sound operations. To the contrary, the Board 
anticipates banks can meet the standards of this part with safe and 
sound loans, investments, and [[Page 22192]] services on which the 
banks expect to make a profit. Banks are permitted and encouraged to 
develop and apply flexible underwriting standards for loans that 
benefit low- or moderate-income geographies or individuals, only if 
consistent with safe and sound operations.

Sec. 228.22   Lending test.

   (a) Scope of test. (1) The lending test evaluates a bank's record 
of helping to meet the credit needs of its assessment area(s) through 
its lending activities by considering a bank's home mortgage, small 
business, small farm, and community development lending. If consumer 
lending constitutes a substantial majority of a bank's business, the 
Board will evaluate the bank's consumer lending in one or more of the 
following categories: motor vehicle, credit card, home equity, other 
secured, and other unsecured loans. In addition, at a bank's option, 
the Board will evaluate one or more categories of consumer lending, if 
the bank has collected and maintained, as required in 
Sec. 228.42(c)(1), the data for each category that the bank elects to 
have the Board evaluate.
   (2) The Board considers originations and purchases of loans. The 
Board will also consider any other loan data the bank may choose to 
provide, including data on loans outstanding, commitments and letters 
of credit.
   (3) A bank may ask the Board to consider loans originated or 
purchased by consortia in which the bank participates or by third 
parties in which the bank has invested only if the loans meet the 
definition of community development loans and only in accordance with 
paragraph (d) of this section. The Board will not consider these loans 
under any criterion of the lending test except the community 
development lending criterion.
   (b) Performance criteria. The Board evaluates a bank's lending 
performance pursuant to the following criteria:
   (1) Lending activity. The number and amount of the bank's home 
mortgage, small business, small farm, and consumer loans, if 
applicable, in the bank's assessment area(s);
   (2) Geographic distribution. The geographic distribution of the 
bank's home mortgage, small business, small farm, and consumer loans, 
if applicable, based on the loan location, including:
   (i) The proportion of the bank's lending in the bank's assessment 
area(s);
   (ii) The dispersion of lending in the bank's assessment area(s); 
and
   (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the bank's assessment area(s);
   (3) Borrower characteristics. The distribution, particularly in the 
bank's assessment area(s), of the bank's home mortgage, small business, 
small farm, and consumer loans, if applicable, based on borrower 
characteristics, including the number and amount of:
   (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;
   (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
   (iii) Small business and small farm loans by loan amount at 
origination; and
   (iv) Consumer loans, if applicable, to low-, moderate-, middle-, 
and upper-income individuals;
   (4) Community development lending. The bank's community development 
lending, including the number and amount of community development 
loans, and their complexity and innovativeness; and
   (5) Innovative or flexible lending practices. The bank's use of 
innovative or flexible lending practices in a safe and sound manner to 
address the credit needs of low- or moderate-income individuals or 
geographies.
   (c) Affiliate lending. (1) At a bank's option, the Board will 
consider loans by an affiliate of the bank, if the bank provides data 
on the affiliate's loans pursuant to Sec. 228.42.
   (2) The Board considers affiliate lending subject to the following 
constraints:
   (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
   (ii) If a bank elects to have the Board consider loans within a 
particular lending category made by one or more of the bank's 
affiliates in a particular assessment area, the bank shall elect to 
have the Board consider, in accordance with paragraph (c)(1) of this 
section, all the loans within that lending category in that particular 
assessment area made by all of the bank's affiliates.
   (3) The Board does not consider affiliate lending in assessing a 
bank's performance under paragraph (b)(2)(i) of this section.
   (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the bank 
participates or by a third party in which the bank has invested:
   (1) Will be considered, at the bank's option, if the bank reports 
the data pertaining to these loans under Sec. 228.42(b)(2); and
   (2) May be allocated among participants or investors, as they 
choose, for purposes of the lending test, except that no participant or 
investor:
   (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; 
or
   (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
   (e) Lending performance rating. The Board rates a bank's lending 
performance as provided in Appendix A of this part.

Sec. 228.23  Investment test.

   (a) Scope of test. The investment test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) through 
qualified investments that benefit its assessment area(s) or a broader 
statewide or regional area that includes the bank's assessment area(s).
   (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.
   (c) Affiliate investment. At a bank's option, the Board will 
consider, in its assessment of a bank's investment performance, a 
qualified investment made by an affiliate of the bank, if the qualified 
investment is not claimed by any other institution.
   (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the bank 
that is located in a predominantly minority neighborhood to a minority 
depository institution or women's depository institution (as these 
terms are defined in 12 U.S.C. 2907(b)) will be considered as a 
qualified investment.
   (e) Performance criteria. The Board evaluates the investment 
performance of a bank pursuant to the following criteria:
   (1) The dollar amount of qualified investments;
   (2) The innovativeness or complexity of qualified investments;
   (3) The responsiveness of qualified investments to credit and 
community development needs; and
   (4) The degree to which the qualified investments are not routinely 
provided by private investors.
   (f) Investment performance rating. The Board rates a bank's 
investment performance as provided in Appendix A of this part.

Sec. 228.24  Service test.

   (a) Scope of test. The service test evaluates a bank's record of 
helping to [[Page 22193]] meet the credit needs of its assessment 
area(s) by analyzing both the availability and effectiveness of a 
bank's systems for delivering retail banking services and the extent 
and innovativeness of its community development services.
   (b) Area(s) benefitted. Community development services must benefit 
a bank's assessment area(s) or a broader statewide or regional area 
that includes the bank's assessment area(s).
   (c) Affiliate service. At a bank's option, the Board will consider, 
in its assessment of a bank's service performance, a community 
development service provided by an affiliate of the bank, if the 
community development service is not claimed by any other institution.
   (d) Performance criteria--retail banking services. The Board 
evaluates the availability and effectiveness of a bank's systems for 
delivering retail banking services, pursuant to the following criteria:
   (1) The current distribution of the bank's branches among low-,
moderate-, middle-, and upper-income geographies;
   (2) In the context of its current distribution of the bank's 
branches, the bank's record of opening and closing branches, 
particularly branches located in low- or moderate-income geographies or 
primarily serving low- or moderate-income individuals;
   (3) The availability and effectiveness of alternative systems for 
delivering retail banking services (e.g., ATMs, ATMs not owned or 
operated by or exclusively for the bank, banking by telephone or 
computer, loan production offices, and bank-at-work or bank-by-mail 
programs) in low- and moderate-income geographies and to low- and 
moderate-income individuals; and
   (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
   (e) Performance criteria--community development services. The Board 
evaluates community development services pursuant to the following 
criteria:
   (1) The extent to which the bank provides community development 
services; and
   (2) The innovativeness and responsiveness of community development 
services.
   (f) Service performance rating. The Board rates a bank's service 
performance as provided in Appendix A of this part.

Sec. 228.25  Community development test for wholesale or limited 
purpose banks.

   (a) Scope of test. The Board assesses a wholesale or limited 
purpose bank's record of helping to meet the credit needs of its 
assessment area(s) under the community development test through its 
community development lending, qualified investments, or community 
development services.
   (b) Designation as a wholesale or limited purpose bank. In order to 
receive a designation as a wholesale or limited purpose bank, a bank 
shall file a request, in writing, with the Board, at least three months 
prior to the proposed effective date of the designation. If the Board 
approves the designation, it remains in effect until the bank requests 
revocation of the designation or until one year after the Board 
notifies the bank that the Board has revoked the designation on its own 
initiative.
   (c) Performance criteria. The Board evaluates the community 
development performance of a wholesale or limited purpose bank pursuant 
to the following criteria:
   (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development 
loan data provided by the bank, such as data on loans outstanding, 
commitments, and letters of credit), qualified investments, or 
community development services;
   (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to which the investments are not routinely provided by private 
investors; and
   (3) The bank's responsiveness to credit and community development 
needs.
   (d) Indirect activities. At a bank's option, the Board will 
consider in its community development performance assessment:
   (1) Qualified investments or community development services 
provided by an affiliate of the bank, if the investments or services 
are not claimed by any other institution; and
   (2) Community development lending by affiliates, consortia and 
third parties, subject to the requirements and limitations in 
Sec. 228.22(c) and (d).
   (e) Benefit to assessment area(s)--(1) Benefit inside assessment 
area(s). The Board considers all qualified investments, community 
development loans, and community development services that benefit 
areas within the bank's assessment area(s) or a broader statewide or 
regional area that includes the bank's assessment area(s).
   (2) Benefit outside assessment area(s). The Board considers the 
qualified investments, community development loans, and community 
development services that benefit areas outside the bank's assessment 
area(s), if the bank has adequately addressed the needs of its 
assessment area(s).
   (f) Community development performance rating. The Board rates a 
bank's community development performance as provided in Appendix A of 
this part.

Sec. 228.26  Small bank performance standards.

   (a) Performance criteria. The Board evaluates the record of a small 
bank, or a bank that was a small bank during the prior calendar year, 
of helping to meet the credit needs of its assessment area(s) pursuant 
to the following criteria:
   (1) The bank's loan-to-deposit ratio, adjusted for seasonal 
variation and, as appropriate, other lending-related activities, such 
as loan originations for sale to the secondary markets, community 
development loans, or qualified investments;
   (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
   (3) The bank's record of lending to and, as appropriate, engaging 
in other lending-related activities for borrowers of different income 
levels and businesses and farms of different sizes;
   (4) The geographic distribution of the bank's loans; and
   (5) The bank's record of taking action, if warranted, in response 
to written complaints about its performance in helping to meet credit 
needs in its assessment area(s).
   (b) Small bank performance rating. The Board rates the performance 
of a bank evaluated under this section as provided in Appendix A of 
this part.

Sec. 228.27  Strategic plan.

   (a) Alternative election. The Board will assess a bank's record of 
helping to meet the credit needs of its assessment area(s) under a 
strategic plan if:
   (1) The bank has submitted the plan to the Board as provided for in 
this section;
   (2) The Board has approved the plan;
   (3) The plan is in effect; and
   (4) The bank has been operating under an approved plan for at least 
one year.
   (b) Data reporting. The Board's approval of a plan does not affect 
the bank's obligation, if any, to report data as required by 
Sec. 228.42.
   (c) Plans in general--(1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must [[Page 22194]] include 
annual interim measurable goals under which the Board will evaluate the 
bank's performance.
   (2) Multiple assessment areas. A bank with more than one assessment 
area may prepare a single plan for all of its assessment areas or one 
or more plans for one or more of its assessment areas.
   (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
   (d) Public participation in plan development. Before submitting a 
plan to the Board for approval, a bank shall:
   (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
   (2) Once the bank has developed a plan, formally solicit public 
comment on the plan for at least 30 days by publishing notice in at 
least one newspaper of general circulation in each assessment area 
covered by the plan; and
   (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of 
the bank in any assessment area covered by the plan and provide copies 
of the plan upon request for a reasonable fee to cover copying and 
mailing, if applicable.
   (e) Submission of plan. The bank shall submit its plan to the Board 
at least three months prior to the proposed effective date of the plan. 
The bank shall also submit with its plan a description of its informal 
efforts to seek suggestions from members of the public, any written 
public comment received, and, if the plan was revised in light of the 
comment received, the initial plan as released for public comment.
   (f) Plan content--(1) Measurable goals. (i) A bank shall specify in 
its plan measurable goals for helping to meet the credit needs of each 
assessment area covered by the plan, particularly the needs of low- and 
moderate-income geographies and low- and moderate-income individuals, 
through lending, investment, and services, as appropriate.
   (ii) A bank shall address in its plan all three performance 
categories and, unless the bank has been designated as a wholesale or 
limited purpose bank, shall emphasize lending and lending-related 
activities. Nevertheless, a different emphasis, including a focus on 
one or more performance categories, may be appropriate if responsive to 
the characteristics and credit needs of its assessment area(s), 
considering public comment and the bank's capacity and constraints, 
product offerings, and business strategy.
   (2) Confidential information. A bank may submit additional 
information to the Board on a confidential basis, but the goals stated 
in the plan must be sufficiently specific to enable the public and the 
Board to judge the merits of the plan.
   (3) Satisfactory and outstanding goals. A bank shall specify in its 
plan measurable goals that constitute ``satisfactory'' performance. A 
plan may specify measurable goals that constitute ``outstanding'' 
performance. If a bank submits, and the Board approves, both 
``satisfactory'' and ``outstanding'' performance goals, the Board will 
consider the bank eligible for an ``outstanding'' performance rating.
   (4) Election if satisfactory goals not substantially met. A bank 
may elect in its plan that, if the bank fails to meet substantially its 
plan goals for a satisfactory rating, the Board will evaluate the 
bank's performance under the lending, investment, and service tests, 
the community development test, or the small bank performance 
standards, as appropriate.
   (g) Plan approval--(1) Timing. The Board will act upon a plan 
within 60 calendar days after the Board receives the complete plan and 
other material required under paragraph (d) of this section. If the 
Board fails to act within this time period, the plan shall be deemed 
approved unless the Board extends the review period for good cause.
   (2) Public participation. In evaluating the plan's goals, the Board 
considers the public's involvement in formulating the plan, written 
public comment on the plan, and any response by the bank to public 
comment on the plan.
   (3) Criteria for evaluating plan. The Board evaluates a plan's 
measurable goals using the following criteria, as appropriate:
   (i) The extent and breadth of lending or lending-related 
activities, including, as appropriate, the distribution of loans among 
different geographies, businesses and farms of different sizes, and 
individuals of different income levels, the extent of community 
development lending, and the use of innovative or flexible lending 
practices to address credit needs;
   (ii) The amount and innovativeness, complexity, and responsiveness 
of the bank's qualified investments; and
   (iii) The availability and effectiveness of the bank's systems for 
delivering retail banking services and the extent and innovativeness of 
the bank's community development services.
   (h) Plan amendment. During the term of a plan, a bank may request 
the Board to approve an amendment to the plan on grounds that there has 
been a material change in circumstances. The bank shall develop an 
amendment to a previously approved plan in accordance with the public 
participation requirements of paragraph (c) of this section.
   (i) Plan assessment. The Board approves the goals and assesses 
performance under a plan as provided for in Appendix A of this part.

Sec. 228.28  Assigned ratings.

   (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the Board assigns to a bank a rating of ``outstanding,'' 
``satisfactory,'' ``needs to improve,'' or ``substantial 
noncompliance'' based on the bank's performance under the lending, 
investment and service tests, the community development test, the small 
bank performance standards, or an approved strategic plan, as 
applicable.
   (b) Lending, investment, and service tests. The Board assigns a 
rating for a bank assessed under the lending, investment, and service 
tests in accordance with the following principles:
   (1) A bank that receives an ``outstanding'' rating on the lending 
test receives an assigned rating of at least ``satisfactory'';
   (2) A bank that receives an ``outstanding'' rating on both the 
service test and the investment test and a rating of at least ``high 
satisfactory'' on the lending test receives an assigned rating of 
``outstanding''; and
   (3) No bank may receive an assigned rating of ``satisfactory'' or 
higher unless it receives a rating of at least ``low satisfactory'' on 
the lending test.
   (c) Effect of evidence of discriminatory or other illegal credit 
practices. Evidence of discriminatory or other illegal credit practices 
adversely affects the Board's evaluation of a bank's performance. In 
determining the effect on the bank's assigned rating, the Board 
considers the nature and extent of the evidence, the policies and 
procedures that the bank has in place to prevent discriminatory or 
other illegal credit practices, any corrective action that the bank has 
taken or has committed to take, particularly voluntary corrective 
action resulting from self-assessment, and other relevant information.

Sec. 228.29  Effect of CRA performance on applications.
   (a) CRA performance. Among other factors, the Board takes into 
account the [[Page 22195]] record of performance under the CRA of:
   (1) Each applicant bank for the:
   (i) Establishment of a domestic branch by a State member bank; and
   (ii) Merger, consolidation, acquisition of assets, or assumption of 
liabilities requiring approval under the Bank Merger Act (12 U.S.C. 
1828(c)) if the acquiring, assuming, or resulting bank is to be a State 
member bank; and
   (2) Each insured depository institution (as defined in 12 U.S.C. 
1813) controlled by an applicant and subsidiary bank or savings 
association proposed to be controlled by an applicant:
   (i) To become a bank holding company in a transaction that requires 
approval under section 3 of the Bank Holding Company Act (12 U.S.C. 
1842);
   (ii) To acquire ownership or control of shares or all or 
substantially all of the assets of a bank, to cause a bank to become a 
subsidiary of a bank holding company, or to merge or consolidate a bank 
holding company with any other bank holding company in a transaction 
that requires approval under section 3 of the Bank Holding Company Act 
(12 U.S.C. 1842); and
   (iii) To own, control or operate a savings association in a 
transaction that requires approval under section 4 of the Bank Holding 
Company Act (12 U.S.C. 1843).
   (b) Interested parties. In considering CRA performance in an 
application described in paragraph (a) of this section, the Board takes 
into account any views expressed by interested parties that are 
submitted in accordance with the Board's Rules of Procedure set forth 
in part 262 of this chapter.
   (c) Denial or conditional approval of application. A bank's record 
of performance may be the basis for denying or conditioning approval of 
an application listed in paragraph (a) of this section.
   (d) Definitions. For purposes of paragraph (a)(2) of this section, 
``bank,'' ``bank holding company,'' ``subsidiary,'' and ``savings 
association'' have the meanings given to those terms in section 2 of 
the Bank Holding Company Act (12 U.S.C. 1841).

Subpart C--Records, Reporting, and Disclosure Requirements

Sec. 228.41  Assessment area delineation.

   (a) In general. A bank shall delineate one or more assessment areas 
within which the Board evaluates the bank's record of helping to meet 
the credit needs of its community. The Board does not evaluate the 
bank's delineation of its assessment area(s) as a separate performance 
criterion, but the Board reviews the delineation for compliance with 
the requirements of this section.
   (b) Geographic area(s) for wholesale or limited purpose banks. The 
assessment area(s) for a wholesale or limited purpose bank must consist 
generally of one or more MSAs (using the MSA boundaries that were in 
effect as of January 1 of the calendar year in which the delineation is 
made) or one or more contiguous political subdivisions, such as 
counties, cities, or towns, in which the bank has its main office, 
branches, and deposit-taking ATMs.
   (c) Geographic area(s) for other banks. The assessment area(s) for 
a bank other than a wholesale or limited purpose bank must:
   (1) Consist generally of one or more MSAs (using the MSA boundaries 
that were in effect as of January 1 of the calendar year in which the 
delineation is made) or one or more contiguous political subdivisions, 
such as counties, cities, or towns; and
   (2) Include the geographies in which the bank has its main office, 
its branches, and its deposit-taking ATMs, as well as the surrounding 
geographies in which the bank has originated or purchased a substantial 
portion of its loans (including home mortgage loans, small business and 
small farm loans, and any other loans the bank chooses, such as those 
consumer loans on which the bank elects to have its performance 
assessed).
   (d) Adjustments to geographic area(s). A bank may adjust the 
boundaries of its assessment area(s) to include only the portion of a 
political subdivision that it reasonably can be expected to serve. An 
adjustment is particularly appropriate in the case of an assessment 
area that otherwise would be extremely large, of unusual configuration, 
or divided by significant geographic barriers.
   (e) Limitations on the delineation of an assessment area. Each 
bank's assessment area(s):
   (1) Must consist only of whole geographies;
   (2) May not reflect illegal discrimination;
   (3) May not arbitrarily exclude low- or moderate-income 
geographies, taking into account the bank's size and financial 
condition; and
   (4) May not extend substantially beyond a CMSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a bank serves a geographic area that extends substantially 
beyond a state boundary, the bank shall delineate separate assessment 
areas for the areas in each state. If a bank serves a geographic area 
that extends substantially beyond a CMSA boundary, the bank shall 
delineate separate assessment areas for the areas inside and outside 
the CMSA.
   (f) Banks serving military personnel. Notwithstanding the 
requirements of this section, a bank whose business predominantly 
consists of serving the needs of military personnel or their dependents 
who are not located within a defined geographic area may delineate its 
entire deposit customer base as its assessment area.
   (g) Use of assessment area(s). The Board uses the assessment 
area(s) delineated by a bank in its evaluation of the bank's CRA 
performance unless the Board determines that the assessment area(s) do 
not comply with the requirements of this section.

Sec. 228.42  Data collection, reporting, and disclosure.

   (a) Loan information required to be collected and maintained. A 
bank, except a small bank, shall collect, and maintain in machine 
readable form (as prescribed by the Board) until the completion of its 
next CRA examination, the following data for each small business or 
small farm loan originated or purchased by the bank:
   (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (2) The loan amount at origination;
   (3) The loan location; and
   (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.
   (b) Loan information required to be reported. A bank, except a 
small bank or a bank that was a small bank during the prior calendar 
year, shall report annually by March 1 to the Board in machine readable 
form (as prescribed by the Board) the following data for the prior 
calendar year:
   (1) Small business and small farm loan data. For each geography in 
which the bank originated or purchased a small business or small farm 
loan, the aggregate number and amount of loans:
   (i) With an amount at origination of $100,000 or less;
   (ii) With amount at origination of more than $100,000 but less than 
or equal to $250,000;
   (iii) With an amount at origination of more than $250,000; and
   (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank considered in making 
its credit decision);
   (2) Community development loan data. The aggregate number and 
aggregate amount of community [[Page 22196]] development loans 
originated or purchased; and
   (3) Home mortgage loans. If the bank is subject to reporting under 
part 203 of this chapter, the location of each home mortgage loan 
application, origination, or purchase outside the MSAs in which the 
bank has a home or branch office (or outside any MSA) in accordance 
with the requirements of part 203 of this chapter.
   (c) Optional data collection and maintenance--(1) Consumer loans. A 
bank may collect and maintain in machine readable form (as prescribed 
by the Board) data for consumer loans originated or purchased by the 
bank for consideration under the lending test. A bank may maintain data 
for one or more of the following categories of consumer loans: motor 
vehicle, credit card, home equity, other secured, and other unsecured. 
If the bank maintains data for loans in a certain category, it shall 
maintain data for all loans originated or purchased within that 
category. The bank shall maintain data separately for each category, 
including for each loan:
   (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (ii) The loan amount at origination or purchase;
   (iii) The loan location; and
   (iv) The gross annual income of the borrower that the bank 
considered in making its credit decision.
   (2) Other loan data. At its option, a bank may provide other 
information concerning its lending performance, including additional 
loan distribution data.
   (d) Data on affiliate lending. A bank that elects to have the Board 
consider loans by an affiliate, for purposes of the lending or 
community development test or an approved strategic plan, shall 
collect, maintain, and report for those loans the data that the bank 
would have collected, maintained, and reported pursuant to paragraphs 
(a), (b), and (c) of this section had the loans been originated or 
purchased by the bank. For home mortgage loans, the bank shall also be 
prepared to identify the home mortgage loans reported under part 203 of 
this chapter by the affiliate.
   (e) Data on lending by a consortium or a third party. A bank that 
elects to have the Board consider community development loans by a 
consortium or third party, for purposes of the lending or community 
development tests or an approved strategic plan, shall report for those 
loans the data that the bank would have reported under paragraph (b)(2) 
of this section had the loans been originated or purchased by the bank.
   (f) Small banks electing evaluation under the lending, investment, 
and service tests. A bank that qualifies for evaluation under the small 
bank performance standards but elects evaluation under the lending, 
investment, and service tests shall collect, maintain, and report the 
data required for other banks pursuant to paragraphs (a) and (b) of 
this section.
   (g) Assessment area data. A bank, except a small bank or a bank 
that was a small bank during the prior calendar year, shall collect and 
report to the Board by March 1 of each year a list for each assessment 
area showing the geographies within the area.
   (h) CRA Disclosure Statement. The Board prepares annually for each 
bank that reports data pursuant to this section a CRA Disclosure 
Statement that contains, on a state-by-state basis:
   (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the bank 
reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-
, and upper-income geographies;
   (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the 
bank reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 
or more but less than 20 percent, 20 or more but less than 30 percent, 
30 or more but less than 40 percent, 40 or more but less than 50 
percent, 50 or more but less than 60 percent, 60 or more but less than 
70 percent, 70 or more but less than 80 percent, 80 or more but less 
than 90 percent, 90 or more but less than 100 percent, 100 or more but 
less than 110 percent, 110 or more but less than 120 percent, and 120 
percent or more;
   (ii) A list grouping each geography in the county or assessment 
area according to whether the median income in the geography relative 
to the area median income is less than 10 percent, 10 or more but less 
than 20 percent, 20 or more but less than 30 percent, 30 or more but 
less than 40 percent, 40 or more but less than 50 percent, 50 or more 
but less than 60 percent, 60 or more but less than 70 percent, 70 or 
more but less than 80 percent, 80 or more but less than 90 percent, 90 
or more but less than 100 percent, 100 or more but less than 110 
percent, 110 or more but less than 120 percent, and 120 percent or 
more;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the bank and the number 
and amount of small business and small farm loans located outside the 
assessment area(s) reported by the bank; and
   (4) The number and amount of community development loans reported 
as originated or purchased.
   (i) Aggregate disclosure statements. The Board, in conjunction with 
the Office of the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, and the Office of Thrift Supervision, prepares 
annually, for each MSA (including an MSA that crosses a state boundary) 
and the non-MSA portion of each state, an aggregate disclosure 
statement of small business and small farm lending by all institutions 
subject to reporting under this part or parts 25, 345, or 563e of this 
title. These disclosure statements indicate, for each geography, the 
number and amount of all small business and small farm loans originated 
or purchased by reporting institutions, except that the Board may 
adjust the form of the disclosure if necessary, because of special 
circumstances, to protect the privacy of a borrower or the competitive 
position of an institution.
   (j) Central data depositories. The Board makes the aggregate 
disclosure statements, described in paragraph (i) of this section, and 
the individual bank CRA Disclosure Statements, described in paragraph 
(h) of this section, available to the public at central data 
depositories. The Board publishes a list of the depositories at which 
the statements are available. [[Page 22197]]

Sec. 228.43  Content and availability of public file.

   (a) Information available to the public. A bank shall maintain a 
public file that includes the following information:
   (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's performance in helping to meet community credit needs, 
and any response to the comments by the bank, if neither the comments 
nor the responses contain statements that reflect adversely on the good 
name or reputation of any persons other than the bank or publication of 
which would violate specific provisions of law;
   (2) A copy of the public section of the bank's most recent CRA 
Performance Evaluation prepared by the Board. The bank shall place this 
copy in the public file within 30 business days after its receipt from 
the Board;
   (3) A list of the bank's branches, their street addresses, and 
geographies;
   (4) A list of branches opened or closed by the bank during the 
current year and each of the prior two calendar years, their street 
addresses, and geographies;
   (5) A list of services (including hours of operation, available 
loan and deposit products, and transaction fees) generally offered at 
the bank's branches and descriptions of material differences in the 
availability or cost of services at particular branches, if any. At its 
option, a bank may include information regarding the availability of 
alternative systems for delivering retail banking services (e.g., ATMs, 
ATMs not owned or operated by or exclusively for the bank, banking by 
telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs);
   (6) A map of each assessment area showing the boundaries of the 
area and identifying the geographies contained within the area, either 
on the map or in a separate list; and
   (7) Any other information the bank chooses.
   (b) Additional information available to the public--(1) Banks other 
than small banks. A bank, except a small bank or a bank that was a 
small bank during the prior calendar year, shall include in its public 
file the following information pertaining to the bank and its 
affiliates, if applicable, for each of the prior two calendar years:
   (i) If the bank has elected to have one or more categories of its 
consumer loans considered under the lending test, for each of these 
categories, the number and amount of loans:
   (A) To low-, moderate-, middle-, and upper-income individuals;
   (B) Located in low-, moderate-, middle-, and upper-income census 
tracts; and
   (C) Located inside the bank's assessment area(s) and outside the 
bank's assessment area(s); and
   (ii) The bank's CRA Disclosure Statement. The bank shall place the 
statement in the public file within three business days of its receipt 
from the Board.
   (2) Banks required to report Home Mortgage Disclosure Act (HMDA) 
data. A bank required to report home mortgage loan data pursuant to 
part 203 of this chapter shall include in its public file a copy of the 
HMDA Disclosure Statement provided by the Federal Financial 
Institutions Examination Council pertaining to the bank for each of the 
prior two calendar years. In addition, a bank that elected to have the 
Board consider the mortgage lending of an affiliate for any of these 
years shall include in its public file the affiliate's HMDA Disclosure 
Statement for those years. The bank shall place the statement(s) in the 
public file within three business days after its receipt.
   (3) Small banks. A small bank or a bank that was a small bank 
during the prior calendar year shall include in its public file:
   (i) The bank's loan-to-deposit ratio for each quarter of the prior 
calendar year and, at its option, additional data on its loan-to-
deposit ratio; and
   (ii) The information required for other banks by paragraph (b)(1) 
of this section, if the bank has elected to be evaluated under the 
lending, investment, and service tests.
   (4) Banks with strategic plans. A bank that has been approved to be 
assessed under a strategic plan shall include in its public file a copy 
of that plan. A bank need not include information submitted to the 
Board on a confidential basis in conjunction with the plan.
   (5) Banks with less than satisfactory ratings. A bank that received 
a less than satisfactory rating during its most recent examination 
shall include in its public file a description of its current efforts 
to improve its performance in helping to meet the credit needs of its 
entire community. The bank shall update the description quarterly.
   (c) Location of public information. A bank shall make available to 
the public for inspection upon request and at no cost the information 
required in this section as follows:
   (1) At the main office and, if an interstate bank, at one branch 
office in each state, all information in the public file; and
   (2) At each branch:
   (i) A copy of the public section of the bank's most recent CRA 
Performance Evaluation and a list of services provided by the branch; 
and
   (ii) Within five calendar days of the request, all the information 
in the public file relating to the assessment area in which the branch 
is located.
   (d) Copies. Upon request, a bank shall provide copies, either on 
paper or in another form acceptable to the person making the request, 
of the information in its public file. The bank may charge a reasonable 
fee not to exceed the cost of copying and mailing (if applicable).
   (e) Updating. Except as otherwise provided in this section, a bank 
shall ensure that the information required by this section is current 
as of April 1 of each year.

Sec. 228.44  Public notice by banks.

   A bank shall provide in the public lobby of its main office and 
each of its branches the appropriate public notice set forth in 
Appendix B of this part. Only a branch of a bank having more than one 
assessment area shall include the bracketed material in the notice for 
branch offices. Only a bank that is an affiliate of a holding company 
shall include the next to the last sentence of the notices. A bank 
shall include the last sentence of the notices only if it is an 
affiliate of a holding company that is not prevented by statute from 
acquiring additional banks.

Sec. 228.45  Publication of planned examination schedule.

   The Board publishes at least 30 days in advance of the beginning of 
each calendar quarter a list of banks scheduled for CRA examinations in 
that quarter.

Subpart D--Transition Rules

Sec. 228.51  Transition rules.

   (a) Effective date. Sections of this part become applicable over a 
period of time in accordance with the schedule set forth in paragraph 
(c) of this section.
   (b) Data collection and reporting; strategic plan; performance 
tests and standards. (i) On January 1, 1996, the data collection 
requirements set forth in Sec. 228.42 (except Sec. 228.42(b) and (g)) 
become applicable.
   (ii) On January 1, 1997, the data reporting requirements set forth 
in Sec. 228.42(b) and (g) become applicable.
   (2) Small banks. Beginning January 1, 1996, the Board evaluates 
banks that qualify for the small bank performance standards described 
in Sec. 228.26 under that section.
   (3) Strategic plan. Beginning January 1, 1996, a bank that elects 
to be [[Page 22198]] evaluated under an approved strategic plan 
pursuant to Sec. 228.27 may submit its strategic plan to the Board for 
approval.
   (4) Other performance tests. (i) Beginning January 1, 1996, a bank 
may elect to be evaluated under the pertinent revised performance tests 
described in Secs. 228.22, 228.23, 228.24, and 228.25, if the bank 
provides the necessary data to permit evaluation.
   (ii) Beginning July 1, 1997, the Board evaluates all banks under 
the pertinent revised performance tests.
   (c) Schedule. (1) On July 1, 1995, Secs. 228.11, 228.12, 228.29, 
and 228.51 become applicable, and Secs. 228.1, 228.2, 228.8, and 
228.100 expire.
   (2) On January 1, 1996, Sec. 228.41 and the pertinent provisions of 
Subpart B of this part will apply to banks that elect to be evaluated 
under Secs. 228.22 through 228.25, banks that submit for approval 
strategic plans under Sec. 228.27, and banks that qualify for the small 
bank performance standards described in Sec. 228.26.
   (3) On January 1, 1996, Secs. 228.42 (except Sec. 228.42(b) and 
(g)) and 228.45 become applicable.
   (4) On January 1, 1997, Secs. 228.41 and 228.42(b) and (g) become 
applicable.
   (5) On July 1, 1997, Secs. 228.21 through 228.28, 228.43, and 
228.44 become applicable, and Secs. 228.3 through 228.7, and 228.51 
expire.

Appendix A to Part 228--Ratings
   (a) Ratings in general. (1) In assigning a rating, the Board 
evaluates a bank's performance under the applicable performance 
criteria in this part, in accordance with Sec. 228.21, and 
Sec. 228.28, which provides for adjustments on the basis of evidence 
of discriminatory or other illegal credit practices.
   (2) A bank's performance need not fit each aspect of a 
particular rating profile in order to receive that rating, and 
exceptionally strong performance with respect to some aspects may 
compensate for weak performance in others. The bank's overall 
performance, however, must be consistent with safe and sound banking 
practices and generally with the appropriate rating profile as 
follows.
   (b) Banks evaluated under the lending, investment, and service 
tests--(1) Lending performance rating. The Board assigns each bank's 
lending performance one of the five following ratings.
   (i) Outstanding. The Board rates a bank's lending performance 
``outstanding'' if, in general, it demonstrates:
   (A) Excellent responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A substantial majority of its loans are made in its 
assessment area(s);
   (C) An excellent geographic distribution of loans in its 
assessment area(s);
   (D) An excellent distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An excellent record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Extensive use of innovative or flexible lending practices in 
a safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It is a leader in making community development loans.
   (ii) High satisfactory. The Board rates a bank's lending 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) Good responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A high percentage of its loans are made in its assessment 
area(s);
   (C) A good geographic distribution of loans in its assessment 
area(s);
   (D) A good distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A good record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made a relatively high level of community development 
loans.
   (iii) Low satisfactory. The Board rates a bank's lending 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) Adequate responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) An adequate percentage of its loans are made in its 
assessment area(s);
   (C) An adequate geographic distribution of loans in its 
assessment area(s);
   (D) An adequate distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An adequate record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Limited use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made an adequate level of community development 
loans.
   (iv) Needs to improve. The Board rates a bank's lending 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) Poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A small percentage of its loans are made in its assessment 
area(s);
   (C) A poor geographic distribution of loans, particularly to 
low- or moderate-income geographies, in its assessment area(s);
   (D) A poor distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Little use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made a low level of community development loans.
   (v) Substantial noncompliance. The Board rates a bank's lending 
performance as being in ``substantial noncompliance'' if, in 
general, it demonstrates:
   (A) A very poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A very small percentage of its loans are made in its 
assessment area(s);
   (C) A very poor geographic distribution of loans, particularly 
to low- or moderate-income geographies, in its assessment area(s);
   (D) A very poor distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) A very poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) No use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made few, if any, community development loans. 
[[Page 22199]] 
   (2) Investment performance rating. The Board assigns each bank's 
investment performance one of the five following ratings.
   (i) Outstanding. The Board rates a bank's investment performance 
``outstanding'' if, in general, it demonstrates:
   (A) An excellent level of qualified investments, particularly 
those that are not routinely provided by private investors, often in 
a leadership position;
   (B) Extensive use of innovative or complex qualified 
investments; and
   (C) Excellent responsiveness to credit and community development 
needs.
   (ii) High satisfactory. The Board rates a bank's investment 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) A significant level of qualified investments, particularly 
those that are not routinely provided by private investors, 
occasionally in a leadership position;
   (B) Significant use of innovative or complex qualified 
investments; and
   (C) Good responsiveness to credit and community development 
needs.
   (iii) Low satisfactory. The Board rates a bank's investment 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) An adequate level of qualified investments, particularly 
those that are not routinely provided by private investors, although 
rarely in a leadership position;
   (B) Occasional use of innovative or complex qualified 
investments; and
   (C) Adequate responsiveness to credit and community development 
needs.
   (iv) Needs to improve. The Board rates a bank's investment 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) A poor level of qualified investments, particularly those 
that are not routinely provided by private investors;
   (B) Rare use of innovative or complex qualified investments; and
   (C) Poor responsiveness to credit and community development 
needs.
   (v) Substantial noncompliance. The Board rates a bank's 
investment performance as being in ``substantial noncompliance'' if, 
in general, it demonstrates:
   (A) Few, if any, qualified investments, particularly those that 
are not routinely provided by private investors;
   (B) No use of innovative or complex qualified investments; and
   (C) Very poor responsiveness to credit and community development 
needs.
   (3) Service performance rating. The Board assigns each bank's 
service performance one of the five following ratings.
   (i) Outstanding. The Board rates a bank's service performance 
``outstanding'' if, in general, the bank demonstrates:
   (A) Its service delivery systems are readily accessible to 
geographies and individuals of different income levels in its 
assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has improved the accessibility of its delivery 
systems, particularly in low- or moderate-income geographies or to 
low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
are tailored to the convenience and needs of its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It is a leader in providing community development services.
   (ii) High satisfactory. The Board rates a bank's service 
performance ``high satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are accessible to geographies 
and individuals of different income levels in its assessment 
area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has not adversely affected the accessibility of 
its delivery systems, particularly in low- and moderate-income 
geographies and to low- and moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides a relatively high level of community development 
services.
   (iii) Low satisfactory. The Board rates a bank's service 
performance ``low satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are reasonably accessible to 
geographies and individuals of different income levels in its 
assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has generally not adversely affected the 
accessibility of its delivery systems, particularly in low- and 
moderate-income geographies and to low- and moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides an adequate level of community development 
services.
   (iv) Needs to improve. The Board rates a bank's service 
performance ``needs to improve'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to portions of its assessment area(s), particularly to low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has adversely affected the accessibility its 
delivery systems, particularly in low- or moderate-income 
geographies or to low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that inconveniences its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides a limited level of community development 
services.
   (v) Substantial noncompliance. The Board rates a bank's service 
performance as being in ``substantial noncompliance'' if, in 
general, the bank demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to significant portions of its assessment area(s), particularly to 
low- or moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has significantly adversely affected the 
accessibility of its delivery systems, particularly in low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that significantly inconveniences its assessment 
area(s), particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides few, if any, community development services.
   (c) Wholesale or limited purpose banks. The Board assigns each 
wholesale or limited purpose bank's community development 
performance one of the four following ratings.
   (1) Outstanding. The Board rates a wholesale or limited purpose 
bank's community development performance ``outstanding'' if, in 
general, it demonstrates:
   (i) A high level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Extensive use of innovative or complex qualified 
investments, community development loans, or community development 
services; and
   (iii) Excellent responsiveness to credit and community 
development needs in its assessment area(s).
   (2) Satisfactory. The Board rates a wholesale or limited purpose 
bank's community development performance ``satisfactory'' if, in 
general, it demonstrates:
   (i) An adequate level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Occasional use of innovative or complex qualified 
investments, community development loans, or community development 
services; and
   (iii) Adequate responsiveness to credit and community 
development needs in its assessment area(s).
   (3) Needs to improve. The Board rates a wholesale or limited 
purpose bank's community development performance as ``needs to 
improve'' if, in general, it demonstrates:
   (i) A poor level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Rare use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Poor responsiveness to credit and community development 
needs in its assessment area(s).
   (4) Substantial noncompliance. The Board rates a wholesale or 
limited purpose bank's [[Page 22200]] community development 
performance in ``substantial noncompliance'' if, in general, it 
demonstrates:
   (i) Few, if any, community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) No use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Very poor responsiveness to credit and community 
development needs in its assessment area(s).
   (d) Banks evaluated under the small bank performance standards. 
The Board rates the performance of each bank evaluated under the 
small bank performance standards as follows.
   (1) Eligibility for a satisfactory rating. The Board rates a 
bank's performance ``satisfactory'' if, in general, the bank 
demonstrates:
   (i) A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's size, financial condition, the credit 
needs of its assessment area(s), and taking into account, as 
appropriate, lending-related activities such as loan originations 
for sale to the secondary markets and community development loans 
and qualified investments;
   (ii) A majority of its loans and, as appropriate, other lending-
related activities are in its assessment area(s);
   (iii) A distribution of loans to and, as appropriate, other 
lending related-activities for individuals of different income 
levels (including low- and moderate-income individuals) and 
businesses and farms of different sizes that is reasonable given the 
demographics of the bank's assessment area(s);
   (iv) A record of taking appropriate action, as warranted, in 
response to written complaints, if any, about the bank's performance 
in helping to meet the credit needs of its assessment area(s); and
   (v) A reasonable geographic distribution of loans given the 
bank's assessment area(s).
   (2) Eligibility for an outstanding rating. A bank that meets 
each of the standards for a ``satisfactory'' rating under this 
paragraph and exceeds some or all of those standards may warrant 
consideration for an overall rating of ``outstanding.'' In assessing 
whether a bank's performance is ``outstanding,'' the Board considers 
the extent to which the bank exceeds each of the performance 
standards for a ``satisfactory'' rating and its performance in 
making qualified investments and its performance in providing 
branches and other services and delivery systems that enhance credit 
availability in its assessment area(s).
   (3) Needs to improve or substantial noncompliance ratings. A 
bank also may receive a rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standards for a ``satisfactory'' 
rating.
   (e) Strategic plan assessment and rating--(1) Satisfactory 
goals. The Board approves as ``satisfactory'' measurable goals that 
adequately help to meet the credit needs of the bank's assessment 
area(s).
   (2) Outstanding goals. If the plan identifies a separate group 
of measurable goals that substantially exceed the levels approved as 
``satisfactory,'' the Board will approve those goals as 
``outstanding.''
   (3) Rating. The Board assesses the performance of a bank 
operating under an approved plan to determine if the bank has met 
its plan goals:
   (i) If the bank substantially achieves its plan goals for a 
satisfactory rating, the Board will rate the bank's performance 
under the plan as ``satisfactory.''
   (ii) If the bank exceeds its plan goals for a satisfactory 
rating and substantially achieves its plan goals for an outstanding 
rating, the Board will rate the bank's performance under the plan as 
``outstanding.''
   (iii) If the bank fails to meet substantially its plan goals for 
a satisfactory rating, the Board will rate the bank as either 
``needs to improve'' or ``substantial noncompliance,'' depending on 
the extent to which it falls short of its plan goals, unless the 
bank elected in its plan to be rated otherwise, as provided in 
Sec. 228.27(f)(4).

Appendix B to Part 228--CRA Notice

   (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the Federal 
Reserve Board (Board) evaluates our record of helping to meet the 
credit needs of this community consistent with safe and sound 
operations. The Board also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the Federal Reserve Bank of ________ 
(Reserve Bank); and comments received from the public relating to 
our performance in helping to meet community credit needs, as well 
as our responses to those comments. You may review this information 
today.
   At least 30 days before the beginning of each quarter, the 
Federal Reserve System publishes a list of the banks that are 
scheduled for CRA examination by the Reserve Bank in that quarter. 
This list is available from (title of responsible official), Federal 
Reserve Bank of ________ (address). You may send written comments 
about our performance in helping to meet community credit needs to 
(name and address of official at bank) and (title of responsible 
official), Federal Reserve Bank of ________ (address). Your letter, 
together with any response by us, will be considered by the Federal 
Reserve System in evaluating our CRA performance and may be made 
public.
   You may ask to look at any comments received by the Reserve 
Bank. You may also request from the Reserve Bank an announcement of 
our applications covered by the CRA filed with the Reserve Bank. We 
are an affiliate of (name of holding company), a bank holding 
company. You may request from (title of responsible official), 
Federal Reserve Bank of ________ (address) an announcement of 
applications covered by the CRA filed by bank holding companies.
   (b) Notice for branch offices.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the Federal 
Reserve Board (Board) evaluates our record of helping to meet the 
credit needs of this community consistent with safe and sound 
operations. The Board also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA evaluation, prepared by the Federal 
Reserve Bank of ________ (address), and a list of services provided 
at this branch. You may also have access to the following additional 
information, which we will make available to you at this branch 
within five calendar days after you make a request to us: (1) a map 
showing the assessment area containing this branch, which is the 
area in which the Board evaluates our CRA performance in this 
community; (2) information about our branches in this assessment 
area; (3) a list of services we provide at those locations; (4) data 
on our lending performance in this assessment area; and (5) copies 
of all written comments received by us that specifically relate to 
our CRA performance in this assessment area, and any responses we 
have made to those comments. If we are operating under an approved 
strategic plan, you may also have access to a copy of the plan.
   [If you would like to review information about our CRA 
performance in other communities served by us, the public file for 
our entire bank is available at (name of office located in state), 
located at (address).]
   At least 30 days before the beginning of each quarter, the 
Federal Reserve System publishes a list of the banks that are 
scheduled for CRA examination by the Reserve Bank in that quarter. 
This list is available from (title of responsible official), Federal 
Reserve Bank of ________ (address). You may send written comments 
about our performance in helping to meet community credit needs to 
(name and address of official at bank) and (title of responsible 
official), Federal Reserve Bank of ________ (address). Your letter, 
together with any response by us, will be considered by the Federal 
Reserve System in evaluating our CRA performance and may be made 
public.
   You may ask to look at any comments received by the Reserve 
Bank. You may also request from the Reserve Bank an announcement of 
our applications covered by the CRA filed with the Reserve Bank. We 
are an affiliate of (name of holding company), a bank holding 
company. You may request from (title of responsible official), 
Federal Reserve Bank of ________ (address) an 
[[Page 22201]] announcement of applications covered by the CRA filed 
by bank holding companies.

Secs. 228.1, 228.2, 228.8, and 228.100  [Removed]

   3. Sections 228.1, 228.2, 228.8, and 228.100 are removed effective 
July 1, 1995.

Secs. 228.3, 228.4, 228.5, 228.6, and 228.7, and Subpart D  [Removed]

   4. Sections 228.3, 228.4, 228.5, 228.6, and 228.7, and Subpart D, 
consisting of Sec. 228.51 are removed effective July 1, 1997.

   By order of the Board of Governors of the Federal Reserve 
System, April 24, 1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

   For the reasons outlined in the joint preamble, the Board of 
Directors of the Federal Deposit Insurance Corporation amends 12 CFR 
chapter III as set forth below:

PART 345--COMMUNITY REINVESTMENT

   1. The authority citation for part 345 is revised to read as 
follows:

   Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2907, 3103-3104, and 3108(a).

   2. Part 345 is amended by adding Subparts A through D and 
Appendices A and B to read as follows:

Subpart A--General

Sec.
345.11  Authority, purposes, and scope.
345.12  Definitions.

Subpart B--Standards for Assessing Performance

345.21  Performance tests, standards, and ratings, in general.
345.22  Lending test.
345.23  Investment test.
345.24  Service test.
345.25  Community development test for wholesale or limited purpose 
banks.
345.26  Small bank performance standards.
345.27  Strategic plan.
345.28  Assigned ratings.
345.29  Effect of CRA performance on applications.

Subpart C--Records, Reporting, and Disclosure Requirements

345.41  Assessment area delineation.
345.42  Data collection, reporting, and disclosure.
345.43  Content and availability of public file.
345.44  Public notice by banks.
345.45  Publication of planned examination schedule.

Subpart D--Transition Rules

345.51  Transition rules.

Appendix A to Part 345--Ratings

Appendix B to Part 345--CRA Notice

Subpart A--General

Sec. 345.11  Authority, purposes, and scope.

   (a) Authority and OMB control number--(1) Authority. The authority 
for this part is 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2907, 3103-3104, and 3108(a).
   (2) OMB control number. The information collection requirements 
contained in this part were approved by the Office of Management and 
Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB control number 3064-0092.
   (b) Purposes. In enacting the Community Reinvestment Act (CRA), the 
Congress required each appropriate Federal financial supervisory agency 
to assess an institution's record of helping to meet the credit needs 
of the local communities in which the institution is chartered, 
consistent with the safe and sound operation of the institution, and to 
take this record into account in the agency's evaluation of an 
application for a deposit facility by the institution. This part is 
intended to carry out the purposes of the CRA by:
   (1) Establishing the framework and criteria by which the Federal 
Deposit Insurance Corporation (FDIC) assesses a bank's record of 
helping to meet the credit needs of its entire community, including 
low- and moderate-income neighborhoods, consistent with the safe and 
sound operation of the bank; and
   (2) Providing that the FDIC takes that record into account in 
considering certain applications.
   (c) Scope--(1) General. Except for certain special purpose banks 
described in paragraph (c)(3) of this section, this part applies to all 
insured State nonmember banks, including insured State branches as 
described in paragraph (c)(2) and any uninsured State branch that 
results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
   (2) Insured State branches. Insured State branches are branches of 
a foreign bank established and operating under the laws of any State, 
the deposits of which are insured in accordance with the provisions of 
the Federal Deposit Insurance Act. In the case of insured State 
branches, references in this part to ``main office'' mean the principal 
branch within the United States and the term ``branch'' or ``branches'' 
refers to any insured State branch or branches located within the 
United States. The ``assessment area'' of an insured State branch is 
the community or communities located within the United States served by 
the branch as described in Sec. 345.41.
   (3) Certain special purpose banks. This part does not apply to 
special purpose banks that do not perform commercial or retail banking 
services by granting credit to the public in the ordinary course of 
business, other than as incident to their specialized operations. These 
banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and 
banks that engage only in one or more of the following activities: 
providing cash management controlled disbursement services or serving 
as correspondent banks, trust companies, or clearing agents.

Sec. 345.12  Definitions.

   For purposes of this part, the following definitions apply:
   (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term ``control'' has 
the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company 
is under common control with another company if both companies are 
directly or indirectly controlled by the same company.
   (b) Area median income means:
   (1) The median family income for the MSA, if a person or geography 
is located in an MSA; or
   (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
   (c) Assessment area means a geographic area delineated in 
accordance with Sec. 345.41.
   (d) Remote Service Facility (RSF) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
bank, such as an automated teller machine, cash dispensing machine, 
point-of-sale terminal, or other remote electronic facility, at which 
deposits are received, cash dispersed, or money lent.
   (e) Bank means a State nonmember bank, as that term is defined in 
section 3(e)(2) of the Federal Deposit Insurance Act, as amended (FDIA) 
(12 U.S.C. 1813(e)(2)), with Federally insured deposits, except as 
provided in Sec. 345.11(c). The term bank also includes an insured 
State branch as defined in Sec. 345.11(c).
   (f) Branch means a staffed banking facility authorized as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
[[Page 22202]] business or nonprofit organization. The term ``branch'' 
only includes a ``domestic branch'' as that term is defined in section 
3(o) of the FDIA (12 U.S.C. 1813(o)).
   (g) CMSA means a consolidated metropolitan statistical area as 
defined by the Director of the Office of Management and Budget.
   (h) Community development means:
   (1) Affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals;
   (2) Community services targeted to low- or moderate-income 
individuals;
   (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of 13 CFR 
121.802(a)(2) or have gross annual revenues of $1 million or less; or
   (4) Activities that revitalize or stabilize low- or moderate-income 
geographies.
   (i) Community development loan means a loan that:
   (1) Has as its primary purpose community development; and
   (2) Except in the case of a wholesale or limited purpose bank:
   (i) Has not been reported or collected by the bank or an affiliate 
for consideration in the bank's assessment as a home mortgage, small 
business, small farm, or consumer loan, unless it is a multifamily 
dwelling loan (as described in Appendix A to Part 203 of this title); 
and
   (ii) Benefits the bank's assessment area(s) or a broader statewide 
or regional area that includes the bank's assessment area(s).
   (j) Community development service means a service that:
   (1) Has as its primary purpose community development;
   (2) Is related to the provision of financial services; and
   (3) Has not been considered in the evaluation of the bank's retail 
banking services under Sec. 345.24(d).
   (k) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
   (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
   (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec. 226.2 of this 
title;
   (3) Home equity loan, which is a consumer loan secured by a 
residence of the borrower;
   (4) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
   (5) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
   (l) Geography means a census tract or a block numbering area 
delineated by the United States Bureau of the Census in the most recent 
decennial census.
   (m) Home mortgage loan means a ``home improvement loan'' or a 
``home purchase loan'' as defined in Sec. 203.2 of this title.
   (n) Income level includes:
   (1) Low-income, which means an individual income that is less than 
50 percent of the area median income or a median family income that is 
less than 50 percent in the case of a geography.
   (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income or 
a median family income that is at least 50 and less than 80 percent in 
the case of a geography.
   (3) Middle-income, which means an individual income that is at 
least 80 percent and less than 120 percent of the area median income or 
a median family income that is at least 80 and less than 120 percent in 
the case of a geography.
   (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income or a median family income 
that is 120 percent or more in the case of a geography.
   (o) Limited purpose bank means a bank that offers only a narrow 
product line (such as credit card or motor vehicle loans) to a regional 
or broader market and for which a designation as a limited purpose bank 
is in effect, in accordance with Sec. 345.25(b).
   (p) Loan location. A loan is located as follows:
   (1) A consumer loan is located in the geography where the borrower 
resides;
   (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
   (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
   (q) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
   (r) MSA means a metropolitan statistical area or a primary 
metropolitan statistical area as defined by the Director of the Office 
of Management and Budget.
   (s) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
   (t) Small bank means a bank that, as of December 31 of either of 
the prior two calendar years, had total assets of less than $250 
million and was independent or an affiliate of a holding company that, 
as of December 31 of either of the prior two calendar years, had total 
banking and thrift assets of less than $1 billion.
   (u) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (v) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
   (w) Wholesale bank means a bank that is not in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers, and for which a designation as a wholesale bank is 
in effect, in accordance with Sec. 345.25(b).

Subpart B--Standards for Assessing Performance

Sec. 345.21  Performance tests, standards, and ratings, in general.
   (a) Performance tests and standards. The FDIC assesses the CRA 
performance of a bank in an examination as follows:
   (1) Lending, investment, and service tests. The FDIC applies the 
lending, investment, and service tests, as provided in Secs. 345.22 
through 345.24, in evaluating the performance of a bank, except as 
provided in paragraphs (a)(2), (a)(3), and (a)(4) of this section.
   (2) Community development test for wholesale or limited purpose 
banks. The FDIC applies the community development test for a wholesale 
or limited purpose bank, as provided in Sec. 345.25, except as provided 
in paragraph (a)(4) of this section.
   (3) Small bank performance standards. The FDIC applies the small 
bank performance standards as provided in Sec. 345.26 in evaluating the 
performance of a small bank or a bank that was a small bank during the 
prior calendar year, unless the bank elects to be assessed as provided 
in paragraphs (a)(1), (a)(2), or (a)(4) of this section. The bank may 
elect to be assessed as provided in paragraph (a)(1) of this section 
only if it collects and reports the data required for other banks under 
Sec. 345.42. [[Page 22203]] 
   (4) Strategic plan. The FDIC evaluates the performance of a bank 
under a strategic plan if the bank submits, and the FDIC approves, a 
strategic plan as provided in Sec. 345.27.
   (b) Performance context. The FDIC applies the tests and standards 
in paragraph (a) of this section and also considers whether to approve 
a proposed strategic plan in the context of:
   (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a bank's assessment area(s);
   (2) Any information about lending, investment, and service 
opportunities in the bank's assessment area(s) maintained by the bank 
or obtained from community organizations, state, local, and tribal 
governments, economic development agencies, or other sources;
   (3) The bank's product offerings and business strategy as 
determined from data provided by the bank;
   (4) Institutional capacity and constraints, including the size and 
financial condition of the bank, the economic climate (national, 
regional, and local), safety and soundness limitations, and any other 
factors that significantly affect the bank's ability to provide 
lending, investments, or services in its assessment area(s);
   (5) The bank's past performance and the performance of similarly 
situated lenders;
   (6) The bank's public file, as described in Sec. 345.43, and any 
written comments about the bank's CRA performance submitted to the bank 
or the FDIC; and
   (7) Any other information deemed relevant by the FDIC.
   (c) Assigned ratings. The FDIC assigns to a bank one of the 
following four ratings pursuant to Sec. 345.28 and Appendix A of this 
part: ``outstanding''; ``satisfactory''; ``needs to improve''; or 
``substantial noncompliance'' as provided in 12 U.S.C. 2906(b)(2). The 
rating assigned by the FDIC reflects the bank's record of helping to 
meet the credit needs of its entire community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of the bank.
   (d) Safe and sound operations. This part and the CRA do not require 
a bank to make loans or investments or to provide services that are 
inconsistent with safe and sound operations. To the contrary, the FDIC 
anticipates banks can meet the standards of this part with safe and 
sound loans, investments, and services on which the banks expect to 
make a profit. Banks are permitted and encouraged to develop and apply 
flexible underwriting standards for loans that benefit low- or 
moderate-income geographies or individuals, only if consistent with 
safe and sound operations.

Sec. 345.22  Lending test.

   (a) Scope of test. (1) The lending test evaluates a bank's record 
of helping to meet the credit needs of its assessment area(s) through 
its lending activities by considering a bank's home mortgage, small 
business, small farm, and community development lending. If consumer 
lending constitutes a substantial majority of a bank's business, the 
FDIC will evaluate the bank's consumer lending in one or more of the 
following categories: motor vehicle, credit card, home equity, other 
secured, and other unsecured loans. In addition, at a bank's option, 
the FDIC will evaluate one or more categories of consumer lending, if 
the bank has collected and maintained, as required in 
Sec. 345.42(c)(1), the data for each category that the bank elects to 
have the FDIC evaluate.
   (2) The FDIC considers originations and purchases of loans. The 
FDIC will also consider any other loan data the bank may choose to 
provide, including data on loans outstanding, commitments and letters 
of credit.
   (3) A bank may ask the FDIC to consider loans originated or 
purchased by consortia in which the bank participates or by third 
parties in which the bank has invested only if the loans meet the 
definition of community development loans and only in accordance with 
paragraph (d) of this section. The FDIC will not consider these loans 
under any criterion of the lending test except the community 
development lending criterion.
   (b) Performance criteria. The FDIC evaluates a bank's lending 
performance pursuant to the following criteria:
   (1) Lending activity. The number and amount of the bank's home 
mortgage, small business, small farm, and consumer loans, if 
applicable, in the bank's assessment area(s);
   (2) Geographic distribution. The geographic distribution of the 
bank's home mortgage, small business, small farm, and consumer loans, 
if applicable, based on the loan location, including:
   (i) The proportion of the bank's lending in the bank's assessment 
area(s);
   (ii) The dispersion of lending in the bank's assessment area(s); 
and
   (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the bank's assessment area(s);
   (3) Borrower characteristics. The distribution, particularly in the 
bank's assessment area(s), of the bank's home mortgage, small business, 
small farm, and consumer loans, if applicable, based on borrower 
characteristics, including the number and amount of:
   (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;
   (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
   (iii) Small business and small farm loans by loan amount at 
origination; and
   (iv) Consumer loans, if applicable, to low-, moderate-, middle-, 
and upper-income individuals;
   (4) Community development lending. The bank's community development 
lending, including the number and amount of community development 
loans, and their complexity and innovativeness; and
   (5) Innovative or flexible lending practices. The bank's use of 
innovative or flexible lending practices in a safe and sound manner to 
address the credit needs of low- or moderate-income individuals or 
geographies.
   (c) Affiliate lending. (1) At a bank's option, the FDIC will 
consider loans by an affiliate of the bank, if the bank provides data 
on the affiliate's loans pursuant to Sec. 345.42.
   (2) The FDIC considers affiliate lending subject to the following 
constraints:
   (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
   (ii) If a bank elects to have the FDIC consider loans within a 
particular lending category made by one or more of the bank's 
affiliates in a particular assessment area, the bank shall elect to 
have the FDIC consider, in accordance with paragraph (c)(1) of this 
section, all the loans within that lending category in that particular 
assessment area made by all of the bank's affiliates.
   (3) The FDIC does not consider affiliate lending in assessing a 
bank's performance under paragraph (b)(2)(i) of this section.
   (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the bank 
participates or by a third party in which the bank has invested:
   (1) Will be considered, at the bank's option, if the bank reports 
the data pertaining to these loans under Sec. 345.42(b)(2); and
   (2) May be allocated among participants or investors, as they 
choose, [[Page 22204]] for purposes of the lending test, except that no 
participant or investor:
   (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; 
or
   (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
   (e) Lending performance rating. The FDIC rates a bank's lending 
performance as provided in Appendix A of this part.

Sec. 345.23  Investment test.

   (a) Scope of test. The investment test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) through 
qualified investments that benefit its assessment area(s) or a broader 
statewide or regional area that includes the bank's assessment area(s).
   (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.
   (c) Affiliate investment. At a bank's option, the FDIC will 
consider, in its assessment of a bank's investment performance, a 
qualified investment made by an affiliate of the bank, if the qualified 
investment is not claimed by any other institution.
   (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the bank 
that is located in a predominantly minority neighborhood to a minority 
depository institution or women's depository institution (as these 
terms are defined in 12 U.S.C. 2907(b)) will be considered as a 
qualified investment.
   (e) Performance criteria. The FDIC evaluates the investment 
performance of a bank pursuant to the following criteria:
   (1) The dollar amount of qualified investments;
   (2) The innovativeness or complexity of qualified investments;
   (3) The responsiveness of qualified investments to credit and 
community development needs; and
   (4) The degree to which the qualified investments are not routinely 
provided by private investors.
   (f) Investment performance rating. The FDIC rates a bank's 
investment performance as provided in Appendix A of this part.

Sec. 345.24  Service test.

   (a) Scope of test. The service test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) by analyzing 
both the availability and effectiveness of a bank's systems for 
delivering retail banking services and the extent and innovativeness of 
its community development services.
   (b) Area(s) benefited. Community development services must benefit 
a bank's assessment area(s) or a broader statewide or regional area 
that includes the bank's assessment area(s).
   (c) Affiliate service. At a bank's option, the FDIC will consider, 
in its assessment of a bank's service performance, a community 
development service provided by an affiliate of the bank, if the 
community development service is not claimed by any other institution.
   (d) Performance criteria--retail banking services. The FDIC 
evaluates the availability and effectiveness of a bank's systems for 
delivering retail banking services, pursuant to the following criteria:
   (1) The current distribution of the bank's branches among low-,
moderate-, middle-, and upper-income geographies;
   (2) In the context of its current distribution of the bank's 
branches, the bank's record of opening and closing branches, 
particularly branches located in low- or moderate-income geographies or 
primarily serving low- or moderate-income individuals;
   (3) The availability and effectiveness of alternative systems for 
delivering retail banking services (e.g., RSFs, RSFs not owned or 
operated by or exclusively for the bank, banking by telephone or 
computer, loan production offices, and bank-at-work or bank-by-mail 
programs) in low- and moderate-income geographies and to low- and 
moderate-income individuals; and
   (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
   (e) Performance criteria--community development services. The FDIC 
evaluates community development services pursuant to the following 
criteria:
   (1) The extent to which the bank provides community development 
services; and
   (2) The innovativeness and responsiveness of community development 
services.
   (f) Service performance rating. The FDIC rates a bank's service 
performance as provided in Appendix A of this part.

Sec. 345.25  Community development test for wholesale or limited 
purpose banks.

   (a) Scope of test. The FDIC assesses a wholesale or limited purpose 
bank's record of helping to meet the credit needs of its assessment 
area(s) under the community development test through its community 
development lending, qualified investments, or community development 
services.
   (b) Designation as a wholesale or limited purpose bank. In order to 
receive a designation as a wholesale or limited purpose bank, a bank 
shall file a request, in writing, with the FDIC, at least three months 
prior to the proposed effective date of the designation. If the FDIC 
approves the designation, it remains in effect until the bank requests 
revocation of the designation or until one year after the FDIC notifies 
the bank that the FDIC has revoked the designation on its own 
initiative.
   (c) Performance criteria. The FDIC evaluates the community 
development performance of a wholesale or limited purpose bank pursuant 
to the following criteria:
   (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development 
loan data provided by the bank, such as data on loans outstanding, 
commitments, and letters of credit), qualified investments, or 
community development services;
   (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to which the investments are not routinely provided by private 
investors; and
   (3) The bank's responsiveness to credit and community development 
needs.
   (d) Indirect activities. At a bank's option, the FDIC will consider 
in its community development performance assessment:
   (1) Qualified investments or community development services 
provided by an affiliate of the bank, if the investments or services 
are not claimed by any other institution; and
   (2) Community development lending by affiliates, consortia and 
third parties, subject to the requirements and limitations in 
Sec. 345.22 (c) and (d).
   (e) Benefit to assessment area(s)--(1) Benefit inside assessment 
area(s). The FDIC considers all qualified investments, community 
development loans, and community development services that benefit 
areas within the bank's assessment area(s) or a broader statewide or 
regional area that includes the bank's assessment area(s).
   (2) Benefit outside assessment area(s). The FDIC considers the 
qualified investments, community development loans, and community 
development services that benefit areas outside the bank's assessment 
area(s), if the bank [[Page 22205]] has adequately addressed the needs 
of its assessment area(s).
   (f) Community development performance rating. The FDIC rates a 
bank's community development performance as provided in Appendix A of 
this part.

Sec. 345.26  Small bank performance standards.

   (a) Performance criteria. The FDIC evaluates the record of a small 
bank, or a bank that was a small bank during the prior calendar year, 
of helping to meet the credit needs of its assessment area(s) pursuant 
to the following criteria:
   (1) The bank's loan-to-deposit ratio, adjusted for seasonal 
variation and, as appropriate, other lending-related activities, such 
as loan originations for sale to the secondary markets, community 
development loans, or qualified investments;
   (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
   (3) The bank's record of lending to and, as appropriate, engaging 
in other lending-related activities for borrowers of different income 
levels and businesses and farms of different sizes;
   (4) The geographic distribution of the bank's loans; and
   (5) The bank's record of taking action, if warranted, in response 
to written complaints about its performance in helping to meet credit 
needs in its assessment area(s).
   (b) Small bank performance rating. The FDIC rates the performance 
of a bank evaluated under this section as provided in Appendix A of 
this part.

Sec. 345.27  Strategic plan.

   (a) Alternative election. The FDIC will assess a bank's record of 
helping to meet the credit needs of its assessment area(s) under a 
strategic plan if:
   (1) The bank has submitted the plan to the FDIC as provided for in 
this section;
   (2) The FDIC has approved the plan;
   (3) The plan is in effect; and
   (4) The bank has been operating under an approved plan for at least 
one year.
   (b) Data reporting. The FDIC's approval of a plan does not affect 
the bank's obligation, if any, to report data as required by 
Sec. 345.42.
   (c) Plans in general--(1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the FDIC will evaluate the bank's 
performance.
   (2) Multiple assessment areas. A bank with more than one assessment 
area may prepare a single plan for all of its assessment areas or one 
or more plans for one or more of its assessment areas.
   (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
   (d) Public participation in plan development. Before submitting a 
plan to the FDIC for approval, a bank shall:
   (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
   (2) Once the bank has developed a plan, formally solicit public 
comment on the plan for at least 30 days by publishing notice in at 
least one newspaper of general circulation in each assessment area 
covered by the plan; and
   (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of 
the bank in any assessment area covered by the plan and provide copies 
of the plan upon request for a reasonable fee to cover copying and 
mailing, if applicable.
   (e) Submission of plan. The bank shall submit its plan to the FDIC 
at least three months prior to the proposed effective date of the plan. 
The bank shall also submit with its plan a description of its informal 
efforts to seek suggestions from members of the public, any written 
public comment received, and, if the plan was revised in light of the 
comment received, the initial plan as released for public comment.
   (f) Plan content--(1) Measurable goals. (i) A bank shall specify in 
its plan measurable goals for helping to meet the credit needs of each 
assessment area covered by the plan, particularly the needs of low- and 
moderate-income geographies and low- and moderate-income individuals, 
through lending, investment, and services, as appropriate.
   (ii) A bank shall address in its plan all three performance 
categories and, unless the bank has been designated as a wholesale or 
limited purpose bank, shall emphasize lending and lending-related 
activities. Nevertheless, a different emphasis, including a focus on 
one or more performance categories, may be appropriate if responsive to 
the characteristics and credit needs of its assessment area(s), 
considering public comment and the bank's capacity and constraints, 
product offerings, and business strategy.
   (2) Confidential information. A bank may submit additional 
information to the FDIC on a confidential basis, but the goals stated 
in the plan must be sufficiently specific to enable the public and the 
FDIC to judge the merits of the plan.
   (3) Satisfactory and outstanding goals. A bank shall specify in its 
plan measurable goals that constitute ``satisfactory'' performance. A 
plan may specify measurable goals that constitute ``outstanding'' 
performance. If a bank submits, and the FDIC approves, both 
``satisfactory'' and ``outstanding'' performance goals, the FDIC will 
consider the bank eligible for an ``outstanding'' performance rating.
   (4) Election if satisfactory goals not substantially met. A bank 
may elect in its plan that, if the bank fails to meet substantially its 
plan goals for a satisfactory rating, the FDIC will evaluate the bank's 
performance under the lending, investment, and service tests, the 
community development test, or the small bank performance standards, as 
appropriate.
   (g) Plan approval--(1) Timing. The FDIC will act upon a plan within 
60 calendar days after the FDIC receives the complete plan and other 
material required under paragraph (d) of this section. If the FDIC 
fails to act within this time period, the plan shall be deemed approved 
unless the FDIC extends the review period for good cause.
   (2) Public participation. In evaluating the plan's goals, the FDIC 
considers the public's involvement in formulating the plan, written 
public comment on the plan, and any response by the bank to public 
comment on the plan.
   (3) Criteria for evaluating plan. The FDIC evaluates a plan's 
measurable goals using the following criteria, as appropriate:
   (i) The extent and breadth of lending or lending-related 
activities, including, as appropriate, the distribution of loans among 
different geographies, businesses and farms of different sizes, and 
individuals of different income levels, the extent of community 
development lending, and the use of innovative or flexible lending 
practices to address credit needs;
   (ii) The amount and innovativeness, complexity, and responsiveness 
of the bank's qualified investments; and
   (iii) The availability and effectiveness of the bank's systems for 
delivering retail banking services and the extent and innovativeness of 
the bank's community development services.
   (h) Plan amendment. During the term of a plan, a bank may request 
the FDIC to approve an amendment to the plan on grounds that there has 
been a material change in circumstances. The bank shall 
[[Page 22206]] develop an amendment to a previously approved plan in 
accordance with the public participation requirements of paragraph (c) 
of this section.
   (i) Plan assessment. The FDIC approves the goals and assesses 
performance under a plan as provided for in Appendix A of this part.

Sec. 345.28  Assigned ratings.

   (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the FDIC assigns to a bank a rating of ``outstanding,'' 
``satisfactory,'' ``needs to improve,'' or ``substantial 
noncompliance'' based on the bank's performance under the lending, 
investment and service tests, the community development test, the small 
bank performance standards, or an approved strategic plan, as 
applicable.
   (b) Lending, investment, and service tests. The FDIC assigns a 
rating for a bank assessed under the lending, investment, and service 
tests in accordance with the following principles:
   (1) A bank that receives an ``outstanding'' rating on the lending 
test receives an assigned rating of at least ``satisfactory'';
   (2) A bank that receives an ``outstanding'' rating on both the 
service test and the investment test and a rating of at least ``high 
satisfactory'' on the lending test receives an assigned rating of 
``outstanding''; and
   (3) No bank may receive an assigned rating of ``satisfactory'' or 
higher unless it receives a rating of at least ``low satisfactory'' on 
the lending test.
   (c) Effect of evidence of discriminatory or other illegal credit 
practices. Evidence of discriminatory or other illegal credit practices 
adversely affects the FDIC's evaluation of a bank's performance. In 
determining the effect on the bank's assigned rating, the FDIC 
considers the nature and extent of the evidence, the policies and 
procedures that the bank has in place to prevent discriminatory or 
other illegal credit practices, any corrective action that the bank has 
taken or has committed to take, particularly voluntary corrective 
action resulting from self-assessment, and other relevant information.

Sec. 345.29  Effect of CRA performance on applications.

   (a) CRA performance. Among other factors, the FDIC takes into 
account the record of performance under the CRA of each applicant bank 
in considering an application for approval of:
   (1) The establishment of a domestic branch or other facility with 
the ability to accept deposits;
   (2) The relocation of the bank's main office or a branch;
   (3) The merger, consolidation, acquisition of assets, or assumption 
of liabilities; and
   (4) Deposit insurance for a newly chartered financial institution.
   (b) New financial institutions. A newly chartered financial 
institution shall submit with its application for deposit insurance a 
description of how it will meet its CRA objectives. The FDIC takes the 
description into account in considering the application and may deny or 
condition approval on that basis.
   (c) Interested parties. The FDIC takes into account any views 
expressed by interested parties that are submitted in accordance with 
the FDIC's procedures set forth in part 303 of this chapter in 
considering CRA performance in an application listed in paragraphs (a) 
and (b) of this section.
   (d) Denial or conditional approval of application. A bank's record 
of performance may be the basis for denying or conditioning approval of 
an application listed in paragraph (a) of this section.

Subpart C--Records, Reporting, and Disclosure Requirements

Sec. 345.41  Assessment area delineation.

   (a) In general. A bank shall delineate one or more assessment areas 
within which the FDIC evaluates the bank's record of helping to meet 
the credit needs of its community. The FDIC does not evaluate the 
bank's delineation of its assessment area(s) as a separate performance 
criterion, but the FDIC reviews the delineation for compliance with the 
requirements of this section.
   (b) Geographic area(s) for wholesale or limited purpose banks. The 
assessment area(s) for a wholesale or limited purpose bank must consist 
generally of one or more MSAs (using the MSA boundaries that were in 
effect as of January 1 of the calendar year in which the delineation is 
made) or one or more contiguous political subdivisions, such as 
counties, cities, or towns, in which the bank has its main office, 
branches, and deposit-taking RSFs.
   (c) Geographic area(s) for other banks. The assessment area(s) for 
a bank other than a wholesale or limited purpose bank must:
   (1) Consist generally of one or more MSAs (using the MSA boundaries 
that were in effect as of January 1 of the calendar year in which the 
delineation is made) or one or more contiguous political subdivisions, 
such as counties, cities, or towns; and
   (2) Include the geographies in which the bank has its main office, 
its branches, and its deposit-taking RSFs, as well as the surrounding 
geographies in which the bank has originated or purchased a substantial 
portion of its loans (including home mortgage loans, small business and 
small farm loans, and any other loans the bank chooses, such as those 
consumer loans on which the bank elects to have its performance 
assessed).
   (d) Adjustments to geographic area(s). A bank may adjust the 
boundaries of its assessment area(s) to include only the portion of a 
political subdivision that it reasonably can be expected to serve. An 
adjustment is particularly appropriate in the case of an assessment 
area that otherwise would be extremely large, of unusual configuration, 
or divided by significant geographic barriers.
   (e) Limitations on the delineation of an assessment area. Each 
bank's assessment area(s):
   (1) Must consist only of whole geographies;
   (2) May not reflect illegal discrimination;
   (3) May not arbitrarily exclude low- or moderate-income 
geographies, taking into account the bank's size and financial 
condition; and
   (4) May not extend substantially beyond a CMSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a bank serves a geographic area that extends substantially 
beyond a state boundary, the bank shall delineate separate assessment 
areas for the areas in each state. If a bank serves a geographic area 
that extends substantially beyond a CMSA boundary, the bank shall 
delineate separate assessment areas for the areas inside and outside 
the CMSA.
   (f) Banks serving military personnel. Notwithstanding the 
requirements of this section, a bank whose business predominantly 
consists of serving the needs of military personnel or their dependents 
who are not located within a defined geographic area may delineate its 
entire deposit customer base as its assessment area.
   (g) Use of assessment area(s). The FDIC uses the assessment area(s) 
delineated by a bank in its evaluation of the bank's CRA performance 
unless the FDIC determines that the assessment area(s) do not comply 
with the requirements of this section.

Sec. 345.42  Data collection, reporting, and disclosure.

   (a) Loan information required to be collected and maintained. A 
bank, except a small bank, shall collect, and maintain in machine 
readable form (as prescribed by the FDIC) until the 
[[Page 22207]] completion of its next CRA examination, the following 
data for each small business or small farm loan originated or purchased 
by the bank:
   (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (2) The loan amount at origination;
   (3) The loan location; and
   (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.
   (b) Loan information required to be reported. A bank, except a 
small bank or a bank that was a small bank during the prior calendar 
year, shall report annually by March 1 to the FDIC in machine readable 
form (as prescribed by the FDIC) the following data for the prior 
calendar year:
   (1) Small business and small farm loan data. For each geography in 
which the bank originated or purchased a small business or small farm 
loan, the aggregate number and amount of loans:
   (i) With an amount at origination of $100,000 or less;
   (ii) With an amount at origination of more than $100,000 but less 
than or equal to $250,000;
   (iii) With an amount at origination of more than $250,000; and
   (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank considered in making 
its credit decision);
   (2) Community development loan data. The aggregate number and 
aggregate amount of community development loans originated or 
purchased; and
   (3) Home mortgage loans. If the bank is subject to reporting under 
part 203 of this title, the location of each home mortgage loan 
application, origination, or purchase outside the MSAs in which the 
bank has a home or branch office (or outside any MSA) in accordance 
with the requirements of part 203 of this title.
   (c) Optional data collection and maintenance.--(1) Consumer loans. 
A bank may collect and maintain in machine readable form (as prescribed 
by the FDIC) data for consumer loans originated or purchased by the 
bank for consideration under the lending test. A bank may maintain data 
for one or more of the following categories of consumer loans: motor 
vehicle, credit card, home equity, other secured, and other unsecured. 
If the bank maintains data for loans in a certain category, it shall 
maintain data for all loans originated or purchased within that 
category. The bank shall maintain data separately for each category, 
including for each loan:
   (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (ii) The loan amount at origination or purchase;
   (iii) The loan location; and
   (iv) The gross annual income of the borrower that the bank 
considered in making its credit decision.
   (2) Other loan data. At its option, a bank may provide other 
information concerning its lending performance, including additional 
loan distribution data.
   (d) Data on affiliate lending. A bank that elects to have the FDIC 
consider loans by an affiliate, for purposes of the lending or 
community development test or an approved strategic plan, shall 
collect, maintain, and report for those loans the data that the bank 
would have collected, maintained, and reported pursuant to paragraphs 
(a), (b), and (c) of this section had the loans been originated or 
purchased by the bank. For home mortgage loans, the bank shall also be 
prepared to identify the home mortgage loans reported under part 203 of 
this title by the affiliate.
   (e) Data on lending by a consortium or a third party. A bank that 
elects to have the FDIC consider community development loans by a 
consortium or third party, for purposes of the lending or community 
development tests or an approved strategic plan, shall report for those 
loans the data that the bank would have reported under paragraph (b)(2) 
of this section had the loans been originated or purchased by the bank.
   (f) Small banks electing evaluation under the lending, investment, 
and service tests. A bank that qualifies for evaluation under the small 
bank performance standards but elects evaluation under the lending, 
investment, and service tests shall collect, maintain, and report the 
data required for other banks pursuant to paragraphs (a) and (b) of 
this section.
   (g) Assessment area data. A bank, except a small bank or a bank 
that was a small bank during the prior calendar year, shall collect and 
report to the FDIC by March 1 of each year a list for each assessment 
area showing the geographies within the area.
   (h) CRA Disclosure Statement. The FDIC prepares annually for each 
bank that reports data pursuant to this section a CRA Disclosure 
Statement that contains, on a state-by-state basis:
   (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the bank 
reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-
, and upper-income geographies;
   (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the 
bank reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 
or more but less than 20 percent, 20 or more but less than 30 percent, 
30 or more but less than 40 percent, 40 or more but less than 50 
percent, 50 or more but less than 60 percent, 60 or more but less than 
70 percent, 70 or more but less than 80 percent, 80 or more but less 
than 90 percent, 90 or more but less than 100 percent, 100 or more but 
less than 110 percent, 110 or more but less than 120 percent, and 120 
percent or more;
   (ii) A list grouping each geography in the county or assessment 
area according to whether the median income in the geography relative 
to the area median income is less than 10 percent, 10 or more but less 
than 20 percent, 20 or more but less than 30 percent, 30 or more but 
less than 40 percent, 40 or more but less than 50 percent, 50 or more 
but less than 60 percent, 60 or more but less than 70 percent, 70 or 
more but less than 80 percent, 80 or more but less than 90 percent, 90 
or more but less than 100 percent, 100 or more but less than 110 
percent, 110 or more but less than 120 percent, and 120 percent or 
more;
   (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the bank and the number 
and amount of small business and small farm loans located outside the 
assessment area(s) reported by the bank; and [[Page 22208]] 
   (4) The number and amount of community development loans reported 
as originated or purchased.
   (i) Aggregate disclosure statements. The FDIC, in conjunction with 
the Board of Governors of the Federal Reserve System, the Office of the 
Comptroller of the Currency, and the Office of Thrift Supervision, 
prepares annually, for each MSA (including an MSA that crosses a state 
boundary) and the non-MSA portion of each state, an aggregate 
disclosure statement of small business and small farm lending by all 
institutions subject to reporting under this part or parts 25, 228, or 
563e of this title. These disclosure statements indicate, for each 
geography, the number and amount of all small business and small farm 
loans originated or purchased by reporting institutions, except that 
the FDIC may adjust the form of the disclosure if necessary, because of 
special circumstances, to protect the privacy of a borrower or the 
competitive position of an institution.
   (j) Central data depositories. The FDIC makes the aggregate 
disclosure statements, described in paragraph (i) of this section, and 
the individual bank CRA Disclosure Statements, described in paragraph 
(h) of this section, available to the public at central data 
depositories. The FDIC publishes a list of the depositories at which 
the statements are available.

Sec. 345.43  Content and availability of public file.

   (a) Information available to the public. A bank shall maintain a 
public file that includes the following information:
   (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's performance in helping to meet community credit needs, 
and any response to the comments by the bank, if neither the comments 
nor the responses contain statements that reflect adversely on the good 
name or reputation of any persons other than the bank or publication of 
which would violate specific provisions of law;
   (2) A copy of the public section of the bank's most recent CRA 
Performance Evaluation prepared by the FDIC. The bank shall place this 
copy in the public file within 30 business days after its receipt from 
the FDIC;
   (3) A list of the bank's branches, their street addresses, and 
geographies;
   (4) A list of branches opened or closed by the bank during the 
current year and each of the prior two calendar years, their street 
addresses, and geographies;
   (5) A list of services (including hours of operation, available 
loan and deposit products, and transaction fees) generally offered at 
the bank's branches and descriptions of material differences in the 
availability or cost of services at particular branches, if any. At its 
option, a bank may include information regarding the availability of 
alternative systems for delivering retail banking services (e.g., RSFs, 
RSFs not owned or operated by or exclusively for the bank, banking by 
telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs);
   (6) A map of each assessment area showing the boundaries of the 
area and identifying the geographies contained within the area, either 
on the map or in a separate list; and
   (7) Any other information the bank chooses.
   (b) Additional information available to the public--(1) Banks other 
than small banks. A bank, except a small bank or a bank that was a 
small bank during the prior calendar year, shall include in its public 
file the following information pertaining to the bank and its 
affiliates, if applicable, for each of the prior two calendar years:
   (i) If the bank has elected to have one or more categories of its 
consumer loans considered under the lending test, for each of these 
categories, the number and amount of loans:
   (A) To low-, moderate-, middle-, and upper-income individuals;
   (B) Located in low-, moderate-, middle-, and upper-income census 
tracts; and
   (C) Located inside the bank's assessment area(s) and outside the 
bank's assessment area(s); and
   (ii) The bank's CRA Disclosure Statement. The bank shall place the 
statement in the public file within three business days of its receipt 
from the FDIC.
   (2) Banks required to report Home Mortgage Disclosure Act (HMDA) 
data. A bank required to report home mortgage loan data pursuant part 
203 of this title shall include in its public file a copy of the HMDA 
Disclosure Statement provided by the Federal Financial Institutions 
Examination Council pertaining to the bank for each of the prior two 
calendar years. In addition, a bank that elected to have the FDIC 
consider the mortgage lending of an affiliate for any of these years 
shall include in its public file the affiliate's HMDA Disclosure 
Statement for those years. The bank shall place the statement(s) in the 
public file within three business days after receipt.
   (3) Small banks. A small bank or a bank that was a small bank 
during the prior calendar year shall include in its public file:
   (i) The bank's loan-to-deposit ratio for each quarter of the prior 
calendar year and, at its option, additional data on its loan-to-
deposit ratio; and
   (ii) The information required for other banks by paragraph (b)(1) 
of this section, if the bank has elected to be evaluated under the 
lending, investment, and service tests.
   (4) Banks with strategic plans. A bank that has been approved to be 
assessed under a strategic plan shall include in its public file a copy 
of that plan. A bank need not include information submitted to the FDIC 
on a confidential basis in conjunction with the plan.
   (5) Banks with less than satisfactory ratings. A bank that received 
a less than satisfactory rating during its most recent examination 
shall include in its public file a description of its current efforts 
to improve its performance in helping to meet the credit needs of its 
entire community. The bank shall update the description quarterly.
   (c) Location of public information. A bank shall make available to 
the public for inspection upon request and at no cost the information 
required in this section as follows:
   (1) At the main office and, if an interstate bank, at one branch 
office in each state, all information in the public file; and
   (2) At each branch:
   (i) A copy of the public section of the bank's most recent CRA 
Performance Evaluation and a list of services provided by the branch; 
and
   (ii) Within five calendar days of the request, all the information 
in the public file relating to the assessment area in which the branch 
is located.
   (d) Copies. Upon request, a bank shall provide copies, either on 
paper or in another form acceptable to the person making the request, 
of the information in its public file. The bank may charge a reasonable 
fee not to exceed the cost of copying and mailing (if applicable).
   (e) Updating. Except as otherwise provided in this section, a bank 
shall ensure that the information required by this section is current 
as of April 1 of each year.

Sec. 345.44  Public notice by banks.

   A bank shall provide in the public lobby of its main office and 
each of its branches the appropriate public notice set forth in 
Appendix B of this part. Only a branch of a bank having more than one 
assessment area shall include the bracketed material in the notice for 
branch offices. Only a bank that is an affiliate of a holding company 
shall include the next to the last sentence of [[Page 22209]] the 
notices. A bank shall include the last sentence of the notices only if 
it is an affiliate of a holding company that is not prevented by 
statute from acquiring additional banks.

Sec. 345.45  Publication of planned examination schedule.

   The FDIC publishes at least 30 days in advance of the beginning of 
each calendar quarter a list of banks scheduled for CRA examinations in 
that quarter.

Subpart D--Transition Rules

Sec. 345.51  Transition rules.

   (a) Effective date. Sections of this part become applicable over a 
period of time in accordance with the schedule set forth in paragraph 
(c) of this section.
   (b) Data collection and reporting; strategic plan; performance 
tests and standards--(1) Data collection and reporting. (i) On January 
1, 1996, the data collection requirements set forth in Sec. 345.42 
(except Sec. 345.42(b) and (g)) become applicable.
   (ii) On January 1, 1997, the data reporting requirements set forth 
in Sec. 345.42(b) and (g) become applicable.
   (2) Small banks. Beginning January 1, 1996, the FDIC evaluates 
banks that qualify for the small bank performance standards described 
in Sec. 345.26 under that section.
   (3) Strategic plan. Beginning January 1, 1996, a bank that elects 
to be evaluated under an approved strategic plan pursuant to 
Sec. 345.27 may submit its strategic plan to the FDIC for approval.
   (4) Other performance tests. (i) Beginning January 1, 1996, a bank 
may elect to be evaluated under the pertinent revised performance tests 
described in Secs. 345.22, 345.23, 345.24, and 345.25, if the bank 
provides the necessary data to permit evaluation.
   (ii) Beginning July 1, 1997, the FDIC evaluates all banks under the 
pertinent revised performance tests.
   (c) Schedule. (1) On July 1, 1995, Secs. 345.11, 345.12, 345.29, 
and 345.51 become applicable, and Secs. 345.1, 345.2, 345.8, 345.101 
and 345.102 expire.
   (2) On January 1, 1996, Sec. 345.41 and the pertinent provisions of 
Subpart B of this part will apply to banks that elect to be evaluated 
under Secs. 345.22 through 345.25, banks that submit for approval 
strategic plans under Sec. 345.27, and banks that qualify for the small 
bank performance standards described in Sec. 345.26.
   (3) On January 1, 1996, Secs. 345.42 (except Sec. 345.42(b) and 
(g)) and 345.45 become applicable.
   (4) On January 1, 1997, Secs. 345.41 and 345.42(b) and (g) become 
applicable.
   (5) On July 1, 1997, Secs. 345.21 through 345.28, 345.43, and 
345.44 become applicable, and Secs. 345.3 through 345.7, and 345.51 
expire.

Appendix A to Part 345--Ratings

   (a) Ratings in general.--(1) In assigning a rating, the FDIC 
evaluates a bank's performance under the applicable performance 
criteria in this part, in accordance with Sec. 345.21, and 
Sec. 345.28, which provides for adjustments on the basis of evidence 
of discriminatory or other illegal credit practices.
   (2) A bank's performance need not fit each aspect of a 
particular rating profile in order to receive that rating, and 
exceptionally strong performance with respect to some aspects may 
compensate for weak performance in others. The bank's overall 
performance, however, must be consistent with safe and sound banking 
practices and generally with the appropriate rating profile as 
follows.
   (b) Banks evaluated under the lending, investment, and service 
tests.--(1) Lending performance rating. The FDIC assigns each bank's 
lending performance one of the five following ratings.
   (i) Outstanding. The FDIC rates a bank's lending performance 
``outstanding'' if, in general, it demonstrates:
   (A) Excellent responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A substantial majority of its loans are made in its 
assessment area(s);
   (C) An excellent geographic distribution of loans in its 
assessment area(s);
   (D) An excellent distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An excellent record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Extensive use of innovative or flexible lending practices in 
a safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It is a leader in making community development loans.
   (ii) High satisfactory. The FDIC rates a bank's lending 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) Good responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A high percentage of its loans are made in its assessment 
area(s);
   (C) A good geographic distribution of loans in its assessment 
area(s);
   (D) A good distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A good record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made a relatively high level of community development 
loans.
   (iii) Low satisfactory. The FDIC rates a bank's lending 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) Adequate responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) An adequate percentage of its loans are made in its 
assessment area(s);
   (C) An adequate geographic distribution of loans in its 
assessment area(s);
   (D) An adequate distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) An adequate record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) Limited use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made an adequate level of community development 
loans.
   (iv) Needs to improve. The FDIC rates a bank's lending 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) Poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A small percentage of its loans are made in its assessment 
area(s);
   (C) A poor geographic distribution of loans, particularly to 
low- or moderate-income geographies, in its assessment area(s);
   (D) A poor distribution, particularly in its assessment area(s), 
of loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines 
offered by the bank;
   (E) A poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations; [[Page 22210]] 
   (F) Little use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or 
moderate-income individuals or geographies; and
   (G) It has made a low level of community development loans.
   (v) Substantial noncompliance. The FDIC rates a bank's lending 
performance as being in ``substantial noncompliance'' if, in 
general, it demonstrates:
   (A) A very poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in 
its assessment area(s);
   (B) A very small percentage of its loans are made in its 
assessment area(s);
   (C) A very poor geographic distribution of loans, particularly 
to low- or moderate-income geographies, in its assessment area(s);
   (D) A very poor distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product 
lines offered by the bank;
   (E) A very poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-
income individuals, or businesses (including farms) with gross 
annual revenues of $1 million or less, consistent with safe and 
sound operations;
   (F) No use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
   (G) It has made few, if any, community development loans.
   (2) Investment performance rating. The FDIC assigns each bank's 
investment performance one of the five following ratings.
   (i) Outstanding. The FDIC rates a bank's investment performance 
``outstanding'' if, in general, it demonstrates:
   (A) An excellent level of qualified investments, particularly 
those that are not routinely provided by private investors, often in 
a leadership position;
   (B) Extensive use of innovative or complex qualified 
investments; and
   (C) Excellent responsiveness to credit and community development 
needs.
   (ii) High satisfactory. The FDIC rates a bank's investment 
performance ``high satisfactory'' if, in general, it demonstrates:
   (A) A significant level of qualified investments, particularly 
those that are not routinely provided by private investors, 
occasionally in a leadership position;
   (B) Significant use of innovative or complex qualified 
investments; and
   (C) Good responsiveness to credit and community development 
needs.
   (iii) Low satisfactory. The FDIC rates a bank's investment 
performance ``low satisfactory'' if, in general, it demonstrates:
   (A) An adequate level of qualified investments, particularly 
those that are not routinely provided by private investors, although 
rarely in a leadership position;
   (B) Occasional use of innovative or complex qualified 
investments; and
   (C) Adequate responsiveness to credit and community development 
needs.
   (iv) Needs to improve. The FDIC rates a bank's investment 
performance ``needs to improve'' if, in general, it demonstrates:
   (A) A poor level of qualified investments, particularly those 
that are not routinely provided by private investors;
   (B) Rare use of innovative or complex qualified investments; and
   (C) Poor responsiveness to credit and community development 
needs.
   (v) Substantial noncompliance. The FDIC rates a bank's 
investment performance as being in ``substantial noncompliance'' if, 
in general, it demonstrates:
   (A) Few, if any, qualified investments, particularly those that 
are not routinely provided by private investors;
   (B) No use of innovative or complex qualified investments; and
   (C) Very poor responsiveness to credit and community development 
needs.
   (3) Service performance rating. The FDIC assigns each bank's 
service performance one of the five following ratings.
   (i) Outstanding. The FDIC rates a bank's service performance 
``outstanding'' if, in general, the bank demonstrates:
   (A) Its service delivery systems are readily accessible to 
geographies and individuals of different income levels in its 
assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has improved the accessibility of its delivery 
systems, particularly in low- or moderate-income geographies or to 
low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
are tailored to the convenience and needs of its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It is a leader in providing community development services.
   (ii) High satisfactory. The FDIC rates a bank's service 
performance ``high satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are accessible to geographies 
and individuals of different income levels in its assessment 
area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has not adversely affected the accessibility of 
its delivery systems, particularly in low- and moderate-income 
geographies and to low- and moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides a relatively high level of community development 
services.
   (iii) Low satisfactory. The FDIC rates a bank's service 
performance ``low satisfactory'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are reasonably accessible to 
geographies and individuals of different income levels in its 
assessment area(s);
   (B) To the extent changes have been made, its record of opening 
and closing branches has generally not adversely affected the 
accessibility of its delivery systems, particularly in low- and 
moderate-income geographies and to low- and moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
do not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and 
moderate-income individuals; and
   (D) It provides an adequate level of community development 
services.
   (iv) Needs to improve. The FDIC rates a bank's service 
performance ``needs to improve'' if, in general, the bank 
demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to portions of its assessment area(s), particularly to low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has adversely affected the accessibility its 
delivery systems, particularly in low- or moderate-income 
geographies or to low- or moderate-income individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that inconveniences its assessment area(s), 
particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides a limited level of community development 
services.
   (v) Substantial noncompliance. The FDIC rates a bank's service 
performance as being in ``substantial noncompliance'' if, in 
general, the bank demonstrates:
   (A) Its service delivery systems are unreasonably inaccessible 
to significant portions of its assessment area(s), particularly to 
low- or moderate-income geographies or to low- or moderate-income 
individuals;
   (B) To the extent changes have been made, its record of opening 
and closing branches has significantly adversely affected the 
accessibility of its delivery systems, particularly in low- or 
moderate-income geographies or to low- or moderate-income 
individuals;
   (C) Its services (including, where appropriate, business hours) 
vary in a way that significantly inconveniences its assessment 
area(s), particularly low- or moderate-income geographies or low- or 
moderate-income individuals; and
   (D) It provides few, if any, community development services.
   (c) Wholesale or limited purpose banks. The FDIC assigns each 
wholesale or limited purpose bank's community development 
performance one of the four following ratings.
   (1) Outstanding. The FDIC rates a wholesale or limited purpose 
bank's community development performance ``outstanding'' if, in 
general, it demonstrates:
   (i) A high level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Extensive use of innovative or complex qualified 
investments, community [[Page 22211]] development loans, or 
community development services; and
   (iii) Excellent responsiveness to credit and community 
development needs in its assessment area(s).
   (2) Satisfactory. The FDIC rates a wholesale or limited purpose 
bank's community development performance ``satisfactory'' if, in 
general, it demonstrates:
   (i) An adequate level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Occasional use of innovative or complex qualified 
investments, community development loans, or community development 
services; and
   (iii) Adequate responsiveness to credit and community 
development needs in its assessment area(s).
   (3) Needs to improve. The FDIC rates a wholesale or limited 
purpose bank's community development performance as ``needs to 
improve'' if, in general, it demonstrates:
   (i) A poor level of community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) Rare use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Poor responsiveness to credit and community development 
needs in its assessment area(s).
   (4) Substantial noncompliance. The FDIC rates a wholesale or 
limited purpose bank's community development performance in 
``substantial noncompliance'' if, in general, it demonstrates:
   (i) Few, if any, community development loans, community 
development services, or qualified investments, particularly 
investments that are not routinely provided by private investors;
   (ii) No use of innovative or complex qualified investments, 
community development loans, or community development services; and
   (iii) Very poor responsiveness to credit and community 
development needs in its assessment area(s).
   (d) Banks evaluated under the small bank performance standards. 
The FDIC rates the performance of each bank evaluated under the 
small bank performance standards as follows.
   (1) Eligibility for a satisfactory rating. The FDIC rates a 
bank's performance ``satisfactory'' if, in general, the bank 
demonstrates:
   (i) A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's size, financial condition, the credit 
needs of its assessment area(s), and taking into account, as 
appropriate, lending-related activities such as loan originations 
for sale to the secondary markets and community development loans 
and qualified investments;
   (ii) A majority of its loans and, as appropriate, other lending-
related activities are in its assessment area(s);
   (iii) A distribution of loans to and, as appropriate, other 
lending related-activities for individuals of different income 
levels (including low- and moderate-income individuals) and 
businesses and farms of different sizes that is reasonable given the 
demographics of the bank's assessment area(s);
   (iv) A record of taking appropriate action, as warranted, in 
response to written complaints, if any, about the bank's performance 
in helping to meet the credit needs of its assessment area(s); and
   (v) A reasonable geographic distribution of loans given the 
bank's assessment area(s).
   (2) Eligibility for an outstanding rating. A bank that meets 
each of the standards for a ``satisfactory'' rating under this 
paragraph and exceeds some or all of those standards may warrant 
consideration for an overall rating of ``outstanding.'' In assessing 
whether a bank's performance is ``outstanding,'' the FDIC considers 
the extent to which the bank exceeds each of the performance 
standards for a ``satisfactory'' rating and its performance in 
making qualified investments and its performance in providing 
branches and other services and delivery systems that enhance credit 
availability in its assessment area(s).
   (3) Needs to improve or substantial noncompliance ratings. A 
bank also may receive a rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standards for a ``satisfactory'' 
rating.
   (e) Strategic plan assessment and rating. (1) Satisfactory 
goals. The FDIC approves as ``satisfactory'' measurable goals that 
adequately help to meet the credit needs of the bank's assessment 
area(s).
   (2) Outstanding goals. If the plan identifies a separate group 
of measurable goals that substantially exceed the levels approved as 
``satisfactory,'' the FDIC will approve those goals as 
``outstanding.''
   (3) Rating. The FDIC assesses the performance of a bank 
operating under an approved plan to determine if the bank has met 
its plan goals:
   (i) If the bank substantially achieves its plan goals for a 
satisfactory rating, the FDIC will rate the bank's performance under 
the plan as ``satisfactory.''
   (ii) If the bank exceeds its plan goals for a satisfactory 
rating and substantially achieves its plan goals for an outstanding 
rating, the FDIC will rate the bank's performance under the plan as 
``outstanding.''
   (iii) If the bank fails to meet substantially its plan goals for 
a satisfactory rating, the FDIC will rate the bank as either ``needs 
to improve'' or ``substantial noncompliance,'' depending on the 
extent to which it falls short of its plan goals, unless the bank 
elected in its plan to be rated otherwise, as provided in 
Sec. 345.27(f)(4).

Appendix B to Part 345--CRA Notice
   (a) Notice for main offices and, if an interstate bank, one 
branch office in each state.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping 
to meet the credit needs of this community consistent with safe and 
sound operations. The FDIC also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA, including, for example, information 
about our branches, such as their location and services provided at 
them; the public section of our most recent CRA Performance 
Evaluation, prepared by the FDIC; and comments received from the 
public relating to our performance in helping to meet community 
credit needs, as well as our responses to those comments. You may 
review this information today.
   At least 30 days before the beginning of each quarter, the FDIC 
publishes a nationwide list of the banks that are scheduled for CRA 
examination in that quarter. This list is available from the 
Regional Manager, Division of Compliance and Consumer Affairs, FDIC 
(address). You may send written comments about our performance in 
helping to meet community credit needs to (name and address of 
official at bank) and FDIC Regional Manager. Your letter, together 
with any response by us, will be considered by the FDIC in 
evaluating our CRA performance and may be made public.
   You may ask to look at any comments received by the FDIC 
Regional Manager. You may also request from the FDIC Regional 
Manager an announcement of our applications covered by the CRA filed 
with the FDIC. We are an affiliate of (name of holding company), a 
bank holding company. You may request from the (title of responsible 
official), Federal Reserve Bank of ____________________ (address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.
   (b) Notice for branch offices.

Community Reinvestment Act Notice

   Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping 
to meet the credit needs of this community consistent with safe and 
sound operations. The FDIC also takes this record into account when 
deciding on certain applications submitted by us.
   Your involvement is encouraged.
   You are entitled to certain information about our operations and 
our performance under the CRA. You may review today the public 
section of our most recent CRA evaluation, prepared by the FDIC, and 
a list of services provided at this branch. You may also have access 
to the following additional information, which we will make 
available to you at this branch within five calendar days after you 
make a request to us: (1) a map showing the assessment area 
containing this branch, which is the area in which the FDIC 
evaluates our CRA performance in this community; (2) information 
about our branches in this assessment area; (3) a list of services 
we provide at those locations; (4) data on our lending performance 
in this [[Page 22212]] assessment area; and (5) copies of all 
written comments received by us that specifically relate to our CRA 
performance in this assessment area, and any responses we have made 
to those comments. If we are operating under an approved strategic 
plan, you may also have access to a copy of the plan.

[If you would like to review information about our CRA performance 
in other communities served by us, the public file for our entire 
bank is available at (name of office located in state), located at 
(address).]

   At least 30 days before the beginning of each quarter, the FDIC 
publishes a nationwide list of the banks that are scheduled for CRA 
examination in that quarter. This list is available from the 
Regional Manager, Division of Compliance and Consumer Affairs, FDIC 
(address). You may send written comments about our performance in 
helping to meet community credit needs to (name and address of 
official at bank) and the FDIC Regional Manager. Your letter, 
together with any response by us, will be considered by the FDIC in 
evaluating our CRA performance and may be made public.
   You may ask to look at any comments received by the FDIC 
Regional Manager. You may also request from the FDIC Regional 
Manager an announcement of our applications covered by the CRA filed 
with the FDIC. We are an affiliate of (name of holding company), a 
bank holding company. You may request from the (title of responsible 
official), Federal Reserve Bank of ____________________ (address) an 
announcement of applications covered by the CRA filed by bank 
holding companies.

Secs. 345.1, 345.2, 345.8, 345.101, and 345.102, and the undersigned 
center heading preceding Sec. 345.101  [Removed]

   3. Sections 345.1, 345.2, 345.8, 345.101 and 345.102, and the 
undersigned center heading preceding Sec. 345.101 are removed effective 
July 1, 1995.

Secs. 345.3, 345.4, 345.5, 345.6, 345.7, and subpart D  [Removed]

   4. Sections 345.3, 345.4, 345.5, 345.6, 345.7, and 345.51 are 
removed effective July 1, 1997.

   By order of the Board of Directors of the Federal Deposit 
Insurance Corporation:

   Dated: April 24, 1995.
Robert E. Feldman,
Acting Executive Secretary.
Office of Thrift Supervision

12 CFR Chapter V

   For the reasons outlined in the joint preamble, the Office of 
Thrift Supervision amends 12 CFR chapter V as set forth below:

PART 563e--COMMUNITY REINVESTMENT

   1. The authority citation for part 563e is revised to read as 
follows:

   Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816, 
1828(c), and 2901 through 2907.

   2. Part 563e is amended by adding Subparts A through D and 
Appendices A and B to read as follows:

Subpart A--General

Sec.
563e.11  Authority, purposes, and scope.
563e.12  Definitions.

Subpart B--Standards for Assessing Performance

563e.21  Performance tests, standards, and ratings, in general.
563e.22  Lending test.
563e.23  Investment test.
563e.24  Service test.
563e.25  Community development test for wholesale or limited purpose 
savings associations.
563e.26  Small savings association performance standards.
563e.27  Strategic plan.
563e.28  Assigned ratings.
563e.29  Effect of CRA performance on applications.

Subpart C--Records, Reporting, and Disclosure Requirements

563e.41  Assessment area delineation.
563e.42  Data collection, reporting, and disclosure.
563e.43  Content and availability of public file.
563e.44  Public notice by savings associations.
563e.45  Publication of planned examination schedule.

Subpart D--Transition Rules

563e.51  Transition rules.

Appendix A to Part 563e--Ratings

Appendix B to Part 563e--CRA Notice

Subpart A--General

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

   (a) Authority and OMB control number--(1) Authority. This part is 
issued under the Community Reinvestment Act of 1977 (CRA), as amended 
(12 U.S.C. 2901 et seq.); section 5, as amended, and sections 3, 4, and 
10, as added, of the Home Owners' Loan Act of 1933 (12 U.S.C. 1462a, 
1463, 1464, and 1467a); and sections 4, 6, and 18(c), as amended of the 
Federal Deposit Insurance Act (12 U.S.C. 1814, 1816, 1828(c)).
   (2) OMB control number. The information collection requirements 
contained in this part were approved by the Office of Management and 
Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB control number 1550-0012.
   (b) Purposes. In enacting the CRA, the Congress required each 
appropriate Federal financial supervisory agency to assess an 
institution's record of helping to meet the credit needs of the local 
communities in which the institution is chartered, consistent with the 
safe and sound operation of the institution, and to take this record 
into account in the agency's evaluation of an application for a deposit 
facility by the institution. This part is intended to carry out the 
purposes of the CRA by:
   (1) Establishing the framework and criteria by which the OTS 
assesses a savings association's record of helping to meet the credit 
needs of its entire community, including low- and moderate-income 
neighborhoods, consistent with the safe and sound operation of the 
savings association; and
   (2) Providing that the OTS takes that record into account in 
considering certain applications.
   (c) Scope. This part applies to all savings associations as defined 
in Sec. 561.43 of this subchapter.

Sec. 563e.12  Definitions.

   For purposes of this part, the following definitions apply:
   (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term ``control'' has 
the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company 
is under common control with another company if both companies are 
directly or indirectly controlled by the same company.
   (b) Area median income means:
   (1) The median family income for the MSA, if a person or geography 
is located in an MSA; or
   (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
   (c) Assessment area means a geographic area delineated in 
accordance with Sec. 563e.41.
   (d) Automated teller machine (ATM) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
savings association at which deposits are received, cash dispersed, or 
money lent.
   (e) Branch means a staffed banking facility authorized as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
business or nonprofit organization.
   (f) CMSA means a consolidated metropolitan statistical area as 
defined by the Director of the Office of Management and Budget.
   (g) Community development means:
   (1) Affordable housing (including multifamily rental housing) for 
low or moderate-income individuals;
   (2) Community services targeted to low- or moderate-income 
individuals; [[Page 22213]] 
   (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of 13 CFR 
121.802(a)(2) or have gross annual revenues of $1 million or less; or
   (4) Activities that revitalize or stabilize low- or moderate-income 
geographies.
   (h) Community development loan means a loan that:
   (1) Has as its primary purpose community development; and
   (2) Except in the case of a wholesale or limited purpose savings 
association:
   (i) Has not been reported or collected by the savings association 
or an affiliate for consideration in the savings association's 
assessment as a home mortgage, small business, small farm, or consumer 
loan, unless it is a multifamily dwelling loan (as described in 
Appendix A to Part 203 of this title); and
   (ii) Benefits the savings association's assessment area(s) or a 
broader statewide or regional area that includes the savings 
association's assessment area(s).
   (i) Community development service means a service that:
   (1) Has as its primary purpose community development;
   (2) Is related to the provision of financial services; and
   (3) Has not been considered in the evaluation of the savings 
association's retail banking services under Sec. 563e.24(d).
   (j) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
   (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
   (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec. 226.2 of this 
title;
   (3) Home equity loan, which is a consumer loan secured by a 
residence of the borrower;
   (4) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
   (5) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
   (k) Geography means a census tract or a block numbering area 
delineated by the United States Bureau of the Census in the most recent 
decennial census.
   (l) Home mortgage loan means a ``home improvement loan'' or a 
``home purchase loan'' as defined in Sec. 203.2 of this title.
   (m) Income level includes:
   (1) Low-income, which means an individual income that is less than 
50 percent of the area median income or a median family income that is 
less than 50 percent in the case of a geography.
   (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income or 
a median family income that is at least 50 and less than 80 percent in 
the case of a geography.
   (3) Middle-income, which means an individual income that is at 
least 80 percent and less than 120 percent of the area median income or 
a median family income that is at least 80 and less than 120 percent in 
the case of a geography.
   (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income or a median family income 
that is 120 percent or more in the case of a geography.
   (n) Limited purpose savings association means a savings association 
that offers only a narrow product line (such as credit card or motor 
vehicle loans) to a regional or broader market and for which a 
designation as a limited purpose savings association is in effect, in 
accordance with Sec. 563e.25(b).
   (o) Loan location. A loan is located as follows:
   (1) A consumer loan is located in the geography where the borrower 
resides;
   (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
   (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
   (p) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
   (q) MSA means a metropolitan statistical area or a primary 
metropolitan statistical area as defined by the Director of the Office 
of Management and Budget.
   (r) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
   (s) Small savings association means a savings association that, as 
of December 31 of either of the prior two calendar years, had total 
assets of less than $250 million and was independent or an affiliate of 
a holding company that, as of December 31 of either of the prior two 
calendar years, had total banking and thrift assets of less than $1 
billion.
   (t) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Thrift Financial Report.
   (u) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the Thrift 
Financial Report.
   (v) Wholesale savings association means a savings association that 
is not in the business of extending home mortgage, small business, 
small farm, or consumer loans to retail customers, and for which a 
designation as a wholesale savings association is in effect, in 
accordance with Sec. 563e.25(b).
Subpart B--Standards for Assessing Performance

Sec. 563e.21  Performance tests, standards, and ratings, in general.

   (a) Performance tests and standards. The OTS assesses the CRA 
performance of a savings association in an examination as follows:
   (1) Lending, investment, and service tests. The OTS applies the 
lending, investment, and service tests, as provided in Secs. 563e.22 
through 563e.24, in evaluating the performance of a savings 
association, except as provided in paragraphs (a)(2), (a)(3), and 
(a)(4) of this section.
   (2) Community development test for wholesale or limited purpose 
savings associations. The OTS applies the community development test 
for a wholesale or limited purpose savings association, as provided in 
Sec. 563e.25, except as provided in paragraph (a)(4) of this section.
   (3) Small savings association performance standards. The OTS 
applies the small savings association performance standards as provided 
in Sec. 563e.26 in evaluating the performance of a small savings 
association or a savings association that was a small savings 
association during the prior calendar year, unless the savings 
association elects to be assessed as provided in paragraphs (a)(1), 
(a)(2), or (a)(4) of this section. The savings association may elect to 
be assessed as provided in paragraph (a)(1) of this section only if it 
collects and reports the data required for other savings associations 
under Sec. 563e.42.
   (4) Strategic plan. The OTS evaluates the performance of a savings 
association under a strategic plan if the savings 
[[Page 22214]] association submits, and the OTS approves, a strategic 
plan as provided in Sec. 563e.27.
   (b) Performance context. The OTS applies the tests and standards in 
paragraph (a) of this section and also considers whether to approve a 
proposed strategic plan in the context of:
   (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a savings association's assessment area(s);
   (2) Any information about lending, investment, and service 
opportunities in the savings association's assessment area(s) 
maintained by the savings association or obtained from community 
organizations, state, local, and tribal governments, economic 
development agencies, or other sources;
   (3) The savings association's product offerings and business 
strategy as determined from data provided by the savings association;
   (4) Institutional capacity and constraints, including the size and 
financial condition of the savings association, the economic climate 
(national, regional, and local), safety and soundness limitations, and 
any other factors that significantly affect the savings association's 
ability to provide lending, investments, or services in its assessment 
area(s);
   (5) The savings association's past performance and the performance 
of similarly situated lenders;
   (6) The savings association's public file, as described in 
Sec. 563e.43, and any written comments about the savings association's 
CRA performance submitted to the savings association or the OTS; and
   (7) Any other information deemed relevant by the OTS.
   (c) Assigned ratings. The OTS assigns to a savings association one 
of the following four ratings pursuant to Sec. 563e.28 and Appendix A 
of this part: ``outstanding''; ``satisfactory''; ``needs to improve''; 
or ``substantial noncompliance,'' as provided in 12 U.S.C. 2906(b)(2). 
The rating assigned by the OTS reflects the savings association's 
record of helping to meet the credit needs of its entire community, 
including low- and moderate-income neighborhoods, consistent with the 
safe and sound operation of the savings association.
   (d) Safe and sound operations. This part and the CRA do not require 
a savings association to make loans or investments or to provide 
services that are inconsistent with safe and sound operations. To the 
contrary, the OTS anticipates savings associations can meet the 
standards of this part with safe and sound loans, investments, and 
services on which the savings associations expect to make a profit. 
Savings associations are permitted and encouraged to develop and apply 
flexible underwriting standards for loans that benefit low- or 
moderate-income geographies or individuals, only if consistent with 
safe and sound operations.

Sec. 563e.22  Lending test.

   (a) Scope of test. (1) The lending test evaluates a savings 
association's record of helping to meet the credit needs of its 
assessment area(s) through its lending activities by considering a 
savings association's home mortgage, small business, small farm, and 
community development lending. If consumer lending constitutes a 
substantial majority of a savings association's business, the OTS will 
evaluate the savings association's consumer lending in one or more of 
the following categories: motor vehicle, credit card, home equity, 
other secured, and other unsecured loans. In addition, at a savings 
association's option, the OTS will evaluate one or more categories of 
consumer lending, if the savings association has collected and 
maintained, as required in Sec. 563e.42(c)(1), the data for each 
category that the savings association elects to have the OTS evaluate.
   (2) The OTS considers originations and purchases of loans. The OTS 
will also consider any other loan data the savings association may 
choose to provide, including data on loans outstanding, commitments and 
letters of credit.
   (3) A savings association may ask the OTS to consider loans 
originated or purchased by consortia in which the savings association 
participates or by third parties in which the savings association has 
invested only if the loans meet the definition of community development 
loans and only in accordance with paragraph (d) of this section. The 
OTS will not consider these loans under any criterion of the lending 
test except the community development lending criterion.
   (b) Performance criteria. The OTS evaluates a savings association's 
lending performance pursuant to the following criteria:
   (1) Lending activity. The number and amount of the savings 
association's home mortgage, small business, small farm, and consumer 
loans, if applicable, in the savings association's assessment area(s);
   (2) Geographic distribution. The geographic distribution of the 
savings association's home mortgage, small business, small farm, and 
consumer loans, if applicable, based on the loan location, including:
   (i) The proportion of the savings association's lending in the 
savings association's assessment area(s);
   (ii) The dispersion of lending in the savings association's 
assessment area(s); and
   (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the savings association's assessment 
area(s);
   (3) Borrower characteristics. The distribution, particularly in the 
savings association's assessment area(s), of the savings association's 
home mortgage, small business, small farm, and consumer loans, if 
applicable, based on borrower characteristics, including the number and 
amount of:
   (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;
   (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
   (iii) Small business and small farm loans by loan amount at 
origination; and
   (iv) Consumer loans, if applicable, to low-, moderate-, middle-, 
and upper-income individuals;
   (4) Community development lending. The savings association's 
community development lending, including the number and amount of 
community development loans, and their complexity and innovativeness; 
and
   (5) Innovative or flexible lending practices. The savings 
association's use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-income 
individuals or geographies.
   (c) Affiliate lending. (1) At a savings association's option, the 
OTS will consider loans by an affiliate of the savings association, if 
the savings association provides data on the affiliate's loans pursuant 
to Sec. 563e.42.
   (2) The OTS considers affiliate lending subject to the following 
constraints:
   (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
   (ii) If a savings association elects to have the OTS consider loans 
within a particular lending category made by one or more of the savings 
association's affiliates in a particular assessment area, the savings 
association shall elect to have the OTS consider, in accordance with 
paragraph (c)(1) of this section, all [[Page 22215]] the loans within 
that lending category in that particular assessment area made by all of 
the savings association's affiliates.
   (3) The OTS does not consider affiliate lending in assessing a 
savings association's performance under paragraph (b)(2)(i) of this 
section.
   (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the savings 
association participates or by a third party in which the savings 
association has invested:
   (1) Will be considered, at the savings association's option, if the 
savings association reports the data pertaining to these loans under 
Sec. 563e.42(b)(2); and
   (2) May be allocated among participants or investors, as they 
choose, for purposes of the lending test, except that no participant or 
investor:
   (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; 
or
   (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
   (e) Lending performance rating. The OTS rates a savings 
association's lending performance as provided in Appendix A of this 
part.

Sec. 563e.23  Investment test.

   (a) Scope of test. The investment test evaluates a savings 
association's record of helping to meet the credit needs of its 
assessment area(s) through qualified investments that benefit its 
assessment area(s) or a broader statewide or regional area that 
includes the savings association's assessment area(s).
   (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.
   (c) Affiliate investment. At a savings association's option, the 
OTS will consider, in its assessment of a savings association's 
investment performance, a qualified investment made by an affiliate of 
the savings association, if the qualified investment is not claimed by 
any other institution.
   (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the savings 
association that is located in a predominantly minority neighborhood to 
a minority depository institution or women's depository institution (as 
these terms are defined in 12 U.S.C. 2907(b)) will be considered as a 
qualified investment.
   (e) Performance criteria. The OTS evaluates the investment 
performance of a savings association pursuant to the following 
criteria:
   (1) The dollar amount of qualified investments;
   (2) The innovativeness or complexity of qualified investments;
   (3) The responsiveness of qualified investments to credit and 
community development needs; and
   (4) The degree to which the qualified investments are not routinely 
provided by private investors.
   (f) Investment performance rating. The OTS rates a savings 
association's investment performance as provided in Appendix A of this 
part.

Sec. 563e.24  Service test.

   (a) Scope of test. The service test evaluates a savings 
association's record of helping to meet the credit needs of its 
assessment area(s) by analyzing both the availability and effectiveness 
of a savings association's systems for delivering retail banking 
services and the extent and innovativeness of its community development 
services.
   (b) Area(s) benefitted. Community development services must benefit 
a savings association's assessment area(s) or a broader statewide or 
regional area that includes the savings association's assessment 
area(s).
   (c) Affiliate service. At a savings association's option, the OTS 
will consider, in its assessment of a savings association's service 
performance, a community development service provided by an affiliate 
of the savings association, if the community development service is not 
claimed by any other institution.
   (d) Performance criteria--retail banking services. The OTS 
evaluates the availability and effectiveness of a savings association's 
systems for delivering retail banking services, pursuant to the 
following criteria:
   (1) The current distribution of the savings association's branches 
among low-,moderate-, middle-, and upper-income geographies;
   (2) In the context of its current distribution of the savings 
association's branches, the savings association's record of opening and 
closing branches, particularly branches located in low- or moderate-
income geographies or primarily serving low- or moderate-income 
individuals;
   (3) The availability and effectiveness of alternative systems for 
delivering retail banking services (e.g., ATMs, ATMs not owned or 
operated by or exclusively for the savings association, banking by 
telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs) in low- and moderate-income geographies and to 
low- and moderate-income individuals; and
   (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
   (e) Performance criteria--community development services. The OTS 
evaluates community development services pursuant to the following 
criteria:
   (1) The extent to which the savings association provides community 
development services; and
   (2) The innovativeness and responsiveness of community development 
services.
   (f) Service performance rating. The OTS rates a savings 
association's service performance as provided in Appendix A of this 
part.

Sec. 563e.25  Community development test for wholesale or limited 
purpose savings associations.

   (a) Scope of test. The OTS assesses a wholesale or limited purpose 
savings association's record of helping to meet the credit needs of its 
assessment area(s) under the community development test through its 
community development lending, qualified investments, or community 
development services.
   (b) Designation as a wholesale or limited purpose savings 
association. In order to receive a designation as a wholesale or 
limited purpose savings association, a savings association shall file a 
request, in writing, with the OTS, at least three months prior to the 
proposed effective date of the designation. If the OTS approves the 
designation, it remains in effect until the savings association 
requests revocation of the designation or until one year after the OTS 
notifies the savings association that the OTS has revoked the 
designation on its own initiative.
   (c) Performance criteria. The OTS evaluates the community 
development performance of a wholesale or limited purpose savings 
association pursuant to the following criteria:
   (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development 
loan data provided by the savings association, such as data on loans 
outstanding, commitments, and letters of credit), qualified 
investments, or community development services;
   (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to [[Page 22216]] which the investments are not routinely 
provided by private investors; and
   (3) The savings association's responsiveness to credit and 
community development needs.
   (d) Indirect activities. At a savings association's option, the OTS 
will consider in its community development performance assessment:
   (1) Qualified investments or community development services 
provided by an affiliate of the savings association, if the investments 
or services are not claimed by any other institution; and
   (2) Community development lending by affiliates, consortia and 
third parties, subject to the requirements and limitations in 
Sec. 563e.22 (c) and (d).
   (e) Benefit to assessment area(s).--(1) Benefit inside assessment 
area(s). The OTS considers all qualified investments, community 
development loans, and community development services that benefit 
areas within the savings association's assessment area(s) or a broader 
statewide or regional area that includes the savings association's 
assessment area(s).
   (2) Benefit outside assessment area(s). The OTS considers the 
qualified investments, community development loans, and community 
development services that benefit areas outside the savings 
association's assessment area(s), if the savings association has 
adequately addressed the needs of its assessment area(s).
   (f) Community development performance rating. The OTS rates a 
savings association's community development performance as provided in 
Appendix A of this part.

Sec. 563e.26  Small savings association performance standards.

   (a) Performance criteria. The OTS evaluates the record of a small 
savings association, or a savings association that was a small savings 
association during the prior calendar year, of helping to meet the 
credit needs of its assessment area(s) pursuant to the following 
criteria:
   (1) The savings association's loan-to-deposit ratio, adjusted for 
seasonal variation and, as appropriate, other lending-related 
activities, such as loan originations for sale to the secondary 
markets, community development loans, or qualified investments;
   (2) The percentage of loans and, as appropriate, other lending-
related activities located in the savings association's assessment 
area(s);
   (3) The savings association's record of lending to and, as 
appropriate, engaging in other lending-related activities for borrowers 
of different income levels and businesses and farms of different sizes;
   (4) The geographic distribution of the savings association's loans; 
and
   (5) The savings association's record of taking action, if 
warranted, in response to written complaints about its performance in 
helping to meet credit needs in its assessment area(s).
   (b) Small savings association performance rating. The OTS rates the 
performance of a savings association evaluated under this section as 
provided in Appendix A of this part.

Sec. 563e.27  Strategic plan.

   (a) Alternative election. The OTS will assess a savings 
association's record of helping to meet the credit needs of its 
assessment area(s) under a strategic plan if:
   (1) The savings association has submitted the plan to the OTS as 
provided for in this section;
   (2) The OTS has approved the plan;
   (3) The plan is in effect; and
   (4) The savings association has been operating under an approved 
plan for at least one year.
   (b) Data reporting. The OTS's approval of a plan does not affect 
the savings association's obligation, if any, to report data as 
required by Sec. 563e.42.
   (c) Plans in general. (1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the OTS will evaluate the savings 
association's performance.
   (2) Multiple assessment areas. A savings association with more than 
one assessment area may prepare a single plan for all of its assessment 
areas or one or more plans for one or more of its assessment areas.
   (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
   (d) Public participation in plan development. Before submitting a 
plan to the OTS for approval, a savings association shall:
   (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
   (2) Once the savings association has developed a plan, formally 
solicit public comment on the plan for at least 30 days by publishing 
notice in at least one newspaper of general circulation in each 
assessment area covered by the plan; and
   (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of 
the savings association in any assessment area covered by the plan and 
provide copies of the plan upon request for a reasonable fee to cover 
copying and mailing, if applicable.
   (e) Submission of plan. The savings association shall submit its 
plan to the OTS at least three months prior to the proposed effective 
date of the plan. The savings association shall also submit with its 
plan a description of its informal efforts to seek suggestions from 
members of the public, any written public comment received, and, if the 
plan was revised in light of the comment received, the initial plan as 
released for public comment.
   (f) Plan content--(1) Measurable goals. (i) A savings association 
shall specify in its plan measurable goals for helping to meet the 
credit needs of each assessment area covered by the plan, particularly 
the needs of low- and moderate-income geographies and low- and 
moderate-income individuals, through lending, investment, and services, 
as appropriate.
   (ii) A savings association shall address in its plan all three 
performance categories and, unless the savings association has been 
designated as a wholesale or limited purpose savings association, shall 
emphasize lending and lending-related activities. Nevertheless, a 
different emphasis, including a focus on one or more performance 
categories, may be appropriate if responsive to the characteristics and 
credit needs of its assessment area(s), considering public comment and 
the savings association's capacity and constraints, product offerings, 
and business strategy.
   (2) Confidential information. A savings association may submit 
additional information to the OTS on a confidential basis, but the 
goals stated in the plan must be sufficiently specific to enable the 
public and the OTS to judge the merits of the plan.
   (3) Satisfactory and outstanding goals. A savings association shall 
specify in its plan measurable goals that constitute ``satisfactory'' 
performance. A plan may specify measurable goals that constitute 
``outstanding'' performance. If a savings association submits, and the 
OTS approves, both ``satisfactory'' and ``outstanding'' performance 
goals, the OTS will consider the savings association eligible for an 
``outstanding'' performance rating.
   (4) Election if satisfactory goals not substantially met. A savings 
association may elect in its plan that, if the savings 
[[Page 22217]] association fails to meet substantially its plan goals 
for a satisfactory rating, the OTS will evaluate the savings 
association's performance under the lending, investment, and service 
tests, the community development test, or the small savings association 
performance standards, as appropriate.
   (g) Plan approval--(1) Timing. The OTS will act upon a plan within 
60 calendar days after the OTS receives the complete plan and other 
material required under paragraph (d) of this section. If the OTS fails 
to act within this time period, the plan shall be deemed approved 
unless the OTS extends the review period for good cause.
   (2) Public participation. In evaluating the plan's goals, the OTS 
considers the public's involvement in formulating the plan, written 
public comment on the plan, and any response by the savings association 
to public comment on the plan.
   (3) Criteria for evaluating plan. The OTS evaluates a plan's 
measurable goals using the following criteria, as appropriate:
   (i) The extent and breadth of lending or lending-related 
activities, including, as appropriate, the distribution of loans among 
different geographies, businesses and farms of different sizes, and 
individuals of different income levels, the extent of community 
development lending, and the use of innovative or flexible lending 
practices to address credit needs;
   (ii) The amount and innovativeness, complexity, and responsiveness 
of the savings association's qualified investments; and
   (iii) The availability and effectiveness of the savings 
association's systems for delivering retail banking services and the 
extent and innovativeness of the savings association's community 
development services.
   (h) Plan amendment. During the term of a plan, a savings 
association may request the OTS to approve an amendment to the plan on 
grounds that there has been a material change in circumstances. The 
savings association shall develop an amendment to a previously approved 
plan in accordance with the public participation requirements of 
paragraph (c) of this section.
   (i) Plan assessment. The OTS approves the goals and assesses 
performance under a plan as provided for in Appendix A of this part.

Sec. 563e.28  Assigned ratings.

   (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the OTS assigns to a savings association a rating of 
``outstanding,'' ``satisfactory,'' ``needs to improve,'' or 
``substantial noncompliance'' based on the savings association's 
performance under the lending, investment and service tests, the 
community development test, the small savings association performance 
standards, or an approved strategic plan, as applicable.
   (b) Lending, investment, and service tests. The OTS assigns a 
rating for a savings association assessed under the lending, 
investment, and service tests in accordance with the following 
principles:
   (1) A savings association that receives an ``outstanding'' rating 
on the lending test receives an assigned rating of at least 
``satisfactory'';
   (2) A savings association that receives an ``outstanding'' rating 
on both the service test and the investment test and a rating of at 
least ``high satisfactory'' on the lending test receives an assigned 
rating of ``outstanding''; and
   (3) No savings association may receive an assigned rating of 
``satisfactory'' or higher unless it receives a rating of at least 
``low satisfactory'' on the lending test.
   (c) Effect of evidence of discriminatory or other illegal credit 
practices. Evidence of discriminatory or other illegal credit practices 
adversely affects the OTS's evaluation of a savings association's 
performance. In determining the effect on the savings association's 
assigned rating, the OTS considers the nature and extent of the 
evidence, the policies and procedures that the savings association has 
in place to prevent discriminatory or other illegal credit practices, 
any corrective action that the savings association has taken or has 
committed to take, particularly voluntary corrective action resulting 
from self-assessment, and other relevant information.

Sec. 563e.29  Effect of CRA performance on applications.

   (a) CRA performance. Among other factors, the OTS takes into 
account the record of performance under the CRA of each applicant 
savings association, and for applications under section 10(e) of the 
Home Owners' Loan Act (12 U.S.C. 1467a(e)), of each proposed subsidiary 
savings association, in considering an application for:
   (1) The establishment of a domestic branch or other facility that 
would be authorized to take deposits;
   (2) The relocation of the main office or a branch;
   (3) The merger or consolidation with or the acquisition of the 
assets or assumption of the liabilities of an insured depository 
institution requiring OTS approval under the Bank Merger Act (12 U.S.C. 
1828(c));
   (4) A Federal thrift charter; and
   (5) Acquisitions subject to section 10(e) of the Home Owners' Loan 
Act (12 U.S.C. 1467a(e)).
   (b) Charter application. An applicant for a Federal thrift charter 
shall submit with its application a description of how it will meet its 
CRA objectives. The OTS takes the description into account in 
considering the application and may deny or condition approval on that 
basis.
   (c) Interested parties. The OTS takes into account any views 
expressed by interested parties that are submitted in accordance with 
the applicable comment procedures in considering CRA performance in an 
application listed in paragraphs (a) and (b) of this section.
   (d) Denial or conditional approval of application. A savings 
association's record of performance may be the basis for denying or 
conditioning approval of an application listed in paragraph (a) of this 
section.
   (e) Insured depository institution. For purposes of this section, 
the term ``insured depository institution'' has the meaning given to 
that term in 12 U.S.C. 1813.

Subpart C--Records, Reporting, and Disclosure Requirements

Sec. 563e.41  Assessment area delineation.

   (a) In general. A savings association shall delineate one or more 
assessment areas within which the OTS evaluates the savings 
association's record of helping to meet the credit needs of its 
community. The OTS does not evaluate the savings association's 
delineation of its assessment area(s) as a separate performance 
criterion, but the OTS reviews the delineation for compliance with the 
requirements of this section.
   (b) Geographic area(s) for wholesale or limited purpose savings 
associations. The assessment area(s) for a wholesale or limited purpose 
savings association must consist generally of one or more MSAs (using 
the MSA boundaries that were in effect as of January 1 of the calendar 
year in which the delineation is made) or one or more contiguous 
political subdivisions, such as counties, cities, or towns, in which 
the savings association has its main office, branches, and deposit-
taking ATMs.
   (c) Geographic area(s) for other savings associations. The 
assessment area(s) for a savings association other than a wholesale or 
limited purpose savings association must:
   (1) Consist generally of one or more MSAs (using the MSA boundaries 
that [[Page 22218]] were in effect as of January 1 of the calendar year 
in which the delineation is made) or one or more contiguous political 
subdivisions, such as counties, cities, or towns; and
   (2) Include the geographies in which the savings association has 
its main office, its branches, and its deposit-taking ATMs, as well as 
the surrounding geographies in which the savings association has 
originated or purchased a substantial portion of its loans (including 
home mortgage loans, small business and small farm loans, and any other 
loans the savings association chooses, such as those consumer loans on 
which the savings association elects to have its performance assessed).
   (d) Adjustments to geographic area(s). A savings association may 
adjust the boundaries of its assessment area(s) to include only the 
portion of a political subdivision that it reasonably can be expected 
to serve. An adjustment is particularly appropriate in the case of an 
assessment area that otherwise would be extremely large, of unusual 
configuration, or divided by significant geographic barriers.
   (e) Limitations on the delineation of an assessment area. Each 
savings association's assessment area(s):
   (1) Must consist only of whole geographies;
   (2) May not reflect illegal discrimination;
   (3) May not arbitrarily exclude low- or moderate-income 
geographies, taking into account the savings association's size and 
financial condition; and
   (4) May not extend substantially beyond a CMSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a savings association serves a geographic area that extends 
substantially beyond a state boundary, the savings association shall 
delineate separate assessment areas for the areas in each state. If a 
savings association serves a geographic area that extends substantially 
beyond a CMSA boundary, the savings association shall delineate 
separate assessment areas for the areas inside and outside the CMSA.
   (f) Savings associations serving military personnel. 
Notwithstanding the requirements of this section, a savings association 
whose business predominantly consists of serving the needs of military 
personnel or their dependents who are not located within a defined 
geographic area may delineate its entire deposit customer base as its 
assessment area.
   (g) Use of assessment area(s). The OTS uses the assessment area(s) 
delineated by a savings association in its evaluation of the savings 
association's CRA performance unless the OTS determines that the 
assessment area(s) do not comply with the requirements of this section.

Sec. 563e.42  Data collection, reporting, and disclosure.

   (a) Loan information required to be collected and maintained. A 
savings association, except a small savings association, shall collect, 
and maintain in machine readable form (as prescribed by the OTS) until 
the completion of its next CRA examination, the following data for each 
small business or small farm loan originated or purchased by the 
savings association:
   (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (2) The loan amount at origination;
   (3) The loan location; and
   (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.
   (b) Loan information required to be reported. A savings 
association, except a small savings association or a savings 
association that was a small savings association during the prior 
calendar year, shall report annually by March 1 to the OTS in machine 
readable form (as prescribed by the OTS) the following data for the 
prior calendar year:
   (1) Small business and small farm loan data. For each geography in 
which the savings association originated or purchased a small business 
or small farm loan, the aggregate number and amount of loans:
   (i) With an amount at origination of $100,000 or less;
   (ii) With amount at origination of more than $100,000 but less than 
or equal to $250,000;
   (iii) With an amount at origination of more than $250,000; and
   (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the savings association 
considered in making its credit decision);
   (2) Community development loan data. The aggregate number and 
aggregate amount of community development loans originated or 
purchased; and
   (3) Home mortgage loans. If the savings association is subject to 
reporting under part 203 of this title, the location of each home 
mortgage loan application, origination, or purchase outside the MSAs in 
which the savings association has a home or branch office (or outside 
any MSA) in accordance with the requirements of part 203 of this title.
   (c) Optional data collection and maintenance--(1) Consumer loans. A 
savings association may collect and maintain in machine readable form 
(as prescribed by the OTS) data for consumer loans originated or 
purchased by the savings association for consideration under the 
lending test. A savings association may maintain data for one or more 
of the following categories of consumer loans: motor vehicle, credit 
card, home equity, other secured, and other unsecured. If the savings 
association maintains data for loans in a certain category, it shall 
maintain data for all loans originated or purchased within that 
category. The savings association shall maintain data separately for 
each category, including for each loan:
   (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
   (ii) The loan amount at origination or purchase;
   (iii) The loan location; and
   (iv) The gross annual income of the borrower that the savings 
association considered in making its credit decision.
   (2) Other loan data. At its option, a savings association may 
provide other information concerning its lending performance, including 
additional loan distribution data.
   (d) Data on affiliate lending. A savings association that elects to 
have the OTS consider loans by an affiliate, for purposes of the 
lending or community development test or an approved strategic plan, 
shall collect, maintain, and report for those loans the data that the 
savings association would have collected, maintained, and reported 
pursuant to paragraphs (a), (b), and (c) of this section had the loans 
been originated or purchased by the savings association. For home 
mortgage loans, the savings association shall also be prepared to 
identify the home mortgage loans reported under part 203 of this title 
by the affiliate.
   (e) Data on lending by a consortium or a third-party. A savings 
association that elects to have the OTS consider community development 
loans by a consortium or third party, for purposes of the lending or 
community development tests or an approved strategic plan, shall report 
for those loans the data that the savings association would have 
reported under paragraph (b)(2) of this section had the loans been 
originated or purchased by the savings association.
   (f) Small savings associations electing evaluation under the 
lending, investment, and service tests. A savings association that 
qualifies for evaluation under the small savings association 
performance standards but elects [[Page 22219]] evaluation under the 
lending, investment, and service tests shall collect, maintain, and 
report the data required for other savings associations pursuant to 
paragraphs (a) and (b) of this section.
   (g) Assessment area data. A savings association, except a small 
savings association or a savings association that was a small savings 
association during the prior calendar year, shall collect and report to 
the OTS by March 1 of each year a list for each assessment area showing 
the geographies within the area.
   (h) CRA Disclosure Statement. The OTS prepares annually for each 
savings association that reports data pursuant to this section a CRA 
Disclosure Statement that contains, on a state-by-state basis:
   (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the 
savings association reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-
, and upper-income geographies;
   (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
   (iii) A list showing each geography in which the savings 
association reported a small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the 
savings association reported a small business or small farm loan:
   (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 
or more but less than 20 percent, 20 or more but less than 30 percent, 
30 or more but less than 40 percent, 40 or more but less than 50 
percent, 50 or more but less than 60 percent, 60 or more but less than 
70 percent, 70 or more but less than 80 percent, 80 or more but less 
than 90 percent, 90 or more but less than 100 percent, 100 or more but 
less than 110 percent, 110 or more but less than 120 percent, and 120 
percent or more;
   (ii) A list grouping each geography in the county or assessment 
area according to whether the median income in the geography relative 
to the area median income is less than 10 percent, 10 or more but less 
than 20 percent, 20 or more but less than 30 percent, 30 or more but 
less than 40 percent, 40 or more but less than 50 percent, 50 or more 
but less than 60 percent, 60 or more but less than 70 percent, 70 or 
more but less than 80 percent, 80 or more but less than 90 percent, 90 
or more but less than 100 percent, 100 or more but less than 110 
percent, 110 or more but less than 120 percent, and 120 percent or 
more;
   (iii) A list showing each geography in which the savings 
association reported a small business or small farm loan; and
   (iv) The number and amount of small business and small farm loans 
to businesses and farms with gross annual revenues of $1 million or 
less;
   (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the savings association 
and the number and amount of small business and small farm loans 
located outside the assessment area(s) reported by the savings 
association; and
   (4) The number and amount of community development loans reported 
as originated or purchased.
   (i) Aggregate disclosure statements. The OTS, in conjunction with 
the Board of Governors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation, and the Office of the Comptroller of the 
Currency, prepares annually, for each MSA (including an MSA that 
crosses a state boundary) and the non-MSA portion of each state, an 
aggregate disclosure statement of small business and small farm lending 
by all institutions subject to reporting under this part or parts 25, 
228, or 345 of this title. These disclosure statements indicate, for 
each geography, the number and amount of all small business and small 
farm loans originated or purchased by reporting institutions, except 
that the OTS may adjust the form of the disclosure if necessary, 
because of special circumstances, to protect the privacy of a borrower 
or the competitive position of an institution.
   (j) Central data depositories. The OTS makes the aggregate 
disclosure statements, described in paragraph (i) of this section, and 
the individual savings association CRA Disclosure Statements, described 
in paragraph (h) of this section, available to the public at central 
data depositories. The OTS publishes a list of the depositories at 
which the statements are available.