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Inactive Financial Institution Letters


[Federal Register: July 12, 2001 (Volume 66, Number 134)]
[Notices]               
[Page 36619-36653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jy01-96]                         

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Part II

Federal Financial Institutions Examination Council

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

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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

Community Reinvestment Act; Interagency Questions and Answers 
Regarding Community Reinvestment

AGENCY: Federal Financial Institutions Examination Council.

ACTION: Notice.

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SUMMARY: The Consumer Compliance Task Force (we) of the Federal 
Financial Institutions Examination Council (FFIEC) is supplementing, 
amending, and republishing its Interagency Questions and Answers 
Regarding Community Reinvestment. The Interagency Questions and Answers 
have been prepared by staff of the Office of the Comptroller of the 
Currency (OCC), the Board of Governors of the Federal Reserve System 
(Board), the Federal Deposit Insurance Corporation (FDIC), and the 
Office of Thrift Supervision (OTS) (collectively, the agencies) to 
answer frequently asked questions about community reinvestment. These 
Interagency Questions and Answers contain informal staff guidance for 
agency personnel, financial institutions, and the public.

DATES: Effective Date of Amended Interagency Questions and Answers on 
Community Reinvestment: July 11, 2001.

FOR FURTHER INFORMATION CONTACT: OCC: Karen Tucker, National Bank 
Examiner, Community and Consumer Policy Division, (202) 874-4446; or 
Margaret Hesse, Special Counsel, Community and Consumer Law Division, 
(202) 874-5750, Office of the Comptroller of the Currency, 250 E 
Street, SW., Washington, DC 20219.
    Board: Catherine M.J. Gates, Senior Review Examiner, (202) 452-
3946; or Kathleen C. Ryan, Senior Attorney, (202) 452-3667, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue, NW., Washington, DC 20551.
    FDIC: Robert W. Mooney, Assistant Director, Division of Compliance 
and Consumer Affairs, (202) 942-3378; Stephanie Caputo, Senior Fair 
Lending Specialist, Division of Compliance and Consumer Affairs, (202) 
942-3413; or A. Ann Johnson, Counsel, Legal Division, (202) 898-3573, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: Theresa A. Stark, Project Manager, Compliance Policy, (202) 
906-7054; or Richard R. Riese, Director, Compliance Policy, (202) 906-
6134, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 
20552.

SUPPLEMENTARY INFORMATION:

Background

    In 1995, the agencies revised the Community Reinvestment Act (CRA) 
regulations by issuing a joint final rule, which was published on May 
4, 1995 (60 FR 22156). See 12 CFR parts 25, 228, 345 and 563e, 
implementing 12 U.S.C. 2901 et seq. The agencies published related 
clarifying documents on December 20, 1995 (60 FR 66048) and May 10, 
1996 (61 FR 21362).
    The revised regulations are interpreted primarily through 
``Interagency Questions and Answers Regarding Community Reinvestment,'' 
which provide informal staff guidance for use by agency personnel, 
financial institutions, and the public, and which are supplemented 
periodically. We published our most recent guidance on April 28, 2000 
(2000 Interagency Questions and Answers). 65 FR 25088. In addition to 
issuing the 2000 Interagency Questions and Answers, we re-proposed 
revisions to one question and answer, as well as a conforming amendment 
to another question and answer, in the accompanying supplementary 
information. The proposed revised question and answer addressed whether 
there must be a direct benefit from community development loans and 
services and qualified investments to an institution's assessment area. 
We specifically requested comment addressing the proposed revised 
question and answer, as well as general comments and questions 
regarding the CRA regulations. 65 FR at 25090-92.
    We received 17 letters in response to our request for comments in 
the 2000 Interagency Questions and Answers. Comments came from 
financial institutions or financial institution holding companies (7), 
community organizations (2), financial institution trade associations 
(4), one state agency, and others (3). This document supplements, 
revises, and republishes the 2000 Interagency Questions and Answers 
based, in part, on questions and comments received from examiners, 
financial institutions, and other interested parties, and on comments 
received in response to our request for comments.
    As discussed below, this document adopts the revisions to the 
question and answer about whether there must be a direct benefit to an 
institution's assessment area for an activity to benefit the assessment 
area that we proposed in April 2000, along with conforming changes to 
another existing question and answer, which addresses what is meant by 
a ``regional area.'' We are also making slight clarifying revisions to 
eight existing questions and answers and adopting six new questions and 
answers.
    The Interagency Questions and Answers has an index to aid readers 
in locating specific information in the document. The index contains 
keywords, listed alphabetically, along with numerical indicators of 
questions and answers that relate to that keyword. The list of 
questions and answers addressing each keyword in the index is not 
intended to be exhaustive. We welcome suggestions for additional 
entries to the index. Further, when this new version of the Interagency 
Questions and Answers is made available on the agencies' and the 
FFIEC's World Wide Web sites, the index question and answer numbers 
will be linked by hypertext to the questions and answers in the 
document to facilitate quick reference to relevant information.
    Questions and answers are grouped by the provision of the CRA 
regulations that they discuss and are presented in the same order as 
the regulatory provisions. The Interagency Questions and Answers employ 
an abbreviated method to cite to the regulations. Because the 
regulations of the four agencies are substantially identical, 
corresponding sections of the different regulations usually bear the 
same suffix. Therefore, the Interagency Questions and Answers typically 
cite only to the suffix. For example, the small bank performance 
standards for national banks appear at 12 CFR 25.26; for Federal 
Reserve System member banks supervised by the Board, they appear at 12 
CFR 228.26; for nonmember state banks, at 12 CFR 345.26; and for 
thrifts, at 12 CFR 563e.26. Accordingly, the citation in this document 
would be to Sec. ____.26. In the few instances in which the suffix in 
one of the regulations is different, the specific citation for that 
regulation is provided. The question numbering system consists of the 
regulatory citation (as described above) and a number, connected by a 
dash. For example, the first question addressing Sec. ____.21(a) would 
be identified as Sec. ____.21(a)-1.

Adopting Question and Answer Re-Proposed in April 2000 and 
Conforming Revisions to One Question and Answer

    We are adopting the revisions that we re-proposed in April 2000 to 
the question and answer about whether there must be a direct benefit to 
an institution's assessment area for an activity to benefit the 
assessment area. We are also adopting conforming revisions to another 
existing question

[[Page 36621]]

and answer to provide consistency with the amended question and answer.

Must There Be Some Immediate or Direct Benefit to the Institution's 
Assessment Area(s) To Satisfy the Regulations' Requirement That 
Qualified Investments and Community Development Loans or Services 
Benefit an Institution's Assessment Area(s) or a Broader Statewide or 
Regional Area That Includes the Assessment Area(s)?

    The fifth question and answer addressing Secs. ____.12(i) and 
563e.12(h) (Secs. ____.12(i) & 563e.12(h)-5) addresses whether there 
must be an immediate or direct benefit to an institution's assessment 
area(s) to satisfy the regulations' requirement that qualified 
investments and community development loans or services benefit an 
institution's assessment area(s) or a broader statewide or regional 
area that includes the assessment area(s). This question and answer 
currently states that an institution's assessment area(s) need not 
receive an immediate or direct benefit from the institution's specific 
participation in the broader statewide or regional organization or 
activity, provided the purpose, mandate, or function of the 
organization or activity includes serving geographies or individuals 
located in the assessment area(s).
    In May 1999, we first proposed revising this question and answer to 
permit consideration of support for community development organizations 
or activities serving individuals or geographies located somewhere in 
the broader statewide or regional area that includes the institution's 
assessment area. This consideration would be given even if the 
organization or activity did not have the purpose, mandate or function 
of serving geographies or individuals within the institution's 
assessment area(s). Most commenters responding to the 1999 proposal 
appeared to favor the original proposed revision, as it would provide 
increased flexibility in engaging in community development activities. 
However, it appeared that a number of those commenters did not 
recognize the revised answer as an expansion of existing options for 
institutions to engage in community development activities outside 
their assessment area(s). Therefore, we re-proposed for public comment 
a slightly revised question and answer to ensure that the public 
understood that the revised question and answer expands the current 
guidance.
    The question and answer, as it was re-proposed in April 2000, 
contained two approaches to determine whether qualified investments and 
community development loans or services benefit an institution's 
assessment area(s) or a broader statewide or regional area that 
includes the institution's assessment area(s). First, as the agencies 
have always maintained, if an activity supports an organization or 
program that benefits the institution's assessment area or a broader 
statewide or regional area that is larger than, but includes, the 
assessment area(s), the activity will be considered if the purpose, 
mandate, or function of the organization or activity includes serving 
the assessment area(s). Second, if, in light of its performance 
context, an institution has adequately addressed the community 
development needs of its assessment area(s), examiners will consider 
community development activities that benefit low-and moderate-income 
individuals or geographies somewhere in the broader statewide or 
regional area that includes the assessment area(s), even if those 
activities do not have a purpose, mandate, or function of benefiting 
the institution's assessment area(s).
    The following example explained the two approaches. An institution 
is located in Chicago. Its assessment area is the Chicago metropolitan 
area. Its community development activities include loans, investments, 
and services in organizations and projects located in and benefiting 
Chicago, its assessment area. These activities would be considered 
under the first approach. The institution's community development 
activities also include loans and investments in several projects that 
benefit the entire state of Illinois, including Chicago. These 
activities also are considered under the first approach. In addition, 
the institution participated in a community development activity that 
benefits the entire Great Lakes region, including the Chicago 
metropolitan area. This activity would also be considered under the 
first approach. Assume that, after considering its performance context, 
examiners have determined that the institution has adequately addressed 
the community development needs of its assessment area through loans, 
investments or services considered under the first approach. Examiners 
then would also consider the institution's investment in a community 
development organization located in Decatur, IL, that will serve only 
the Decatur area--with no potential that it will ever benefit Chicago, 
the institution's assessment area. Decatur, of course, is in the 
statewide area (Illinois) that includes the institution's assessment 
area. The institution would receive consideration for this activity 
under the second approach.
    The agencies received 14 letters commenting on the proposed 
question and answer. All of the commenters were generally in favor of 
the proposed question and answer. As one financial institution 
commenter stated, ``We believe that community development organizations 
and programs that operate on a local, statewide, or even multi-state 
basis ultimately provide benefit to all surrounding areas. Such 
initiatives help stabilize these markets and provide a ripple effect on 
neighboring geographies. As the capacity of one area grows, it is 
possible to leverage that effort to build community development 
momentum.''
    The agencies are adopting the amended question and answer, 
Secs. ____.12(i) & 563e.12(h)-5, as it was proposed in April 2000.

What Is Meant by the Term ``Regional Area''?

    In addition, the agencies are also adopting the conforming 
amendment to question and answer, Secs. ____.12(i) & 563e.12(h)-6, 
which was also proposed in April 2000. This revised question and answer 
is necessary so that, in cases where an institution has already 
adequately addressed the community development needs of its assessment 
area(s), examiner discretion does not unduly impede the broader choice 
and judgment permitted to institutions for performing community 
development activities in the relevant statewide or regional area. This 
conforming amendment clarifies that, if an institution has adequately 
addressed the community development needs of its assessment area(s), 
examiners will consider its community development activities that 
benefit geographies or individuals located somewhere within the broader 
statewide or regional area that includes the institution's assessment 
area(s), even if those activities do not benefit its assessment 
area(s).

New Questions and Answers

    The agencies are adopting six new questions and answers, which are 
discussed below.

Revitalize and Stabilize Low- and Moderate-Income Areas

    Financial institutions and examiners have asked us about the types 
of activities that are considered to revitalize and/or stabilize low- 
and moderate-income areas. In response, the agencies are adopting a new 
question and answer, Secs. ____.12(h)(4) & 563e.12(g)(4)-1, which 
provides

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guidance about such activities. It states that activities that 
revitalize or stabilize a low- or moderate-income geography are 
activities that help to attract and retain businesses and residents. 
Examiners will presume that an activity revitalizes or stabilizes a 
low- or moderate-income geography if the activity has been approved by 
the governing board of an Enterprise Community or Empowerment Zone 
(designated pursuant to 26 U.S.C. 1391) and is consistent with the 
board's strategic plan. They will make the same presumption if the 
activity has received similar official designation as consistent with a 
federal, state, local, or tribal government plan for the revitalization 
or stabilization of the low- or moderate-income geography. To determine 
whether other activities revitalize or stabilize a low- or moderate-
income geography, examiners will evaluate the activity's actual impact 
on the geography, if information about this is available. If not, 
examiners will determine whether the activity is consistent with the 
community's formal or informal plans for the revitalization and 
stabilization of the low- or moderate-income geography.

Types of Lending Activities That May Warrant Favorable Consideration as 
Activities Responsive to the Credit Needs of an Institution's Community

    Credit needs vary from community to community. However, there are 
some lending activities that are likely to be responsive in helping to 
meet the credit needs of many communities. The agencies are adopting a 
new question and answer, Sec. ____.22(a)-1, which identifies the 
following activities as being responsive to the needs of an 
institution's assessment area:
     Providing loan programs that include a financial education 
component about how to avoid lending activities that may be abusive or 
otherwise unsuitable;
     Establishing loan programs that provide small, unsecured 
consumer loans in a safe and sound manner (i.e., based on the 
borrower's ability to repay) and with reasonable terms;
     Offering lending programs, which feature reporting to 
consumer reporting agencies, that transition borrowers from loans with 
higher interest rates and fees (based on credit risk) to lower-cost 
loans, consistent with safe and sound lending practices. Reporting to 
consumer reporting agencies allows borrowers accessing these programs 
the opportunity to improve their credit histories and thereby improve 
their access to competitive credit products. Examiners may consider 
favorably such lending activities, which have features augmenting the 
success and effectiveness of the institution's lending programs.

Indirect Community Development Services

    The agencies are adopting a new question and answer, 
Sec. ____.24(e)-1, that addresses the conditions under which an 
institution may receive consideration for community development 
services offered by affiliates or third parties. The guidance states 
that, at an institution's option, the agencies will consider services 
performed by an affiliate or by a third party on the institution's 
behalf under the service test if the services provided enable the 
institution to help meet the credit needs of its community. Indirect 
services that enhance an institution's ability to deliver credit 
products or deposit services within its community and that can be 
quantified may be considered under the service test if those services 
have not been considered already under the lending or investment test. 
For example, an institution that contracts with a community 
organization to provide home ownership counseling to low- and moderate-
income home buyers as part of the institution's mortgage program may 
receive consideration for that indirect service under the service test. 
In contrast, donations to a community organization that offers 
financial services to low- or moderate-income individuals may be 
considered under the investment test, but would not also be eligible 
for consideration under the service test. Services performed by an 
affiliate will be treated the same as affiliate loans and investments 
made in the institution's assessment area and may be considered if the 
service is not claimed by any other institution.

Credit Card Banks' Activities

    The agencies are adopting a new question and answer, 
Sec. ____.25(a)-1, that applies only to credit card banks that are 
exempt from the definition of ``bank'' in the Bank Holding Company Act 
(BHCA), as amended by the Competitive Equality Banking Act of 1987 
(CEBA credit card banks). This new guidance explains how a CEBA credit 
card bank (if designated as a limited-purpose institution) can meet its 
community's credit needs without losing its exemption from the 
definition of ``bank.'' This guidance memorializes a letter issued in 
1996 by staff at the Board of Governors of the Federal Reserve System 
to the president of the Association of Financial Services Holding 
Companies. The guidance clarifies that, although the BHCA restricts 
CEBA credit card banks to credit card operations, a CEBA credit card 
bank can engage in community development activities without losing its 
exemption under the BHCA. A CEBA credit card bank could provide 
community development services and investments without engaging in 
operations other than credit card operations. For example, the bank 
could provide credit card counseling, or the financial expertise of its 
executives, free of charge, to community development organizations. In 
addition, a CEBA credit card bank could make qualified investments, as 
long as the investments meet the guidelines for passive and 
noncontrolling investments provided in the BHCA and the Board's 
Regulation Y. Finally, although a CEBA credit card bank cannot make any 
loans other than credit card loans, under Sec. ____.25(d)(2) (community 
development test-- indirect activities), the bank could elect to have 
part of its qualified passive and noncontrolling investments in a 
third-party lending consortium considered as community development 
lending, provided that the consortium's loans otherwise meet the 
requirements for community development lending. When assessing a CEBA 
credit card bank's CRA performance under the community development 
test, examiners will take into account the bank's performance context. 
In particular, examiners will consider the legal constraints imposed by 
the BHCA on the bank's activities as part of the bank's performance 
context in Sec. ____.21(b)(4).

Effect of Evidence of Other Illegal Credit Practices

    Section ____.28(c) of our regulations states that evidence of 
discriminatory or other illegal credit practices adversely affects the 
evaluation of an institution's performance. The agencies are adopting a 
new question and answer addressing this provision. The new question and 
answer, Sec. ____.28(c)-1, discusses what is meant by ``discriminatory 
or other illegal credit practices.'' It explains that an institution 
engages in discriminatory credit practices if it discourages or 
discriminates against credit applicants or borrowers on a prohibited 
basis, in violation, for example, of the Fair Housing Act or the Equal 
Credit Opportunity Act (as implemented by Regulation B). Examples of 
other illegal credit practices inconsistent with helping to meet 
community credit needs include violations of:
     The Truth in Lending Act regarding rescission of certain 
mortgage transactions and regarding disclosures and certain loan term 
restrictions in

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connection with credit transactions that are subject to the Home 
Ownership and Equity Protection Act;
     The Real Estate Settlement Procedures Act regarding the 
giving and accepting of referral fees, unearned fees or kickbacks in 
connection with certain mortgage transactions; and
     The Federal Trade Commission Act regarding unfair or 
deceptive acts or practices.
    Examiners will determine the effect of evidence of illegal credit 
practices as set forth in examination procedures and Sec. ____.28(c) of 
the regulations.
    Violations of other provisions of the consumer protection laws 
generally will not adversely affect an institution's CRA rating, but 
may warrant the inclusion of comments in an institution's performance 
evaluation. These comments may address the institution's policies, 
procedures, training programs, and internal assessment efforts.

Electronic Public Files

    Some financial institutions have inquired whether it is acceptable 
to maintain the required public file information electronically on an 
intranet or the Internet. The agencies believe that an institution may 
keep all or part of its public file on an intranet or the Internet, 
provided that the institution maintains all of the information, either 
in paper or electronic form, that is required in Sec. ____.43 of the 
regulations. An institution that opts to keep part or all of its public 
file on an intranet or the Internet must follow the rules in 
Sec. ____.43(c)(1) and (2) as to what information is required to be 
kept at a main office and at a branch. The institution must also ensure 
that the information required to be maintained at a main office and 
branch, if kept electronically, can be readily downloaded and printed 
for any member of the public who requests a hard copy of the 
information.
    The agencies are adopting a new question and answer, 
Sec. ____.43(c)-2, which addresses maintaining public files on an 
intranet or the Internet.

Revised Questions and Answers

    The agencies are revising eight existing questions and answers, 
which are discussed below.

New Markets Venture Capital Companies

    The Consolidated Appropriations Act of 2001 (Pub. L. 106-554), 
enacted December 21, 2000, included the New Markets Venture Capital 
Program Act of 2000. The New Markets Venture Capital Program, which is 
administered by the Small Business Administration (SBA), allows the SBA 
to designate New Market Venture Capital companies (NMVCCs). NMVCCs are 
investment funds that will promote economic development and create 
wealth and job opportunities in low-income geographies and among 
individuals living in such areas through equity-type investments in 
smaller enterprises located in those low-income geographical areas.
    Based on the statutory mandate for NMVCCs, the agencies will 
presume that any loan to or lawful investment in NMVCCs will promote 
economic development. Therefore, we are revising Sec. ____.12(h)(3)-1 
to reflect this presumption.

Reporting Loans With a Business Purpose That Are Secured by Residential 
Real Estate

    The agencies are adopting revisions to two existing questions and 
answers to accommodate the difference in treatment between the Call 
Report and Thrift Financial Report (TFR) instructions concerning loans 
secured by residential real estate that have a business purpose. Under 
the Call Report instructions, loans secured by nonfarm residential real 
estate that are used to finance small businesses must be reported as 
``loans secured by real estate'' unless the security interest in the 
nonfarm residential real estate is taken only as an abundance of 
caution. The TFR instructions, however, allow an institution to 
classify a loan that meets the definition of a mortgage loan, but that 
is used to finance small businesses, as a mortgage loan or as a 
nonmortgage loan according to the purpose of the loan, at the option of 
the reporting institution. As a result, institutions that file Call 
Reports and those that file TFRs may treat loans secured by nonfarm 
residential real estate, but that are for the purpose of financing a 
small business, in different ways.
    The agencies are revising Secs. ____.12(u) & 563e.12(t)-3 and 
Sec. ____.42(c)(2)-1 to be consistent with guidance provided in the 
Call Report and TFR instructions. The agencies are bifurcating the 
answer to Secs. ____.12(u) & 563e.12(t)-3 to account for the different 
treatment in the Call Report and TFR instructions. The guidance states 
that, for banks filing Call Reports, loans secured by nonfarm 
residential real estate to finance small businesses will typically not 
be included as ``loans to small businesses'' for Call Report purposes, 
unless the security interest in the property is taken only as an 
abundance of caution. The agencies recognize that many small businesses 
are financed by loans that would not have been made or would have been 
made on less favorable terms had they not been secured by residential 
real estate. If these loans have a primary purpose of community 
development, as defined in the regulations, they may be reported as 
community development loans. Otherwise, at an institution's option, the 
institution may collect and maintain data separately concerning these 
loans and request that the data be considered in its CRA evaluation as 
``Other Secured Lines/Loans for Purposes of Small Business.''
    For institutions that file TFRs, depending on how a loan is 
classified, it is possible that a loan secured by nonfarm residential 
real estate that finances a small business will be reported as a 
``small business loan.'' Loans secured by nonfarm residential real 
estate to finance small businesses may be reported as small business 
loans if they are reported on the TFR as nonmortgage, commercial loans. 
Otherwise, loans that meet the definition of mortgage loans, for TFR 
reporting purposes, may be classified as mortgage loans. These loans 
may be reported as community development loans, if appropriate, or 
collected as ``Other Secured Lines/Loans for Purposes of Small 
Business.''
    The guidance provided in Sec. ____.42(c)(2)-1 is being revised to 
be applicable only to banks that file Call Reports. This question and 
answer is inapplicable to thrifts that file TFRs. The question and 
answer reiterates that banks that make loans to finance small 
businesses, which are secured by nonfarm, residential real estate, and 
for which the security interest was not taken only as an abundance of 
caution, may either report the loans as community development loans, if 
appropriate, or may collect and maintain loan information as ``Other 
Secured Lines/Loans for Purposes of Small Business.''

Clarification of Sec. ____.21(b)(5)-1 Addressing Assigned Ratings Being 
Adversely Affected by Poor Past Performance

    The agencies are clarifying the wording of the answer to this 
question. We intend no substantive change.

Home Mortgage Loan Modification, Extension, and Consolidation 
Agreements (MECAs)

    In several states, financial institutions use MECAs as an 
alternative to refinancings for their customers. Existing guidance 
Sec. ____.22(a)(2)-3 states that an institution may receive

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consideration under CRA as ``other loan data'' for MECAs, in which it 
obtains loans from other institutions without actually purchasing or 
refinancing the loans. The agencies are clarifying this guidance to 
indicate that it applies only to home mortgage loans.

Reporting Lines of Credit

    The agencies have received inquiries from examiners and our 
institutions about how institutions should report increases to small 
business or small farm lines of credit once the total line exceeds the 
$1 million or $500,000 limit for reporting a loan to a small business 
or a loan to a small farm, respectively, as described in the Call 
Report or TFR instructions. Because the Call Report and TFR no longer 
consider lines of credit that have exceeded the $1 million or $500,000 
thresholds as loans to small businesses or loans to small farms, 
respectively, such lines would also no longer be considered small 
business or small farm loans for CRA purposes.
    The agencies are revising existing question and answer 
Sec. ____.42-3 to clarify this view.

Clarification of Sec. ____.42(a)-5 Addressing Reporting Data on 
Refinancings and Renewals of Small Business and Small Farm Loans

    In the 2000 Interagency Questions and Answers, the agencies adopted 
a revised version of Sec. ____.42(a)-5, which discusses collection and 
reporting of data on small business and farm loans that are refinanced 
or renewed. The 2000 guidance suggests that if a renewal of $15,000 and 
new money of $5,000 are provided in connection with the same loan to 
the same borrower, the two amounts should be reported separately as two 
separate originations. In response to several communications from 
institutions indicating that their data systems may not allow such a 
transaction to be reported as two originations, the agencies are 
clarifying that institutions may report the two originations (the 
renewal and the increase in the line) together as a single origination. 
In the example above, an institution may report one origination of 
$20,000.
    We have also deleted from the answer to this question information 
that was relevant to data collected in the year 2000 and reported in 
2001. Because this data should have been reported by March 1, 2001, 
this portion of the answer is no longer pertinent. The remaining answer 
is applicable beginning with data on small business and small farm 
collected in 2000 and reported in 2001.

Updating Sec. ____.42-4

    Consistent with the deletion of the out-dated portion of the answer 
to Sec. ____.42(a)-5, we are also deleting the part of the answer to 
Sec. ____.42 `` - that was relevant only to data that was collected in 
2000 and reported in 2001. The remaining answer is applicable beginning 
with data about renewals of lines of credit collected in 2000 that will 
be reported in 2001.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    The SBREFA requires an agency, for each rule for which it prepares 
a final regulatory flexibility analysis, to publish one or more 
compliance guides to help small entities understand how to comply with 
the rule.
    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
agencies certified that their proposed CRA rule would not have a 
significant economic impact on a substantial number of small entities 
and invited public comments on that determination. See 58 FR 67478 
(Dec. 21, 1993); 59 FR 51250 (Oct. 7, 1994). In response to public 
comment, the agencies voluntarily prepared a final regulatory 
flexibility analysis for the joint final rule, although the analysis 
was not required because it supported the agencies' earlier 
certification regarding the proposed rule. Because a regulatory 
flexibility analysis was not required, section 212 of the SBREFA does 
not apply to the final CRA rule. However, in their continuing efforts 
to provide clear, understandable regulations and to comply with the 
spirit of the SBREFA, the agencies have compiled the Interagency 
Questions and Answers. The Interagency Questions and Answers serve the 
same purpose as the compliance guide described in the SBREFA by 
providing guidance on a variety of issues of particular concern to 
small banks and thrifts.
    The text of the Interagency Questions and Answers follows:

Interagency Questions and Answers Regarding Community Reinvestment

Sec. ____.11--Authority, Purposes, and Scope

Sec. ____.11(c) Scope

Secs. ____.11(c)(3) & 563e.11(c)(2)  Certain Special Purpose 
Institutions
    Secs. ____.11(c)(3) & 563e.11(c)(2)-1: Is the list of special 
purpose institutions exclusive?
    A1. No, there may be other examples of special purpose 
institutions. These institutions engage in specialized activities that 
do not involve granting credit to the public in the ordinary course of 
business. Special purpose institutions typically serve as correspondent 
banks, trust companies, or clearing agents or engage only in 
specialized services, such as cash management controlled disbursement 
services. A financial institution, however, does not become a special 
purpose institution merely by ceasing to make loans and, instead, 
making investments and providing other retail banking services.
    Sec. ____.11(c)(3) & 563e.11(c)(2)-2: To be a special purpose 
institution, must an institution limit its activities in its charter?
    A2. No. A special purpose institution may, but is not required to, 
limit the scope of its activities in its charter, articles of 
association or other corporate organizational documents. An institution 
that does not have legal limitations on its activities, but has 
voluntarily limited its activities, however, would no longer be exempt 
from Community Reinvestment Act (CRA) requirements if it subsequently 
engaged in activities that involve granting credit to the public in the 
ordinary course of business. An institution that believes it is exempt 
from CRA as a special purpose institution should seek confirmation of 
this status from its supervisory agency.

Sec. ____.12--Definitions

Sec. ____.12(a)  Affiliate

    Sec. ____.12(a)-1: Does the definition of ``affiliate'' include 
subsidiaries of an institution?
    A1. Yes, ``affiliate'' includes any company that controls, is 
controlled by, or is under common control with another company. An 
institution's subsidiary is controlled by the institution and is, 
therefore, an affiliate.

Secs. ____.12(f) & 563e.12(e)  Branch

    Secs. ____.12(f)-563e.12(e) & 1: Do the definitions of ``branch,'' 
``automated teller machine (ATM),'' and ``remote service facility 
(RSF)'' include mobile branches, ATMs, and RSFs?
    A1. Yes. Staffed mobile offices that are authorized as branches are 
considered ``branches'' and mobile ATMs and RSFs are considered 
``ATMs'' and ``RSFs.''
    Secs. ____.12(f) & 563e.12(e)-2: Are loan production offices (LPOs) 
branches for purposes of the CRA?
    A2. LPOs and other offices are not ``branches'' unless they are 
authorized as branches of the institution through the regulatory 
approval process of the institution's supervisory agency.

[[Page 36625]]

Secs. ____.12(h)-563e.12(g)  Community Development

    Secs. ____.12(h) & 563e.12(g)-1: Are community development 
activities limited to those that promote economic development?
    A1. No. Although the definition of ``community development'' 
includes activities that promote economic development by financing 
small businesses or farms, the rule does not limit community 
development loans and services and qualified investments to those 
activities. Community development also includes community- or tribal-
based child care, educational, health, or social services targeted to 
low- or moderate-income persons, affordable housing for low- or 
moderate-income individuals, and activities that revitalize or 
stabilize low- or moderate-income areas.
    Secs. ____.12(h) & 563e.12(g)-2: Must a community development 
activity occur inside a low- or moderate-income area in order for an 
institution to receive CRA consideration for the activity?
    A2. No. Community development includes activities outside of low- 
and moderate-income areas that provide affordable housing for, or 
community services targeted to, low- or moderate-income individuals and 
activities that promote economic development by financing small 
businesses and farms. Activities that stabilize or revitalize 
particular low- or moderate-income areas (including by creating, 
retaining, or improving jobs for low- or moderate-income persons) also 
qualify as community development, even if the activities are not 
located in these low- or moderate-income areas. One example is 
financing a supermarket that serves as an anchor store in a small strip 
mall located at the edge of a middle-income area, if the mall 
stabilizes the adjacent low-income community by providing needed 
shopping services that are not otherwise available in the low-income 
community.
    Secs. ____.12(h) & 563e.12(g)-3: Does the regulation provide 
flexibility in considering performance in high-cost areas?
    A3. Yes, the flexibility of the performance standards allows 
examiners to account in their evaluations for conditions in high-cost 
areas. Examiners consider lending and services to individuals and 
geographies of all income levels and businesses of all sizes and 
revenues. 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. For example, examiners could take into account the fact that 
activities address a credit shortage among middle-income people or 
areas caused by the disproportionately high cost of building, 
maintaining or acquiring a house when determining whether an 
institution's loan to or investment in an organization that funds 
affordable housing for middle-income people or areas, as well as low- 
and moderate-income people or areas, has as its primary purpose 
community development.

Secs. ____.12(h)(1) & 563e.12(g)(1)  Affordable Housing (Including 
Multifamily Rental Housing) for Low- or Moderate-Income Individuals

    Secs. ____.12(h)(1) & 563e.12(g)(1)-1: When determining whether a 
project is ``affordable housing for low- or moderate-income 
individuals,'' thereby meeting the definition of ``community 
development,'' will it be sufficient to use a formula that relates the 
cost of ownership, rental or borrowing to the income levels in the area 
as the only factor, regardless of whether the users, likely users, or 
beneficiaries of that affordable housing are low- or moderate-income 
individuals?
    A1. The concept of ``affordable housing'' for low- or moderate-
income individuals does hinge on whether low- or moderate-income 
individuals benefit, or are likely to benefit, from the housing. It 
would be inappropriate to give consideration to a project that 
exclusively or predominately houses families that are not low- or 
moderate-income simply because the rents or housing prices are set 
according to a particular formula.
    For projects that do not yet have occupants, and for which the 
income of the potential occupants cannot be determined in advance, or 
in other projects where the income of occupants cannot be verified, 
examiners will review factors such as demographic, economic and market 
data to determine the likelihood that the housing will ``primarily'' 
accommodate low- or moderate-income individuals. For example, examiners 
may look at median rents of the assessment area and the project; the 
median home value of either the assessment area, low- or moderate-
income geographies or the project; the low- or moderate-income 
population in the area of the project; or the past performance record 
of the organization(s) undertaking the project. Further, such a project 
could receive consideration if its express, bona fide intent, as 
stated, for example, in a prospectus, loan proposal or community action 
plan, is community development.

Secs. ____.12(h)(3) & 563e.12(g)(3)  Activities That Promote Economic 
Development by Financing Businesses or Farms That Meet Certain Size 
Eligibility Standards 

    Sec. ____.12(h)(3) & 563e.12(g)(3)-1: ``Community development'' 
includes activities that promote economic development by financing 
businesses or farms that meet certain size eligibility standards. Are 
all activities that finance businesses and farms that meet these size 
eligibility standards considered to be community development?
    A1. No. To be considered as ``community development'' under 
Secs. ____.12(h)(3) and 563e.12(g)(3), a loan, investment or service, 
whether made directly or through an intermediary, must meet both a size 
test and a purpose test. An activity meets the size requirement if it 
finances entities that either meet the size eligibility standards of 
the Small Business Administration's Development Company (SBDC) or Small 
Business Investment Company (SBIC) programs, or have gross annual 
revenues of $1 million or less. To meet the purpose test, the activity 
must promote economic development. An activity is considered to promote 
economic development if it supports permanent job creation, retention, 
and/or improvement for persons who are currently low- or moderate-
income, or supports permanent job creation, retention, and/or 
improvement either in low- or moderate-income geographies or in areas 
targeted for redevelopment by Federal, state, local or tribal 
governments. The agencies will presume that any loan to or investment 
in a SBDC, SBIC, or New Markets Venture Capital Company promotes 
economic development.
    In addition to their quantitative assessment of the amount of a 
financial institution's community development activities, examiners 
must make qualitative assessments of an institution's leadership in 
community development matters and the complexity, responsiveness, and 
impact of the community development activities of the institution. In 
reaching a conclusion about the impact of an institution's community 
development activities, examiners may, for example, determine that a 
loan to a small business in a low- or moderate-income geography that 
provides needed jobs and services in that area may have a greater 
impact and be more responsive to the community credit needs than does a 
loan to a small business in the

[[Page 36626]]

same geography that does not directly provide additional jobs or 
services to the community.

Secs. ____.12(h)(4) & 563e.12(g)(4)  Activities That Revitalize or 
Stabilize Low- or Moderate-Income Geographies

    Sec. ____.12(h)(4) & 563e.12(g)(4)-1: What are activities that 
revitalize or stabilize a low- or moderate-income geography?
    A1. Activities that revitalize or stabilize a low- or moderate-
income geography are activities that help to attract and retain 
businesses and residents. Examiners will presume that an activity 
revitalizes or stabilizes a low- or moderate-income geography if the 
activity has been approved by the governing board of an Enterprise 
Community or Empowerment Zone (designated pursuant to 26 U.S.C. 1391) 
and is consistent with the board's strategic plan. They will make the 
same presumption if the activity has received similar official 
designation as consistent with a federal, state, local or tribal 
government plan for the revitalization or stabilization of the 
geography. To determine whether other activities revitalize or 
stabilize a low- or moderate-income geography, examiners will evaluate 
the activity's actual impact on the geography, if information about 
this is available. If not, examiners will determine whether the 
activity is consistent with the community's formal or informal plans 
for the revitalization and stabilization of the low- or moderate-income 
geography. For more information on what activities revitalize or 
stabilize a low- or moderate-income geography, see Secs. ____.12(h) & 
563e.12(g)-2 and Secs. ____.12(i) & 563e.12(h)-4.

Secs. ____.12(i) & 563e.12(h)  Community Development Loan

    Secs. ____.12(i) & 563e.12(h)-1: What are examples of community 
development loans?
    A1. 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 to construct or rehabilitate community 
facilities that are located in low- and moderate-income areas or that 
serve primarily low- and moderate-income individuals;
     Financial intermediaries including Community Development 
Financial Institutions (CDFIs), Community Development Corporations 
(CDCs), minority- and women-owned financial institutions, community 
loan funds or pools, and low-income or community development credit 
unions that primarily lend or facilitate lending to promote community 
development.
     Local, state, and tribal governments for community 
development activities; and
     Borrowers 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.
    The rehabilitation and construction of affordable housing or 
community facilities, referred to above, may include the abatement or 
remediation of, or other actions to correct, environmental hazards, 
such as lead-based paint, that are present in the housing, facilities, 
or site.
    Secs. ____.12(i) & 563e.12(h)-2: If a retail institution that is 
not required to report under the Home Mortgage Disclosure Act (HMDA) 
makes affordable home mortgage loans that would be HMDA-reportable home 
mortgage loans if it were a reporting institution, or if a small 
institution that is not required to collect and report loan data under 
CRA makes small business and small farm loans and consumer loans that 
would be collected and/or reported if the institution were a large 
institution, may the institution have these loans considered as 
community development loans?
    A2. No. Although small institutions are not required to report or 
collect information on small business and small farm loans and consumer 
loans, and some institutions are not required to report information 
about their home mortgage loans under HMDA, if these institutions are 
retail institutions, the agencies will consider in their CRA 
evaluations the institutions' originations and purchases of loans that 
would have been collected or reported as small business, small farm, 
consumer or home mortgage loans, had the institution been a collecting 
and reporting institution under the CRA or the HMDA. Therefore, these 
loans will not be considered as community development loans. 
Multifamily dwelling loans, however, may be considered as community 
development loans as well as home mortgage loans. See also 
Sec. ____.42(b)(2)-2.
    Secs. ____.12(i) & 563e.12(h)-3: Do secured credit cards or other 
credit card programs targeted to low- or moderate-income individuals 
qualify as community development loans?
    A3. No. Credit cards issued to low- or moderate-income individuals 
for household, family, or other personal expenditures, whether as part 
of a program targeted to such individuals or otherwise, do not qualify 
as community development loans because they do not have as their 
primary purpose any of the activities included in the definition of 
``community development.''
    Secs. ____.12(i) & 563e.12(h)-4: The regulation indicates that 
community development includes ``activities that revitalize or 
stabilize low- or moderate-income geographies.'' Do all loans in a low- 
to moderate-income geography have a stabilizing effect?
    A4. No. Some loans may provide only indirect or short-term benefits 
to low- or moderate-income individuals in a low- or moderate-income 
geography. These loans are not considered to have a community 
development purpose. For example, a loan for upper-income housing in a 
distressed area is not considered to have a community development 
purpose simply because 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. On the other hand, a loan for an anchor business in a 
distressed area (or a nearby area), that employs or serves residents of 
the area, and thus stabilizes the area, may be considered to have a 
community development purpose. For example, in an underserved, 
distressed area, a loan for a pharmacy that employs, and provides 
supplies to, residents of the area promotes community development.
    Secs. ____.12(i) & 563e.12(h)-5: Must there be some immediate or 
direct benefit to the institution's assessment area(s) to satisfy the 
regulations' requirement that qualified investments and community 
development loans or services benefit an institution's assessment 
area(s) or a broader statewide or regional area that includes the 
institution's assessment area(s)?
    A5. No. The regulations recognize that community development 
organizations and programs are efficient and effective ways for 
institutions to promote community development. These organizations and 
programs often operate on a statewide or even multi-state basis. 
Therefore, an institution's activity is considered a community 
development loan or service or a qualified investment if it supports an 
organization or activity that covers an area that is larger than, but 
includes, the institution's assessment area(s). The

[[Page 36627]]

institution's assessment area(s) need not receive an immediate or 
direct benefit from the institution's specific participation in the 
broader organization or activity, provided that the purpose, mandate, 
or function of the organization or activity includes serving 
geographies or individuals located within the institution's assessment 
area(s).
    In addition, a retail institution that, considering its performance 
context, has adequately addressed the community development needs of 
its assessment area(s) will receive consideration for certain other 
community development activities. These community development 
activities must benefit geographies or individuals located somewhere 
within a broader statewide or regional area that includes the 
institution's assessment area(s). Examiners will consider these 
activities even if they will not benefit the institution's assessment 
area(s).
    Secs. ____.12(i) & 563e.12(h)-6: What is meant by the term 
``regional area''?
    A6. A ``regional area'' may be as small as a city or county or as 
large as a multistate area. For example, the ``mid-Atlantic states'' 
may comprise a regional area.
    Community development loans and services and qualified investments 
to statewide or regional organizations that have a bona fide purpose, 
mandate, or function that includes serving the geographies or 
individuals within the institution's assessment area(s) will be 
considered as addressing assessment area needs. When examiners evaluate 
community development loans and services and qualified investments that 
benefit a regional area that includes the institution's assessment 
area(s), they will consider the institution's performance context as 
well as the size of the regional area and the actual or potential 
benefit to the institution's assessment area(s). With larger regional 
areas, benefit to the institution's assessment area(s) may be diffused 
and, thus less responsive to assessment area needs.
    In addition, as long as an institution has adequately addressed the 
community development needs of its assessment area(s), it will also 
receive consideration for community development activities that benefit 
geographies or individuals located somewhere within the broader 
statewide or regional area that includes the institution's assessment 
area(s), even if those activities do not benefit its assessment 
area(s).
    Secs. ____.12(i) & 563e.12(h)-7: What is meant by the term 
``primary purpose'' as that term is used to define what constitutes a 
community development loan, a qualified investment or a community 
development service?
    A7. A loan, investment or service has as its primary purpose 
community development when it is 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 that meet the requirements set forth in 
Secs. ____.12(h) or 563e.12(g). To determine whether an activity is 
designed for an express community development purpose, the agencies 
apply one of two approaches. First, if a majority of the dollars or 
beneficiaries of the activity are identifiable to one or more of the 
enumerated community development purposes, then the activity will be 
considered to possess the requisite primary purpose. Alternatively, 
where the measurable portion of any benefit bestowed or dollars applied 
to the community development purpose is less than a majority of the 
entire activity's benefits or dollar value, then the activity may still 
be considered to possess the requisite primary purpose if (1) the 
express, bona fide intent of the activity, as stated, for example, in a 
prospectus, loan proposal, or community action plan, is primarily one 
or more of the enumerated community development purposes; (2) the 
activity is specifically structured (given any relevant market or legal 
constraints or performance context factors) to achieve the expressed 
community development purpose; and (3) the activity accomplishes, or is 
reasonably certain to accomplish, the community development purpose 
involved. The fact that an activity provides indirect or short-term 
benefits to low-or moderate-income persons does not make the activity 
community development, nor does the mere presence of such indirect or 
short-term benefits constitute a primary purpose of community 
development. Financial institutions that want examiners to consider 
certain activities under either approach should be prepared to 
demonstrate the activities' qualifications.

Secs. ____.12(j) & 563e.12(i)  Community Development Service

    Secs. ____.12(j) & 563e.12(i)-1: In addition to meeting the 
definition of ``community development'' in the regulation, community 
development services must also be related to the provision of financial 
services. What is meant by ``provision of financial services''? 
    A1. Providing financial services means providing services of the 
type generally provided by the financial services industry. Providing 
financial services often involves informing community members about how 
to get or use credit or otherwise providing credit services or 
information to the community. For example, service on the board of 
directors of an organization that promotes credit availability or 
finances affordable housing is related to the provision of financial 
services. Providing technical assistance about financial services 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 providing 
financial services. By contrast, activities that do not take advantage 
of the employees' financial expertise, such as neighborhood cleanups, 
do not involve the provision of financial services.
    Secs. ____.12(j) & 563e.12(i)-2: Are personal charitable activities 
provided by an institution's employees or directors outside the 
ordinary course of their employment considered community development 
services? 
    A2. No. Services must be provided as a representative of the 
institution. For example, if a financial institution's director, on her 
own time and not as a representative of the institution, volunteers one 
evening a week at a local community development corporation's financial 
counseling program, the institution may not consider this activity a 
community development service.
    Secs. ____.12(j) & 563e.12(i)-3: What are examples of community 
development services? 
    A3. Examples of community development services include, but are not 
limited to, the following:
     Providing technical assistance on financial matters to 
nonprofit, tribal or government organizations serving low-and moderate-
income housing or economic revitalization and development needs;
     Providing technical assistance on financial matters to 
small businesses or community development organizations, including 
organizations and individuals who apply for loans or grants under the 
Federal Home Loan Banks' Affordable Housing Program;
     Lending employees to provide financial services for 
organizations facilitating affordable housing construction and 
rehabilitation or development of affordable housing;
     Providing credit counseling, home-buyer and home-
maintenance counseling, financial planning or other

[[Page 36628]]

financial services education to promote community development and 
affordable housing;
     Establishing school savings programs and developing or 
teaching financial education curricula for low-or moderate-income 
individuals;
     Providing electronic benefits transfer and point of sale 
terminal systems to improve access to financial services, such as by 
decreasing costs, for low- or moderate-income individuals; and
     Providing other financial services with the primary 
purpose of community development, such as low-cost bank accounts, 
including ``Electronic Transfer Accounts'' provided pursuant to the 
Debt Collection Improvement Act of 1996, or free government check 
cashing that increases access to financial services for low- or 
moderate-income individuals.
    Examples of technical assistance activities that might be provided 
to community development organizations include:
     Serving on a loan review committee;
     Developing loan application and underwriting standards;
     Developing loan processing systems;
     Developing secondary market vehicles or programs;
     Assisting in marketing financial services, including 
development of advertising and promotions, publications, workshops and 
conferences;
     Furnishing financial services training for staff and 
management;
     Contributing accounting/bookkeeping services; and
     Assisting in fund raising, including soliciting or 
arranging investments.

Secs. ____.12(k) & 563e.12(j) Consumer Loan

    Secs. ____.12(k) & 563e.12(j)-1: Are home equity loans considered 
``consumer loans''?
    A1. Home equity loans made for purposes other than home purchase, 
home improvement or refinancing home purchase or home improvement loans 
are consumer loans if they are extended to one or more individuals for 
household, family, or other personal expenditures.
    Secs. ____.12(k) & 563e.12(j)-2: May a home equity line of credit 
be considered a ``consumer loan'' even if part of the line is for home 
improvement purposes? 
    A2. If the predominant purpose of the line is home improvement, the 
line may only be reported under HMDA and may not be considered a 
consumer loan. However, the full amount of the line may be considered a 
``consumer loan'' if its predominant purpose is for household, family, 
or other personal expenditures, and to a lesser extent home 
improvement, and the full amount of the line has not been reported 
under HMDA. This is the case even though there may be ``double 
counting'' because part of the line may also have been reported under 
HMDA.
    Secs. ____.12(k) & 563e.12(j)-3: How should an institution collect 
or report information on loans the proceeds of which will be used for 
multiple purposes?
    A3. If an institution makes a single loan or provides a line of 
credit to a customer to be used for both consumer and small business 
purposes, consistent with the Call Report and TFR instructions, the 
institution should determine the major (predominant) component of the 
loan or the credit line and collect or report the entire loan or credit 
line in accordance with the regulation's specifications for that loan 
type.

Secs. ____.12(m) & 563e.12(l)  Home Mortgage Loan

    Secs. ____.12(m) & 563e.12(l)-1: Does the term ``home mortgage 
loan'' include loans other than ``home purchase loans''?
    A1. Yes. ``Home mortgage loan'' includes a ``home improvement 
loan'' as well as a ``home purchase loan,'' as both terms are defined 
in the HMDA regulation, Regulation C, 12 CFR part 203. This definition 
also includes multifamily (five-or-more families) dwelling loans, loans 
for the purchase of manufactured homes, and refinancings of home 
improvement and home purchase loans.
    Secs. ____.12(m) & 563e.12(l)-2: Some financial institutions broker 
home mortgage loans. They typically take the borrower's application and 
perform other settlement activities; however, they do not make the 
credit decision. The broker institutions may also initially fund these 
mortgage loans, then immediately assign them to another lender. Because 
the broker institution does not make the credit decision, under 
Regulation C (HMDA), they do not record the loans on their HMDA-LARs, 
even if they fund the loans. May an institution receive any 
consideration under CRA for its home mortgage loan brokerage 
activities?
    A2. Yes. A financial institution that funds home mortgage loans but 
immediately assigns the loans to the lender that made the credit 
decisions may present information about these loans to examiners for 
consideration under the lending test as ``other loan data.'' Under 
Regulation C, the broker institution does not record the loans on its 
HMDA-LAR because it does not make the credit decisions, even if it 
funds the loans. An institution electing to have these home mortgage 
loans considered must maintain information about all of the home 
mortgage loans that it has funded in this way. Examiners will consider 
this other loan data using the same criteria by which home mortgage 
loans originated or purchased by an institution are evaluated.
    Institutions that do not provide funding but merely take 
applications and provide settlement services for another lender that 
makes the credit decisions will receive consideration for this service 
as a retail banking service. Examiners will consider an institution's 
mortgage brokerage services when evaluating the range of services 
provided to low-, moderate-, middle-and upper-income geographies and 
the degree to which the services are tailored to meet the needs of 
those geographies. Alternatively, an institution's mortgage brokerage 
service may be considered a community development service if the 
primary purpose of the service is community development. An institution 
wishing to have its mortgage brokerage service considered as a 
community development service must provide sufficient information to 
substantiate that its primary purpose is community development and to 
establish the extent of the services provided.

Secs. ____.12(n) & 563e.12(m)  Income Level

    Secs. ____.12(n) & 563e.12(m)-1: Where do institutions find income 
level data for geographies and individuals? 
    A1. The income levels for geographies, i.e., census tracts and 
block numbering areas, are derived from Census Bureau information and 
are updated every ten years. Institutions may contact their regional 
Census Bureau office or the Census Bureau's Income Statistics Office at 
(301) 763-8576 to obtain income levels for geographies. See Appendix A 
of these Interagency Questions and Answers for a list of the regional 
Census Bureau offices. The income levels for individuals are derived 
from information calculated by the Department of Housing and Urban 
Development (HUD) and updated annually. Institutions may contact HUD at 
(800) 245-2691 to request a copy of ``FY [year number, e.g., 1996] 
Median Family Incomes for States and their Metropolitan and 
Nonmetropolitan Portions.''

[[Page 36629]]

    Alternatively, institutions may obtain a list of the 1990 Census 
Bureau-calculated and the annually updated HUD median family incomes 
for metropolitan statistical areas (MSAs) and statewide nonmetropolitan 
areas by calling the Federal Financial Institution Examination 
Council's (FFIEC's) HMDA Help Line at (202) 452-2016. A free copy will 
be faxed to the caller through the ``fax-back'' system. Institutions 
may also call this number to have ``faxed-back'' an order form, from 
which they may order a list providing the median family income level, 
as a percentage of the appropriate MSA or nonmetropolitan median family 
income, of every census tract and block numbering area (BNA). This list 
costs $50. Institutions may also obtain the list of MSA and statewide 
nonmetropolitan area median family incomes or an order form through the 
FFIEC's home page on the Internet at http://www.ffiec.gov>.

Secs. ____.12(o) & 563e.12(n)  Limited Purpose Institution

    Secs. ____.12(o) & 563e.12(n)-1: What Constitutes a ``Narrow 
Product Line'' in the Definition of ``Limited Purpose Institution''?
    A1. An institution offers a narrow product line by limiting its 
lending activities to a product line other than a traditional retail 
product line required to be evaluated under the lending test (i.e., 
home mortgage, small business, and small farm loans). Thus, an 
institution engaged only in making credit card or motor vehicle loans 
offers a narrow product line, while an institution limiting its lending 
activities to home mortgages is not offering a narrow product line.
    Secs. ____.12(o) & 563e.12(n)-2: What factors will the agencies 
consider to determine whether an institution that, if limited purpose, 
makes loans outside a narrow product line, or, if wholesale, engages in 
retail lending, will lose its limited purpose or wholesale designation 
because of too much other lending? 
    A2. Wholesale institutions may engage in some retail lending 
without losing their designation if this activity is incidental and 
done on an accommodation basis. Similarly, limited purpose institutions 
continue to meet the narrow product line requirement if they provide 
other types of loans on an infrequent basis. In reviewing other lending 
activities by these institutions, the agencies will consider the 
following factors:
     Is the other lending provided as an incident to the 
institution's wholesale lending?
     Are the loans provided as an accommodation to the 
institution's wholesale customers?
     Are the loans made only infrequently to the limited 
purpose institution's customers?
     Does only an insignificant portion of the institution's 
total assets and income result from the other lending?
     How significant a role does the institution play in 
providing that type(s) of loan(s) in the institution's assessment 
area(s)?
     Does the institution hold itself out as offering that 
type(s) of loan(s)?
     Does the lending test or the community development test 
present a more accurate picture of the institution's CRA performance?
    Secs. ____.12(o) & 563e.12(n)-3: Do ``niche institutions'' qualify 
as limited purpose (or wholesale) institutions?
    A3. Generally, no. Institutions that are in the business of lending 
to the public, but specialize in certain types of retail loans (for 
example, home mortgage or small business loans) to certain types of 
borrowers (for example, to high-end income level customers or to 
corporations or partnerships of licensed professional practitioners) 
(``niche institutions'') generally would not qualify as limited purpose 
(or wholesale) institutions.

Secs. ____.12(s) & 563e.12(r)  Qualified Investment

    Secs. ____.12(s) & 563e.12(r)-1: Does the CRA regulation provide 
authority for institutions to make investments?
    A1. No. The CRA regulation does not provide authority for 
institutions to make investments that are not otherwise allowed by 
Federal law.
    Secs. ____.12(s) & 563e.12(r)-2: Are mortgage-backed securities or 
municipal bonds ``qualified investments''?
    A2. As a general rule, mortgage-backed securities and municipal 
bonds are not qualified investments because they do not have as their 
primary purpose community development, as defined in the CRA 
regulations. Nonetheless, mortgage-backed securities or municipal bonds 
designed primarily to finance community development generally are 
qualified investments. Municipal bonds or other securities with a 
primary purpose of community development need not be housing-related. 
For example, a bond to fund a community facility or park or to provide 
sewage services as part of a plan to redevelop a low-income 
neighborhood is a qualified investment. Housing-related bonds or 
securities must primarily address affordable housing (including 
multifamily rental housing) needs in order to qualify. See also 
Sec. ____.23(b)-2.
    Secs. ____.12(s) & 563e.12(r)-3: Are Federal Home Loan Bank stocks 
and membership reserves with the Federal Reserve Banks ``qualified 
investments''?
    A3. No. Federal Home Loan Bank (FHLB) stock and membership reserves 
with the Federal Reserve Banks do not have a sufficient connection to 
community development to be qualified investments. However, FHLB member 
institutions may receive CRA consideration for technical assistance 
they provide on behalf of applicants and recipients of funding from the 
FHLB's Affordable Housing Program. See Secs. ____.12(j) & 563e.12(i)-3.
    Secs. ____.12(s) & 563e.12(r)-4: What are examples of qualified 
investments? 
    A4. Examples of qualified investments include, but are not limited 
to, investments, grants, deposits or shares in or to:
     Financial intermediaries (including, Community Development 
Financial Institutions (CDFIs), Community Development Corporations 
(CDCs), minority- and women-owned financial institutions, community 
loan funds, 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;
     Organizations engaged in affordable housing rehabilitation 
and construction, including multifamily rental housing;
     Organizations, including, for example, Small Business 
Investment Companies (SBICs) and specialized SBICs, that promote 
economic development by financing small businesses;
     Facilities that promote community development in low- and 
moderate-income areas for low- and moderate-income individuals, such as 
youth programs, homeless centers, soup kitchens, health care 
facilities, battered women's centers, and alcohol and drug recovery 
centers;
     Projects eligible for low-income housing tax credits;
     State and municipal obligations, such as revenue bonds, 
that specifically support affordable housing or other community 
development;
     Not-for-profit organizations serving low- and moderate-
income housing or other community development needs, such as counseling 
for credit, home-ownership, home maintenance, and other financial 
services education; and
     Organizations supporting activities essential to the 
capacity of low- and

[[Page 36630]]

moderate-income individuals or geographies to utilize credit or to 
sustain economic development, such as, for example, day care operations 
and job training programs that enable people to work.
    Secs. ____.12(s) & 563e.12(r)-5: Will an institution receive 
consideration for charitable contributions as ``qualified 
investments''?
    A5. Yes, provided they have as their primary purpose community 
development as defined in the regulations. A charitable contribution, 
whether in cash or an in-kind contribution of property, is included in 
the term ``grant.'' A qualified investment is not disqualified because 
an institution receives favorable treatment for it (for example, as a 
tax deduction or credit) under the Internal Revenue Code.
    Secs. ____.12(s) & 563e.12(r)-6: An institution makes or 
participates in a community development loan. The institution provided 
the loan at below-market interest rates or ``bought down'' the interest 
rate to the borrower. Is the lost income resulting from the lower 
interest rate or buy-down a qualified investment?
    A6. No. The agencies will, however, consider the innovativeness and 
complexity of the community development loan within the bounds of safe 
and sound banking practices.
    Secs. ____.12(s) & 563e.12(r)-7: Will the agencies consider as a 
qualified investment the wages or other compensation of an employee or 
director who provides assistance to a community development 
organization on behalf of the institution?
    A7. No. However, the agencies will consider donated labor of 
employees or directors of a financial institution in the service test 
if the activity is a community development service.

Secs. ____.12(t) & 563e.12(s)  Small Institution

    Secs. ____.12(t) & 563e.12(s)-1: How are the ``total bank and 
thrift assets'' of a holding company determined?
    A1. ``Total banking and thrift assets'' of a holding company are 
determined by combining the total assets of all banks and/or thrifts 
that are majority-owned by the holding company. An institution is 
majority-owned if the holding company directly or indirectly owns more 
than 50 percent of its outstanding voting stock.
    Secs. ____.12(t) & 563e.12(s)-2: How are Federal and State branch 
assets of a foreign bank calculated for purposes of the CRA?
    A2. A Federal or State branch of a foreign bank is considered a 
small institution if the Federal or State branch has less than $250 
million in assets and the total assets of the foreign bank's or its 
holding company's U.S. bank and thrift subsidiaries that are subject to 
the CRA are less than $1 billion. This calculation includes not only 
FDIC-insured bank and thrift subsidiaries, but also the assets of any 
FDIC-insured branch of the foreign bank and the assets of any uninsured 
Federal or State branch (other than a limited branch or a Federal 
agency) of the foreign bank that results from an acquisition described 
in section 5(a)(8) of the International Banking Act of 1978 (12 U.S.C. 
Sec. 3103(a)(8)).

Secs. ____.12(u) & 563e.12(t) Small Business Loan

    Secs. ____.12(u) & 563e.12(t)-1: Are loans to nonprofit 
organizations considered small business loans or are they considered 
community development loans?
    A1. To be considered a small business loan, a loan must meet the 
definition of ``loan to small business'' in the instructions in the 
``Consolidated Reports of Conditions and Income'' (Call Report) and 
``Thrift Financial Reports'' (TFR). In general, a loan to a nonprofit 
organization, for business or farm purposes, where the loan is secured 
by nonfarm nonresidential property and the original amount of the loan 
is $1 million or less, if a business loan, or $500,000 or less, if a 
farm loan, would be reported in the Call Report and TFR as a small 
business or small farm loan. If a loan to a nonprofit organization is 
reportable as a small business or small farm loan, it cannot also be 
considered as a community development loan, except by a wholesale or 
limited purpose institution. Loans to nonprofit organizations that are 
not small business or small farm loans for Call Report and TFR purposes 
may be considered as community development loans if they meet the 
regulatory definition.
    Secs. ____.12(u) & 563e.12(t)-2: Are loans secured by commercial 
real estate considered small business loans?
    A2. Yes, depending on their principal amount. Small business loans 
include loans secured by ``nonfarm nonresidential properties,'' as 
defined in the Call Report and TFR, in amounts less than $1 million.
    Secs. ____.12(u) & 563e.12(t)-3: Are loans secured by nonfarm 
residential real estate to finance small businesses ``small business 
loans''?
    A3. Applicable to banks filing Call Reports: Typically not. Loans 
secured by nonfarm residential real estate that are used to finance 
small businesses are not included as ``small business'' loans for Call 
Report purposes unless the security interest in the nonfarm residential 
real estate is taken only as an abundance of caution. (See Call Report 
Glossary definition of ``Loan Secured by Real Estate.'') The agencies 
recognize that many small businesses are financed by loans that would 
not have been made or would have been made on less favorable terms had 
they not been secured by residential real estate. If these loans 
promote community development, as defined in the regulation, they may 
be considered as community development loans. Otherwise, at an 
institution's option, the institution may collect and maintain data 
separately concerning these loans and request that the data be 
considered in its CRA evaluation as ``Other Secured Lines/Loans for 
Purposes of Small Business.''
    Applicable to institutions that file TFRs: Possibly, depending how 
the loan is classified for TFR purposes. Loans secured by nonfarm 
residential real estate to finance small businesses may be included as 
small business loans only if they are reported on the TFR as 
nonmortgage, commercial loans. (See TFR Q&A No. 62.) Otherwise, loans 
that meet the definition of mortgage loans, for TFR reporting purposes, 
may be classified as mortgage loans.
    Secs. ____.12(u) & 563e.12(t)-4: Are credit cards issued to small 
businesses considered ``small business loans''?
    A4. Credit cards issued to a small business or to individuals to be 
used, with the institution's knowledge, as business accounts are small 
business loans if they meet the definitional requirements in the Call 
Report or TFR instructions.

Secs. ____.12(w) & 563e.12(v)  Wholesale Institution

    Secs. ____.12(w) & 563e.12(v)-1: What factors will the agencies 
consider in determining whether an institution is in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers?
    A1. The agencies will consider whether:
     The institution holds itself out to the retail public as 
providing such loans; and
     The institution's revenues from extending such loans are 
significant when compared to its overall operations.
    A wholesale institution may make some retail loans without losing 
its wholesale designation as described above in Secs. ____.12(o) & 
563e.12(n)-2.

[[Page 36631]]

Sec. ____.21--Performance Tests, Standards, and Ratings, in General

Sec. ____.21(a)  Performance Tests and Standards

    Sec. ____.21(a)-1: Are all community development activities 
weighted equally by examiners?
    A1. No. Examiners will consider the responsiveness to credit and 
community development needs, as well as the innovativeness and 
complexity of an institution's community development lending, qualified 
investments, and community development services. These criteria include 
consideration of the degree to which they serve as a catalyst for other 
community development activities. The criteria are designed to add a 
qualitative element to the evaluation of an institution's performance.

Sec. ____.21(b)  Performance context

    Sec. ____.21(b)-1: Is the performance context essentially the same 
as the former regulation's needs assessment?
    A1. No. The performance context is a broad range of economic, 
demographic, and institution-and community-specific information that an 
examiner reviews to understand the context in which an institution's 
record of performance should be evaluated. The agencies will provide 
examiners with much of this information prior to the examination. The 
performance context is not a formal or written assessment of community 
credit needs.

Sec. ____.21(b)(2) Information Maintained by the Institution or 
Obtained From Community Contacts

    Sec. ____.21(b)(2)-1: Will examiners consider performance context 
information provided by institutions?
    A1. Yes. An institution may provide examiners with any information 
it deems relevant, including information on the lending, investment, 
and service opportunities in its assessment area(s). This information 
may include data on the business opportunities addressed by lenders not 
subject to the CRA. Institutions are not required, however, to prepare 
a needs assessment. If an institution provides information to 
examiners, the agencies will not expect information other 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). The agencies 
will not evaluate an institution's efforts to ascertain community 
credit needs or rate an institution on the quality of any information 
it provides.
    Sec. ____.21(b)(2)-2: Will examiners conduct community contact 
interviews as part of the examination process?
    A2. Yes. Examiners will consider information obtained from 
interviews with local community, civic, and government leaders. These 
interviews provide examiners with knowledge regarding the local 
community, its economic base, and community development initiatives. To 
ensure that information from local leaders is considered--particularly 
in areas where the number of potential contacts may be limited--
examiners may use information obtained through an interview with a 
single community contact for examinations of more than one institution 
in a given market. In addition, the agencies will consider information 
obtained from interviews conducted by other agency staff and by the 
other agencies. In order to augment contacts previously used by the 
agencies and foster a wider array of contacts, the agencies will share 
community contact information.

Sec. ____.21(b)(4)  Institutional Capacity and Constraints

    Sec. ____.21(b)(4)-1: Will examiners consider factors outside of an 
institution's control that prevent it from engaging in certain 
activities?
    A1. Yes. Examiners will take into account statutory and supervisory 
limitations on an institution's ability to engage in any lending, 
investment, and service activities. For example, a savings association 
that has made few or no qualified investments due to its limited 
investment authority may still receive a low satisfactory rating under 
the investment test if it has a strong lending record.

Sec. ____.21(b)(5)  Institution's Past Performance and the Performance 
of Similarly Situated Lenders

    Sec. ____.21(b)(5)-1: Can an institution's assigned rating be 
adversely affected by poor past performance?
    A1. Yes. The agencies will consider an institution's past 
performance in its overall evaluation. For example, an institution that 
received a rating of ``needs to improve'' in the past may receive a 
rating of ``substantial noncompliance'' if its performance has not 
improved.
    Sec. ____.21(b)(5)-2: How will examiners consider the performance 
of similarly situated lenders?
    A2. The performance context section of the regulation permits the 
performance of similarly situated lenders to be considered, for 
example, as one of a number of considerations in evaluating the 
geographic distribution of an institution's loans to low-, moderate-, 
middle-, and upper-income geographies. This analysis, as well as other 
analyses, may be used, for example, where groups of contiguous 
geographies within an institution's assessment area(s) exhibit 
abnormally low penetration. In this regard, the performance of 
similarly situated lenders may be analyzed if such an analysis would 
provide accurate insight into the institution's lack of performance in 
those areas. The regulation does not require the use of a specific type 
of analysis under these circumstances. Moreover, no ratio developed 
from any type of analysis is linked to any lending test rating.

Sec. ____.22--Lending Test

Sec. ____.22(a)  Scope of Test

    Sec. ____.22(a)-1: Are there any types of lending activities that 
help meet the credit needs of an institution's assessment area(s) and 
that may warrant favorable consideration as activities that are 
responsive to the needs of the institution's assessment area(s)?
    A1. Credit needs vary from community to community. However, there 
are some lending activities that are likely to be responsive in helping 
to meet the credit needs of many communities. These activities include:
     Providing loan programs that include a financial education 
component about how to avoid lending activities that may be abusive or 
otherwise unsuitable;
     Establishing loan programs that provide small, unsecured 
consumer loans in a safe and sound manner (i.e., based on the 
borrower's ability to repay) and with reasonable terms;
     Offering lending programs, which feature reporting to 
consumer reporting agencies, that transition borrowers from loans with 
higher interest rates and fees (based on credit risk) to lower-cost 
loans, consistent with safe and sound lending practices. Reporting to 
consumer reporting agencies allows borrowers accessing these programs 
the opportunity to improve their credit histories and thereby improve 
their access to competitive credit products.
    Examiners may consider favorably such lending activities, which 
have features augmenting the success and effectiveness of the 
institution's lending programs.

Sec. ____.22(a)(1) Types of Loans Considered

    Sec. ____.22(a)(1)-1: If a large retail institution is not required 
to collect and report home mortgage data under the

[[Page 36632]]

HMDA, will the agencies still evaluate the institution's home mortgage 
lending performance?
    A1. Yes. The agencies will sample the institution's home mortgage 
loan files in order to assess its performance under the lending test 
criteria.
    Sec. ____.22(a)(1)-2: When will examiners consider consumer loans 
as part of an institution's CRA evaluation?
    A2. Consumer loans will be evaluated if the institution so elects; 
and an institution that elects not to have its consumer loans evaluated 
will not be viewed less favorably by examiners than one that does. 
However, if consumer loans constitute a substantial majority of the 
institution's business, the agencies will evaluate them even if the 
institution does not so elect. The agencies interpret ``substantial 
majority'' to be so significant a portion of the institution's lending 
activity by number or dollar volume of loans that the lending test 
evaluation would not meaningfully reflect its lending performance if 
consumer loans were excluded.

Sec. ____.22(a)(2)   Loan Originations and Purchases/Other Loan Data

    Sec. ____.22(a)(2)-1: How are lending commitments (such as letters 
of credit) evaluated under the regulation?
    A1. The agencies consider lending commitments (such as letters of 
credit) only at the option of the institution. Commitments must be 
legally binding between an institution and a borrower in order to be 
considered. Information about lending commitments will be used by 
examiners to enhance their understanding of an institution's 
performance.
    Sec. ____.22(a)(2)-2: Will examiners review application data as 
part of the lending test?
    A2. Application activity is not a performance criterion of the 
lending test. However, examiners may consider this information in the 
performance context analysis because this information may give 
examiners insight on, for example, the demand for loans.
    Sec. ____.22(a)(2)-3: May a financial institution receive 
consideration under CRA for home mortgage loan modification, extension, 
and consolidation agreements (MECAs), in which it obtains home mortgage 
loans from other institutions without actually purchasing or 
refinancing the home mortgage loans, as those terms have been 
interpreted under CRA and HMDA, as implemented by 12 CFR pt. 203?
    A3. Yes. In some states, MECAs, which are not considered loan 
refinancings because the existing loan obligations are not satisfied 
and replaced, are common. Although these transactions are not 
considered to be purchases or refinancings, as those terms have been 
interpreted under CRA, they do achieve the same results. An institution 
may present information about its MECA activities with respect to home 
mortgages to examiners for consideration under the lending test as 
``other loan data.''
    Sec. ____.22(a)(2)-4: Do institutions receive consideration for 
originating or purchasing loans that are fully guaranteed?
    A4. Yes. The lending test evaluates an institution's record of 
helping to meet the credit needs of its assessment area(s) through the 
origination or purchase of specified types of loans. The test does not 
take into account whether or not such loans are guaranteed.

Sec. ____.22(b)  Performance Criteria

    Sec. ____.22(b)-1: How will examiners apply the performance 
criteria in the lending test?
    A1. Examiners will apply the performance criteria reasonably and 
fairly, in accord with the regulations, the examination procedures, and 
this Guidance. In doing so, examiners will disregard efforts by an 
institution to manipulate business operations or present information in 
an artificial light that does not accurately reflect an institution's 
overall record of lending performance.

Sec. ____.22(b)(1)  Lending Activity

    Sec. ____.22(b)(1)-1: How will the agencies apply the lending 
activity criterion to discourage an institution from originating loans 
that are viewed favorably under CRA in the institution itself and 
referring other loans, which are not viewed as favorably, for 
origination by an affiliate?
    A1. Examiners will review closely institutions with (1) a small 
number and amount of home mortgage loans with an unusually good 
distribution among low-and moderate-income areas and low- and moderate-
income borrowers and (2) a policy of referring most, but not all, of 
their home mortgage loans to affiliated institutions. If an institution 
is making loans mostly to low- and moderate-income individuals and 
areas and referring the rest of the loan applicants to an affiliate for 
the purpose of receiving a favorable CRA rating, examiners may conclude 
that the institution's lending activity is not satisfactory because it 
has inappropriately attempted to influence the rating. In evaluating an 
institution's lending, examiners will consider legitimate business 
reasons for the allocation of the lending activity.

Sec. ____.22(b)(2) & (3)  Geographic Distribution and Borrower 
Characteristics

    Sec. ____.22(b)(2) & (3)-1: How do the geographic distribution of 
loans and the distribution of lending by borrower characteristics 
interact in the lending test?
    A1. Examiners generally will consider both the distribution of an 
institution's loans among geographies of different income levels and 
among borrowers of different income levels and businesses of different 
sizes. The importance of the borrower distribution criterion, 
particularly in relation to the geographic distribution criterion, will 
depend on the performance context. For example, distribution among 
borrowers with different income levels may be more important in areas 
without identifiable geographies of different income categories. On the 
other hand, geographic distribution may be more important in areas with 
the full range of geographies of different income categories.
    Sec. ____.22(b)(2) & (3)-2: Must an institution lend to all 
portions of its assessment area?
    A2. The term ``assessment area'' describes the geographic area 
within which the agencies assess how well an institution has met the 
specific performance tests and standards in the rule. The agencies do 
not expect that simply because a census tract or block numbering area 
is within an institution's assessment area(s) the institution must lend 
to that census tract or block numbering area. Rather the agencies will 
be concerned with conspicuous gaps in loan distribution that are not 
explained by the performance context. Similarly, if 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. The capacity and constraints of an institution, its 
business decisions about how it can best help to meet the needs of its 
assessment area(s), including those of low- and moderate-income 
neighborhoods, and other aspects of the performance context, are all 
relevant to explain why the institution is serving or not serving 
portions of its assessment area(s).
    Sec. ____.22(b)(2) & (3)-3: Will examiners take into account loans 
made by affiliates when evaluating the

[[Page 36633]]

proportion of an institution's lending in its assessment area(s)?
    A3. Examiners will not take into account loans made by affiliates 
when determining the proportion of an institution's lending in its 
assessment area(s), even if the institution elects to have its 
affiliate lending considered in the remainder of the lending test 
evaluation. However, examiners may consider an institution's business 
strategy of conducting lending through an affiliate in order to 
determine whether a low proportion of lending in the assessment area(s) 
should adversely affect the institution's lending test rating.
    Sec. ____.22(b)(2) & (3)-4: When will examiners consider loans 
(other than community development loans) made outside an institution's 
assessment area(s)?
    A4. Consideration will be given for loans to low- and moderate-
income persons and small business and farm loans outside of an 
institution's assessment area(s), provided the institution has 
adequately addressed the needs of borrowers within its assessment 
area(s). The agencies will apply this consideration not only to loans 
made by large retail institutions being evaluated under the lending 
test, but also to loans made by small institutions being evaluated 
under the small institution performance standards. Loans to low- and 
moderate-income persons and small businesses and farms outside of an 
institution's assessment area(s), however, will not compensate for poor 
lending performance within the institution's assessment area(s).
    Sec. ____.22(b)(2) & (3)-5: Under the lending test, how will 
examiners evaluate home mortgage loans to middle- or upper-income 
individuals in a low- or moderate-income geography?
    A5. Examiners will consider these home mortgage loans under the 
performance criteria of the lending test, i.e., by number and amount of 
home mortgage loans, whether they are inside or outside the financial 
institution's assessment area(s), their geographic distribution, and 
the income levels of the borrowers. Examiners will use information 
regarding the financial institution's performance context to determine 
how to evaluate the loans under these performance criteria. Depending 
on the performance context, examiners could view home mortgage loans to 
middle-income individuals in a low-income geography very differently. 
For example, if the loans are for homes or multifamily housing located 
in an area for which the local, state, tribal, or Federal government or 
a community-based development organization has developed a 
revitalization or stabilization plan (such as a Federal enterprise 
community or empowerment zone) that includes attracting mixed-income 
residents to establish a stabilized, economically diverse neighborhood, 
examiners may give more consideration to such loans, which may be 
viewed as serving the low- or moderate-income community's needs as well 
as serving those of the middle- or upper-income borrowers. If, on the 
other hand, no such plan exists and there is no other evidence of 
governmental support for a revitalization or stabilization project in 
the area and the loans to middle- or upper-income borrowers 
significantly disadvantage or primarily have the effect of displacing 
low- or moderate-income residents, examiners may view these loans 
simply as home mortgage loans to middle- or upper-income borrowers who 
happen to reside in a low- or moderate-income geography and weigh them 
accordingly in their evaluation of the institution.

Sec. ____.22(b)(4);  Community Development Lending

    Sec. ____.22(b)(4)-1: When evaluating an institution's record of 
community development lending, may an examiner distinguish among 
community development loans on the basis of the actual amount of the 
loan that advances the community development purpose?
    A1. Yes. When evaluating the institution's record of community 
development lending under Sec. ____.22(b)(4), it is appropriate to give 
greater weight to the amount of the loan that is targeted to the 
intended community development purpose. For example, consider two $10 
million projects (with a total of 100 units each) that have as their 
express primary purpose affordable housing and are located in the same 
community. One of these projects sets aside 40 percent of its units for 
low-income residents and the other project allocates 65 percent of its 
units for low-income residents. An institution would report both loans 
as $10 million community development loans under the Sec. ____.42(b)(2) 
aggregate reporting obligation. However, transaction complexity, 
innovation and all other relevant considerations being equal, an 
examiner should also take into account that the 65 percent project 
provides more affordable housing for more people per dollar expended.
    Under Sec. ____.22(b)(4), the extent of CRA consideration an 
institution receives for its community development loans should bear a 
direct relation to the benefits received by the community and the 
innovation or complexity of the loans required to accomplish the 
activity, not simply to the dollar amount expended on a particular 
transaction. By applying all lending test performance criteria, a 
community development loan of a lower dollar amount could meet the 
credit needs of the institution's community to a greater extent than a 
community development loan with a higher dollar amount, but with less 
innovation, complexity, or impact on the community.

Sec. ____.22(b)(5)  Innovative or Flexible Lending Practices

    Sec. ____.22(b)(5)-1: What is the range of practices that examiners 
may consider in evaluating the innovativeness or flexibility of an 
institution's lending?
    A1. In evaluating the innovativeness or flexibility of an 
institution's lending practices (and the complexity and innovativeness 
of its community development lending), examiners will not be limited to 
reviewing the overall variety and specific terms and conditions of the 
credit products themselves. In connection with the evaluation of an 
institution's lending, examiners also may give consideration to related 
innovations when they augment the success and effectiveness of the 
institution's lending under its community development loan programs or, 
more generally, its lending under its loan programs that address the 
credit needs of low- and moderate-income geographies or individuals. 
For example:
     In connection with a community development loan program, a 
bank may establish a technical assistance program under which the bank, 
directly or through third parties, provides affordable housing 
developers and other loan recipients with financial consulting 
services. Such a technical assistance program may, by itself, 
constitute a community development service eligible for consideration 
under the service test of the CRA regulations. In addition, the 
technical assistance may be favorably considered as an innovation that 
augments the success and effectiveness of the related community 
development loan program.
     In connection with a small business lending program in a 
low- or moderate-income area and consistent with safe and sound lending 
practices, a bank may implement a program under which, in addition to 
providing financing, the bank also contracts with the small business 
borrowers. Such a contracting arrangement would not, standing alone, 
qualify for CRA consideration. However, it may be favorably considered 
as an innovation that augments the loan program's success and 
effectiveness, and improves the program's ability to

[[Page 36634]]

serve community development purposes by helping to promote economic 
development through support of small business activities and 
revitalization or stabilization of low- or moderate-income geographies.

Sec. ____.22(c)  Affiliate Lending

Sec. ____.22(c)(1)  In General
    Sec. ____.22(c)(1)-1: If an institution elects to have loans by its 
affiliate(s) considered, may it elect to have only certain categories 
of loans considered?
    A1. Yes. An institution may elect to have only a particular 
category of its affiliate's lending considered. The basic categories of 
loans are home mortgage loans, small business loans, small farm loans, 
community development loans, and the five categories of consumer loans 
(motor vehicle loans, credit card loans, home equity loans, other 
secured loans, and other unsecured loans).

Sec. ____.22(c)(2)  Constraints on Affiliate Lending

Sec. ____.22(c)(2)(i) No Affiliate May Claim a Loan Origination or Loan 
Purchase if Another Institution Claims the Same Loan Origination or 
Purchase
    Sec. ____.22(c)(2)(i)-1: How is this constraint on affiliate 
lending applied?
    A1. This constraint prohibits one affiliate from claiming a loan 
origination or purchase claimed by another affiliate. However, an 
institution can count as a purchase a loan originated by an affiliate 
that the institution subsequently purchases, or count as an origination 
a loan later sold to an affiliate, provided the same loans are not sold 
several times to inflate their value for CRA purposes.
Sec. ____.22(c)(2)(ii)  If an Institution Elects To Have Its 
Supervisory Agency Consider Loans Within a Particular Lending Category 
Made by One or More of the Institution's Affiliates in a Particular 
Assessment Area, the Institution Shall Elect To Have the Agency 
Consider All Loans Within That Lending Category in That Particular 
Assessment Area Made by All of the Institution's Affiliates
    Sec. ____.22(c)(2)(ii)-1: How is this constraint on affiliate 
lending applied?
    A1. This constraint prohibits ``cherry-picking'' affiliate loans 
within any one category of loans. The constraint requires an 
institution that elects to have a particular category of affiliate 
lending in a particular assessment area considered to include all loans 
of that type made by all of its affiliates in that particular 
assessment area. For example, assume that an institution has one or 
more affiliates, such as a mortgage bank that makes loans in the 
institution's assessment area. If the institution elects to include the 
mortgage bank's home mortgage loans, it must include all of mortgage 
bank's home mortgage loans made in its assessment area. The institution 
cannot elect to include only those low- and moderate-income home 
mortgage loans made by the mortgage bank affiliate and not home 
mortgage loans to middle- and upper-income individuals or areas.
    Sec. ____.22(c)(2)(ii)-2: How is this constraint applied if an 
institution's affiliates are also insured depository institutions 
subject to the CRA?
    A2. Strict application of this constraint against ``cherry-
picking'' to loans of an affiliate that is also an insured depository 
institution covered by the CRA would produce the anomalous result that 
the other institution would, without its consent, not be able to count 
its own loans. Because the agencies did not intend to deprive an 
institution subject to the CRA of receiving consideration for its own 
lending, the agencies read this constraint slightly differently in 
cases involving a group of affiliated institutions, some of which are 
subject to the CRA and share the same assessment area(s). In those 
circumstances, an institution that elects to include all of its 
mortgage affiliate's home mortgage loans in its assessment area would 
not automatically be required to include all home mortgage loans in its 
assessment area of another affiliate institution subject to the CRA. 
However, all loans of a particular type made by any affiliate in the 
institution's assessment area(s) must either be counted by the lending 
institution or by another affiliate institution that is subject to the 
CRA. This reading reflects the fact that a holding company may, for 
business reasons, choose to transact different aspects of its business 
in different subsidiary institutions. However, the method by which 
loans are allocated among the institutions for CRA purposes must 
reflect actual business decisions about the allocation of banking 
activities among the institutions and should not be designed solely to 
enhance their CRA evaluations.

Sec. ____.22(d)  Lending by a Consortium or a Third Party

    Sec. ____.22(d)-1: Will equity and equity-type investments in a 
third party receive consideration under the lending test?
    A1. If an institution has made an equity or equity-type investment 
in a third party, community development loans made by the third party 
may be considered under the lending test. On the other hand, asset-
backed and debt securities that do not represent an equity-type 
interest in a third party will not be considered under the lending test 
unless the securities are booked by the purchasing institution as a 
loan. For example, if an institution purchases stock in a community 
development corporation (``CDC'') that primarily lends in low- and 
moderate-income areas or to low-and moderate-income individuals in 
order to promote community development, the institution may claim a pro 
rata share of the CDC's loans as community development loans. The 
institution's pro rata share is based on its percentage of equity 
ownership in the CDC. Sec. ____.23(b)-1 provides information concerning 
consideration of an equity or equity-type investment under the 
investment test and both the lending and investment tests.
    Sec. ____.22(d)-2: How will examiners evaluate loans made by 
consortia or third parties under the lending test?
    A2. Loans originated or purchased by consortia in which an 
institution participates or by third parties in which an institution 
invests will only be considered if they qualify as community 
development loans and will only be considered under the community 
development criterion of the lending test. However, loans originated 
directly on the books of an institution or purchased by the institution 
are considered to have been made or purchased directly by the 
institution, even if the institution originated or purchased the loans 
as a result of its participation in a loan consortium. These loans 
would be considered under all the lending test criteria appropriate to 
them depending on the type of loan.
    Sec. ____.22(d)-3: In some circumstances, an institution may invest 
in a third party, such as a community development bank, that is also an 
insured depository institution and is thus subject to CRA requirements. 
If the investing institution requests its supervisory agency to 
consider its pro rata share of community development loans made by the 
third party, as allowed under 12 CFR____.22(d), may the third party 
also receive consideration for these loans?
    A3. Yes, as long as the financial institution and the third party 
are not affiliates. The regulations state, at 12 CFR____.22(c)(2)(i), 
that two affiliates may not both claim the same loan origination or 
loan purchase. However, if the financial institution and the third 
party are not affiliates, the third party may receive consideration for 
the community development loans it originates, and the financial 
institution that invested in the third party may also receive 
consideration for its pro rata

[[Page 36635]]

share of the same community development loans under 12 CFR____.22(d).

Sec. ____.23--Investment Test

Sec. ____.23(a)  Scope of Test

    Sec. ____.23(a)-1: May an institution receive consideration under 
the CRA regulations if it invests indirectly through a fund, the 
purpose of which is community development, as that is defined in the 
CRA regulations?
    A1: Yes, the direct or indirect nature of the qualified investment 
does not affect whether an institution will receive consideration under 
the CRA regulations because the regulations do not distinguish between 
``direct'' and ``indirect'' investments. Thus, an institution's 
investment in an equity fund that, in turn, invests in projects that, 
for example, provide affordable housing to low- and moderate-income 
individuals, would receive consideration as a qualified investment 
under the CRA regulations, provided the investment benefits one or more 
of the institution's assessment area(s) or a broader statewide or 
regional area(s) that includes one or more of the institution's 
assessment area(s). Similarly, an institution may receive consideration 
for a direct qualified investment in a nonprofit organization that, for 
example, supports affordable housing for low- and moderate-income 
individuals in the institution's assessment area(s) or a broader 
statewide or regional area(s) that includes the institution's 
assessment area(s).

Sec. ____.23(b)  Exclusion

    Sec. ____.23(b)-1: Even though the regulations state that an 
activity that is considered under the lending or service tests cannot 
also be considered under the investment test, may parts of an activity 
be considered under one test and other parts be considered under 
another test? 
    A1. Yes, in some instances the nature of an activity may make it 
eligible for consideration under more than one of the performance 
tests. For example, certain investments and related support provided by 
a large retail institution to a CDC may be evaluated under the lending, 
investment, and service tests. Under the service test, the institution 
may receive consideration for any community development services that 
it provides to the CDC, such as service by an executive of the 
institution on the CDC's board of directors. If the institution makes 
an investment in the CDC that the CDC uses to make community 
development loans, the institution may receive consideration under the 
lending test for its pro-rata share of community development loans made 
by the CDC. Alternatively, the institution's investment may be 
considered under the investment test, assuming it is a qualified 
investment. In addition, an institution may elect to have a part of its 
investment considered under the lending test and the remaining part 
considered under the investment test. If the investing institution opts 
to have a portion of its investment evaluated under the lending test by 
claiming a share of the CDC's community development loans, the amount 
of investment considered under the investment test will be offset by 
that portion. Thus, the institution would only receive consideration 
under the investment test for the amount of its investment multiplied 
by the percentage of the CDC's assets that meet the definition of a 
qualified investment.
    Sec. ____.23(b)-2: If home mortgage loans to low- and moderate-
income borrowers have been considered under an institution's lending 
test, may the institution that originated or purchased them also 
receive consideration under the investment test if it subsequently 
purchases mortgage-backed securities that are primarily or exclusively 
backed by such loans? 
    A2. No. Because the institution received lending test consideration 
for the loans that underlie the securities, the institution may not 
also receive consideration under the investment test for its purchase 
of the securities. Of course, an institution may receive investment 
test consideration for purchases of mortgage-backed securities that are 
backed by loans to low- and moderate-income individuals as long as the 
securities are not backed primarily or exclusively by loans that the 
same institution originated or purchased.

Sec. ____.23(e)  Performance Criteria

    Sec. ____.23(e)-1: When applying the performance criteria of 
Sec. ____.23(e), may an examiner distinguish among qualified 
investments based on how much of the investment actually supports the 
underlying community development purpose? 
    A1. Yes. Although Sec. ____.23(e)(1) speaks in terms of the dollar 
amount of qualified investments, the criterion permits an examiner to 
weight certain investments differently or to make other appropriate 
distinctions when evaluating an institution's record of making 
qualified investments. For instance, an examiner should take into 
account that a targeted mortgage-backed security that qualifies as an 
affordable housing issue that has only 60 percent of its face value 
supported by loans to low -or moderate-income borrowers would not 
provide as much affordable housing for low- and moderate-income 
individuals as a targeted mortgage-backed security with 100 percent of 
its face value supported by affordable housing loans to low- and 
moderate-income borrowers. The examiner should describe any 
differential weighting (or other adjustment), and its basis in the 
Public Evaluation. However, no matter how a qualified investment is 
handled for purposes of Sec. ____.23(e)(1), it will also be evaluated 
with respect to the qualitative performance criteria set forth in 
Sec. ____.23(e)(2), (3) and (4) . By applying all criteria, a qualified 
investment of a lower dollar amount may be weighed more heavily under 
the Investment Test than a qualified investment with a higher dollar 
amount, but with fewer qualitative enhancements.
    Sec. ____.23(e)-2: How do examiners evaluate an institution's 
qualified investment in a fund, the primary purpose of which is 
community development, as that is defined in the CRA regulations? 
    A2. When evaluating qualified investments that benefit an 
institution's assessment area(s) or a broader statewide or regional 
area that includes its assessment area(s), examiners will look at the 
following four performance 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.
    With respect to the first criterion, examiners will determine the 
dollar amount of qualified investments by relying on the figures 
recorded by the institution according to generally accepted accounting 
principles (GAAP). Although institutions may exercise a range of 
investment strategies, including short-term investments, long-term 
investments, investments that are immediately funded, and investments 
with a binding, up-front commitment that are funded over a period of 
time, institutions making the same dollar amount of investments over 
the same number of years, all other performance criteria being equal, 
would receive the same level of consideration. Examiners will include 
both new and outstanding investments in this determination. The dollar 
amount of qualified investments also will include the dollar amount of

[[Page 36636]]

legally binding commitments recorded by the institution according to 
GAAP.
    The extent to which qualified investments receive consideration, 
however, depends on how examiners evaluate the investments under the 
remaining three performance criteria--innovativeness and complexity, 
responsiveness, and degree to which the investment is not routinely 
provided by private investors. Examiners also will consider factors 
relevant to the institution's CRA performance context, such as the 
effect of outstanding long-term qualified investments, the pay-in 
schedule, and the amount of any cash call, on the capacity of the 
institution to make new investments.

Sec. ____.24--Service Test

Sec. ____.24(d)  Performance Criteria--Retail Banking Services

    Sec. ____.24(d)-1: How do examiners evaluate the availability and 
effectiveness of an institution's systems for delivering retail banking 
services? 
    A1. Convenient access to full service branches within a community 
is an important factor in determining the availability of credit and 
non-credit services. Therefore, the service test performance standards 
place primary emphasis on full service branches while still considering 
alternative systems, such as automated teller machines (``ATMs''). The 
principal focus is on an institution's current distribution of 
branches; therefore, an institution is not required to expand its 
branch network or operate unprofitable branches. Under the service 
test, alternative systems for delivering retail banking services, such 
as ATMs, are considered only to the extent that they are effective 
alternatives in providing needed services to low- and moderate-income 
areas and individuals.
    Sec. ____.24(d)-2: How do examiners evaluate an institution's 
activities in connection with Individual Development Accounts (IDAs)? 
    A2. Although there is no standard IDA program, IDAs typically are 
deposit accounts targeted to low- and moderate-income families that are 
designed to help them accumulate savings for education or job-training, 
down-payment and closing costs on a new home, or start-up capital for a 
small business. Once participants have successfully funded an IDA, 
their personal IDA savings are matched by a public or private entity. 
Financial institution participation in IDA programs comes in a variety 
of forms, including providing retail banking services to IDA account 
holders, providing matching dollars or operating funds to an IDA 
program, designing or implementing IDA programs, providing consumer 
financial education to IDA account holders or prospective account 
holders, or other means. The extent of financial institutions' 
involvement in IDAs and the products and services they offer in 
connection with the accounts will vary. Thus, subject to 
Sec. ____.23(b), examiners evaluate the actual services and products 
provided by an institution in connection with IDA programs as one or 
more of the following: community development services, retail banking 
services, qualified investments, home mortgage loans, small business 
loans, consumer loans, or community development loans.

Sec. ____.24(d)(3)  Availability and Effectiveness of Alternative 
Systems for Delivering Retail Banking Services?

    Sec. ____.24(d)(3)-1: How will examiners evaluate alternative 
systems for delivering retail banking services? 
    A1. The regulation recognizes the multitude of ways in which an 
institution can provide services, for example, ATMs, banking by 
telephone or computer, and bank-by-mail programs. Delivery systems 
other than branches will be considered under the regulation to the 
extent that they are effective alternatives to branches in providing 
needed services to low-and moderate-income areas and individuals. The 
list of systems in the regulation is not intended to be inclusive.
    Sec. ____.24(d)(3)-2: Are debit cards considered under the service 
test as an alternative delivery system? 
    A2. By themselves, no. However, if debit cards are a part of a 
larger combination of products, such as a comprehensive electronic 
banking service, that allows an institution to deliver needed services 
to low- and moderate-income areas and individuals in its community, the 
overall delivery system that includes the debit card feature would be 
considered an alternative delivery system.

Sec. ____.24(e)  Performance Criteria--Community Development Services

    Sec. ____.24(e)-1: Under what conditions may an institution receive 
consideration for community development services offered by affiliates 
or third parties?
    A1. At an institution's option, the agencies will consider services 
performed by an affiliate or by a third party on the institution's 
behalf under the service test if the services provided enable the 
institution to help meet the credit needs of its community. Indirect 
services that enhance an institution's ability to deliver credit 
products or deposit services within its community and that can be 
quantified may be considered under the service test, if those services 
have not been considered already under the lending or investment test 
(see Sec. ____.23(b)-1). For example, an institution that contracts 
with a community organization to provide home ownership counseling to 
low- and moderate-income home buyers as part of the institution's 
mortgage program may receive consideration for that indirect service 
under the service test. In contrast, donations to a community 
organization that offers financial services to low- or moderate-income 
individuals may be considered under the investment test, but would not 
also be eligible for consideration under the service test. Services 
performed by an affiliate will be treated the same as affiliate loans 
and investments made in the institution's assessment area and may be 
considered if the service is not claimed by any other institution. See 
Secs. ____.22(c) and .23(c).

Sec. ____.25  Community Development Test for Wholesale or Limited 
Purpose Institutions

Sec. ____.25(a)  Scope of Test

    Sec. ____.25(a)-1: How can certain credit card banks help to meet 
the credit needs of their communities without losing their exemption 
from the definition of ``bank'' in the Bank Holding Company Act (the 
BHCA), as amended by the Competitive Equality Banking Act of 1987 
(CEBA)?
    A1. Although the BHCA restricts institutions known as CEBA credit 
card banks to credit card operations, a CEBA credit card bank can 
engage in community development activities without losing its exemption 
under the BHCA. A CEBA credit card bank could provide community 
development services and investments without engaging in operations 
other than credit card operations. For example, the bank could provide 
credit card counseling, or the financial expertise of its executives, 
free of charge, to community development organizations. In addition, a 
CEBA credit card bank could make qualified investments, as long as the 
investments meet the guidelines for passive and noncontrolling 
investments provided in the BHC Act and the Board's Regulation Y. 
Finally, although a CEBA credit card bank cannot make any loans other 
than credit card loans, under Sec. ____.25(d)(2) (community development 
test--indirect activities), the bank could elect to have part of its 
qualified passive and noncontrolling investments in a third-party 
lending consortium considered as community development lending, 
provided that the

[[Page 36637]]

consortium's loans otherwise meet the requirements for community 
development lending. When assessing a CEBA credit card bank's CRA 
performance under the community development test, examiners will take 
into account the bank's performance context. In particular, examiners 
will consider the legal constraints imposed by the BHCA on the bank's 
activities, as part of the bank's performance context in 
Sec. ____.21(b)(4).

Sec. ____.25(d)  Indirect Activities

    Sec. ____.25(d)-1: How are investments in third party community 
development organizations considered under the community development 
test?
    A1. Similar to the lending test for retail institutions, 
investments in third party community development organizations may be 
considered as qualified investments or as community development loans 
or both (provided there is no double counting), at the institution's 
option, as described above in the discussion regarding Secs. ____.22(d) 
and ____.23(b).

Sec. ____.25(e)  Benefit to Assessment Area(s)

    Sec. ____.25(e)-1: How do examiners evaluate a wholesale or limited 
purpose institution's qualified investment in a fund that invests in 
projects nationwide and which has a primary purpose of community 
development, as that is defined in the regulations?
    A1. If examiners find that a wholesale or limited purpose 
institution has adequately addressed the needs of its assessment 
area(s), they will give consideration to qualified investments, as well 
as community development loans and community development services, by 
that institution nationwide. In determining whether an institution has 
adequately addressed the needs of its assessment area(s), examiners 
will consider qualified investments that benefit a broader statewide or 
regional area that includes the institution's assessment area(s).

Sec. ____.25(f) Community Development Performance Rating

    Sec. ____.25(f)-1: Must a wholesale or limited purpose institution 
engage in all three categories of community development activities 
(lending, investment and service) to perform well under the community 
development test?
    A1. No, a wholesale or limited purpose institution may perform well 
under the community development test by engaging in one or more of 
these activities.

Sec. ____.26--Small Institution Performance Standards

Sec. ____.26(a) Performance Criteria

    Sec. ____.26(a)-1:  May examiners consider, under one or more of 
the performance criteria of the small institution performance 
standards, lending-related activities, such as community development 
loans and lending-related qualified investments, when evaluating a 
small institution?
    A1. Yes. Examiners can consider ``lending-related activities,'' 
including community development loans and lending-related qualified 
investments, when evaluating the first four performance criteria of the 
small institution performance test. Although lending-related activities 
are specifically mentioned in the regulation in connection with only 
the first three criteria (i.e., loan-to-deposit ratio, percentage of 
loans in the institution's assessment area, and lending to borrowers of 
different incomes and businesses of different sizes), examiners can 
also consider these activities when they evaluate the fourth criteria--
geographic distribution of the institution's loans.
    Sec. ____.26(a)-2: What is meant by ``as appropriate'' when 
referring to the fact that lending-related activities will be 
considered, ``as appropriate,'' under the various small institution 
performance criteria?
    A2. ``As appropriate'' means that lending-related activities will 
be considered when it is necessary to determine whether an institution 
meets or exceeds the standards for a satisfactory rating. Examiners 
will also consider other lending-related activities at an institution's 
request.
    Sec. ____.26(a)-3: When evaluating a small institution's lending 
performance, will examiners consider, at the institution's request, 
community development loans originated or purchased by a consortium in 
which the institution participates or by a third party in which the 
institution has invested?
    A3. Yes. However, a small institution that elects to have examiners 
consider community development loans originated or purchased by a 
consortium or third party must maintain sufficient information on its 
share of the community development loans so that the examiners may 
evaluate these loans under the small institution performance criteria.
    Sec. ____.26(a)-4: Under the small institution performance 
standards, will examiners consider both loan originations and 
purchases?
    A4. Yes, consistent with the other assessment methods in the 
regulation, examiners will consider both loans originated and purchased 
by the institution. Likewise, examiners may consider any other loan 
data the small institution chooses to provide, including data on loans 
outstanding, commitments and letters of credit.
    Sec. ____.26(a)-5: Under the small institution performance 
standards, how will qualified investments be considered for purposes of 
determining whether a small institution receives a satisfactory CRA 
rating?
    A5. The small institution performance standards focus on lending 
and other lending-related activities. Therefore, examiners will 
consider only lending-related qualified investments for the purposes of 
determining whether the small institution receives a satisfactory CRA 
rating.

Sec. ____.26(a)(1) Loan-to-Deposit Ratio

    Sec. ____.26(a)(1)-1: How is the loan-to-deposit ratio calculated?
    A1. A small institution's loan-to-deposit ratio is calculated in 
the same manner that the Uniform Bank Performance Report/Uniform Thrift 
Performance Report (UBPR/UTPR) determines the ratio. It is calculated 
by dividing the institution's net loans and leases by its total 
deposits. The ratio is found in the Liquidity and Investment Portfolio 
section of the UBPR and UTPR. Examiners will use this ratio to 
calculate an average since the last examination by adding the quarterly 
loan-to-deposit ratios and dividing the total by the number of 
quarters.
    Sec. ____.26(a)(1)-2: How is the ``reasonableness'' of a loan-to-
deposit ratio evaluated?
    A2. No specific ratio is reasonable in every circumstance, and each 
small institution's ratio is evaluated in light of information from the 
performance context, including the institution's capacity to lend, 
demographic and economic factors present in the assessment area, and 
the lending opportunities available in the assessment area(s). If a 
small institution's loan-to-deposit ratio appears unreasonable after 
considering this information, lending performance may still be 
satisfactory under this criterion taking into consideration the number 
and the dollar volume of loans sold to the secondary market or the 
number and amount and innovativeness or complexity of community 
development loans and lending-related qualified investments.
    Sec. ____.26(a)(1)-3: If an institution makes a large number of 
loans off-shore, will examiners segregate the domestic

[[Page 36638]]

loan-to-deposit ratio from the foreign loan-to-deposit ratio?
    A3. No. Examiners will look at the institution's net loan-to-
deposit ratio for the whole institution, without any adjustments.
Sec. ____.26(a)(2)  Percentage of Lending Within Assessment Area(s)
    Sec. ____.26(a)(2)-1: Must a small institution have a majority of 
its lending in its assessment area(s) to receive a satisfactory 
performance rating?
    A1. No. The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s) is but one 
of the performance criteria upon which small institutions are 
evaluated. If the percentage of loans and other lending related 
activities in an institution's assessment area(s) is less than a 
majority, then the institution does not meet the standards for 
satisfactory performance only under this criterion. The effect on the 
overall performance rating of the institution, however, is considered 
in light of the performance context, including information regarding 
economic conditions, loan demand, the institution's size, financial 
condition and business strategies, and branching network and other 
aspects of the institution's lending record.

Sec. ____.26(a)(3) & (4)  Distribution of Lending Within Assessment 
Area(s) by Borrower Income and Geographic Location

    Sec. ____.26(a)(3) & (4)-1: How will a small institution's 
performance be assessed under these lending distribution criteria?
    A1. Distribution of loans, like other small institution performance 
criteria, is considered in light of the performance context. For 
example, a small institution is not required to lend evenly throughout 
its assessment area(s) or in any particular geography. However, in 
order to meet the standards for satisfactory performance under this 
criterion, conspicuous gaps in a small institution's loan distribution 
must be adequately explained by performance context factors such as 
lending opportunities in the institution's assessment area(s), the 
institution's product offerings and business strategy, and 
institutional capacity and constraints. In addition, it may be 
impracticable to review the geographic distribution of the lending of 
an institution with few demographically distinct geographies within an 
assessment area. If sufficient information on the income levels of 
individual borrowers or the revenues or sizes of business borrowers is 
not available, examiners may use proxies such as loan size for 
estimating borrower characteristics, where appropriate.

Sec. ____.26(b)  Performance Rating

    Sec. ____.26(b)-1: How can a small institution achieve an 
``outstanding'' performance rating?
    A1. A small institution that meets each of the standards for a 
``satisfactory'' rating and exceeds some or all of those standards may 
warrant an ``outstanding'' performance rating. In assessing performance 
at the ``outstanding'' level, the agencies consider the extent to which 
the institution exceeds each of the performance standards and, at the 
institution's option, its performance in making qualified investments 
and providing services that enhance credit availability in its 
assessment area(s). In some cases, a small institution may qualify for 
an ``outstanding'' performance rating solely on the basis of its 
lending activities, but only if its performance materially exceeds the 
standards for a ``satisfactory'' rating, particularly with respect to 
the penetration of borrowers at all income levels and the dispersion of 
loans throughout the geographies in its assessment area(s) that display 
income variation. An institution with a high loan-to-deposit ratio and 
a high percentage of loans in its assessment area(s), but with only a 
reasonable penetration of borrowers at all income levels or a 
reasonable dispersion of loans throughout geographies of differing 
income levels in its assessment area(s), generally will not be rated 
``outstanding'' based only on its lending performance. However, the 
institution's 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) may 
augment the institution's satisfactory rating to the extent that it may 
be rated ``outstanding.''
    Sec. ____.26(b)-2: Will a small institution's qualified 
investments, community development loans, and community development 
services be considered if they do not directly benefit its assessment 
area(s)?
    A2. Yes. These activities are eligible for consideration if they 
benefit a broader statewide or regional area that includes a small 
institution's assessment area(s), as discussed more fully in 
Secs. ____.12(i) & 563e.12(h)-6.

Sec. ____.27--Strategic Plan

Sec. ____.27(c)  Plans in General

    Sec. ____.27(c)-1: To what extent will the agencies provide 
guidance to an institution during the development of its strategic 
plan?
    A1. An institution will have an opportunity to consult with and 
provide information to the agencies on a proposed strategic plan. 
Through this process, an institution is provided guidance on procedures 
and on the information necessary to ensure a complete submission. For 
example, the agencies will provide guidance on whether the level of 
detail as set out in the proposed plan would be sufficient to permit 
agency evaluation of the plan. However, the agencies' guidance during 
plan development and, particularly, prior to the public comment period, 
will not include commenting on the merits of a proposed strategic plan 
or on the adequacy of measurable goals.
    Sec. ____.27(c)-2: How will a joint strategic plan be reviewed if 
the affiliates have different primary Federal supervisors?
    A2. The agencies will coordinate review of and action on the joint 
plan. Each agency will evaluate the measurable goals for those 
affiliates for which it is the primary regulator.

Sec. ____.27(f)  Plan Content

Sec. ____.27(f)(1)  Measurable Goals
    Sec. ____.27(f)(1)-1: How should ``measurable goals'' be specified 
in a strategic plan?
    A1. Measurable goals (e.g., number of loans, dollar amount, 
geographic location of activity, and benefit to low-and moderate-income 
areas or individuals) must be stated with sufficient specificity to 
permit the public and the agencies to quantify what performance will be 
expected. However, institutions are provided flexibility in specifying 
goals. For example, an institution may provide ranges of lending 
amounts in different categories of loans. Measurable goals may also be 
linked to funding requirements of certain public programs or indexed to 
other external factors as long as these mechanisms provide a 
quantifiable standard.

Sec. ____.27(g)  Plan Approval

Sec. ____.27(g)(2)  Public Participation
    Sec. ____.27(g)(2)-1: How will the public receive notice of a 
proposed strategic plan?
    A1. An institution submitting a strategic plan for approval by the 
agencies is required to solicit public comment on the plan for a period 
of

[[Page 36639]]

thirty (30) days after publishing notice of the plan at least once in a 
newspaper of general circulation. The notice should be sufficiently 
prominent to attract public attention and should make clear that public 
comment is desired. An institution may, in addition, provide notice to 
the public in any other manner it chooses.

Sec. ____.28--Assigned Ratings

    Sec. ____.28-1: Are innovative lending practices, innovative or 
complex qualified investments, and innovative community development 
services required for a ``satisfactory'' or ``outstanding'' CRA rating?
    A1. No. Moreover, the lack of innovative lending practices, 
innovative or complex qualified investments, or innovative community 
development services alone will not result in a ``needs to improve'' 
CRA rating. However, the use of innovative lending practices, 
innovative or complex qualified investments, and innovative community 
development services may augment the consideration given to an 
institution's performance under the quantitative criteria of the 
regulations, resulting in a higher level of performance rating.
    Sec. ____.28-2: How is performance under the quantitative and 
qualitative performance criteria weighed when examiners assign a CRA 
rating?
    A2. The lending, investment, and service tests each contain a 
number of performance criteria designed to measure whether an 
institution is effectively helping to meet the credit needs of its 
entire community, including low- and moderate-income neighborhoods, in 
a safe and sound manner. Some of these performance criteria are 
quantitative, such as number and amount, and others, such as the use of 
innovative or flexible lending practices, the innovativeness or 
complexity of qualified investments, and the innovativeness and 
responsiveness of community development services, are qualitative. The 
performance criteria that deal with these qualitative aspects of 
performance recognize that these loans, qualified investments, and 
community development services sometimes require special expertise and 
effort on the part of the institution and provide a benefit to the 
community that would not otherwise be possible. As such, the agencies 
consider the qualitative aspects of an institution's activities when 
measuring the benefits received by a community. An institution's 
performance under these qualitative criteria may augment the 
consideration given to an institution's performance under the 
quantitative criteria of the regulations, resulting in a higher level 
of performance and rating.

Sec. ____.28(a)  Ratings in General

    Sec. ____.28(a)-1: How are institutions with domestic branches in 
more than one state assigned a rating?
    A1. The evaluation of an institution that maintains domestic 
branches in more than one state (``multistate institution'') will 
include a written evaluation and rating of its CRA record of 
performance as a whole and in each state in which it has a domestic 
branch. The written evaluation will contain a separate presentation on 
a multistate institution's performance for each metropolitan 
statistical area and the nonmetropolitan area within each state, if it 
maintains one or more domestic branch offices in these areas. This 
separate presentation will contain conclusions, supported by facts and 
data, on performance under the performance tests and standards in the 
regulation. The evaluation of a multistate institution that maintains a 
domestic branch in two or more states in a multistate metropolitan area 
will include a written evaluation (containing the same information 
described above) and rating of its CRA record of performance in the 
multistate metropolitan area. In such cases, the statewide evaluation 
and rating will be adjusted to reflect performance in the portion of 
the state not within the multistate metropolitan statistical area.
    Sec. ____.28(a)-2:  How are institutions that operate within only a 
single state assigned a rating?
    A2. An institution that operates within only a single state 
(``single-state institution'') will be assigned a rating of its CRA 
record based on its performance within that state. In assigning this 
rating, the agencies will separately present a single-state 
institution's performance for each metropolitan area in which the 
institution maintains one or more domestic branch offices. This 
separate presentation will contain conclusions, supported by facts and 
data, on the single-state institution's performance under the 
performance tests and standards in the regulation.
    Sec. ____.28(a)-3:  How do the agencies weight performance under 
the lending, investment and service test for large retail institutions?
    A3. A rating of ``outstanding,'' ``high satisfactory,'' ``low 
satisfactory,'' ``needs to improve,'' or ``substantial noncompliance,'' 
based on a judgment supported by facts and data, will be assigned under 
each performance test. Points will then be assigned to each rating as 
described in the first matrix set forth below. A large retail 
institution's overall rating under the lending, investment and service 
tests will then be calculated in accordance with the second matrix set 
forth below, which incorporates the rating principles in the 
regulation.
Points Assigned for Performance Under Lending, Investment and Service Tests
Lending Service Investment
Outstanding 12 6 6
High Satisfactory 9 4 4
Low Satisfactory 6 3 3
Needs to Improve 3 1 1
Substantial Noncompliance 0 0 0

----------------------------------------------------------------------------------------------------------------
Composite Rating Point Requirements
[Add points from three tests]
Rating Total points
Outstanding 20 or over.
Satisfactory 11 through 19.
Needs to Improve 5 through 10.
Substantial Noncompliance 0 through 4.

------------------------------------------------------------------------ [[Page 36640]] Note: There is one exception to the Composite Rating matrix. An institution may not receive a rating of ``satisfactory'' unless it receives at least ``low satisfactory'' on the lending test. Therefore, the total points are capped at three times the lending test score. Sec. ____.28(c) Effect of Evidence of Discriminatory or Other Illegal Credit Practices Sec. ____.28(c)-1: What is meant by ``discriminatory or other illegal credit practices''? A1. An institution engages in discriminatory credit practices if it discourages or discriminates against credit applicants or borrowers on a prohibited basis, in violation, for example, of the Fair Housing Act or the Equal Credit Opportunity Act (as implemented by Regulation B). Examples of other illegal credit practices inconsistent with helping to meet community credit needs include violations of: The Truth in Lending Act regarding rescission of certain mortgage transactions and regarding disclosures and certain loan term restrictions in connection with credit transactions that are subject to the Home Ownership and Equity Protection Act; The Real Estate Settlement Procedures Act regarding the giving and accepting of referral fees, unearned fees or kickbacks in connection with certain mortgage transactions; and The Federal Trade Commission Act regarding unfair or deceptive acts or practices. Examiners will determine the effect of evidence of illegal credit practices as set forth in examination procedures and Sec. ____.28(c) of the regulation. Violations of other provisions of the consumer protection laws generally will not adversely affect an institution's CRA rating, but may warrant the inclusion of comments in an institution's performance evaluation. These comments may address the institution's policies, procedures, training programs, and internal assessment efforts. Sec. ____.29--Effect of CRA Performance on Applications Sec. ____.29(a) CRA Performance Sec. ____.29(a)-1: What weight is given to an institution's CRA performance examination in reviewing an application? A1. In cases in which CRA performance is a relevant factor, information from a CRA performance examination of the institution is a particularly important consideration in the applications process because it represents a detailed evaluation of the institution's CRA performance by its Federal supervisory agency. In this light, an examination is an important, and often controlling, factor in the consideration of an institution's record. In some cases, however, the examination may not be recent or a specific issue raised in the application process, such as progress in addressing weaknesses noted by examiners, progress in implementing commitments previously made to the reviewing agency, or a supported allegation from a commenter, is relevant to CRA performance under the regulation and was not addressed in the examination. In these circumstances, the applicant should present sufficient information to supplement its record of performance and to respond to the substantive issues raised in the application proceeding. Sec. ____.29(a)-2: What consideration is given to an institution's commitments for future action in reviewing an application by those agencies that consider such commitments? A2. Commitments for future action are not viewed as part of the CRA record of performance. In general, institutions cannot use commitments made in the applications process to overcome a seriously deficient record of CRA performance. However, commitments for improvements in an institution's performance may be appropriate to address specific weaknesses in an otherwise satisfactory record or to address CRA performance when a financially troubled institution is being acquired. Sec. ____.29(b) Interested Parties Sec. ____.29(b)-1: What consideration is given to comments from interested parties in reviewing an application? A1. Materials relating to CRA performance received during the applications process can provide valuable information. Written comments, which may express either support for or opposition to the application, are made a part of the record in accordance with the agencies' procedures, and are carefully considered in making the agencies' decision. Comments should be supported by facts about the applicant's performance and should be as specific as possible in explaining the basis for supporting or opposing the application. These comments must be submitted within the time limits provided under the agencies' procedures. Sec. ____.29(b)-2: Is an institution required to enter into agreements with private parties? A2. No. Although communications between an institution and members of its community may provide a valuable method for the institution to assess how best to address the credit needs of the community, the CRA does not require an institution to enter into agreements with private parties. These agreements are not monitored or enforced by the agencies. Sec. ____.41--Assessment Area Delineation Sec. ____.41(a) In General Sec. ____.41(a)-1: How do the agencies evaluate ``assessment areas'' under the revised CRA regulations compared to how they evaluated ``local communities'' that institutions delineated under the original CRA regulations? A1. The revised rule focuses on the distribution and level of an institution's lending, investments, and services rather than on how and why an institution delineated its ``local community'' or assessment area(s) in a particular manner. Therefore, the agencies will not evaluate an institution's delineation of its assessment area(s) as a separate performance criterion as they did under the original regulation. Rather, the agencies will only review whether the assessment area delineated by the institution complies with the limitations set forth in the regulations at Sec. ____.41(e). Sec. ____.41(a)-2: If an institution elects to have the agencies consider affiliate lending, will this decision affect the institution's assessment area(s)? A2. If an institution elects to have the lending activities of its affiliates considered in the evaluation of the institution's lending, the geographies in which the affiliate lends do not affect the institution's delineation of assessment area(s). Sec. ____.41(a)-3: Can a financial institution identify a specific ethnic group rather than a geographic area as its assessment area? A3. No, assessment areas must be based on geography. Sec. ____.41(c) Geographic Area(s) for Institutions Other than Wholesale or Limited Purpose Institutions Sec. ____.41(c)(1) Generally Consist of one or More MSAs or one or More Contiguous Political Subdivisions Sec. ____.41(c)(1)-1: Besides cities, towns, and counties, what other units of local government are political subdivisions for CRA purposes? A1. Townships and Indian reservations are political subdivisions for CRA purposes. Institutions should be aware that the boundaries of townships and Indian reservations may not be consistent with the boundaries of [[Page 36641]] the census tracts or block numbering areas (``geographies'') in the area. In these cases, institutions must ensure that their assessment area(s) consists only of whole geographies by adding any portions of the geographies that lie outside the political subdivision to the delineated assessment area(s). Sec. ____.41(c)(1)-2: Are wards, school districts, voting districts, and water districts political subdivisions for CRA purposes? A2. No. However, an institution that determines that it predominantly serves an area that is smaller than a city, town or other political subdivision may delineate as its assessment area the larger political subdivision and then, in accordance with Sec. ____.41(d), adjust the boundaries of the assessment area to include only the portion of the political subdivision that it reasonably can be expected to serve. The smaller area that the institution delineates must consist of entire geographies, may not reflect illegal discrimination, and may not arbitrarily exclude low- or moderate-income geographies. Sec. ____.41(d) Adjustments to Geographic Area(s) Sec. ____.41(d)-1: When may an institution adjust the boundaries of an assessment area to include only a portion of a political subdivision? A1. Institutions must include whole geographies (i.e., census tracts or block numbering areas) in their assessment areas and generally should include entire political subdivisions. Because census tracts and block numbering areas are the common geographic areas used consistently nationwide for data collection, the agencies require that assessment areas be made up of whole geographies. If including an entire political subdivision would create an area that is larger than the area the institution can reasonably be expected to serve, an institution may, but is not required to, adjust the boundaries of its assessment area to include only portions of the political subdivision. For example, this adjustment is appropriate if the assessment area would otherwise be extremely large, of unusual configuration, or divided by significant geographic barriers (such as a river, mountain, or major highway system). When adjusting the boundaries of their assessment areas, institutions must not arbitrarily exclude low- or moderate-income geographies or set boundaries that reflect illegal discrimination. Sec. ____.41(e) Limitations on Delineation of an Assessment Area Sec. ____.41(e)(3) May not Arbitrarily Exclude Low- or Moderate-Income Geographies Sec. ____.41(e)(3)-1: How will examiners determine whether an institution has arbitrarily excluded low- or moderate-income geographies? A1. Examiners will make this determination on a case-by-case basis after considering the facts relevant to the institution's assessment area delineation. Information that examiners will consider may include: Income levels in the institution's assessment area(s) and surrounding geographies; Locations of branches and deposit-taking ATMs; Loan distribution in the institution's assessment area(s) and surrounding geographies; The institution's size; The institution's financial condition; and The business strategy, corporate structure and product offerings of the institution. Sec. ____.41(e)(4) May Not Extend Substantially Beyond a CMSA Boundary or Beyond a State Boundary Unless Located in a Multistate MSA Sec. ____.41(e)(4)-1: What are the maximum limits on the size of an assessment area? A1. An institution shall not delineate an assessment area extending substantially across the boundaries of a consolidated metropolitan statistical area (CMSA) or the boundaries of an MSA, if the MSA is not located in a CMSA. Similarly, an assessment area may not extend substantially across state boundaries unless the assessment area is located in a multistate MSA. An institution may not delineate a whole state as its assessment area unless the entire state is contained within a CMSA. These limitations apply to wholesale and limited purpose institutions as well as other institutions. An institution shall delineate separate assessment areas for the areas inside and outside a CMSA (or MSA if the MSA is not located in a CMSA) if the area served by the institution's branches outside the CMSA (or MSA) extends substantially beyond the CMSA (or MSA) boundary. Similarly, the institution shall delineate separate assessment areas for the areas inside and outside of a state if the institution's branches extend substantially beyond the boundary of one state (unless the assessment area is located in a multistate MSA). In addition, the institution should also delineate separate assessment areas if it has branches in areas within the same state that are widely separate and not at all contiguous. For example, an institution that has its main office in New York City and a branch in Buffalo, New York, and each office serves only the immediate areas around it, should delineate two separate assessment areas. Sec. ____.41(e)(4)-2: Can an institution delineate one assessment area that consists of an MSA and two large counties that abut the MSA but are not adjacent to each other? A2. As a general rule, an institution's assessment area should not extend substantially beyond the boundary of an MSA if the MSA is not located in a CMSA. Therefore, the MSA would be a separate assessment area, and because the two abutting counties are not adjacent to each other and, in this example, extend substantially beyond the boundary of the MSA, the institution would delineate each county as a separate assessment area (so, in this example, there would be three assessment areas). However, if the MSA and the two counties were in the same CMSA, then the institution could delineate only one assessment area including them all. Sec. ____.42--Data collection, reporting, and disclosure Sec. ____.42-1: When must an institution collect and report data under the CRA regulations? A1. All institutions except small institutions are subject to data collection and reporting requirements. A small institution is a bank or thrift 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. For example:
Date Institution's
asset size
(in millions)
Data collection
required for
following calendar
year?
12/31/94 $240 No.
12/31/95 260 No.
12/31/96 230 No.
12/31/97 280 No.
12/31/98 260 Yes, beginning 1/01/ 99.

------------------------------------------------------------------------ All institutions that are subject to the data collection and reporting requirements must report the data for a calendar year by March 1 of the [[Page 36642]] subsequent year. In the example, above, the institution would report the data collected for calendar year 1999 by March 1, 2000. The Board of Governors of the Federal Reserve System is handling the processing of the reports for all of the primary regulators. The reports should be submitted in a prescribed electronic format on a timely basis. The mailing address for submitting these reports is: Attention: CRA Processing, Board of Governors of the Federal Reserve System, 1709 New York Avenue, NW., 5th Floor, Washington, DC 20006. Sec. ____.42-2: Should an institution develop its own program for data collection, or will the regulators require a certain format? A2. An institution may use the free software that is provided by the FFIEC to reporting institutions for data collection and reporting or develop its own program. Those institutions that develop their own programs must follow the precise format for the new CRA data collection and reporting rules. This format may be obtained by contacting the CRA Assistance Line at (202) 872-7584. Sec. ____.42-3: How should an institution report data on lines of credit? A3. Institutions must collect and report data on lines of credit in the same way that they provide data on loan originations. 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 is the amount that is considered originated. In the case of an increase to an existing line, the amount of the increase is the amount that is considered originated and that amount should be reported. However, consistent with the Call Report and TFR instructions, institutions would not report an increase to a small business or small farm line of credit if the increase would cause the total line of credit to exceed $1 million, in the case of a small business line, or $500,000, in the case of a small farm line. Of course, institutions may provide information about such line increases to examiners as ``other loan data.'' Sec. ____.42-4: Should renewals of lines of credit be collected and/or reported? A4. Renewals of lines of credit for small business, small farm or consumer purposes should be collected and reported, if applicable, in the same manner as renewals of small business or small farm loans. See Sec. ____.42(a)-5. Institutions that are HMDA reporters continue to collect and report home equity lines of credit at their option in accordance with the requirements of 12 CFR part 203. Sec. ____.42-5: When should merging institutions collect data? A5. Three scenarios of data collection responsibilities for the calendar year of a merger and subsequent data reporting responsibilities are described below. Two institutions are exempt from CRA collection and reporting requirements because of asset size. The institutions merge. No data collection is required for the year in which the merger takes place, regardless of the resulting asset size. Data collection would begin after two consecutive years in which the combined institution had year-end assets of at least $250 million or was part of a holding company that had year-end banking and thrift assets of at least $1 billion. Institution A, an institution required to collect and report the data, and Institution B, an exempt institution, merge. Institution A is the surviving institution. For the year of the merger, data collection is required for Institution A's transactions. Data collection is optional for the transactions of the previously exempt institution. For the following year, all transactions of the surviving institution must be collected and reported. Two institutions that each are required to collect and report the data merge. Data collection is required for the entire year of the merger and for subsequent years so long as the surviving institution is not exempt. The surviving institution may file either a consolidated submission or separate submissions for the year of the merger but must file a consolidated report for subsequent years. Sec. ____.42-6: Can small institutions get a copy of the data collection software even though they are not required to collect or report data? A6. Yes. Any institution that is interested in receiving a copy of the software may send a written request to: Attn.: CRA Processing, Board of Governors of the Federal Reserve System, 1709 New York Ave, NW., 5th Floor, Washington, DC 20006. They may also call the CRA Assistance Line at (202) 872-7584 or send Internet e-mail to CRAHELP@FRB.GOV. Sec. ____.42-7: If a small institution is designated a wholesale or limited purpose institution, must it collect data that it would not otherwise be required to collect because it is a small institution? A7. No. However, small institutions must be prepared to identify those loans, investments and services to be evaluated under the community development test. Sec. ____.42(a) Loan Information Required To Be Collected and Maintained Sec. ____.42(a)-1: Must institutions collect and report data on all commercial loans under $1 million at origination? A1. No. Institutions that are not exempt from data collection and reporting are required to collect and report only those commercial loans that they capture in the Call Report, Schedule RC-C, Part II, and in the TFR, Schedule SB. Small business loans are defined as those whose original amounts are $1 million or less and that were reported as either ``Loans secured by nonfarm or nonresidential real estate'' or ``Commercial and Industrial loans'' in Part I of the Call Report or TFR. Sec. ____.42(a)-2: For loans defined as small business loans, what information should be collected and maintained? A2. Institutions that are not exempt from data collection and reporting are required to collect and maintain in a standardized, machine readable format information on each small business loan originated or purchased for each calendar year: A unique number or alpha-numeric symbol that can be used to identify the relevant loan file; The loan amount at origination; The loan location; and An indicator whether the loan was to a business with gross annual revenues of $1 million or less. The location of the loan must be maintained by census tract or block numbering area. In addition, supplemental information contained in the file specifications includes a date associated with the origination or purchase and whether a loan was originated or purchased by an affiliate. The same requirements apply to small farm loans. Sec. ____.42(a)-3: Will farm loans need to be segregated from business loans? A3. Yes. Sec. ____.42(a)-4: Should institutions collect and report data on all agricultural loans under $500,000 at origination? A4. Institutions are to report those farm loans that they capture in the Call Report, Schedule RC-C, Part II and Schedule SB of the TFR. Small farm loans are defined as those whose original amounts are $500,000 or less and were reported as either ``Loans to finance agricultural production and other loans to farmers'' or ``Loans [[Page 36643]] secured by farmland'' in Part I of the Call Report and TFR. Sec. ____.42(a)-5: Should institutions collect and report data about small business and small farm loans that are refinanced or renewed? A5. An institution should collect information about small business and small farm loans that it refinances or renews as loan originations. (A refinancing generally occurs when the existing loan obligation or note is satisfied and a new note is written, while a renewal refers to an extension of the term of a loan. However, for purposes of small business and small farm CRA data collection and reporting, it is no longer necessary to distinguish between the two.) When reporting small business and small farm data, however, an institution may only report one origination (including a renewal or refinancing treated as an origination) per loan per year, unless an increase in the loan amount is granted. If an institution increases the amount of a small business or small farm loan when it extends the term of the loan, it should always report the amount of the increase as a small business or small farm loan origination. The institution should report only the amount of the increase if the original or remaining amount of the loan has already been reported one time that year. For example, a financial institution makes a term loan for $25,000; principal payments have resulted in a present outstanding balance of $15,000. In the next year, the customer requests an additional $5,000, which is approved, and a new note is written for $20,000. In this example, the institution should report both the $5,000 increase and the renewal or refinancing of the $15,000 as originations for that year. These two originations may be reported together as a single origination of $20,000. Sec. ____.42(a)-6: Does a loan to the ``fishing industry'' come under the definition of a small farm loan? A6. Yes. Instructions for Part I of the Call Report and Schedule SB of the TFR include loans ``made for the purpose of financing fisheries and forestries, including loans to commercial fishermen'' as a component of the definition for ``Loans to finance agricultural production and other loans to farmers.'' Part II of Schedule RC-C of the Call Report and Schedule SB of the TFR, which serve as the basis of the definition for small business and small farm loans in the revised regulation, capture both ``Loans to finance agricultural production and other loans to farmers'' and ``Loans secured by farmland.'' Sec. ____.42(a)-7: How should an institution report a home equity line of credit, part of which is for home improvement purposes, but the predominant part of which is for small business purposes? A7. The institution has the option of reporting the portion of the home equity line that is for home improvement purposes under HMDA. That portion of the loan would then be considered when examiners evaluate home mortgage lending. If the line meets the regulatory definition of a ``community development loan,'' the institution should collect and report information on the entire line as a community development loan. If the line does not qualify as a community development loan, the institution has the option of collecting and maintaining (but not reporting) the entire line of credit as ``Other Secured Lines/Loans for Purposes of Small Business.'' Sec. ____.42(a)-8: When collecting small business and small farm data for CRA purposes, may an institution collect and report information about loans to small businesses and small farms located outside the United States? A8. At an institution's option, it may collect data about small business and small farm loans located outside the United States; however, it cannot report this data because the CRA data collection software will not accept data concerning loan locations outside the United States. Sec. ____.42(a)-9: Is an institution that has no small farm or small business loans required to report under CRA? A9. Each institution subject to data reporting requirements must, at a minimum, submit a transmittal sheet, definition of its assessment area(s), and a record of its community development loans. If the institution does not have community development loans to report, the record should be sent with ``0'' in the community development loan composite data fields. An institution that has not purchased or originated any small business or small farm loans during the reporting period would not submit the composite loan records for small business or small farm loans. Sec. ____.42(a)-10: How should an institution collect and report the location of a loan made to a small business or farm if the borrower provides an address that consists of a post office box number or a rural route and box number? A10. Prudent banking practices dictate that an institution know the location of its customers and loan collateral. Therefore, institutions typically will know the actual location of their borrowers or loan collateral beyond an address consisting only of a post office box. Many borrowers have street addresses in addition to post office box numbers or rural route and box numbers. Institutions should ask their borrowers to provide the street address of the main business facility or farm or the location where the loan proceeds otherwise will be applied. Moreover, in many cases in which the borrower's address consists only of a rural route number or post office box, the institution knows the location (i.e., the census tract or block numbering area) of the borrower or loan collateral. Once the institution has this information available, it should assign a census tract or block numbering area to that location (geocode) and report that information as required under the regulation. For loans originated or purchased in 1998 or later, if the institution cannot determine the borrower's street address, and does not know the census tract or block numbering area, the institution should report the borrower's state, county, MSA, if applicable, and ``NA,'' for ``not available,'' in lieu of a census tract or block numbering area code. Sec. ____.42(a)(2) Loan Amount at Origination Sec. ____.42(a)(2)-1: When an institution purchases a small business or small farm loan, which amount should the institution collect and report--the original amount of the loan or the amount at purchase? A1. When collecting and reporting information on purchased small business and small farm loans, an institution collects and reports the amount of the loan at origination, not at the time of purchase. This is consistent with the Call Report's and TFR's use of the ``original amount of the loan'' to determine whether a loan should be reported as a ``loan to a small business'' or a ``loan to a small farm'' and in which loan size category a loan should be reported. When assessing the volume of small business and small farm loan purchases for purposes of evaluating lending test performance under CRA, however, examiners will evaluate an institution's activity based on the amounts at purchase. Sec. ____.42(a)(2)-2: How should an institution collect data about multiple loan originations to the same business? A2. If an institution makes multiple originations to the same business, the loans should be collected and reported as separate originations rather than combined and reported as they are on the Call Report or TFR, which reflect loans outstanding, rather than [[Page 36644]] originations. However, if institutions make multiple originations to the same business solely to inflate artificially the number or volume of loans evaluated for CRA lending performance, the agencies may combine these loans for purposes of evaluation under the CRA. Sec. ____.42(a)(2)-3: How should an institution collect data pertaining to credit cards issued to small businesses? A3. If an institution agrees to issue credit cards to a business' employees, all of the credit card lines opened on a particular date for that single business should be reported as one small business loan origination rather than reporting each individual credit card line, assuming the criteria in the ``small business loan'' definition in the regulation are met. The credit card program's ``amount at origination'' is the sum of all of the employee/business credit cards' credit limits opened on a particular date. If subsequently issued credit cards increase the small business credit line, the added amount is reported as a new origination. Sec. ____.42(a)(3) The Loan Location Sec. ____.42(a)(3)-1: Which location should an institution record if a small business loan's proceeds are used in a variety of locations? A1. The institution should record the loan location by either the location of the business headquarters or the location where the greatest portion of the proceeds are applied, as indicated by the borrower. Sec. ____.42(a)(4) Indicator of Gross Annual Revenue Sec. ____.42(a)(4)-1: When indicating whether a small business borrower had gross annual revenues of $1 million or less, upon what revenues should an institution rely? A1. Generally, an institution should rely on the revenues that it considered in making its credit decision. For example, in the case of affiliated businesses, such as a parent corporation and its subsidiary, if the institution considered the revenues of the entity's parent or a subsidiary corporation of the parent as well, then the institution would aggregate the revenues of both corporations to determine whether the revenues are $1 million or less. Alternatively, if the institution considered the revenues of only the entity to which the loan is actually extended, the institution should rely solely upon whether gross annual revenues are above or below $1 million for that entity. However, if the institution considered and relied on revenues or income of a cosigner or guarantor that is not an affiliate of the borrower, such as a sole proprietor, the institution should not adjust the borrower's revenues for reporting purposes. Sec. ____.42(a)(4)-2: If an institution that is not exempt from data collection and reporting does not request or consider revenue information to make the credit decision regarding a small business or small farm loan, must the institution collect revenue information in connection with that loan? A2. No. In those instances, the institution should enter the code indicating ``revenues not known'' on the individual loan portion of the data collection software or on an internally developed system. Loans for which the institution did not collect revenue information may not be included in the loans to businesses and farms with gross annual revenues of $1 million or less when reporting this data. Sec. ____.42(a)(4)-3: What gross revenue should an institution use in determining the gross annual revenue of a start-up business? A3. The institution should use the actual gross annual revenue to date (including $0 if the new business has had no revenue to date). Although a start-up business will provide the institution with pro forma projected revenue figures, these figures may not accurately reflect actual gross revenue. Sec. ____.42(a)(4)-4: When collecting and reporting the gross annual revenue of small business or farm borrowers, do institutions collect and report the gross annual revenue or the adjusted gross annual revenue of its borrowers? A4. Institutions collect and report the gross annual revenue, rather than the adjusted gross annual revenue, of their small business or farm borrowers. The purpose of this data collection is to enable examiners and the public to judge whether the institution is lending to small businesses and farms or whether it is only making small loans to larger businesses and farms. The regulation does not require institutions to request or consider revenue information when making a loan; however, if institutions do gather this information from their borrowers, the agencies expect them to collect and report the borrowers' gross annual revenue for purposes of CRA. The CRA regulations similarly do not require institutions to verify revenue amounts; thus, institutions may rely on the gross annual revenue amount provided by borrowers in the ordinary course of business. If an institution does not collect gross annual revenue information for its small business and small farm borrowers, the institution would not indicate on the CRA data collection software that the gross annual revenues of the borrower are $1 million or less. (See Sec. ____.42(a)(4)-2.) Sec. ____.42(b) Loan Information Required To Be Reported Sec. ____.42(b)(1) Small Business and Small Farm Loan Data Sec. ____.42(b)(1)-1: For small business and small farm loan information that is collected and maintained, what data should be reported? A1. Each institution that is not exempt from data collection and reporting is required to report in machine-readable form annually by March 1 the following information, aggregated for each census tract or block numbering area in which the institution originated or purchased at least one small business or small farm loan during the prior year: The number and amount of loans originated or purchased with original amounts of $100,000 or less; The number and amount of loans originated or purchased with original amounts of more than $100,000 but less than or equal to $250,000; The number and amount of loans originated or purchased with original amounts of more than $250,000 but not more than $1 million, as to small business loans, or $500,000, as to small farm loans; and To the extent that information is available, the 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). Sec. ____.42(b)(2) Community Development Loan Data Sec. ____.42(b)(2)-1: What information about community development loans must institutions report? A1. Institutions subject to data reporting requirements must report the aggregate number and amount of community development loans originated and purchased during the prior calendar year. Sec. ____.42(b)(2)-2: If a loan meets the definition of a home mortgage, small business, or small farm loan AND qualifies as a community development loan, where should it be reported? Can FHA, VA and SBA loans be reported as community development loans? A2. Except for multifamily affordable housing loans, which may be reported by retail institutions both under HMDA as home mortgage loans and as community development loans, in order to avoid double counting, retail institutions must report loans that meet the definitions of home mortgage, small [[Page 36645]] business, or small farm loans only in those respective categories even if they also meet the definition of community development loans. As a practical matter, this is not a disadvantage for retail institutions because any affordable housing mortgage, small business, small farm or consumer loan that would otherwise meet the definition of a community development loan will be considered elsewhere in the lending test. Any of these types of loans that occur outside the institution's assessment area can receive consideration under the borrower characteristic criteria of the lending test. See Sec. ____.22(b)(2) & (3)-4. Limited purpose and wholesale institutions also must report loans that meet the definitions of home mortgage, small business, or small farm loans in those respective categories; however, they must also report any loans from those categories that meet the regulatory definition of ``community development loans'' as community development loans. There is no double counting because wholesale and limited purpose institutions are not subject to the lending test and, therefore, are not evaluated on their level and distribution of home mortgage, small business, small farm and consumer loans. Sec. ____.42(b)(2)-3: When the primary purpose of a loan is to finance an affordable housing project for low-or moderate-income individuals, but, for example, only 40 percent of the units in question will actually be occupied by individuals or families with low or moderate incomes, should the entire loan amount be reported as a community development loan? A3. Yes. As long as the primary purpose of the loan is a community development purpose, the full amount of the institution's loan should be included in its reporting of aggregate amounts of community development lending. However, as noted in Sec. ____.22(b)(4)-1, examiners may make qualitative distinctions among community development loans on the basis of the extent to which the loan advances the community development purpose. Sec. ____.42(b)(3) Home Mortgage Loans Sec. ____.42(b)(3)-1: Must institutions that are not required to collect home mortgage loan data by the HMDA collect home mortgage loan data for purposes of the CRA? A1. No. If an institution is not required to collect home mortgage loan data by the HMDA, the institution need not collect home mortgage loan data under the CRA. Examiners will sample these loans to evaluate the institution's home mortgage lending. If an institution wants to ensure that examiners consider all of its home mortgage loans, the institution may collect and maintain data on these loans. Sec. ____.42(c) Optional Data Collection and Maintenance Sec. ____.42(c)(1) Consumer Loans Sec. ____.42(c)(1)-1: What are the data requirements regarding consumer loans? A1. There are no data reporting requirements for consumer loans. Institutions may, however, opt to collect and maintain data on consumer loans. If an institution chooses to collect information on consumer loans, it may collect data for one or more of the following categories of consumer loans: motor vehicle, credit card, home equity, other secured, and other unsecured. If an institution collects data for loans in a certain category, it must collect data for all loans originated or purchased within that category. The institution must maintain these data separately for each category for which it chooses to collect data. The data collected and maintained should include for each loan: A unique number or alpha-numeric symbol that can be used to identify the relevant loan file; The loan amount at origination or purchase; The loan location; and The gross annual income of the borrower that the institution considered in making its credit decision. Generally, guidance given with respect to data collection of small business and small farm loans, including, for example, guidance regarding collecting loan location data, and whether to collect data in connection with refinanced or renewed loans, will also apply to consumer loans. Sec. ____.42(c)(1)(iv) Income of Borrower Sec. ____.42(c)(1)(iv)-1: If an institution does not consider income when making an underwriting decision in connection with a consumer loan, must it collect income information? A1. No. 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. Sec. ____.42(c)(1)(iv)-2: May an institution list ``0'' in the income field on consumer loans made to employees when collecting data for CRA purposes as the institution would be permitted to do under HMDA? A2. Yes. Sec. ____.42(c)(1)(iv)-3: When collecting the gross annual income of consumer borrowers, do institutions collect the gross annual income or the adjusted gross annual income of the borrowers? A3. Institutions collect the gross annual income, rather than the adjusted gross annual income, of consumer borrowers. The purpose of income data collection in connection with consumer loans is to enable examiners to determine the distribution, particularly in the institution's assessment area(s), of the institution's consumer loans, based on borrower characteristics, including the number and amount of consumer loans to low-, moderate-, middle-, and upper-income borrowers, as determined on the basis of gross annual income. The regulation does not require institutions to request or consider income information when making a loan; however, if institutions do gather this information from their borrowers, the agencies expect them to collect the borrowers' gross annual income for purposes of CRA. The CRA regulations similarly do not require institutions to verify income amounts; thus, institutions may rely on the gross annual income amount provided by borrowers in the ordinary course of business. Secs. ____.42(c)(1)(iv)-4: Whose income does an institution collect when a consumer loan is made to more than one borrower? A4. An institution that chooses to collect and maintain information on consumer loans collects the gross annual income of all primary obligors for consumer loans, to the extent that the institution considered the income of the obligors when making the decision to extend credit. Primary obligors include co-applicants and co-borrowers, including co-signers. An institution does not, however, collect the income of guarantors on consumer loans, because guarantors are only secondarily liable for the debt. Sec. ____.42(c)(2) Other Loan Data Sec. ____.42(c)(2)-1: Schedule RC-C, Part II of the Call Report does not allow banks to report loans for commercial and industrial purposes that are secured by residential real estate, unless the security interest in the nonfarm residential real estate is taken only as an abundance of caution. (See Secs. ____.12(u) & 563e.12(t)-3.) Loans extended to small businesses with gross annual revenues of $1 million or less may, however, be secured by residential real estate. May a bank collect this information to supplement its small business lending data at the time of examination? [[Page 36646]] A1. Yes. If these loans promote community development, as defined in the regulation, the bank should collect and report information about the loans as community development loans. Otherwise, at the bank's option, it may collect and maintain data concerning loans, purchases, and lines of credit extended to small businesses and secured by nonfarm residential real estate for consideration in the CRA evaluation of its small business lending. A bank may collect this information as ``Other Secured Lines/Loans for Purposes of Small Business'' in the individual loan data. This information should be maintained at the bank but should not be submitted for central reporting purposes. Sec. ____.42(c)(2)-2: Must an institution collect data on loan commitments and letters of credit? A2. No. Institutions are not required to collect data on loan commitments and letters of credit. Institutions may, however, provide for examiner consideration information on letters of credit and commitments. Sec. ____.42(c)(2)-3: Are commercial and consumer leases considered loans for purposes of CRA data collection? A3. Commercial and consumer leases are not considered small business or small farm loans or consumer loans for purposes of the data collection requirements in 12 CFR ____.42(a) & (c)(1). However, if an institution wishes to collect and maintain data about leases, the institution may provide this data to examiners as ``other loan data'' under 12 CFR ____.42(c)(2) for consideration under the lending test. Sec. ____.42(d) Data on Affiliate Lending Sec. ____.42(d)-1: If an institution elects to have an affiliate's home mortgage lending considered in its CRA evaluation, what data must the institution make available to examiners? A1. If the affiliate is a HMDA reporter, the institution must identify those loans reported by its affiliate under 12 CFR part 203 (Regulation C, implementing HMDA). At its option, the institution may either provide examiners with the affiliate's entire HMDA Disclosure Statement or just those portions covering the loans in its assessment area(s) that it is electing to consider. If the affiliate is not required by HMDA to report home mortgage loans, the institution must provide sufficient data concerning the affiliate's home mortgage loans for the examiners to apply the performance tests. Sec. ____.43--Content and Availability of Public File Sec. ____.43(a) Information Available to the Public Sec. ____.43(a)(1) Public Comments Sec. ____.43(a)(1)-1: What happens to comments received by the agencies? A1. Comments received by a Federal financial supervisory agency will be on file at the agency for use by examiners. Those comments are also available to the public unless they are exempt from disclosure under the Freedom of Information Act. Sec. ____.43(a)(1)-2: Is an institution required to respond to public comments? A2. No. All institutions should review comments and complaints carefully to determine whether any response or other action is warranted. A small institution subject to the small institution performance standards is specifically evaluated on its record of taking action, if warranted, in response to written complaints about its performance in helping to meet the credit needs in its assessment area(s) (Sec. ____.26(a)(5)). For all institutions, responding to comments may help to foster a dialogue with members of the community or to present relevant information to an institution's Federal financial supervisory agency. If an institution responds in writing to a letter in the public file, the response must also be placed in that file, unless the response reflects adversely on any person or placing it in the public file violates a law. Sec. ____.43(a)(1)-3: May an institution include a response to its CRA Performance Evaluation in its public file? A3. Yes. However, the format and content of the evaluation, as transmitted by the supervisory agency, may not be altered or abridged in any manner. In addition, an institution that received a less than satisfactory rating during it most recent examination must 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 institution must update the description on a quarterly basis. Sec. ____.43(b) Additional Information Available to the Public Sec. ____.43(b)(1) Institutions Other Than Small Institutions Sec. ____.43(b)(1)-1: Must an institution that elects to have affiliate lending considered include data on this lending in its public file? A1. Yes. The lending data to be contained in an institution's public file covers the lending of the institution's affiliates, as well as of the institution itself, considered in the assessment of the institution's CRA performance. An institution that has elected to have mortgage loans of an affiliate considered must include either the affiliate's HMDA Disclosure Statements for the two prior years or the parts of the Disclosure Statements that relate to the institution's assessment area(s), at the institution's option. Sec. ____.43(b)(1)-2: May an institution retain the compact disc provided by the Federal Financial Institution Examination Council that contains its CRA Disclosure Statement in its public file, rather than printing a hard copy of the CRA Disclosure Statement for retention in its public file? A2. Yes, if the institution can readily print out from the compact disc (or a duplicate of the compact disc) its CRA Disclosure Statement for a consumer when the public file is requested. If the request is at a branch other than the main office or the one designated branch in each state that holds the complete public file, the bank should provide the CRA Disclosure Statement in a paper copy, or in another format acceptable to the requestor, within 5 calendar days, as required by Sec. ____.43(c)(2)(ii). Sec. ____.43(c) Location of Public Information Sec. ____.43(c)-1: What is an institution's ``main office''? A1. An institution's main office is the main, home, or principal office as designated in its charter. Sec. ____.43(c)-2: May an institution maintain a copy of its public file on an intranet or the Internet? A2. Yes, an institution may keep all or part of its public file on an intranet or the Internet, provided that the institution maintains all of the information, either in paper or electronic form, that is required in Sec. ____.43 of the regulations. An institution that opts to keep part or all of its public file on an intranet or the Internet must follow the rules in Secs. ____.43(c)(1) and (2) as to what information is required to be kept at a main office and at a branch. The institution also must ensure that the information required to be maintained at a main office and branch, if kept electronically, can be readily downloaded and printed for any member of the public who requests a hard copy of the information. [[Page 36647]] Sec. ____.44--Public Notice by Institutions Sec. ____.44-1: Are there any placement or size requirements for an institution's public notice? A1. The notice must be placed in the institution's public lobby, but the size and placement may vary. The notice should be placed in a location and be of a sufficient size that customers can easily see and read it. Sec. ____.45--Publication of Planned Examination Schedule Sec. ____.45-1: Where will the agencies publish the planned examination schedule for the upcoming calendar quarter? A1. The agencies may use the Federal Register, a press release, the Internet, or other existing agency publications for disseminating the list of the institutions scheduled to for CRA examinations during the upcoming calendar quarter. Interested parties should contact the appropriate Federal financial supervisory agency for information on how the agency is publishing the planned examination schedule. Sec. ____.45-2: Is inclusion on the list of institutions that are scheduled to undergo CRA examinations in the next calendar quarter determinative of whether an institution will be examined in that quarter? A2. No. The agencies attempt to determine as accurately as possible which institutions will be examined during the upcoming calendar quarter. However, whether an institution's name appears on the published list does not conclusively determine whether the institution will be examined during that quarter. The agencies may need to defer a planned examination or conduct an unforeseen examination because of scheduling difficulties or other circumstances. Appendix A to Part ____--Ratings Appendix A to Part ____--1: Must an institution's performance fit each aspect of a particular rating profile in order to receive that rating? A1. No. Exceptionally strong performance in some aspects of a particular rating profile may compensate for weak performance in others. For example, a retail institution that uses non-branch delivery systems to obtain deposits and to deliver loans may have almost all of its loans outside the institution's assessment area. Assume that an examiner, after consideration of performance context and other applicable regulatory criteria, concludes that the institution has weak performance under the lending test criteria applicable to lending activity, geographic distribution, and borrower characteristics within the assessment area. The institution may compensate for such weak performance by exceptionally strong performance in community development lending in its assessment area or a broader statewide or regional area that includes its assessment area. Appendix B to Part ____--CRA Notice Appendix B to Part____--1: What agency information should be added to the CRA notice form? A1. The following information should be added to the form: OCC-supervised institutions only: The address of the deputy comptroller of the district in which the institution is located should be inserted in the appropriate blank. These addresses can be found at 12 CFR 4.5(a). OCC-, FDIC-, and Board-supervised institutions: ``Officer in Charge of Supervision'' is the title of the responsible official at the appropriate Federal Reserve Bank. Appendix A--Regional Offices of the Bureau of the Census To obtain median family income levels of census tracts, MSAs, block numbering areas and statewide nonmetropolitan areas, contact the appropriate regional office of the Bureau of the Census as indicated below. The list shows the states covered by each regional office. Atlanta (404) 730-3833 Alabama, Florida, Georgia Boston (617) 424-0510 Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont Charlotte (704) 344-6144 Kentucky, North Carolina, South Carolina, Tennessee, Virginia Chicago (312) 353-9747 Illinois, Indiana, Wisconsin Dallas (214) 655-3050 Louisiana, Mississippi, Texas Denver (303) 969-7750 Arizona, Colorado, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, Wyoming Detroit (313) 259-1875 Michigan, Ohio, West Virginia Kansas City (913) 551-6711 Arkansas, Iowa, Kansas, Minnesota, Missouri, Oklahoma Los Angeles (818) 904-6339 Southern California, Hawaii New York (212) 264-4730 New York, New Jersey--selected counties Philadelphia (215) 656-7578 Delaware, District of Columbia, Maryland, New Jersey--selected counties, Pennsylvania Seattle (206) 553-5835 Alaska, Northern California, Idaho, Oregon, Washington
Index
Keyword Q & A
Affiliate lending Sec. ____.22(b)(1)-1
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(c)(1)-1
Sec. ____.22(c)(2)(i)-1
Sec. ____.22(c)(2)(ii)-1
Sec. ____.41(a)-2
Sec. ____.42(d)-1
Sec. ____.43(b)(1)-1
Affiliates Sec. ____.12(a)-1
Sec. ____.27(c)-2
Affordable housing Secs. ____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h)(1) & 563e.12(g)(1)-1
Sec. ____.42(b)(2)-3
Alternative delivery systems Sec. ____.24(d)-1
Sec. ____.24(d)(3)-1
Sec. ____.24(d)(3)-2
Applications, corporate Sec. ____.29(a)-1
Sec. ____.29(a)-2
Sec. ____.29(b)-1
Assessment area Sec. ____.22(b)(2) & (3)-2
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(b)(2) & (3)-4
Sec. ____.26(a)(2)-1
Sec. ____.41(a)-1
Sec. ____.41(a)-2
Sec. ____.41(a)-3
Sec. ____.41(c)(1)-1
Sec. ____.41(c)(1)-2
Sec. ____.41(d)-1
Sec. ____.41(e)(3)-1
Sec. ____.41(e)(4)-1
Sec. ____.41(e)(4)-2
Assessment area, benefit to Secs. ____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-6
Sec. ____.25(e)-1
Sec. ____.26(b)-2
Assets Secs. ____.12(t) & 563e.12(s)-1
Secs. ____.12(t) & 563e.12(s)-2
ATMs Secs. ____.12(f) & 563e.12(e)-1
Sec. ____.24(d)-1
Sec. ____.24(d)(3)-1
Sec. ____.41(e)(3)-1
Borrower characteristics Sec. ____.22(b)(2) & (3)-1
Sec. ____.22(b)(2) & (3)-5
Sec. ____.26(a)(3) & (4)-1
Sec. ____.42(c)(1)(iv)-3
Branch Secs. ____.12(f) & 563e.12(e)-1
Sec. ____.28(a)-1
Sec. ____.41(e)(3)-1
Brokerage Secs. ____.12(m) & 563e.12(l)-2
CEBA credit card banks Sec. ____.25(a)-1
Charitable contributions or activities Secs. ____.12(j) & 563e.12(i)-2
Secs. ____.12(s) & 563e.12(r)-4
Secs. ____.12(s) & 563e.12(r)-5
Child care services Secs. ____.12(h) & 563e.12(g)-1
Commercial loans Sec. ____.12(u) & 563e.12(t)-2
Sec. ____.42(a)-1
Sec. ____.42(c)(2)-1
Commitments Sec. ____.22(a)(2)-1
Sec. ____.26(a)-4
Sec. ____.29(a)-2
Sec. ____.42(c)(2)-2
Community contact interviews Sec. ____.21(b)(2)-2
Community development Secs. ____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h) & 563e.12(g)(3)-1
Sec. ____.42(b)(2)-3
Community development activities Sec. ____.21(a)-1
Community development loan Secs. ____.12(i) & 563e.12(h)-1
Secs. ____.12(i) & 563e.12(h)-2
Secs. ____.12(i) & 563e.12(h)-3
Secs. ____.12(i) & 563e.12(h)-4
Secs. ____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-6
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(s) & 563e.12(r)-6
Secs. ____.12(u) & 563e.12(t)-1
Sec. ____.22(b)(4)-1
Sec. ____.22(d)-3
Sec. ____.23(b)-1
Sec. ____.25(d)-1
Sec. ____.26(a)-1
Sec. ____.26(a)-3
Sec. ____.26(b)-2
Sec. ____.42(b)(2)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(2)-3
Community development service Secs. ____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(j) & 563e.12(i)-1
Secs. ____.12(j) & 563e.12(i)-2
Secs. ____.12(j) & 563e.12(i)-3
Secs. ____.12(s) & 563e.12(r)-7
Sec. ____.23(b)-1
Sec. ____.26(b)-2
Sec. ____.42(c)(2)-1
Community development test Sec. ____.25(f)-1
Community services Secs. ____.12(h) & 563e.12(g)-2
Sec. ____.25(d)-1
Complexity Sec. ____.22(b)(5)-1
Sec. ____.23(e)-2
Sec. ____.28-1
Consortia Sec. ____.22(d)-2
Sec. ____.26(a)-3
Consumer loan Secs. ____.12(k) & 563e.12(j)-1
Secs. ____.12(k) & 563e.12(j)-2
Secs. ____.12(k) & 563e.12(j)-3
Sec. ____.22(a)(1)-2
Sec. ____.42(c)(1)-1
Sec. ____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Secs. ____.42(c)(1)(iv)-4
CRA disclosure statement Sec. ____.43(b)(1)-2
Credit cards Secs. ____.12(i) & 563e.12(h)-3
Secs. ____.12(u) & 563e.12(t)-4
Sec. ____.42(a)(2)-3
Data collection Sec. ____.42-1
Sec. ____.42-2
Sec. ____.42-5
Sec. ____.42-7
Sec. ____.42(a)-1
Sec. ____.42(a)-2
Sec. ____.42(a)-4
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)-10
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(2)-2
Sec. ____.42(a)(2)-3
Sec. ____.42(a)(3)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(3)-1
Sec. ____.42(c)(1)-1
Sec. ____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Sec. ____.42(c)(1)(iv)-3
Sec. ____.42(c)(2)-1
Sec. ____.42(c)(2)-2
Data reporting Sec. ____.42-1
Sec. ____.42-3
Sec. ____.42-4
Sec. ____.42(a)-1
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)-9
Sec. ____.42(a)-10
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(2)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(2)-3
Debit cards Sec. ____.42(d)(3)-2
Economic development Secs. ____.12(h) & 563e.12(g)-2
Educational services Secs. ____.12(h) & 563e.12(g)-1
Employees' charitable activities Secs. ____.12(j) & 563e.12(i)-2
Employees' income Sec. ____.42(c)(1)(iv)-2
Examination schedule Sec. ____.45-1
Sec. ____.45-2
Federal branch Secs. ____.12(t) & 563e.12(s)-2
Federal Home Loan Bank Secs. ____.12(s) & 563e.12(r)-3
Federal Reserve Bank membership reserves. Secs. ____.12(s) & 563e.12(r)-3
Financial services, provision of Secs. ____.12(j) & 563e.12(i)-1
Fisheries Sec. ____.42(a)-6
Flexibility Sec. ____.22(b)(5)-1
Forestries Sec. ____.42(a)-6
Geographic distribution Sec. ____.22(b)(2) & (3)-1
Sec. ____.22(b)(2) & (3)-2
Sec. ____.22(b)(2) & (3)-3
Sec. ____.22(b)(2) & (3)-4
Sec. ____.26(a)(3) & (4)-1
Geography Sec. ____.41(d)-1
Guaranteed loans Sec. ____.22(a)(2)-4
Guarantor Secs. ____.42(c)(1)(iv)-4
Health services Secs. ____.12(h) & 563e.12(g)-1
High cost area Secs. ____.12(h) & 563e.12(g)-3
HMDA reporting Secs. ____.12(i) & 563e.12(h)-2
Sec. ____.42(b)(3)-1
Home equity line of credit Secs. ____.12(k) & 563e.12(j)-2
Sec. ____.42(a)-7
Home equity loan Secs. ____.12(k) & 563e.12(j)-1
Home mortgage lending Secs. ____.22(a)(1)-1
Sec. ____.42(d)-1
Home mortgage loan Secs. ____.12(m) & 563e.12(1)-1
Secs. ____.12(m) & 563e.12(1)-2
Sec. ____.23(b)-2
Sec. ____.42(b)(2)-2
Sec. ____.42(b)(3)-1
Illegal credit practices Sec. ____.28(c)-1
Income Sec. ____.42(c)(1)(iv)-1
Sec. ____.42(c)(1)(iv)-2
Sec. ____.42(c)(1)(iv)-3
Income level Secs. ____.12(n) & 563e.12(m)-1
Indirect investments Sec. ____.23(a)-1
Individual development accounts (IDAs) Sec. ____.24(d)-2
Innovativeness Sec. ____.22(b)(5)-1
Sec. ____.23(e)-2
Sec. ____.28-1
Institutional capacity and constraints Sec. ____.21(b)(4)-1
Internet Sec. ____.43(c)-2
Intranet Sec. ____.43(c)-2
Leases Sec. ____.42(c)(2)-3
Lending activity Sec. ____.22(b)(1)-1
Lending distribution Sec. ____.26(a)(3) & (4)-1
Lending within assessment area Sec. ____.22(b)(2) & (3)-3
Sec. ____.26(a)(2)-1
Sec. ____.26(a)(3) & (4)-1
Letters of credit Sec. ____.22(a)(2)-1
Sec. ____.26(a)-4
Sec. ____.42(c)(2)-2
Limited purpose institution Secs. ____.12(o) & 563e.12(n)-1
Secs. ____.12(o) & 563e.12(n)-2
Secs. ____.12(o) & 563e.12(n)-3
Sec. ____.42-7
Lines of credit Sec. ____.42-3
Sec. ____.42-4
Loan amount Sec. ____.42(a)(2)-1
Loan application activity Sec. ____.22(a)(2)-2
Loan location Sec. ____.42(a)-10
Sec. ____.42(a)(3)-1
Loan originations, multiple Sec. ____.42(a)(2)-2
Loan production office (LPO) Secs. ____.12(f) & 563e.12(e)-2
Loans, outside-assessment area Sec. ____.22(b)(2) & (3)-4
Loan-to-deposit ratio Sec. ____.26(a)(1)-1
Sec. ____.26(a)(1)-2
Sec. ____.26(a)(1)-3
Main office Sec. ____.43(c)-1
Measurable goals Sec. ____.27(f)(1)-1
MECAs Sec. ____.22(a)(2)-3
Merging institutions Sec. ____.42-5
Mortgage-backed securities Secs. ____.12(s) & 563e.12(r)-2
Sec. ____.23(b)-2
Multi-purpose loan Secs. ____.12(k) & 563e.12(j)-3
Sec. ____.42(a)-7
Municipal bonds Secs. ____.12(s) & 563e.12(r)-2
National fund Sec. ____.25(e)-1
New Markets Venture Capital Company Secs. ____.12(h)(3) & 563e.12(g)(3)-1
Niche institution Secs. ____.12(o) & 563e.12(n)-3
Nonprofit organization Secs. ____.12(u) & 563e.12(t)-1
Past performance Sec. ____.21(b)(5)-1
Performance context Sec. ____.21(b)-1
Sec. ____.21(b)(2)-1
Sec. ____.21(b)(2)-2
Sec. ____.21(b)(4)-1
Sec. ____.21(b)(5)-1
Sec. ____.21(b)(5)-2
Performance criteria Sec. ____.22(b)-1
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.26(a)-1
Sec. ____.26(a)-2
Sec. ____.28-2
Performance evaluation Sec. ____.43(a)(1)-3
Performance rating Sec. ____.26(a)-2
Sec. ____.26(a)-5
Sec. ____.26(b)-1
Sec. ____.28-1
Sec. ____.28-2
Sec. ____.28(a)-1
Sec. ____.28(a)-2
Sec. ____.28(a)-3
Appendix A to Part ____-1
Political subdivision Sec. ____.41(c)(1)-1
Sec. ____.41(c)(1)-2
Sec. ____.41(d)-1
Primary purpose Secs. ____.12(i) & 563e.12(h)-7
Sec. ____.42(b)(2)-3
Public comment Sec. ____.27(g)(2)-1
Sec. ____.29(b)-1
Sec. ____.29(b)-2
Sec. ____.43(a)(1)-1
Sec. ____.43(a)(1)-2
Public file Sec. ____.43(a)(1)-2
Sec. ____.43(a)(1)-3
Sec. ____.43(b)(1)-1
Sec. ____.43(b)(1)-2
Sec. ____.43(c)-2
Public notice Sec. ____.44-1
Appendix B to Part ____-1
Qualified investment Secs. ____.12(i) & 563e.12(h)-5
Secs. ____.12(i) & 563e.12(h)-7
Secs. ____.12(s) & 563e.12(r)-1
Secs. ____.12(s) & 563e.12(r)-2
Secs. ____.12(s) & 563e.12(r)-3
Secs. ____.12(s) & 563e.12(r)-4
Secs. ____.12(s) & 563e.12(r)-5
Secs. ____.12(s) & 563e.12(r)-6
Secs. ____.12(s) & 563e.12(r)-7
Sec. ____.23(b)-1
Sec. ____.23(b)-2
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.25(d)-1
Sec. ____.26(a)-1
Sec. ____.26(a)-5
Sec. ____.26(b)-2
Qualitative factors Sec. ____.21(a)-1
Sec. ____.22(b)(4)-1
Sec. ____.22(b)(5)-1
Sec. ____.23(e)-1
Sec. ____.23(e)-2
Sec. ____.28-1
Sec. ____.28-2
Ratings matrix Sec. ____.28(a)-3
Refinancings Sec. ____.42(a)-5
Regional area Secs. ____.12(i) & 563e.12(h)-6
Remote service facility (RSF) Secs. ____.12(f) & 563e.12(e)-1
Renewals Sec. ____.42-4 Sec. ____.42(a)-5
Responsiveness Sec. ____.22(a)-1 Sec. ____.23(e)-2
Retail banking services Sec. ____.24(d)-1
Revenue Sec. ____.42(a)(4)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-3
Sec. ____.42(a)(4)-4
Revitalize or stabilize Secs. ____.12(h) & 563e.12(g)-1
Secs. ____.12(h) & 563e.12(g)-2
Secs. ____.12(h)(4) & 563e.12(g)(4)-1
Secs. ____.12(i) & 563e.12(h)-4
SBIC or SBDC Sec. ____.12(h)(3)____563e.12(g)(3)-1
Similarly situated lenders Sec. ____.21(b)(5)-2
Small business loan Secs. ____.12(u) & 563e.12(t)-1
Secs. ____.12(u) & 563e.12(t)-2
Secs. ____.12(u) & 563e.12(t)-3
Secs. ____.12(u) & 563e.12(t)-4
Sec. ____.42(a)-2
Sec. ____.42(a)-3
Sec. ____.42(a)-5
Sec. ____.42(a)-8
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(2)-3
Sec. ____.42(a)(3)-1
Sec. ____.42(a)(4)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(b)(2)-2
Sec. ____.42(c)(2)-1
Small farm loan Sec. ____.42(a)-3
Sec. ____.42(a)-4
Sec. ____.42(a)-5
Sec. ____.42(a)-6
Sec. ____.42(a)-8
Sec. ____.42(a)(2)-1
Sec. ____.42(a)(4)-2
Sec. ____.42(a)(4)-4
Sec. ____.42(b)(1)-1
Sec. ____.42(a)(2)-2
Small institution Secs. ____.12(t) & 563e.12(s)-1
Secs. ____.12(t) & 563e.12(s)-2
Sec. ____.42-6
Sec. ____.42-7
Small institution performance standards Sec. ____.26(a)-1
Sec. ____.26(a)-2
Sec. ____.26(a)-3
Sec. ____.26(a)-4
Sec. ____.26(a)-5
Sec. ____.26(a)(3) & (4)-1
Sec. ____.26(b)-1
Sec. ____.26(b)-2
Social services Secs. ____.12(h) & 563e.12(g)-1
Software for data collection and reporting. Sec. ____.42-2
Sec. ____.42-6
Sec. ____.42(c)(2)-1
Special purpose institution Secs. ____.11(c)(3) & 563e.11(c)(2)-1
Secs. ____.11(c)(3) & 563e.11(c)(2)-2
State branch Secs. ____.12(t) & 563e.12(s)-2
Strategic plan Sec. ____.27(c)-1
Sec. ____.27(c)-2
Sec. ____.27(f)(1)-1
Sec. ____.27(g)(2)-1
Subsidiary Sec. ____.12(a)-1
Third party investments Sec. ____.22(d)-1 Sec. ____.22(d)-2
Sec. ____.22(d)-3
Sec. ____.25(d)-1
Sec. ____.26(a)-3
Wholesale institution Secs. ____.12(o) & 563e.12(n)-2
Secs. ____.12(w) & 563e.12(v)-1
Sec. ____.42-7
---------------------------------------------------------------------------------------------------------------- End of text of the Interagency Questions and Answers Dated: July 5, 2001. Joanne Giese, Assistant Executive Secretary, Federal Financial Institutions Examination Council. Billing Codes OCC: 4810-33-P (25%) FRB: 6210-01-P (25%) FDIC: 6714-01-P (25%) OTS: 6720-01-P (25%) [FR Doc. 01-17246 Filed 7-11-01; 8:45 am] BILLING CODES 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P

Last Updated 11/25/2011 communications@fdic.gov