Interagency Questions and Answers Regarding Community - ffiec

Thursday,

July 12, 2001

Part II

Federal FinancialInstitutionsExamination CouncilCommunity Reinvestment Act;Interagency Questions and AnswersRegarding Community Reinvestments;Notice

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36620 Federal Register / Vol. 66, No. 134 / Thursday, July 12, 2001 / Notices

FEDERAL FINANCIAL INSTITUTIONSEXAMINATION COUNCIL

Community Reinvestment Act;Interagency Questions and AnswersRegarding Community Reinvestment

AGENCY: Federal Financial InstitutionsExamination Council.ACTION: Notice.

SUMMARY: The Consumer ComplianceTask Force (we) of the Federal FinancialInstitutions Examination Council(FFIEC) is supplementing, amending,and republishing its InteragencyQuestions and Answers RegardingCommunity Reinvestment. TheInteragency Questions and Answershave been prepared by staff of the Officeof the Comptroller of the Currency(OCC), the Board of Governors of theFederal Reserve System (Board), theFederal Deposit Insurance Corporation(FDIC), and the Office of ThriftSupervision (OTS) (collectively, theagencies) to answer frequently askedquestions about communityreinvestment. These InteragencyQuestions and Answers containinformal staff guidance for agencypersonnel, financial institutions, andthe public.DATES: Effective Date of AmendedInteragency Questions and Answers onCommunity Reinvestment: July 11,2001.FOR FURTHER INFORMATION CONTACT:OCC: Karen Tucker, National BankExaminer, Community and ConsumerPolicy Division, (202) 874–4446; orMargaret Hesse, Special Counsel,Community and Consumer LawDivision, (202) 874–5750, Office of theComptroller of the Currency, 250 EStreet, SW., Washington, DC 20219.

Board: Catherine M.J. Gates, SeniorReview Examiner, (202) 452–3946; orKathleen C. Ryan, Senior Attorney,(202) 452–3667, Board of Governors ofthe Federal Reserve System, 20th Streetand Constitution Avenue, NW.,Washington, DC 20551.

FDIC: Robert W. Mooney, AssistantDirector, Division of Compliance andConsumer Affairs, (202) 942–3378;Stephanie Caputo, Senior Fair LendingSpecialist, Division of Compliance andConsumer Affairs, (202) 942–3413; or A.Ann Johnson, Counsel, Legal Division,(202) 898–3573, Federal DepositInsurance Corporation, 550 17th Street,NW., Washington, DC 20429.

OTS: Theresa A. Stark, ProjectManager, Compliance Policy, (202) 906–7054; or Richard R. Riese, Director,Compliance Policy, (202) 906–6134,Office of Thrift Supervision, 1700 GStreet, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

BackgroundIn 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 publishedrelated clarifying documents onDecember 20, 1995 (60 FR 66048) andMay 10, 1996 (61 FR 21362).

The revised regulations areinterpreted primarily through‘‘Interagency Questions and AnswersRegarding Community Reinvestment,’’which provide informal staff guidancefor use by agency personnel, financialinstitutions, and the public, and whichare supplemented periodically. Wepublished our most recent guidance onApril 28, 2000 (2000 InteragencyQuestions and Answers). 65 FR 25088.In addition to issuing the 2000Interagency Questions and Answers, were-proposed revisions to one questionand answer, as well as a conformingamendment to another question andanswer, in the accompanyingsupplementary information. Theproposed revised question and answeraddressed whether there must be adirect benefit from communitydevelopment loans and services andqualified investments to an institution’sassessment area. We specificallyrequested comment addressing theproposed revised question and answer,as well as general comments andquestions regarding the CRAregulations. 65 FR at 25090–92.

We received 17 letters in response toour request for comments in the 2000Interagency Questions and Answers.Comments came from financialinstitutions or financial institutionholding companies (7), communityorganizations (2), financial institutiontrade associations (4), one state agency,and others (3). This documentsupplements, revises, and republishesthe 2000 Interagency Questions andAnswers based, in part, on questionsand comments received from examiners,financial institutions, and otherinterested parties, and on commentsreceived in response to our request forcomments.

As discussed below, this documentadopts the revisions to the question andanswer about whether there must be adirect benefit to an institution’sassessment area for an activity to benefitthe assessment area that we proposed inApril 2000, along with conformingchanges to another existing questionand answer, which addresses what ismeant by a ‘‘regional area.’’ We are also

making slight clarifying revisions toeight existing questions and answersand adopting six new questions andanswers.

The Interagency Questions andAnswers has an index to aid readers inlocating specific information in thedocument. The index containskeywords, listed alphabetically, alongwith numerical indicators of questionsand answers that relate to that keyword.The list of questions and answersaddressing each keyword in the index isnot intended to be exhaustive. Wewelcome suggestions for additionalentries to the index. Further, when thisnew version of the InteragencyQuestions and Answers is madeavailable on the agencies’ and theFFIEC’s World Wide Web sites, theindex question and answer numberswill be linked by hypertext to thequestions and answers in the documentto facilitate quick reference to relevantinformation.

Questions and answers are groupedby the provision of the CRA regulationsthat they discuss and are presented inthe same order as the regulatoryprovisions. The Interagency Questionsand Answers employ an abbreviatedmethod to cite to the regulations.Because the regulations of the fouragencies are substantially identical,corresponding sections of the differentregulations usually bear the same suffix.Therefore, the Interagency Questionsand Answers typically cite only to thesuffix. For example, the small bankperformance standards for nationalbanks appear at 12 CFR 25.26; forFederal Reserve System member bankssupervised by the Board, they appear at12 CFR 228.26; for nonmember statebanks, at 12 CFR 345.26; and for thrifts,at 12 CFR 563e.26. Accordingly, thecitation in this document would be to§ll.26. In the few instances in whichthe suffix in one of the regulations isdifferent, the specific citation for thatregulation is provided. The questionnumbering system consists of theregulatory citation (as described above)and a number, connected by a dash. Forexample, the first question addressing§ll.21(a) would be identified as§ll.21(a)–1.

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

We are adopting the revisions that were-proposed in April 2000 to thequestion and answer about whetherthere must be a direct benefit to aninstitution’s assessment area for anactivity to benefit the assessment area.We are also adopting conformingrevisions to another existing question


36621Federal Register / Vol. 66, No. 134 / Thursday, July 12, 2001 / Notices

and answer to provide consistency withthe amended question and answer.

Must There Be Some Immediate orDirect Benefit to the Institution’sAssessment Area(s) To Satisfy theRegulations’ Requirement ThatQualified Investments and CommunityDevelopment Loans or Services Benefitan Institution’s Assessment Area(s) or aBroader Statewide or Regional AreaThat Includes the Assessment Area(s)?

The fifth question and answeraddressing §§ll.12(i) and 563e.12(h)(§§ll.12(i) & 563e.12(h)–5) addresseswhether there must be an immediate ordirect benefit to an institution’sassessment area(s) to satisfy theregulations’ requirement that qualifiedinvestments and communitydevelopment loans or services benefitan institution’s assessment area(s) or abroader statewide or regional area thatincludes the assessment area(s). Thisquestion and answer currently statesthat an institution’s assessment area(s)need not receive an immediate or directbenefit from the institution’s specificparticipation in the broader statewide orregional organization or activity,provided the purpose, mandate, orfunction of the organization or activityincludes serving geographies orindividuals located in the assessmentarea(s).

In May 1999, we first proposedrevising this question and answer topermit consideration of support forcommunity development organizationsor activities serving individuals orgeographies located somewhere in thebroader statewide or regional area thatincludes the institution’s assessmentarea. This consideration would be giveneven if the organization or activity didnot have the purpose, mandate orfunction of serving geographies orindividuals within the institution’sassessment area(s). Most commentersresponding to the 1999 proposalappeared to favor the original proposedrevision, as it would provide increasedflexibility in engaging in communitydevelopment activities. However, itappeared that a number of thosecommenters did not recognize therevised answer as an expansion ofexisting options for institutions toengage in community developmentactivities outside their assessmentarea(s). Therefore, we re-proposed forpublic comment a slightly revisedquestion and answer to ensure that thepublic understood that the revisedquestion and answer expands thecurrent guidance.

The question and answer, as it was re-proposed in April 2000, contained twoapproaches to determine whether

qualified investments and communitydevelopment loans or services benefitan institution’s assessment area(s) or abroader statewide or regional area thatincludes the institution’s assessmentarea(s). First, as the agencies havealways maintained, if an activitysupports an organization or programthat benefits the institution’s assessmentarea or a broader statewide or regionalarea that is larger than, but includes, theassessment area(s), the activity will beconsidered if the purpose, mandate, orfunction of the organization or activityincludes serving the assessment area(s).Second, if, in light of its performancecontext, an institution has adequatelyaddressed the community developmentneeds of its assessment area(s),examiners will consider communitydevelopment activities that benefit low-and moderate-income individuals orgeographies somewhere in the broaderstatewide or regional area that includesthe assessment area(s), even if thoseactivities do not have a purpose,mandate, or function of benefiting theinstitution’s assessment area(s).

The following example explained thetwo approaches. An institution islocated in Chicago. Its assessment areais the Chicago metropolitan area. Itscommunity development activitiesinclude loans, investments, and servicesin organizations and projects located inand benefiting Chicago, its assessmentarea. These activities would beconsidered under the first approach.The institution’s communitydevelopment activities also includeloans and investments in severalprojects that benefit the entire state ofIllinois, including Chicago. Theseactivities also are considered under thefirst approach. In addition, theinstitution participated in a communitydevelopment activity that benefits theentire Great Lakes region, including theChicago metropolitan area. This activitywould also be considered under the firstapproach. Assume that, afterconsidering its performance context,examiners have determined that theinstitution has adequately addressed thecommunity development needs of itsassessment area through loans,investments or services consideredunder the first approach. Examinersthen would also consider theinstitution’s investment in a communitydevelopment organization located inDecatur, IL, that will serve only theDecatur area—with no potential that itwill ever benefit Chicago, theinstitution’s assessment area. Decatur, ofcourse, is in the statewide area (Illinois)that includes the institution’sassessment area. The institution would

receive consideration for this activityunder the second approach.

The agencies received 14 letterscommenting on the proposed questionand answer. All of the commenters weregenerally in favor of the proposedquestion and answer. As one financialinstitution commenter stated, ‘‘Webelieve that community developmentorganizations and programs that operateon a local, statewide, or even multi-statebasis ultimately provide benefit to allsurrounding areas. Such initiatives helpstabilize these markets and provide aripple effect on neighboringgeographies. As the capacity of one areagrows, it is possible to leverage thateffort to build community developmentmomentum.’’

The agencies are adopting theamended question and answer,§§ll.12(i) & 563e.12(h)–5, as it wasproposed in April 2000.

What Is Meant by the Term ‘‘RegionalArea’’?

In addition, the agencies are alsoadopting the conforming amendment toquestion and answer, §§ll.12(i) &563e.12(h)–6, which was also proposedin April 2000. This revised question andanswer is necessary so that, in caseswhere an institution has alreadyadequately addressed the communitydevelopment needs of its assessmentarea(s), examiner discretion does notunduly impede the broader choice andjudgment permitted to institutions forperforming community developmentactivities in the relevant statewide orregional area. This conformingamendment clarifies that, if aninstitution has adequately addressed thecommunity development needs of itsassessment area(s), examiners willconsider its community developmentactivities that benefit geographies orindividuals located somewhere withinthe broader statewide or regional areathat includes the institution’sassessment area(s), even if thoseactivities do not benefit its assessmentarea(s).

New Questions and AnswersThe agencies are adopting six new

questions and answers, which arediscussed below.

Revitalize and Stabilize Low- andModerate-Income Areas

Financial institutions and examinershave asked us about the types ofactivities that are considered torevitalize and/or stabilize low- andmoderate-income areas. In response, theagencies are adopting a new questionand answer, §§ll.12(h)(4) &563e.12(g)(4)–1, which provides



guidance about such activities. It statesthat activities that revitalize or stabilizea low- or moderate-income geographyare activities that help to attract andretain businesses and residents.Examiners will presume that an activityrevitalizes or stabilizes a low- ormoderate-income geography if theactivity has been approved by thegoverning board of an EnterpriseCommunity or Empowerment Zone(designated pursuant to 26 U.S.C. 1391)and is consistent with the board’sstrategic plan. They will make the samepresumption if the activity has receivedsimilar official designation as consistentwith a federal, state, local, or tribalgovernment plan for the revitalization orstabilization of the low- or moderate-income geography. To determinewhether other activities revitalize orstabilize a low- or moderate-incomegeography, examiners will evaluate theactivity’s actual impact on thegeography, if information about this isavailable. If not, examiners willdetermine whether the activity isconsistent with the community’s formalor informal plans for the revitalizationand stabilization of the low- ormoderate-income geography.

Types of Lending Activities That MayWarrant Favorable Consideration asActivities Responsive to the CreditNeeds of an Institution’s Community

Credit needs vary from community tocommunity. However, there are somelending activities that are likely to beresponsive in helping to meet the creditneeds of many communities. Theagencies are adopting a new questionand answer, §ll.22(a)–1, whichidentifies the following activities asbeing responsive to the needs of aninstitution’s assessment area:

• Providing loan programs thatinclude a financial educationcomponent about how to avoid lendingactivities that may be abusive orotherwise unsuitable;

• Establishing loan programs thatprovide small, unsecured consumerloans in a safe and sound manner (i.e.,based on the borrower’s ability to repay)and with reasonable terms;

• Offering lending programs, whichfeature reporting to consumer reportingagencies, that transition borrowers fromloans with higher interest rates and fees(based on credit risk) to lower-costloans, consistent with safe and soundlending practices. Reporting toconsumer reporting agencies allowsborrowers accessing these programs theopportunity to improve their credithistories and thereby improve theiraccess to competitive credit products.Examiners may consider favorably such

lending activities, which have featuresaugmenting the success andeffectiveness of the institution’s lendingprograms.

Indirect Community DevelopmentServices

The agencies are adopting a newquestion and answer, §ll.24(e)–1,that addresses the conditions underwhich an institution may receiveconsideration for communitydevelopment services offered byaffiliates or third parties. The guidancestates that, at an institution’s option, theagencies will consider servicesperformed by an affiliate or by a thirdparty on the institution’s behalf underthe service test if the services providedenable the institution to help meet thecredit needs of its community. Indirectservices that enhance an institution’sability to deliver credit products ordeposit services within its communityand that can be quantified may beconsidered under the service test ifthose services have not been consideredalready under the lending or investmenttest. For example, an institution thatcontracts with a communityorganization to provide homeownership counseling to low- andmoderate-income home buyers as part ofthe institution’s mortgage program mayreceive consideration for that indirectservice under the service test. Incontrast, donations to a communityorganization that offers financialservices to low- or moderate-incomeindividuals may be considered underthe investment test, but would not alsobe eligible for consideration under theservice test. Services performed by anaffiliate will be treated the same asaffiliate loans and investments made inthe institution’s assessment area andmay be considered if the service is notclaimed by any other institution.

Credit Card Banks’ ActivitiesThe agencies are adopting a new

question and answer, §ll.25(a)–1,that applies only to credit card banksthat are exempt from the definition of‘‘bank’’ in the Bank Holding CompanyAct (BHCA), as amended by theCompetitive Equality Banking Act of1987 (CEBA credit card banks). Thisnew guidance explains how a CEBAcredit card bank (if designated as alimited-purpose institution) can meet itscommunity’s credit needs withoutlosing its exemption from the definitionof ‘‘bank.’’ This guidance memorializesa letter issued in 1996 by staff at theBoard of Governors of the FederalReserve System to the president of theAssociation of Financial ServicesHolding Companies. The guidance

clarifies that, although the BHCArestricts CEBA credit card banks tocredit card operations, a CEBA creditcard bank can engage in communitydevelopment activities without losingits exemption under the BHCA. A CEBAcredit card bank could providecommunity development services andinvestments without engaging inoperations other than credit cardoperations. For example, the bank couldprovide credit card counseling, or thefinancial expertise of its executives, freeof charge, to community developmentorganizations. In addition, a CEBAcredit card bank could make qualifiedinvestments, as long as the investmentsmeet the guidelines for passive andnoncontrolling investments provided inthe BHCA and the Board’s Regulation Y.Finally, although a CEBA credit cardbank cannot make any loans other thancredit card loans, under §ll.25(d)(2)(community development test— indirectactivities), the bank could elect to havepart of its qualified passive andnoncontrolling investments in a third-party lending consortium considered ascommunity development lending,provided that the consortium’s loansotherwise meet the requirements forcommunity development lending. Whenassessing a CEBA credit card bank’sCRA performance under the communitydevelopment test, examiners will takeinto account the bank’s performancecontext. In particular, examiners willconsider the legal constraints imposedby the BHCA on the bank’s activities aspart of the bank’s performance contextin §ll.21(b)(4).

Effect of Evidence of Other Illegal CreditPractices

Section ll.28(c) of our regulationsstates that evidence of discriminatory orother illegal credit practices adverselyaffects the evaluation of an institution’sperformance. The agencies are adoptinga new question and answer addressingthis provision. The new question andanswer, §ll.28(c)–1, discusses whatis meant by ‘‘discriminatory or otherillegal credit practices.’’ It explains thatan institution engages in discriminatorycredit practices if it discourages ordiscriminates against credit applicantsor borrowers on a prohibited basis, inviolation, for example, of the FairHousing Act or the Equal CreditOpportunity Act (as implemented byRegulation B). Examples of other illegalcredit practices inconsistent withhelping to meet community credit needsinclude violations of:

• The Truth in Lending Act regardingrescission of certain mortgagetransactions and regarding disclosuresand certain loan term restrictions in



connection with credit transactions thatare subject to the Home Ownership andEquity Protection Act;

• The Real Estate SettlementProcedures Act regarding the giving andaccepting of referral fees, unearned feesor kickbacks in connection with certainmortgage transactions; and

• The Federal Trade Commission Actregarding unfair or deceptive acts orpractices.

Examiners will determine the effect ofevidence of illegal credit practices as setforth in examination procedures and§ll.28(c) of the regulations.

Violations of other provisions of theconsumer protection laws generally willnot adversely affect an institution’s CRArating, but may warrant the inclusion ofcomments in an institution’sperformance evaluation. Thesecomments may address the institution’spolicies, procedures, training programs,and internal assessment efforts.

Electronic Public Files

Some financial institutions haveinquired whether it is acceptable tomaintain the required public fileinformation electronically on anintranet or the Internet. The agenciesbelieve that an institution may keep allor part of its public file on an intranetor the Internet, provided that theinstitution maintains all of theinformation, either in paper orelectronic form, that is required in§ll.43 of the regulations. Aninstitution that opts to keep part or allof its public file on an intranet or theInternet must follow the rules in§ll.43(c)(1) and (2) as to whatinformation is required to be kept at amain office and at a branch. Theinstitution must also ensure that theinformation required to be maintainedat a main office and branch, if keptelectronically, can be readilydownloaded and printed for anymember of the public who requests ahard copy of the information.

The agencies are adopting a newquestion and answer, §ll.43(c)–2,which addresses maintaining publicfiles on an intranet or the Internet.

Revised Questions and AnswersThe agencies are revising eight

existing questions and answers, whichare discussed below.

New Markets Venture CapitalCompanies

The Consolidated Appropriations Actof 2001 (Pub. L. 106–554), enactedDecember 21, 2000, included the NewMarkets Venture Capital Program Act of2000. The New Markets Venture CapitalProgram, which is administered by the

Small Business Administration (SBA),allows the SBA to designate NewMarket Venture Capital companies(NMVCCs). NMVCCs are investmentfunds that will promote economicdevelopment and create wealth and jobopportunities in low-incomegeographies and among individualsliving in such areas through equity-typeinvestments in smaller enterpriseslocated in those low-incomegeographical areas.

Based on the statutory mandate forNMVCCs, the agencies will presumethat any loan to or lawful investment inNMVCCs will promote economicdevelopment. Therefore, we are revising§ll.12(h)(3)–1 to reflect thispresumption.

Reporting Loans With a BusinessPurpose That Are Secured byResidential Real Estate

The agencies are adopting revisions totwo existing questions and answers toaccommodate the difference intreatment between the Call Report andThrift Financial Report (TFR)instructions concerning loans securedby residential real estate that have abusiness purpose. Under the Call Reportinstructions, loans secured by nonfarmresidential real estate that are used tofinance small businesses must bereported as ‘‘loans secured by realestate’’ unless the security interest inthe nonfarm residential real estate istaken only as an abundance of caution.The TFR instructions, however, allowan institution to classify a loan thatmeets the definition of a mortgage loan,but that is used to finance smallbusinesses, as a mortgage loan or as anonmortgage loan according to thepurpose of the loan, at the option of thereporting institution. As a result,institutions that file Call Reports andthose that file TFRs may treat loanssecured by nonfarm residential realestate, but that are for the purpose offinancing a small business, in differentways.

The agencies are revising§§ll.12(u) & 563e.12(t)–3 and§ll.42(c)(2)–1 to be consistent withguidance provided in the Call Reportand TFR instructions. The agencies arebifurcating the answer to §§ll.12(u) &563e.12(t)–3 to account for the differenttreatment in the Call Report and TFRinstructions. The guidance states that,for banks filing Call Reports, loanssecured by nonfarm residential realestate to finance small businesses willtypically not be included as ‘‘loans tosmall businesses’’ for Call Reportpurposes, unless the security interest inthe property is taken only as anabundance of caution. The agencies

recognize that many small businessesare financed by loans that would nothave been made or would have beenmade on less favorable terms had theynot been secured by residential realestate. If these loans have a primarypurpose of community development, asdefined in the regulations, they may bereported as community developmentloans. Otherwise, at an institution’soption, the institution may collect andmaintain data separately concerningthese loans and request that the data beconsidered in its CRA evaluation as‘‘Other Secured Lines/Loans forPurposes of Small Business.’’

For institutions that file TFRs,depending on how a loan is classified,it is possible that a loan secured bynonfarm residential real estate thatfinances a small business will bereported as a ‘‘small business loan.’’Loans secured by nonfarm residentialreal estate to finance small businessesmay be reported as small business loansif they are reported on the TFR asnonmortgage, commercial loans.Otherwise, loans that meet thedefinition of mortgage loans, for TFRreporting purposes, may be classified asmortgage loans. These loans may bereported as community developmentloans, if appropriate, or collected as‘‘Other Secured Lines/Loans forPurposes of Small Business.’’

The guidance provided in§ll.42(c)(2)–1 is being revised to beapplicable only to banks that file CallReports. This question and answer isinapplicable to thrifts that file TFRs.The question and answer reiterates thatbanks that make loans to finance smallbusinesses, which are secured bynonfarm, residential real estate, and forwhich the security interest was nottaken only as an abundance of caution,may either report the loans ascommunity development loans, ifappropriate, or may collect andmaintain loan information as ‘‘OtherSecured Lines/Loans for Purposes ofSmall Business.’’

Clarification of §ll.21(b)(5)–1Addressing Assigned Ratings BeingAdversely Affected by Poor PastPerformance

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

Home Mortgage Loan Modification,Extension, and ConsolidationAgreements (MECAs)

In several states, financial institutionsuse MECAs as an alternative torefinancings for their customers.Existing guidance §ll.22(a)(2)–3states that an institution may receive



consideration under CRA as ‘‘other loandata’’ for MECAs, in which it obtainsloans from other institutions withoutactually purchasing or refinancing theloans. The agencies are clarifying thisguidance to indicate that it applies onlyto home mortgage loans.

Reporting Lines of Credit

The agencies have received inquiriesfrom examiners and our institutionsabout how institutions should reportincreases to small business or smallfarm lines of credit once the total lineexceeds the $1 million or $500,000 limitfor reporting a loan to a small businessor a loan to a small farm, respectively,as described in the Call Report or TFRinstructions. Because the Call Reportand TFR no longer consider lines ofcredit that have exceeded the $1 millionor $500,000 thresholds as loans to smallbusinesses or loans to small farms,respectively, such lines would also nolonger be considered small business orsmall farm loans for CRA purposes.

The agencies are revising existingquestion and answer §ll.42–3 toclarify this view.

Clarification of §ll.42(a)–5Addressing Reporting Data onRefinancings and Renewals of SmallBusiness and Small Farm Loans

In the 2000 Interagency Questions andAnswers, the agencies adopted a revisedversion of §ll.42(a)–5, whichdiscusses collection and reporting ofdata on small business and farm loansthat are refinanced or renewed. The2000 guidance suggests that if a renewalof $15,000 and new money of $5,000 areprovided in connection with the sameloan to the same borrower, the twoamounts should be reported separatelyas two separate originations. In responseto several communications frominstitutions indicating that their datasystems may not allow such atransaction to be reported as twooriginations, the agencies are clarifyingthat institutions may report the twooriginations (the renewal and theincrease in the line) together as a singleorigination. In the example above, aninstitution may report one origination of$20,000.

We have also deleted from the answerto this question information that wasrelevant to data collected in the year2000 and reported in 2001. Because thisdata should have been reported byMarch 1, 2001, this portion of theanswer is no longer pertinent. Theremaining answer is applicablebeginning with data on small businessand small farm collected in 2000 andreported in 2001.

Updating §ll.42–4

Consistent with the deletion of theout-dated portion of the answer to§ll.42(a)–5, we are also deleting thepart of the answer to §ll.42 ‘‘ – thatwas relevant only to data that wascollected in 2000 and reported in 2001.The remaining answer is applicablebeginning with data about renewals oflines of credit collected in 2000 that willbe reported in 2001.

Small Business Regulatory EnforcementFairness Act of 1996 (SBREFA)

The SBREFA requires an agency, foreach rule for which it prepares a finalregulatory flexibility analysis, to publishone or more compliance guides to helpsmall entities understand how tocomply with the rule.

Pursuant to section 605(b) of theRegulatory Flexibility Act, the agenciescertified that their proposed CRA rulewould not have a significant economicimpact on a substantial number of smallentities and invited public comments onthat determination. See 58 FR 67478(Dec. 21, 1993); 59 FR 51250 (Oct. 7,1994). In response to public comment,the agencies voluntarily prepared a finalregulatory flexibility analysis for thejoint final rule, although the analysiswas not required because it supportedthe agencies’ earlier certificationregarding the proposed rule. Because aregulatory flexibility analysis was notrequired, section 212 of the SBREFAdoes not apply to the final CRA rule.However, in their continuing efforts toprovide clear, understandableregulations and to comply with thespirit of the SBREFA, the agencies havecompiled the Interagency Questions andAnswers. The Interagency Questionsand Answers serve the same purpose asthe compliance guide described in theSBREFA by providing guidance on avariety of issues of particular concern tosmall banks and thrifts.

The text of the Interagency Questionsand Answers follows:

Interagency Questions and AnswersRegarding Community Reinvestment

§ll.11—Authority, Purposes, andScope

§ll.11(c) Scope

§§ll.11(c)(3) & 563e.11(c)(2) CertainSpecial Purpose Institutions

§§ll.11(c)(3) & 563e.11(c)(2)–1: Isthe list of special purpose institutionsexclusive?

A1. No, there may be other examplesof special purpose institutions. Theseinstitutions engage in specializedactivities that do not involve grantingcredit to the public in the ordinary

course of business. Special purposeinstitutions typically serve ascorrespondent banks, trust companies,or clearing agents or engage only inspecialized services, such as cashmanagement controlled disbursementservices. A financial institution,however, does not become a specialpurpose institution merely by ceasing tomake loans and, instead, makinginvestments and providing other retailbanking services.

§ll.11(c)(3) & 563e.11(c)(2)–2: Tobe a special purpose institution, mustan institution limit its activities in itscharter?

A2. No. A special purpose institutionmay, but is not required to, limit thescope of its activities in its charter,articles of association or other corporateorganizational documents. Aninstitution that does not have legallimitations on its activities, but hasvoluntarily limited its activities,however, would no longer be exemptfrom Community Reinvestment Act(CRA) requirements if it subsequentlyengaged in activities that involvegranting credit to the public in theordinary course of business. Aninstitution that believes it is exemptfrom CRA as a special purposeinstitution should seek confirmation ofthis status from its supervisory agency.

§ll.12—Definitions

§ll.12(a) Affiliate

§ll.12(a)–1: Does the definition of‘‘affiliate’’ include subsidiaries of aninstitution?

A1. Yes, ‘‘affiliate’’ includes anycompany that controls, is controlled by,or is under common control withanother company. An institution’ssubsidiary is controlled by theinstitution and is, therefore, an affiliate.

§§ll.12(f) & 563e.12(e) Branch

§§ll.12(f)–563e.12(e) & 1: Do thedefinitions of ‘‘branch,’’ ‘‘automatedteller machine (ATM),’’ and ‘‘remoteservice facility (RSF)’’ include mobilebranches, ATMs, and RSFs?

A1. Yes. Staffed mobile offices thatare authorized as branches areconsidered ‘‘branches’’ and mobileATMs and RSFs are considered ‘‘ATMs’’and ‘‘RSFs.’’

§§ll.12(f) & 563e.12(e)–2: Are loanproduction offices (LPOs) branches forpurposes of the CRA?

A2. LPOs and other offices are not‘‘branches’’ unless they are authorizedas branches of the institution throughthe regulatory approval process of theinstitution’s supervisory agency.



§§ll.12(h)–563e.12(g) CommunityDevelopment

§§ll.12(h) & 563e.12(g)–1: Arecommunity development activitieslimited to those that promote economicdevelopment?

A1. No. Although the definition of‘‘community development’’ includesactivities that promote economicdevelopment by financing smallbusinesses or farms, the rule does notlimit community development loansand services and qualified investmentsto those activities. Communitydevelopment also includes community-or tribal-based child care, educational,health, or social services targeted tolow- or moderate-income persons,affordable housing for low- or moderate-income individuals, and activities thatrevitalize or stabilize low- or moderate-income areas.

§§ll.12(h) & 563e.12(g)–2: Must acommunity development activity occurinside a low- or moderate-income areain order for an institution to receiveCRA consideration for the activity?

A2. No. Community developmentincludes activities outside of low- andmoderate-income areas that provideaffordable housing for, or communityservices targeted to, low- or moderate-income individuals and activities thatpromote economic development byfinancing small businesses and farms.Activities that stabilize or revitalizeparticular low- or moderate-incomeareas (including by creating, retaining,or improving jobs for low- or moderate-income persons) also qualify ascommunity development, even if theactivities are not located in these low-or moderate-income areas. One exampleis financing a supermarket that serves asan anchor store in a small strip malllocated at the edge of a middle-incomearea, if the mall stabilizes the adjacentlow-income community by providingneeded shopping services that are nototherwise available in the low-incomecommunity.

§§ll.12(h) & 563e.12(g)–3: Does theregulation provide flexibility inconsidering performance in high-costareas?

A3. Yes, the flexibility of theperformance standards allowsexaminers to account in theirevaluations for conditions in high-costareas. Examiners consider lending andservices to individuals and geographiesof all income levels and businesses ofall sizes and revenues. In addition, theflexibility in the requirement thatcommunity development loans,community development services, andqualified investments have as their‘‘primary’’ purpose community

development allows examiners toaccount for conditions in high-costareas. For example, examiners couldtake into account the fact that activitiesaddress a credit shortage among middle-income people or areas caused by thedisproportionately high cost of building,maintaining or acquiring a house whendetermining whether an institution’sloan to or investment in an organizationthat funds affordable housing formiddle-income people or areas, as wellas low- and moderate-income people orareas, has as its primary purposecommunity development.

§§ll.12(h)(1) & 563e.12(g)(1)Affordable Housing (IncludingMultifamily Rental Housing) for Low- orModerate-Income Individuals

§§ll.12(h)(1) & 563e.12(g)(1)–1:When determining whether a project is‘‘affordable housing for low- ormoderate-income individuals,’’ therebymeeting the definition of ‘‘communitydevelopment,’’ will it be sufficient to usea formula that relates the cost ofownership, rental or borrowing to theincome levels in the area as the onlyfactor, regardless of whether the users,likely users, or beneficiaries of thataffordable housing are low- ormoderate-income individuals?

A1. The concept of ‘‘affordablehousing’’ for low- or moderate-incomeindividuals does hinge on whether low-or moderate-income individuals benefit,or are likely to benefit, from thehousing. It would be inappropriate togive consideration to a project thatexclusively or predominately housesfamilies that are not low- or moderate-income simply because the rents orhousing prices are set according to aparticular formula.

For projects that do not yet haveoccupants, and for which the income ofthe potential occupants cannot bedetermined in advance, or in otherprojects where the income of occupantscannot be verified, examiners willreview factors such as demographic,economic and market data to determinethe likelihood that the housing will‘‘primarily’’ accommodate low- ormoderate-income individuals. Forexample, examiners may look at medianrents of the assessment area and theproject; the median home value of eitherthe assessment area, low- or moderate-income geographies or the project; thelow- or moderate-income population inthe area of the project; or the pastperformance record of theorganization(s) undertaking the project.Further, such a project could receiveconsideration if its express, bona fideintent, as stated, for example, in a

prospectus, loan proposal or communityaction plan, is community development.

§§ll.12(h)(3) & 563e.12(g)(3)Activities That Promote EconomicDevelopment by Financing Businessesor Farms That Meet Certain SizeEligibility Standards

§ll.12(h)(3) & 563e.12(g)(3)–1:‘‘Community development’’ includesactivities that promote economicdevelopment by financing businesses orfarms that meet certain size eligibilitystandards. Are all activities that financebusinesses and farms that meet thesesize eligibility standards considered tobe community development?

A1. No. To be considered as‘‘community development’’ under§§ll.12(h)(3) and 563e.12(g)(3), aloan, investment or service, whethermade directly or through anintermediary, must meet both a size testand a purpose test. An activity meetsthe size requirement if it financesentities that either meet the sizeeligibility standards of the SmallBusiness Administration’s DevelopmentCompany (SBDC) or Small BusinessInvestment Company (SBIC) programs,or have gross annual revenues of $1million or less. To meet the purposetest, the activity must promoteeconomic development. An activity isconsidered to promote economicdevelopment if it supports permanentjob creation, retention, and/orimprovement for persons who arecurrently low- or moderate-income, orsupports permanent job creation,retention, and/or improvement either inlow- or moderate-income geographies orin areas targeted for redevelopment byFederal, state, local or tribalgovernments. The agencies willpresume that any loan to or investmentin a SBDC, SBIC, or New MarketsVenture Capital Company promoteseconomic development.

In addition to their quantitativeassessment of the amount of a financialinstitution’s community developmentactivities, examiners must makequalitative assessments of aninstitution’s leadership in communitydevelopment matters and thecomplexity, responsiveness, and impactof the community developmentactivities of the institution. In reachinga conclusion about the impact of aninstitution’s community developmentactivities, examiners may, for example,determine that a loan to a smallbusiness in a low- or moderate-incomegeography that provides needed jobsand services in that area may have agreater impact and be more responsiveto the community credit needs thandoes a loan to a small business in the



same geography that does not directlyprovide additional jobs or services tothe community.

§§ll.12(h)(4) & 563e.12(g)(4)Activities That Revitalize or StabilizeLow- or Moderate-Income Geographies

§ll.12(h)(4) & 563e.12(g)(4)–1:What are activities that revitalize orstabilize a low- or moderate-incomegeography?

A1. Activities that revitalize orstabilize a low- or moderate-incomegeography are activities that help toattract and retain businesses andresidents. Examiners will presume thatan activity revitalizes or stabilizes alow- or moderate-income geography ifthe activity has been approved by thegoverning board of an EnterpriseCommunity or Empowerment Zone(designated pursuant to 26 U.S.C. 1391)and is consistent with the board’sstrategic plan. They will make the samepresumption if the activity has receivedsimilar official designation as consistentwith a federal, state, local or tribalgovernment plan for the revitalization orstabilization of the geography. Todetermine whether other activitiesrevitalize or stabilize a low- ormoderate-income geography, examinerswill evaluate the activity’s actual impacton the geography, if information aboutthis is available. If not, examiners willdetermine whether the activity isconsistent with the community’s formalor informal plans for the revitalizationand stabilization of the low- ormoderate-income geography. For moreinformation on what activities revitalizeor stabilize a low- or moderate-incomegeography, see §§ll.12(h) &563e.12(g)–2 and §§ll.12(i) &563e.12(h)–4.

§§ll.12(i) & 563e.12(h) CommunityDevelopment Loan

§§ll.12(i) & 563e.12(h)–1: What areexamples of community developmentloans?

A1. Examples of communitydevelopment loans include, but are notlimited to, loans to:

• Borrowers for affordable housingrehabilitation and construction,including construction and permanentfinancing of multifamily rental propertyserving low- and moderate-incomepersons;

• Not-for-profit organizations servingprimarily low- and moderate-incomehousing or other communitydevelopment needs;

• Borrowers to construct orrehabilitate community facilities thatare located in low- and moderate-income areas or that serve primarilylow- and moderate-income individuals;

• Financial intermediaries includingCommunity Development FinancialInstitutions (CDFIs), CommunityDevelopment Corporations (CDCs),minority- and women-owned financialinstitutions, community loan funds orpools, and low-income or communitydevelopment credit unions thatprimarily lend or facilitate lending topromote community development.

• Local, state, and tribal governmentsfor community development activities;and

• Borrowers to finance environmentalclean-up or redevelopment of anindustrial site as part of an effort torevitalize the low- or moderate-incomecommunity in which the property islocated.

The rehabilitation and construction ofaffordable housing or communityfacilities, referred to above, may includethe abatement or remediation of, orother actions to correct, environmentalhazards, such as lead-based paint, thatare present in the housing, facilities, orsite.

§§ll.12(i) & 563e.12(h)–2: If a retailinstitution that is not required to reportunder the Home Mortgage DisclosureAct (HMDA) makes affordable homemortgage loans that would be HMDA-reportable home mortgage loans if itwere a reporting institution, or if a smallinstitution that is not required to collectand report loan data under CRA makessmall business and small farm loansand consumer loans that would becollected and/or reported if theinstitution were a large institution, maythe institution have these loansconsidered as community developmentloans?

A2. No. Although small institutionsare not required to report or collectinformation on small business and smallfarm loans and consumer loans, andsome institutions are not required toreport information about their homemortgage loans under HMDA, if theseinstitutions are retail institutions, theagencies will consider in their CRAevaluations the institutions’ originationsand purchases of loans that would havebeen collected or reported as smallbusiness, small farm, consumer or homemortgage loans, had the institution beena collecting and reporting institutionunder the CRA or the HMDA. Therefore,these loans will not be considered ascommunity development loans.Multifamily dwelling loans, however,may be considered as communitydevelopment loans as well as homemortgage loans. See also §ll.42(b)(2)–2.

§§ll.12(i) & 563e.12(h)–3: Dosecured credit cards or other credit cardprograms targeted to low- or moderate-

income individuals qualify ascommunity development loans?

A3. No. Credit cards issued to low- ormoderate-income individuals forhousehold, family, or other personalexpenditures, whether as part of aprogram targeted to such individuals orotherwise, do not qualify as communitydevelopment loans because they do nothave as their primary purpose any of theactivities included in the definition of‘‘community development.’’

§§ll.12(i) & 563e.12(h)–4: Theregulation indicates that communitydevelopment includes ‘‘activities thatrevitalize or stabilize low- or moderate-income geographies.’’ Do all loans in alow- to moderate-income geographyhave a stabilizing effect?

A4. No. Some loans may provide onlyindirect or short-term benefits to low- ormoderate-income individuals in a low-or moderate-income geography. Theseloans are not considered to have acommunity development purpose. Forexample, a loan for upper-incomehousing in a distressed area is notconsidered to have a communitydevelopment purpose simply because ofthe indirect benefit to low- or moderate-income persons from construction jobsor the increase in the local tax base thatsupports enhanced services to low- andmoderate-income area residents. On theother hand, a loan for an anchorbusiness in a distressed area (or anearby area), that employs or servesresidents of the area, and thus stabilizesthe area, may be considered to have acommunity development purpose. Forexample, in an underserved, distressedarea, a loan for a pharmacy thatemploys, and provides supplies to,residents of the area promotescommunity development.

§§ll.12(i) & 563e.12(h)–5: Mustthere be some immediate or directbenefit to the institution’s assessmentarea(s) to satisfy the regulations’requirement that qualified investmentsand community development loans orservices benefit an institution’sassessment area(s) or a broaderstatewide or regional area that includesthe institution’s assessment area(s)?

A5. No. The regulations recognize thatcommunity development organizationsand programs are efficient and effectiveways for institutions to promotecommunity development. Theseorganizations and programs oftenoperate on a statewide or even multi-state basis. Therefore, an institution’sactivity is considered a communitydevelopment loan or service or aqualified investment if it supports anorganization or activity that covers anarea that is larger than, but includes, theinstitution’s assessment area(s). The



institution’s assessment area(s) need notreceive an immediate or direct benefitfrom the institution’s specificparticipation in the broader organizationor activity, provided that the purpose,mandate, or function of the organizationor activity includes serving geographiesor individuals located within theinstitution’s assessment area(s).

In addition, a retail institution that,considering its performance context, hasadequately addressed the communitydevelopment needs of its assessmentarea(s) will receive consideration forcertain other community developmentactivities. These communitydevelopment activities must benefitgeographies or individuals locatedsomewhere within a broader statewideor regional area that includes theinstitution’s assessment area(s).Examiners will consider these activitieseven if they will not benefit theinstitution’s assessment area(s).

§§ll.12(i) & 563e.12(h)–6: What ismeant by the term ‘‘regional area’’?

A6. A ‘‘regional area’’ may be as smallas a city or county or as large as amultistate area. For example, the ‘‘mid-Atlantic states’’ may comprise a regionalarea.

Community development loans andservices and qualified investments tostatewide or regional organizations thathave a bona fide purpose, mandate, orfunction that includes serving thegeographies or individuals within theinstitution’s assessment area(s) will beconsidered as addressing assessmentarea needs. When examiners evaluatecommunity development loans andservices and qualified investments thatbenefit a regional area that includes theinstitution’s assessment area(s), theywill consider the institution’sperformance context as well as the sizeof the regional area and the actual orpotential benefit to the institution’sassessment area(s). With larger regionalareas, benefit to the institution’sassessment area(s) may be diffused and,thus less responsive to assessment areaneeds.

In addition, as long as an institutionhas adequately addressed thecommunity development needs of itsassessment area(s), it will also receiveconsideration for communitydevelopment activities that benefitgeographies or individuals locatedsomewhere within the broaderstatewide or regional area that includesthe institution’s assessment area(s), evenif those activities do not benefit itsassessment area(s).

§§ll.12(i) & 563e.12(h)–7: What ismeant by the term ‘‘primary purpose’’ asthat term is used to define whatconstitutes a community development

loan, a qualified investment or acommunity development service?

A7. A loan, investment or service hasas its primary purpose communitydevelopment when it is designed for theexpress purpose of revitalizing orstabilizing low-or moderate-incomeareas, providing affordable housing for,or community services targeted to, low-or moderate-income persons, orpromoting economic development byfinancing small businesses and farmsthat meet the requirements set forth in§§ll.12(h) or 563e.12(g). Todetermine whether an activity isdesigned for an express communitydevelopment purpose, the agenciesapply one of two approaches. First, if amajority of the dollars or beneficiaries ofthe activity are identifiable to one ormore of the enumerated communitydevelopment purposes, then the activitywill be considered to possess therequisite primary purpose.Alternatively, where the measurableportion of any benefit bestowed ordollars applied to the communitydevelopment purpose is less than amajority of the entire activity’s benefitsor dollar value, then the activity maystill be considered to possess therequisite primary purpose if (1) theexpress, bona fide intent of the activity,as stated, for example, in a prospectus,loan proposal, or community actionplan, is primarily one or more of theenumerated community developmentpurposes; (2) the activity is specificallystructured (given any relevant market orlegal constraints or performance contextfactors) to achieve the expressedcommunity development purpose; and(3) the activity accomplishes, or isreasonably certain to accomplish, thecommunity development purposeinvolved. The fact that an activityprovides indirect or short-term benefitsto low-or moderate-income persons doesnot make the activity communitydevelopment, nor does the merepresence of such indirect or short-termbenefits constitute a primary purpose ofcommunity development. Financialinstitutions that want examiners toconsider certain activities under eitherapproach should be prepared todemonstrate the activities’qualifications.

§§ll.12(j) & 563e.12(i) CommunityDevelopment Service

§§ll.12(j) & 563e.12(i)–1: Inaddition to meeting the definition of‘‘community development’’ in theregulation, community developmentservices must also be related to theprovision of financial services. What ismeant by ‘‘provision of financialservices’’?

A1. Providing financial servicesmeans providing services of the typegenerally provided by the financialservices industry. Providing financialservices often involves informingcommunity members about how to getor use credit or otherwise providingcredit services or information to thecommunity. For example, service on theboard of directors of an organizationthat promotes credit availability orfinances affordable housing is related tothe provision of financial services.Providing technical assistance aboutfinancial services to community-basedgroups, local or tribal governmentagencies, or intermediaries that help tomeet the credit needs of low-andmoderate-income individuals or smallbusinesses and farms is also providingfinancial services. By contrast, activitiesthat do not take advantage of theemployees’ financial expertise, such asneighborhood cleanups, do not involvethe provision of financial services.

§§ll.12(j) & 563e.12(i)–2: Arepersonal charitable activities providedby an institution’s employees ordirectors outside the ordinary course oftheir employment consideredcommunity development services?

A2. No. Services must be provided asa representative of the institution. Forexample, if a financial institution’sdirector, on her own time and not as arepresentative of the institution,volunteers one evening a week at a localcommunity development corporation’sfinancial counseling program, theinstitution may not consider thisactivity a community developmentservice.

§§ll.12(j) & 563e.12(i)–3: What areexamples of community developmentservices?

A3. Examples of communitydevelopment services include, but arenot limited to, the following:

• Providing technical assistance onfinancial matters to nonprofit, tribal orgovernment organizations serving low-and moderate-income housing oreconomic revitalization anddevelopment needs;

• Providing technical assistance onfinancial matters to small businesses orcommunity development organizations,including organizations and individualswho apply for loans or grants under theFederal Home Loan Banks’ AffordableHousing Program;

• Lending employees to providefinancial services for organizationsfacilitating affordable housingconstruction and rehabilitation ordevelopment of affordable housing;

• Providing credit counseling, home-buyer and home-maintenancecounseling, financial planning or other



financial services education to promotecommunity development and affordablehousing;

• Establishing school savingsprograms and developing or teachingfinancial education curricula for low-ormoderate-income individuals;

• Providing electronic benefitstransfer and point of sale terminalsystems to improve access to financialservices, such as by decreasing costs, forlow- or moderate-income individuals;and

• Providing other financial serviceswith the primary purpose of communitydevelopment, such as low-cost bankaccounts, including ‘‘Electronic TransferAccounts’’ provided pursuant to theDebt Collection Improvement Act of1996, or free government check cashingthat increases access to financialservices for low- or moderate-incomeindividuals.

Examples of technical assistanceactivities that might be provided tocommunity development organizationsinclude:

• Serving on a loan reviewcommittee;

• Developing loan application andunderwriting standards;

• Developing loan processingsystems;

• Developing secondary marketvehicles or programs;

• Assisting in marketing financialservices, including development ofadvertising and promotions,publications, workshops andconferences;

• Furnishing financial servicestraining for staff and management;

• Contributing accounting/bookkeeping services; and

• Assisting in fund raising, includingsoliciting or arranging investments.

§§ll.12(k) & 563e.12(j) ConsumerLoan

§§ll.12(k) & 563e.12(j)–1: Arehome equity loans considered‘‘consumer loans’’?

A1. Home equity loans made forpurposes other than home purchase,home improvement or refinancing homepurchase or home improvement loansare consumer loans if they are extendedto one or more individuals forhousehold, family, or other personalexpenditures.

§§ll.12(k) & 563e.12(j)–2: May ahome equity line of credit be considereda ‘‘consumer loan’’ even if part of theline is for home improvement purposes?

A2. If the predominant purpose of theline is home improvement, the line mayonly be reported under HMDA and maynot be considered a consumer loan.However, the full amount of the line

may be considered a ‘‘consumer loan’’ ifits predominant purpose is forhousehold, family, or other personalexpenditures, and to a lesser extenthome improvement, and the full amountof the line has not been reported underHMDA. This is the case even thoughthere may be ‘‘double counting’’ becausepart of the line may also have beenreported under HMDA.

§§ll.12(k) & 563e.12(j)–3: Howshould an institution collect or reportinformation on loans the proceeds ofwhich will be used for multiplepurposes?

A3. If an institution makes a singleloan or provides a line of credit to acustomer to be used for both consumerand small business purposes, consistentwith the Call Report and TFRinstructions, the institution shoulddetermine the major (predominant)component of the loan or the credit lineand collect or report the entire loan orcredit line in accordance with theregulation’s specifications for that loantype.

§§ll.12(m) & 563e.12(l) HomeMortgage Loan

§§ll.12(m) & 563e.12(l)–1: Does theterm ‘‘home mortgage loan’’ includeloans other than ‘‘home purchaseloans’’?

A1. Yes. ‘‘Home mortgage loan’’includes a ‘‘home improvement loan’’ aswell as a ‘‘home purchase loan,’’ as bothterms are defined in the HMDAregulation, Regulation C, 12 CFR part203. This definition also includesmultifamily (five-or-more families)dwelling loans, loans for the purchase ofmanufactured homes, and refinancingsof home improvement and homepurchase loans.

§§ll.12(m) & 563e.12(l)–2: Somefinancial institutions broker homemortgage loans. They typically take theborrower’s application and performother settlement activities; however,they do not make the credit decision.The broker institutions may alsoinitially fund these mortgage loans, thenimmediately assign them to anotherlender. Because the broker institutiondoes not make the credit decision,under Regulation C (HMDA), they donot record the loans on their HMDA–LARs, even if they fund the loans. Mayan institution receive any considerationunder CRA for its home mortgage loanbrokerage activities?

A2. Yes. A financial institution thatfunds home mortgage loans butimmediately assigns the loans to thelender that made the credit decisionsmay present information about theseloans to examiners for considerationunder the lending test as ‘‘other loan

data.’’ Under Regulation C, the brokerinstitution does not record the loans onits HMDA–LAR because it does notmake the credit decisions, even if itfunds the loans. An institution electingto have these home mortgage loansconsidered must maintain informationabout all of the home mortgage loansthat it has funded in this way.Examiners will consider this other loandata using the same criteria by whichhome mortgage loans originated orpurchased by an institution areevaluated.

Institutions that do not providefunding but merely take applicationsand provide settlement services foranother lender that makes the creditdecisions will receive consideration forthis service as a retail banking service.Examiners will consider an institution’smortgage brokerage services whenevaluating the range of servicesprovided to low-, moderate-, middle-and upper-income geographies and thedegree to which the services are tailoredto meet the needs of those geographies.Alternatively, an institution’s mortgagebrokerage service may be considered acommunity development service if theprimary purpose of the service iscommunity development. An institutionwishing to have its mortgage brokerageservice considered as a communitydevelopment service must providesufficient information to substantiatethat its primary purpose is communitydevelopment and to establish the extentof the services provided.

§§ll.12(n) & 563e.12(m) IncomeLevel

§§ll.12(n) & 563e.12(m)–1: Wheredo institutions find income level datafor geographies and individuals?

A1. The income levels forgeographies, i.e., census tracts and blocknumbering areas, are derived fromCensus Bureau information and areupdated every ten years. Institutionsmay contact their regional CensusBureau office or the Census Bureau’sIncome Statistics Office at (301) 763–8576 to obtain income levels forgeographies. See Appendix A of theseInteragency Questions and Answers fora list of the regional Census Bureauoffices. The income levels forindividuals are derived frominformation calculated by theDepartment of Housing and UrbanDevelopment (HUD) and updatedannually. Institutions may contact HUDat (800) 245–2691 to request a copy of‘‘FY [year number, e.g., 1996] MedianFamily Incomes for States and theirMetropolitan and NonmetropolitanPortions.’’



Alternatively, institutions may obtaina list of the 1990 Census Bureau-calculated and the annually updatedHUD median family incomes formetropolitan statistical areas (MSAs)and statewide nonmetropolitan areas bycalling the Federal Financial InstitutionExamination Council’s (FFIEC’s) HMDAHelp Line at (202) 452–2016. A freecopy will be faxed to the caller throughthe ‘‘fax-back’’ system. Institutions mayalso call this number to have ‘‘faxed-back’’ an order form, from which theymay order a list providing the medianfamily income level, as a percentage ofthe appropriate MSA ornonmetropolitan median family income,of every census tract and blocknumbering area (BNA). This list costs$50. Institutions may also obtain the listof MSA and statewide nonmetropolitanarea median family incomes or an orderform through the FFIEC’s home page onthe Internet at <http://www.ffiec.gov>.

§§ll.12(o) & 563e.12(n) LimitedPurpose Institution

§§ll.12(o) & 563e.12(n)–1: WhatConstitutes a ‘‘Narrow Product Line’’ inthe Definition of ‘‘Limited PurposeInstitution’’?

A1. An institution offers a narrowproduct line by limiting its lendingactivities to a product line other than atraditional retail product line requiredto be evaluated under the lending test(i.e., home mortgage, small business,and small farm loans). Thus, aninstitution engaged only in makingcredit card or motor vehicle loans offersa narrow product line, while aninstitution limiting its lending activitiesto home mortgages is not offering anarrow product line.

§§ll.12(o) & 563e.12(n)–2: Whatfactors will the agencies consider todetermine whether an institution that, iflimited purpose, makes loans outside anarrow product line, or, if wholesale,engages in retail lending, will lose itslimited purpose or wholesaledesignation because of too much otherlending?

A2. Wholesale institutions mayengage in some retail lending withoutlosing their designation if this activity isincidental and done on anaccommodation basis. Similarly, limitedpurpose institutions continue to meetthe narrow product line requirement ifthey provide other types of loans on aninfrequent basis. In reviewing otherlending activities by these institutions,the agencies will consider the followingfactors:

• Is the other lending provided as anincident to the institution’s wholesalelending?

• Are the loans provided as anaccommodation to the institution’swholesale customers?

• Are the loans made onlyinfrequently to the limited purposeinstitution’s customers?

• Does only an insignificant portionof the institution’s total assets andincome result from the other lending?

• How significant a role does theinstitution play in providing that type(s)of loan(s) in the institution’s assessmentarea(s)?

• Does the institution hold itself outas offering that type(s) of loan(s)?

• Does the lending test or thecommunity development test present amore accurate picture of theinstitution’s CRA performance?

§§ll.12(o) & 563e.12(n)–3: Do‘‘niche institutions’’ qualify as limitedpurpose (or wholesale) institutions?

A3. Generally, no. Institutions that arein the business of lending to the public,but specialize in certain types of retailloans (for example, home mortgage orsmall business loans) to certain types ofborrowers (for example, to high-endincome level customers or tocorporations or partnerships of licensedprofessional practitioners) (‘‘nicheinstitutions’’) generally would notqualify as limited purpose (orwholesale) institutions.

§§ll.12(s) & 563e.12(r) QualifiedInvestment

§§ll.12(s) & 563e.12(r)–1: Does theCRA regulation provide authority forinstitutions to make investments?

A1. No. The CRA regulation does notprovide authority for institutions tomake investments that are not otherwiseallowed by Federal law.

§§ll.12(s) & 563e.12(r)–2: Aremortgage-backed securities ormunicipal bonds ‘‘qualifiedinvestments’’?

A2. As a general rule, mortgage-backed securities and municipal bondsare not qualified investments becausethey do not have as their primarypurpose community development, asdefined in the CRA regulations.Nonetheless, mortgage-backed securitiesor municipal bonds designed primarilyto finance community developmentgenerally are qualified investments.Municipal bonds or other securitieswith a primary purpose of communitydevelopment need not be housing-related. For example, a bond to fund acommunity facility or park or to providesewage services as part of a plan toredevelop a low-income neighborhoodis a qualified investment. Housing-related bonds or securities mustprimarily address affordable housing(including multifamily rental housing)

needs in order to qualify. See also§ll.23(b)–2.

§§ll.12(s) & 563e.12(r)–3: AreFederal Home Loan Bank stocks andmembership reserves with the FederalReserve Banks ‘‘qualified investments’’?

A3. No. Federal Home Loan Bank(FHLB) stock and membership reserveswith the Federal Reserve Banks do nothave a sufficient connection tocommunity development to be qualifiedinvestments. However, FHLB memberinstitutions may receive CRAconsideration for technical assistancethey provide on behalf of applicants andrecipients of funding from the FHLB’sAffordable Housing Program. See§§ll.12(j) & 563e.12(i)–3.

§§ll.12(s) & 563e.12(r)–4: What areexamples of qualified investments?

A4. Examples of qualifiedinvestments include, but are not limitedto, investments, grants, deposits orshares in or to:

• Financial intermediaries (including,Community Development FinancialInstitutions (CDFIs), CommunityDevelopment Corporations (CDCs),minority- and women-owned financialinstitutions, community loan funds, andlow-income or community developmentcredit unions) that primarily lend orfacilitate lending in low- and moderate-income areas or to low- and moderate-income individuals in order to promotecommunity development, such as aCDFI that promotes economicdevelopment on an Indian reservation;

• Organizations engaged in affordablehousing rehabilitation and construction,including multifamily rental housing;

• Organizations, including, forexample, Small Business InvestmentCompanies (SBICs) and specializedSBICs, that promote economicdevelopment by financing smallbusinesses;

• Facilities that promote communitydevelopment in low- and moderate-income areas for low- and moderate-income individuals, such as youthprograms, homeless centers, soupkitchens, health care facilities, batteredwomen’s centers, and alcohol and drugrecovery centers;

• Projects eligible for low-incomehousing tax credits;

• State and municipal obligations,such as revenue bonds, that specificallysupport affordable housing or othercommunity development;

• Not-for-profit organizations servinglow- and moderate-income housing orother community development needs,such as counseling for credit, home-ownership, home maintenance, andother financial services education; and

• Organizations supporting activitiesessential to the capacity of low- and



moderate-income individuals orgeographies to utilize credit or tosustain economic development, such as,for example, day care operations and jobtraining programs that enable people towork.

§§ll.12(s) & 563e.12(r)–5: Will aninstitution receive consideration forcharitable contributions as ‘‘qualifiedinvestments’’?

A5. Yes, provided they have as theirprimary purpose communitydevelopment as defined in theregulations. A charitable contribution,whether in cash or an in-kindcontribution of property, is included inthe term ‘‘grant.’’ A qualified investmentis not disqualified because aninstitution receives favorable treatmentfor it (for example, as a tax deductionor credit) under the Internal RevenueCode.

§§ll.12(s) & 563e.12(r)–6: Aninstitution makes or participates in acommunity development loan. Theinstitution provided the loan at below-market interest rates or ‘‘bought down’’the interest rate to the borrower. Is thelost income resulting from the lowerinterest rate or buy-down a qualifiedinvestment?

A6. No. The agencies will, however,consider the innovativeness andcomplexity of the communitydevelopment loan within the bounds ofsafe and sound banking practices.

§§ll.12(s) & 563e.12(r)–7: Will theagencies consider as a qualifiedinvestment the wages or othercompensation of an employee ordirector who provides assistance to acommunity development organizationon behalf of the institution?

A7. No. However, the agencies willconsider donated labor of employees ordirectors of a financial institution in theservice test if the activity is acommunity development service.

§§ll.12(t) & 563e.12(s) SmallInstitution

§§ll.12(t) & 563e.12(s)–1: How arethe ‘‘total bank and thrift assets’’ of aholding company determined?

A1. ‘‘Total banking and thrift assets’’of a holding company are determined bycombining the total assets of all banksand/or thrifts that are majority-ownedby the holding company. An institutionis majority-owned if the holdingcompany directly or indirectly ownsmore than 50 percent of its outstandingvoting stock.

§§ll.12(t) & 563e.12(s)–2: How areFederal and State branch assets of aforeign bank calculated for purposes ofthe CRA?

A2. A Federal or State branch of aforeign bank is considered a small

institution if the Federal or State branchhas less than $250 million in assets andthe total assets of the foreign bank’s orits holding company’s U.S. bank andthrift subsidiaries that are subject to theCRA are less than $1 billion. Thiscalculation includes not only FDIC-insured bank and thrift subsidiaries, butalso the assets of any FDIC-insuredbranch of the foreign bank and theassets of any uninsured Federal or Statebranch (other than a limited branch ora Federal agency) of the foreign bankthat results from an acquisitiondescribed in section 5(a)(8) of theInternational Banking Act of 1978 (12U.S.C. § 3103(a)(8)).

§§ll.12(u) & 563e.12(t) SmallBusiness Loan

§§ll.12(u) & 563e.12(t)–1: Areloans to nonprofit organizationsconsidered small business loans or arethey considered communitydevelopment loans?

A1. To be considered a small businessloan, a loan must meet the definition of‘‘loan to small business’’ in theinstructions in the ‘‘ConsolidatedReports of Conditions and Income’’ (CallReport) and ‘‘Thrift Financial Reports’’(TFR). In general, a loan to a nonprofitorganization, for business or farmpurposes, where the loan is secured bynonfarm nonresidential property andthe original amount of the loan is $1million or less, if a business loan, or$500,000 or less, if a farm loan, wouldbe reported in the Call Report and TFRas a small business or small farm loan.If a loan to a nonprofit organization isreportable as a small business or smallfarm loan, it cannot also be consideredas a community development loan,except by a wholesale or limitedpurpose institution. Loans to nonprofitorganizations that are not small businessor small farm loans for Call Report andTFR purposes may be considered ascommunity development loans if theymeet the regulatory definition.

§§ll.12(u) & 563e.12(t)–2: Areloans secured by commercial real estateconsidered small business loans?

A2. Yes, depending on their principalamount. Small business loans includeloans secured by ‘‘nonfarmnonresidential properties,’’ as defined inthe Call Report and TFR, in amountsless than $1 million.

§§ll.12(u) & 563e.12(t)–3: Areloans secured by nonfarm residentialreal estate to finance small businesses‘‘small business loans’’?

A3. Applicable to banks filing CallReports: Typically not. Loans securedby nonfarm residential real estate thatare used to finance small businesses arenot included as ‘‘small business’’ loans

for Call Report purposes unless thesecurity interest in the nonfarmresidential real estate is taken only as anabundance of caution. (See Call ReportGlossary definition of ‘‘Loan Secured byReal Estate.’’) The agencies recognizethat many small businesses are financedby loans that would not have been madeor would have been made on lessfavorable terms had they not beensecured by residential real estate. Ifthese loans promote communitydevelopment, as defined in theregulation, they may be considered ascommunity development loans.Otherwise, at an institution’s option, theinstitution may collect and maintaindata separately concerning these loansand request that the data be consideredin its CRA evaluation as ‘‘Other SecuredLines/Loans for Purposes of SmallBusiness.’’

Applicable to institutions that fileTFRs: Possibly, depending how the loanis classified for TFR purposes. Loanssecured by nonfarm residential realestate to finance small businesses maybe included as small business loansonly if they are reported on the TFR asnonmortgage, commercial loans. (SeeTFR Q&A No. 62.) Otherwise, loans thatmeet the definition of mortgage loans,for TFR reporting purposes, may beclassified as mortgage loans.

§§ll.12(u) & 563e.12(t)–4: Arecredit cards issued to small businessesconsidered ‘‘small business loans’’?

A4. Credit cards issued to a smallbusiness or to individuals to be used,with the institution’s knowledge, asbusiness accounts are small businessloans if they meet the definitionalrequirements in the Call Report or TFRinstructions.

§§ll.12(w) & 563e.12(v) WholesaleInstitution

§§ll.12(w) & 563e.12(v)–1: Whatfactors will the agencies consider indetermining whether an institution is inthe business of extending homemortgage, small business, small farm, orconsumer loans to retail customers?

A1. The agencies will considerwhether:

• The institution holds itself out tothe retail public as providing suchloans; and

• The institution’s revenues fromextending such loans are significantwhen compared to its overalloperations.

A wholesale institution may makesome retail loans without losing itswholesale designation as describedabove in §§ll.12(o) & 563e.12(n)–2.



§ll.21—Performance Tests,Standards, and Ratings, in General

§ll.21(a) Performance Tests andStandards

§ll.21(a)–1: Are all communitydevelopment activities weighted equallyby examiners?

A1. No. Examiners will consider theresponsiveness to credit and communitydevelopment needs, as well as theinnovativeness and complexity of aninstitution’s community developmentlending, qualified investments, andcommunity development services.These criteria include consideration ofthe degree to which they serve as acatalyst for other communitydevelopment activities. The criteria aredesigned to add a qualitative element tothe evaluation of an institution’sperformance.

§ll.21(b) Performance context

§ll.21(b)–1: Is the performancecontext essentially the same as theformer regulation’s needs assessment?

A1. No. The performance context is abroad range of economic, demographic,and institution-and community-specificinformation that an examiner reviews tounderstand the context in which aninstitution’s record of performanceshould be evaluated. The agencies willprovide examiners with much of thisinformation prior to the examination.The performance context is not a formalor written assessment of communitycredit needs.

§ll.21(b)(2) Information Maintainedby the Institution or Obtained FromCommunity Contacts

§ll.21(b)(2)–1: Will examinersconsider performance contextinformation provided by institutions?

A1. Yes. An institution may provideexaminers with any information itdeems relevant, including informationon the lending, investment, and serviceopportunities in its assessment area(s).This information may include data onthe business opportunities addressed bylenders not subject to the CRA.Institutions are not required, however,to prepare a needs assessment. If aninstitution provides information toexaminers, the agencies will not expectinformation other than what theinstitution normally would develop toprepare a business plan or to identifypotential markets and customers,including low-and moderate-incomepersons and geographies in itsassessment area(s). The agencies willnot evaluate an institution’s efforts toascertain community credit needs orrate an institution on the quality of anyinformation it provides.

§ll.21(b)(2)–2: Will examinersconduct community contact interviewsas part of the examination process?

A2. Yes. Examiners will considerinformation obtained from interviewswith local community, civic, andgovernment leaders. These interviewsprovide examiners with knowledgeregarding the local community, itseconomic base, and communitydevelopment initiatives. To ensure thatinformation from local leaders isconsidered—particularly in areas wherethe number of potential contacts may belimited—examiners may useinformation obtained through aninterview with a single communitycontact for examinations of more thanone institution in a given market. Inaddition, the agencies will considerinformation obtained from interviewsconducted by other agency staff and bythe other agencies. In order to augmentcontacts previously used by the agenciesand foster a wider array of contacts, theagencies will share community contactinformation.

§ll.21(b)(4) Institutional Capacityand Constraints

§ll.21(b)(4)–1: Will examinersconsider factors outside of aninstitution’s control that prevent it fromengaging in certain activities?

A1. Yes. Examiners will take intoaccount statutory and supervisorylimitations on an institution’s ability toengage in any lending, investment, andservice activities. For example, a savingsassociation that has made few or noqualified investments due to its limitedinvestment authority may still receive alow satisfactory rating under theinvestment test if it has a strong lendingrecord.

§ll.21(b)(5) Institution’s PastPerformance and the Performance ofSimilarly Situated Lenders

§ll.21(b)(5)–1: Can an institution’sassigned rating be adversely affected bypoor past performance?

A1. Yes. The agencies will consideran institution’s past performance in itsoverall evaluation. For example, aninstitution that received a rating of‘‘needs to improve’’ in the past mayreceive a rating of ‘‘substantialnoncompliance’’ if its performance hasnot improved.

§ll.21(b)(5)–2: How will examinersconsider the performance of similarlysituated lenders?

A2. The performance context sectionof the regulation permits theperformance of similarly situatedlenders to be considered, for example,as one of a number of considerations inevaluating the geographic distribution of

an institution’s loans to low-, moderate-, middle-, and upper-incomegeographies. This analysis, as well asother analyses, may be used, forexample, where groups of contiguousgeographies within an institution’sassessment area(s) exhibit abnormallylow penetration. In this regard, theperformance of similarly situatedlenders may be analyzed if such ananalysis would provide accurate insightinto the institution’s lack ofperformance in those areas. Theregulation does not require the use of aspecific type of analysis under thesecircumstances. Moreover, no ratiodeveloped from any type of analysis islinked to any lending test rating.

§ll.22—Lending Test

§ll.22(a) Scope of Test

§ll.22(a)–1: Are there any types oflending activities that help meet thecredit needs of an institution’sassessment area(s) and that maywarrant favorable consideration asactivities that are responsive to theneeds of the institution’s assessmentarea(s)?

A1. Credit needs vary fromcommunity to community. However,there are some lending activities that arelikely to be responsive in helping tomeet the credit needs of manycommunities. These activities include:

• Providing loan programs thatinclude a financial educationcomponent about how to avoid lendingactivities that may be abusive orotherwise unsuitable;

• Establishing loan programs thatprovide small, unsecured consumerloans in a safe and sound manner (i.e.,based on the borrower’s ability to repay)and with reasonable terms;

• Offering lending programs, whichfeature reporting to consumer reportingagencies, that transition borrowers fromloans with higher interest rates and fees(based on credit risk) to lower-costloans, consistent with safe and soundlending practices. Reporting toconsumer reporting agencies allowsborrowers accessing these programs theopportunity to improve their credithistories and thereby improve theiraccess to competitive credit products.

Examiners may consider favorablysuch lending activities, which havefeatures augmenting the success andeffectiveness of the institution’s lendingprograms.

§ll.22(a)(1) Types of LoansConsidered

§ll.22(a)(1)–1: If a large retailinstitution is not required to collect andreport home mortgage data under the



HMDA, will the agencies still evaluatethe institution’s home mortgage lendingperformance?

A1. Yes. The agencies will sample theinstitution’s home mortgage loan files inorder to assess its performance underthe lending test criteria.

§ll.22(a)(1)–2: When willexaminers consider consumer loans aspart of an institution’s CRA evaluation?

A2. Consumer loans will be evaluatedif the institution so elects; and aninstitution that elects not to have itsconsumer loans evaluated will not beviewed less favorably by examiners thanone that does. However, if consumerloans constitute a substantial majority ofthe institution’s business, the agencieswill evaluate them even if theinstitution does not so elect. Theagencies interpret ‘‘substantial majority’’to be so significant a portion of theinstitution’s lending activity by numberor dollar volume of loans that thelending test evaluation would notmeaningfully reflect its lendingperformance if consumer loans wereexcluded.

§ll.22(a)(2) Loan Originations andPurchases/Other Loan Data

§ll.22(a)(2)–1: How are lendingcommitments (such as letters of credit)evaluated under the regulation?

A1. The agencies consider lendingcommitments (such as letters of credit)only at the option of the institution.Commitments must be legally bindingbetween an institution and a borrowerin order to be considered. Informationabout lending commitments will beused by examiners to enhance theirunderstanding of an institution’sperformance.

§ll.22(a)(2)–2: Will examinersreview application data as part of thelending test?

A2. Application activity is not aperformance criterion of the lendingtest. However, examiners may considerthis information in the performancecontext analysis because thisinformation may give examiners insighton, for example, the demand for loans.

§ll.22(a)(2)–3: May a financialinstitution receive consideration underCRA for home mortgage loanmodification, extension, andconsolidation agreements (MECAs), inwhich it obtains home mortgage loansfrom other institutions without actuallypurchasing or refinancing the homemortgage loans, as those terms havebeen interpreted under CRA and HMDA,as implemented by 12 CFR pt. 203?

A3. Yes. In some states, MECAs,which are not considered loanrefinancings because the existing loanobligations are not satisfied and

replaced, are common. Although thesetransactions are not considered to bepurchases or refinancings, as thoseterms have been interpreted under CRA,they do achieve the same results. Aninstitution may present informationabout its MECA activities with respectto home mortgages to examiners forconsideration under the lending test as‘‘other loan data.’’

§ll.22(a)(2)–4: Do institutionsreceive consideration for originating orpurchasing loans that are fullyguaranteed?

A4. Yes. The lending test evaluates aninstitution’s record of helping to meetthe credit needs of its assessment area(s)through the origination or purchase ofspecified types of loans. The test doesnot take into account whether or notsuch loans are guaranteed.

§ll.22(b) Performance Criteria§ll.22(b)–1: How will examiners

apply the performance criteria in thelending test?

A1. Examiners will apply theperformance criteria reasonably andfairly, in accord with the regulations,the examination procedures, and thisGuidance. In doing so, examiners willdisregard efforts by an institution tomanipulate business operations orpresent information in an artificial lightthat does not accurately reflect aninstitution’s overall record of lendingperformance.

§ll.22(b)(1) Lending Activity§ll.22(b)(1)–1: How will the

agencies apply the lending activitycriterion to discourage an institutionfrom originating loans that are viewedfavorably under CRA in the institutionitself and referring other loans, whichare not viewed as favorably, fororigination by an affiliate?

A1. Examiners will review closelyinstitutions with (1) a small number andamount of home mortgage loans with anunusually good distribution among low-and moderate-income areas and low-and moderate-income borrowers and (2)a policy of referring most, but not all, oftheir home mortgage loans to affiliatedinstitutions. If an institution is makingloans mostly to low- and moderate-income individuals and areas andreferring the rest of the loan applicantsto an affiliate for the purpose ofreceiving a favorable CRA rating,examiners may conclude that theinstitution’s lending activity is notsatisfactory because it hasinappropriately attempted to influencethe rating. In evaluating an institution’slending, examiners will considerlegitimate business reasons for theallocation of the lending activity.

§ll.22(b)(2) & (3) GeographicDistribution and BorrowerCharacteristics

§ll.22(b)(2) & (3)–1: How do thegeographic distribution of loans and thedistribution of lending by borrowercharacteristics interact in the lendingtest?

A1. Examiners generally will considerboth the distribution of an institution’sloans among geographies of differentincome levels and among borrowers ofdifferent income levels and businessesof different sizes. The importance of theborrower distribution criterion,particularly in relation to the geographicdistribution criterion, will depend onthe performance context. For example,distribution among borrowers withdifferent income levels may be moreimportant in areas without identifiablegeographies of different incomecategories. On the other hand,geographic distribution may be moreimportant in areas with the full range ofgeographies of different incomecategories.

§ll.22(b)(2) & (3)–2: Must aninstitution lend to all portions of itsassessment area?

A2. The term ‘‘assessment area’’describes the geographic area withinwhich the agencies assess how well aninstitution has met the specificperformance tests and standards in therule. The agencies do not expect thatsimply because a census tract or blocknumbering area is within aninstitution’s assessment area(s) theinstitution must lend to that census tractor block numbering area. Rather theagencies will be concerned withconspicuous gaps in loan distributionthat are not explained by theperformance context. Similarly, if aninstitution delineated the entire countyin which it is located as its assessmentarea, but could have delineated itsassessment area as only a portion of thecounty, it will not be penalized forlending only in that portion of thecounty, so long as that portion does notreflect illegal discrimination orarbitrarily exclude low- or moderate-income geographies. The capacity andconstraints of an institution, its businessdecisions about how it can best help tomeet the needs of its assessment area(s),including those of low- and moderate-income neighborhoods, and otheraspects of the performance context, areall relevant to explain why theinstitution is serving or not servingportions of its assessment area(s).

§ll.22(b)(2) & (3)–3: Will examinerstake into account loans made byaffiliates when evaluating the



proportion of an institution’s lending inits assessment area(s)?

A3. Examiners will not take intoaccount loans made by affiliates whendetermining the proportion of aninstitution’s lending in its assessmentarea(s), even if the institution elects tohave its affiliate lending considered inthe remainder of the lending testevaluation. However, examiners mayconsider an institution’s businessstrategy of conducting lending throughan affiliate in order to determinewhether a low proportion of lending inthe assessment area(s) should adverselyaffect the institution’s lending testrating.

§ll.22(b)(2) & (3)–4: When willexaminers consider loans (other thancommunity development loans) madeoutside an institution’s assessmentarea(s)?

A4. Consideration will be given forloans to low- and moderate-incomepersons and small business and farmloans outside of an institution’sassessment area(s), provided theinstitution has adequately addressed theneeds of borrowers within itsassessment area(s). The agencies willapply this consideration not only toloans made by large retail institutionsbeing evaluated under the lending test,but also to loans made by smallinstitutions being evaluated under thesmall institution performance standards.Loans to low- and moderate-incomepersons and small businesses and farmsoutside of an institution’s assessmentarea(s), however, will not compensatefor poor lending performance within theinstitution’s assessment area(s).

§ll.22(b)(2) & (3)–5: Under thelending test, how will examinersevaluate home mortgage loans tomiddle- or upper-income individuals ina low- or moderate-income geography?

A5. Examiners will consider thesehome mortgage loans under theperformance criteria of the lending test,i.e., by number and amount of homemortgage loans, whether they are insideor outside the financial institution’sassessment area(s), their geographicdistribution, and the income levels ofthe borrowers. Examiners will useinformation regarding the financialinstitution’s performance context todetermine how to evaluate the loansunder these performance criteria.Depending on the performance context,examiners could view home mortgageloans to middle-income individuals in alow-income geography very differently.For example, if the loans are for homesor multifamily housing located in anarea for which the local, state, tribal, orFederal government or a community-based development organization has

developed a revitalization orstabilization plan (such as a Federalenterprise community or empowermentzone) that includes attracting mixed-income residents to establish astabilized, economically diverseneighborhood, examiners may give moreconsideration to such loans, which maybe viewed as serving the low- ormoderate-income community’s needs aswell as serving those of the middle- orupper-income borrowers. If, on the otherhand, no such plan exists and there isno other evidence of governmentalsupport for a revitalization orstabilization project in the area and theloans to middle- or upper-incomeborrowers significantly disadvantage orprimarily have the effect of displacinglow- or moderate-income residents,examiners may view these loans simplyas home mortgage loans to middle- orupper-income borrowers who happen toreside in a low- or moderate-incomegeography and weigh them accordinglyin their evaluation of the institution.

§ll.22(b)(4); CommunityDevelopment Lending

§ll.22(b)(4)–1: When evaluating aninstitution’s record of communitydevelopment lending, may an examinerdistinguish among communitydevelopment loans on the basis of theactual amount of the loan that advancesthe community development purpose?

A1. Yes. When evaluating theinstitution’s record of communitydevelopment lending under§ll.22(b)(4), it is appropriate to givegreater weight to the amount of the loanthat is targeted to the intendedcommunity development purpose. Forexample, consider two $10 millionprojects (with a total of 100 units each)that have as their express primarypurpose affordable housing and arelocated in the same community. One ofthese projects sets aside 40 percent of itsunits for low-income residents and theother project allocates 65 percent of itsunits for low-income residents. Aninstitution would report both loans as$10 million community developmentloans under the §ll.42(b)(2) aggregatereporting obligation. However,transaction complexity, innovation andall other relevant considerations beingequal, an examiner should also take intoaccount that the 65 percent projectprovides more affordable housing formore people per dollar expended.

Under §ll.22(b)(4), the extent ofCRA consideration an institutionreceives for its community developmentloans should bear a direct relation to thebenefits received by the community andthe innovation or complexity of theloans required to accomplish the

activity, not simply to the dollar amountexpended on a particular transaction. Byapplying all lending test performancecriteria, a community development loanof a lower dollar amount could meet thecredit needs of the institution’scommunity to a greater extent than acommunity development loan with ahigher dollar amount, but with lessinnovation, complexity, or impact onthe community.

§ll.22(b)(5) Innovative or FlexibleLending Practices

§ll.22(b)(5)–1: What is the range ofpractices that examiners may considerin evaluating the innovativeness orflexibility of an institution’s lending?

A1. In evaluating the innovativenessor flexibility of an institution’s lendingpractices (and the complexity andinnovativeness of its communitydevelopment lending), examiners willnot be limited to reviewing the overallvariety and specific terms andconditions of the credit productsthemselves. In connection with theevaluation of an institution’s lending,examiners also may give considerationto related innovations when theyaugment the success and effectivenessof the institution’s lending under itscommunity development loan programsor, more generally, its lending under itsloan programs that address the creditneeds of low- and moderate-incomegeographies or individuals. Forexample:

• In connection with a communitydevelopment loan program, a bank mayestablish a technical assistance programunder which the bank, directly orthrough third parties, providesaffordable housing developers and otherloan recipients with financial consultingservices. Such a technical assistanceprogram may, by itself, constitute acommunity development serviceeligible for consideration under theservice test of the CRA regulations. Inaddition, the technical assistance maybe favorably considered as aninnovation that augments the successand effectiveness of the relatedcommunity development loan program.

• In connection with a small businesslending program in a low- or moderate-income area and consistent with safeand sound lending practices, a bankmay implement a program under which,in addition to providing financing, thebank also contracts with the smallbusiness borrowers. Such a contractingarrangement would not, standing alone,qualify for CRA consideration. However,it may be favorably considered as aninnovation that augments the loanprogram’s success and effectiveness,and improves the program’s ability to



serve community development purposesby helping to promote economicdevelopment through support of smallbusiness activities and revitalization orstabilization of low- or moderate-incomegeographies.

§ll.22(c) Affiliate Lending

§ll.22(c)(1) In General§ll.22(c)(1)–1: If an institution

elects to have loans by its affiliate(s)considered, may it elect to have onlycertain categories of loans considered?

A1. Yes. An institution may elect tohave only a particular category of itsaffiliate’s lending considered. The basiccategories of loans are home mortgageloans, small business loans, small farmloans, community development loans,and the five categories of consumerloans (motor vehicle loans, credit cardloans, home equity loans, other securedloans, and other unsecured loans).

§ll.22(c)(2) Constraints on AffiliateLending

§ll.22(c)(2)(i) No Affiliate May Claima Loan Origination or Loan Purchase ifAnother Institution Claims the SameLoan Origination or Purchase

§ll.22(c)(2)(i)–1: How is thisconstraint on affiliate lending applied?

A1. This constraint prohibits oneaffiliate from claiming a loan originationor purchase claimed by another affiliate.However, an institution can count as apurchase a loan originated by anaffiliate that the institutionsubsequently purchases, or count as anorigination a loan later sold to anaffiliate, provided the same loans arenot sold several times to inflate theirvalue for CRA purposes.

§ll.22(c)(2)(ii) If an InstitutionElects To Have Its Supervisory AgencyConsider Loans Within a ParticularLending Category Made by One or Moreof the Institution’s Affiliates in aParticular Assessment Area, theInstitution Shall Elect To Have theAgency Consider All Loans Within ThatLending Category in That ParticularAssessment Area Made by All of theInstitution’s Affiliates

§ll.22(c)(2)(ii)–1: How is thisconstraint on affiliate lending applied?

A1. This constraint prohibits ‘‘cherry-picking’’ affiliate loans within any onecategory of loans. The constraintrequires an institution that elects tohave a particular category of affiliatelending in a particular assessment areaconsidered to include all loans of thattype made by all of its affiliates in thatparticular assessment area. For example,assume that an institution has one ormore affiliates, such as a mortgage bank

that makes loans in the institution’sassessment area. If the institution electsto include the mortgage bank’s homemortgage loans, it must include all ofmortgage bank’s home mortgage loansmade in its assessment area. Theinstitution cannot elect to include onlythose low- and moderate-income homemortgage loans made by the mortgagebank affiliate and not home mortgageloans to middle- and upper-incomeindividuals or areas.

§ll.22(c)(2)(ii)–2: How is thisconstraint applied if an institution’saffiliates are also insured depositoryinstitutions subject to the CRA?

A2. Strict application of thisconstraint against ‘‘cherry-picking’’ toloans of an affiliate that is also aninsured depository institution coveredby the CRA would produce theanomalous result that the otherinstitution would, without its consent,not be able to count its own loans.Because the agencies did not intend todeprive an institution subject to theCRA of receiving consideration for itsown lending, the agencies read thisconstraint slightly differently in casesinvolving a group of affiliatedinstitutions, some of which are subjectto the CRA and share the sameassessment area(s). In thosecircumstances, an institution that electsto include all of its mortgage affiliate’shome mortgage loans in its assessmentarea would not automatically berequired to include all home mortgageloans in its assessment area of anotheraffiliate institution subject to the CRA.However, all loans of a particular typemade by any affiliate in the institution’sassessment area(s) must either becounted by the lending institution or byanother affiliate institution that issubject to the CRA. This reading reflectsthe fact that a holding company may, forbusiness reasons, choose to transactdifferent aspects of its business indifferent subsidiary institutions.However, the method by which loansare allocated among the institutions forCRA purposes must reflect actualbusiness decisions about the allocationof banking activities among theinstitutions and should not be designedsolely to enhance their CRA evaluations.

§ll.22(d) Lending by a Consortiumor a Third Party

§ll.22(d)–1: Will equity and equity-type investments in a third party receiveconsideration under the lending test?

A1. If an institution has made anequity or equity-type investment in athird party, community developmentloans made by the third party may beconsidered under the lending test. Onthe other hand, asset-backed and debt

securities that do not represent anequity-type interest in a third party willnot be considered under the lending testunless the securities are booked by thepurchasing institution as a loan. Forexample, if an institution purchasesstock in a community developmentcorporation (‘‘CDC’’) that primarilylends in low- and moderate-incomeareas or to low-and moderate-incomeindividuals in order to promotecommunity development, the institutionmay claim a pro rata share of the CDC’sloans as community development loans.The institution’s pro rata share is basedon its percentage of equity ownership inthe CDC. §ll.23(b)–1 providesinformation concerning consideration ofan equity or equity-type investmentunder the investment test and both thelending and investment tests.

§ll.22(d)–2: How will examinersevaluate loans made by consortia orthird parties under the lending test?

A2. Loans originated or purchased byconsortia in which an institutionparticipates or by third parties in whichan institution invests will only beconsidered if they qualify as communitydevelopment loans and will only beconsidered under the communitydevelopment criterion of the lendingtest. However, loans originated directlyon the books of an institution orpurchased by the institution areconsidered to have been made orpurchased directly by the institution,even if the institution originated orpurchased the loans as a result of itsparticipation in a loan consortium.These loans would be considered underall the lending test criteria appropriateto them depending on the type of loan.

§ll.22(d)–3: In somecircumstances, an institution may investin a third party, such as a communitydevelopment bank, that is also aninsured depository institution and isthus subject to CRA requirements. If theinvesting institution requests itssupervisory agency to consider its prorata share of community developmentloans made by the third party, asallowed under 12 CFRll.22(d), maythe third party also receiveconsideration for these loans?

A3. Yes, as long as the financialinstitution and the third party are notaffiliates. The regulations state, at 12CFRll.22(c)(2)(i), that two affiliatesmay not both claim the same loanorigination or loan purchase. However,if the financial institution and the thirdparty are not affiliates, the third partymay receive consideration for thecommunity development loans itoriginates, and the financial institutionthat invested in the third party may alsoreceive consideration for its pro rata



share of the same communitydevelopment loans under 12CFRll.22(d).

§ll.23—Investment Test

§ll.23(a) Scope of Test

§ll.23(a)–1: May an institutionreceive consideration under the CRAregulations if it invests indirectlythrough a fund, the purpose of which iscommunity development, as that isdefined in the CRA regulations?

A1: Yes, the direct or indirect natureof the qualified investment does notaffect whether an institution willreceive consideration under the CRAregulations because the regulations donot distinguish between ‘‘direct’’ and‘‘indirect’’ investments. Thus, aninstitution’s investment in an equityfund that, in turn, invests in projectsthat, for example, provide affordablehousing to low- and moderate-incomeindividuals, would receiveconsideration as a qualified investmentunder the CRA regulations, provided theinvestment benefits one or more of theinstitution’s assessment area(s) or abroader statewide or regional area(s)that includes one or more of theinstitution’s assessment area(s).Similarly, an institution may receiveconsideration for a direct qualifiedinvestment in a nonprofit organizationthat, for example, supports affordablehousing for low- and moderate-incomeindividuals in the institution’sassessment area(s) or a broaderstatewide or regional area(s) thatincludes the institution’s assessmentarea(s).

§ll.23(b) Exclusion

§ll.23(b)–1: Even though theregulations state that an activity that isconsidered under the lending or servicetests cannot also be considered underthe investment test, may parts of anactivity be considered under one testand other parts be considered underanother test?

A1. Yes, in some instances the natureof an activity may make it eligible forconsideration under more than one ofthe performance tests. For example,certain investments and related supportprovided by a large retail institution toa CDC may be evaluated under thelending, investment, and service tests.Under the service test, the institutionmay receive consideration for anycommunity development services that itprovides to the CDC, such as service byan executive of the institution on theCDC’s board of directors. If theinstitution makes an investment in theCDC that the CDC uses to makecommunity development loans, the

institution may receive considerationunder the lending test for its pro-ratashare of community development loansmade by the CDC. Alternatively, theinstitution’s investment may beconsidered under the investment test,assuming it is a qualified investment. Inaddition, an institution may elect tohave a part of its investment consideredunder the lending test and theremaining part considered under theinvestment test. If the investinginstitution opts to have a portion of itsinvestment evaluated under the lendingtest by claiming a share of the CDC’scommunity development loans, theamount of investment considered underthe investment test will be offset by thatportion. Thus, the institution wouldonly receive consideration under theinvestment test for the amount of itsinvestment multiplied by the percentageof the CDC’s assets that meet thedefinition of a qualified investment.

§ll.23(b)–2: If home mortgageloans to low- and moderate-incomeborrowers have been considered underan institution’s lending test, may theinstitution that originated or purchasedthem also receive consideration underthe investment test if it subsequentlypurchases mortgage-backed securitiesthat are primarily or exclusively backedby such loans?

A2. No. Because the institutionreceived lending test consideration forthe loans that underlie the securities,the institution may not also receiveconsideration under the investment testfor its purchase of the securities. Ofcourse, an institution may receiveinvestment test consideration forpurchases of mortgage-backed securitiesthat are backed by loans to low- andmoderate-income individuals as long asthe securities are not backed primarilyor exclusively by loans that the sameinstitution originated or purchased.

§ll.23(e) Performance Criteria§ll.23(e)–1: When applying the

performance criteria of §ll.23(e), mayan examiner distinguish amongqualified investments based on howmuch of the investment actuallysupports the underlying communitydevelopment purpose?

A1. Yes. Although §ll.23(e)(1)speaks in terms of the dollar amount ofqualified investments, the criterionpermits an examiner to weight certaininvestments differently or to make otherappropriate distinctions whenevaluating an institution’s record ofmaking qualified investments. Forinstance, an examiner should take intoaccount that a targeted mortgage-backedsecurity that qualifies as an affordablehousing issue that has only 60 percent

of its face value supported by loans tolow -or moderate-income borrowerswould not provide as much affordablehousing for low- and moderate-incomeindividuals as a targeted mortgage-backed security with 100 percent of itsface value supported by affordablehousing loans to low- and moderate-income borrowers. The examiner shoulddescribe any differential weighting (orother adjustment), and its basis in thePublic Evaluation. However, no matterhow a qualified investment is handledfor purposes of §ll.23(e)(1), it willalso be evaluated with respect to thequalitative performance criteria set forthin §ll.23(e)(2), (3) and (4) . Byapplying all criteria, a qualifiedinvestment of a lower dollar amountmay be weighed more heavily under theInvestment Test than a qualifiedinvestment with a higher dollar amount,but with fewer qualitativeenhancements.

§ll.23(e)–2: How do examinersevaluate an institution’s qualifiedinvestment in a fund, the primarypurpose of which is communitydevelopment, as that is defined in theCRA regulations?

A2. When evaluating qualifiedinvestments that benefit an institution’sassessment area(s) or a broaderstatewide or regional area that includesits assessment area(s), examiners willlook at the following four performancecriteria:

(1) The dollar amount of qualifiedinvestments;

(2) The innovativeness or complexityof qualified investments;

(3) The responsiveness of qualifiedinvestments to credit and communitydevelopment needs; and

(4) The degree to which the qualifiedinvestments are not routinely providedby private investors.

With respect to the first criterion,examiners will determine the dollaramount of qualified investments byrelying on the figures recorded by theinstitution according to generallyaccepted accounting principles (GAAP).Although institutions may exercise arange of investment strategies, includingshort-term investments, long-terminvestments, investments that areimmediately funded, and investmentswith a binding, up-front commitmentthat are funded over a period of time,institutions making the same dollaramount of investments over the samenumber of years, all other performancecriteria being equal, would receive thesame level of consideration. Examinerswill include both new and outstandinginvestments in this determination. Thedollar amount of qualified investmentsalso will include the dollar amount of



legally binding commitments recordedby the institution according to GAAP.

The extent to which qualifiedinvestments receive consideration,however, depends on how examinersevaluate the investments under theremaining three performance criteria—innovativeness and complexity,responsiveness, and degree to which theinvestment is not routinely provided byprivate investors. Examiners also willconsider factors relevant to theinstitution’s CRA performance context,such as the effect of outstanding long-term qualified investments, the pay-inschedule, and the amount of any cashcall, on the capacity of the institution tomake new investments.

§ll.24—Service Test

§ll.24(d) Performance Criteria—Retail Banking Services

§ll.24(d)–1: How do examinersevaluate the availability andeffectiveness of an institution’s systemsfor delivering retail banking services?

A1. Convenient access to full servicebranches within a community is animportant factor in determining theavailability of credit and non-creditservices. Therefore, the service testperformance standards place primaryemphasis on full service branches whilestill considering alternative systems,such as automated teller machines(‘‘ATMs’’). The principal focus is on aninstitution’s current distribution ofbranches; therefore, an institution is notrequired to expand its branch networkor operate unprofitable branches. Underthe service test, alternative systems fordelivering retail banking services, suchas ATMs, are considered only to theextent that they are effective alternativesin providing needed services to low-and moderate-income areas andindividuals.

§ll.24(d)–2: How do examinersevaluate an institution’s activities inconnection with IndividualDevelopment Accounts (IDAs)?

A2. Although there is no standardIDA program, IDAs typically are depositaccounts targeted to low- and moderate-income families that are designed tohelp them accumulate savings foreducation or job-training, down-payment and closing costs on a newhome, or start-up capital for a smallbusiness. Once participants havesuccessfully funded an IDA, theirpersonal IDA savings are matched by apublic or private entity. Financialinstitution participation in IDAprograms comes in a variety of forms,including providing retail bankingservices to IDA account holders,providing matching dollars or operating

funds to an IDA program, designing orimplementing IDA programs, providingconsumer financial education to IDAaccount holders or prospective accountholders, or other means. The extent offinancial institutions’ involvement inIDAs and the products and services theyoffer in connection with the accountswill vary. Thus, subject to §ll.23(b),examiners evaluate the actual servicesand products provided by an institutionin connection with IDA programs as oneor more of the following: communitydevelopment services, retail bankingservices, qualified investments, homemortgage loans, small business loans,consumer loans, or communitydevelopment loans.

§ll.24(d)(3) Availability andEffectiveness of Alternative Systems forDelivering Retail Banking Services?

§ll.24(d)(3)–1: How will examinersevaluate alternative systems fordelivering retail banking services?

A1. The regulation recognizes themultitude of ways in which aninstitution can provide services, forexample, ATMs, banking by telephoneor computer, and bank-by-mailprograms. Delivery systems other thanbranches will be considered under theregulation to the extent that they areeffective alternatives to branches inproviding needed services to low-andmoderate-income areas and individuals.The list of systems in the regulation isnot intended to be inclusive.

§ll.24(d)(3)–2: Are debit cardsconsidered under the service test as analternative delivery system?

A2. By themselves, no. However, ifdebit cards are a part of a largercombination of products, such as acomprehensive electronic bankingservice, that allows an institution todeliver needed services to low- andmoderate-income areas and individualsin its community, the overall deliverysystem that includes the debit cardfeature would be considered analternative delivery system.

§ll.24(e) Performance Criteria—Community Development Services

§ll.24(e)–1: Under what conditionsmay an institution receive considerationfor community development servicesoffered by affiliates or third parties?

A1. At an institution’s option, theagencies will consider servicesperformed by an affiliate or by a thirdparty on the institution’s behalf underthe service test if the services providedenable the institution to help meet thecredit needs of its community. Indirectservices that enhance an institution’sability to deliver credit products ordeposit services within its community

and that can be quantified may beconsidered under the service test, ifthose services have not been consideredalready under the lending or investmenttest (see §ll.23(b)–1). For example, aninstitution that contracts with acommunity organization to providehome ownership counseling to low- andmoderate-income home buyers as part ofthe institution’s mortgage program mayreceive consideration for that indirectservice under the service test. Incontrast, donations to a communityorganization that offers financialservices to low- or moderate-incomeindividuals may be considered underthe investment test, but would not alsobe eligible for consideration under theservice test. Services performed by anaffiliate will be treated the same asaffiliate loans and investments made inthe institution’s assessment area andmay be considered if the service is notclaimed by any other institution. See§§ll.22(c) and .23(c).

§ll.25 Community DevelopmentTest for Wholesale or Limited PurposeInstitutions

§ll.25(a) Scope of Test§ll.25(a)–1: How can certain credit

card banks help to meet the credit needsof their communities without losingtheir exemption from the definition of‘‘bank’’ in the Bank Holding CompanyAct (the BHCA), as amended by theCompetitive Equality Banking Act of1987 (CEBA)?

A1. Although the BHCA restrictsinstitutions known as CEBA credit cardbanks to credit card operations, a CEBAcredit card bank can engage incommunity development activitieswithout losing its exemption under theBHCA. A CEBA credit card bank couldprovide community developmentservices and investments withoutengaging in operations other than creditcard operations. For example, the bankcould provide credit card counseling, orthe financial expertise of its executives,free of charge, to communitydevelopment organizations. In addition,a CEBA credit card bank could makequalified investments, as long as theinvestments meet the guidelines forpassive and noncontrolling investmentsprovided in the BHC Act and theBoard’s Regulation Y. Finally, althougha CEBA credit card bank cannot makeany loans other than credit card loans,under §ll.25(d)(2) (communitydevelopment test—indirect activities),the bank could elect to have part of itsqualified passive and noncontrollinginvestments in a third-party lendingconsortium considered as communitydevelopment lending, provided that the



consortium’s loans otherwise meet therequirements for communitydevelopment lending. When assessing aCEBA credit card bank’s CRAperformance under the communitydevelopment test, examiners will takeinto account the bank’s performancecontext. In particular, examiners willconsider the legal constraints imposedby the BHCA on the bank’s activities, aspart of the bank’s performance contextin §ll.21(b)(4).

§ll.25(d) Indirect Activities

§ll.25(d)–1: How are investmentsin third party community developmentorganizations considered under thecommunity development test?

A1. Similar to the lending test forretail institutions, investments in thirdparty community developmentorganizations may be considered asqualified investments or as communitydevelopment loans or both (providedthere is no double counting), at theinstitution’s option, as described abovein the discussion regarding §§ll.22(d)and ll.23(b).

§ll.25(e) Benefit to AssessmentArea(s)

§ll.25(e)–1: How do examinersevaluate a wholesale or limited purposeinstitution’s qualified investment in afund that invests in projects nationwideand which has a primary purpose ofcommunity development, as that isdefined in the regulations?

A1. If examiners find that a wholesaleor limited purpose institution hasadequately addressed the needs of itsassessment area(s), they will giveconsideration to qualified investments,as well as community developmentloans and community developmentservices, by that institution nationwide.In determining whether an institutionhas adequately addressed the needs ofits assessment area(s), examiners willconsider qualified investments thatbenefit a broader statewide or regionalarea that includes the institution’sassessment area(s).

§ll.25(f) Community DevelopmentPerformance Rating

§ll.25(f)–1: Must a wholesale orlimited purpose institution engage in allthree categories of communitydevelopment activities (lending,investment and service) to perform wellunder the community development test?

A1. No, a wholesale or limitedpurpose institution may perform wellunder the community development testby engaging in one or more of theseactivities.

§ll.26—Small InstitutionPerformance Standards

§ll.26(a) Performance Criteria

§ll.26(a)–1: May examinersconsider, under one or more of theperformance criteria of the smallinstitution performance standards,lending-related activities, such ascommunity development loans andlending-related qualified investments,when evaluating a small institution?

A1. Yes. Examiners can consider‘‘lending-related activities,’’ includingcommunity development loans andlending-related qualified investments,when evaluating the first fourperformance criteria of the smallinstitution performance test. Althoughlending-related activities are specificallymentioned in the regulation inconnection with only the first threecriteria (i.e., loan-to-deposit ratio,percentage of loans in the institution’sassessment area, and lending toborrowers of different incomes andbusinesses of different sizes), examinerscan also consider these activities whenthey evaluate the fourth criteria—geographic distribution of theinstitution’s loans.

§ll.26(a)–2: What is meant by ‘‘asappropriate’’ when referring to the factthat lending-related activities will beconsidered, ‘‘as appropriate,’’ under thevarious small institution performancecriteria?

A2. ‘‘As appropriate’’ means thatlending-related activities will beconsidered when it is necessary todetermine whether an institution meetsor exceeds the standards for asatisfactory rating. Examiners will alsoconsider other lending-related activitiesat an institution’s request.

§ll.26(a)–3: When evaluating asmall institution’s lending performance,will examiners consider, at theinstitution’s request, communitydevelopment loans originated orpurchased by a consortium in which theinstitution participates or by a thirdparty in which the institution hasinvested?

A3. Yes. However, a small institutionthat elects to have examiners considercommunity development loansoriginated or purchased by a consortiumor third party must maintain sufficientinformation on its share of thecommunity development loans so thatthe examiners may evaluate these loansunder the small institution performancecriteria.

§ll.26(a)–4: Under the smallinstitution performance standards, willexaminers consider both loanoriginations and purchases?

A4. Yes, consistent with the otherassessment methods in the regulation,examiners will consider both loansoriginated and purchased by theinstitution. Likewise, examiners mayconsider any other loan data the smallinstitution chooses to provide,including data on loans outstanding,commitments and letters of credit.

§ll.26(a)–5: Under the smallinstitution performance standards, howwill qualified investments be consideredfor purposes of determining whether asmall institution receives a satisfactoryCRA rating?

A5. The small institution performancestandards focus on lending and otherlending-related activities. Therefore,examiners will consider only lending-related qualified investments for thepurposes of determining whether thesmall institution receives a satisfactoryCRA rating.

§ll.26(a)(1) Loan-to-Deposit Ratio§ll.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 samemanner that the Uniform BankPerformance Report/Uniform ThriftPerformance Report (UBPR/UTPR)determines the ratio. It is calculated bydividing the institution’s net loans andleases by its total deposits. The ratio isfound in the Liquidity and InvestmentPortfolio section of the UBPR andUTPR. Examiners will use this ratio tocalculate an average since the lastexamination by adding the quarterlyloan-to-deposit ratios and dividing thetotal by the number of quarters.

§ll.26(a)(1)–2: How is the‘‘reasonableness’’ of a loan-to-depositratio evaluated?

A2. No specific ratio is reasonable inevery circumstance, and each smallinstitution’s ratio is evaluated in light ofinformation from the performancecontext, including the institution’scapacity to lend, demographic andeconomic factors present in theassessment area, and the lendingopportunities available in theassessment area(s). If a smallinstitution’s loan-to-deposit ratioappears unreasonable after consideringthis information, lending performancemay still be satisfactory under thiscriterion taking into consideration thenumber and the dollar volume of loanssold to the secondary market or thenumber and amount and innovativenessor complexity of communitydevelopment loans and lending-relatedqualified investments.

§ll.26(a)(1)–3: If an institutionmakes a large number of loans off-shore,will examiners segregate the domestic



loan-to-deposit ratio from the foreignloan-to-deposit ratio?

A3. No. Examiners will look at theinstitution’s net loan-to-deposit ratio forthe whole institution, without anyadjustments.

§ll.26(a)(2) Percentage of LendingWithin Assessment Area(s)

§ll.26(a)(2)–1: Must a smallinstitution have a majority of its lendingin its assessment area(s) to receive asatisfactory performance rating?

A1. No. The percentage of loans and,as appropriate, other lending-relatedactivities located in the bank’sassessment area(s) is but one of theperformance criteria upon which smallinstitutions are evaluated. If thepercentage of loans and other lendingrelated activities in an institution’sassessment area(s) is less than amajority, then the institution does notmeet the standards for satisfactoryperformance only under this criterion.The effect on the overall performancerating of the institution, however, isconsidered in light of the performancecontext, including informationregarding economic conditions, loandemand, the institution’s size, financialcondition and business strategies, andbranching network and other aspects ofthe institution’s lending record.

§ll.26(a)(3) & (4) Distribution ofLending Within Assessment Area(s) byBorrower Income and GeographicLocation

§ll.26(a)(3) & (4)–1: How will asmall institution’s performance beassessed under these lendingdistribution criteria?

A1. Distribution of loans, like othersmall institution performance criteria, isconsidered in light of the performancecontext. For example, a small institutionis not required to lend evenlythroughout its assessment area(s) or inany particular geography. However, inorder to meet the standards forsatisfactory performance under thiscriterion, conspicuous gaps in a smallinstitution’s loan distribution must beadequately explained by performancecontext factors such as lendingopportunities in the institution’sassessment area(s), the institution’sproduct offerings and business strategy,and institutional capacity andconstraints. In addition, it may beimpracticable to review the geographicdistribution of the lending of aninstitution with few demographicallydistinct geographies within anassessment area. If sufficientinformation on the income levels ofindividual borrowers or the revenues orsizes of business borrowers is not

available, examiners may use proxiessuch as loan size for estimatingborrower characteristics, whereappropriate.

§ll.26(b) Performance Rating

§ll.26(b)–1: How can a smallinstitution achieve an ‘‘outstanding’’performance rating?

A1. A small institution that meetseach of the standards for a ‘‘satisfactory’’rating and exceeds some or all of thosestandards may warrant an‘‘outstanding’’ performance rating. Inassessing performance at the‘‘outstanding’’ level, the agenciesconsider the extent to which theinstitution exceeds each of theperformance standards and, at theinstitution’s option, its performance inmaking qualified investments andproviding services that enhance creditavailability in its assessment area(s). Insome cases, a small institution mayqualify for an ‘‘outstanding’’performance rating solely on the basis ofits lending activities, but only if itsperformance materially exceeds thestandards for a ‘‘satisfactory’’ rating,particularly with respect to thepenetration of borrowers at all incomelevels and the dispersion of loansthroughout the geographies in itsassessment area(s) that display incomevariation. An institution with a highloan-to-deposit ratio and a highpercentage of loans in its assessmentarea(s), but with only a reasonablepenetration of borrowers at all incomelevels or a reasonable dispersion ofloans throughout geographies ofdiffering income levels in its assessmentarea(s), generally will not be rated‘‘outstanding’’ based only on its lendingperformance. However, the institution’sperformance in making qualifiedinvestments and its performance inproviding branches and other servicesand delivery systems that enhancecredit availability in its assessmentarea(s) may augment the institution’ssatisfactory rating to the extent that itmay be rated ‘‘outstanding.’’

§ll.26(b)–2: Will a smallinstitution’s qualified investments,community development loans, andcommunity development services beconsidered if they do not directly benefitits assessment area(s)?

A2. Yes. These activities are eligiblefor consideration if they benefit abroader statewide or regional area thatincludes a small institution’sassessment area(s), as discussed morefully in §§ll.12(i) & 563e.12(h)–6.

§ll.27—Strategic Plan

§ll.27(c) Plans in General

§ll.27(c)–1: To what extent will theagencies provide guidance to aninstitution during the development of itsstrategic plan?

A1. An institution will have anopportunity to consult with and provideinformation to the agencies on aproposed strategic plan. Through thisprocess, an institution is providedguidance on procedures and on theinformation necessary to ensure acomplete submission. For example, theagencies will provide guidance onwhether the level of detail as set out inthe proposed plan would be sufficient topermit agency evaluation of the plan.However, the agencies’ guidance duringplan development and, particularly,prior to the public comment period, willnot include commenting on the meritsof a proposed strategic plan or on theadequacy of measurable goals.

§ll.27(c)–2: How will a jointstrategic plan be reviewed if theaffiliates have different primary Federalsupervisors?

A2. The agencies will coordinatereview of and action on the joint plan.Each agency will evaluate themeasurable goals for those affiliates forwhich it is the primary regulator.

§ll.27(f) Plan Content

§ll.27(f)(1) Measurable Goals

§ll.27(f)(1)–1: How should‘‘measurable goals’’ be specified in astrategic plan?

A1. Measurable goals (e.g., number ofloans, dollar amount, geographiclocation of activity, and benefit to low-and moderate-income areas orindividuals) must be stated withsufficient specificity to permit thepublic and the agencies to quantify whatperformance will be expected. However,institutions are provided flexibility inspecifying goals. For example, aninstitution may provide ranges oflending amounts in different categoriesof loans. Measurable goals may also belinked to funding requirements ofcertain public programs or indexed toother external factors as long as thesemechanisms provide a quantifiablestandard.

§ll.27(g) Plan Approval

§ll.27(g)(2) Public Participation

§ll.27(g)(2)–1: How will the publicreceive notice of a proposed strategicplan?

A1. An institution submitting astrategic plan for approval by theagencies is required to solicit publiccomment on the plan for a period of



thirty (30) days after publishing noticeof the plan at least once in a newspaperof general circulation. The notice shouldbe sufficiently prominent to attractpublic attention and should make clearthat public comment is desired. Aninstitution may, in addition, providenotice to the public in any other mannerit chooses.

§ll.28—Assigned Ratings§ll.28–1: Are innovative lending

practices, innovative or complexqualified investments, and innovativecommunity development servicesrequired for a ‘‘satisfactory’’ or‘‘outstanding’’ CRA rating?

A1. No. Moreover, the lack ofinnovative lending practices, innovativeor complex qualified investments, orinnovative community developmentservices alone will not result in a‘‘needs to improve’’ CRA rating.However, the use of innovative lendingpractices, innovative or complexqualified investments, and innovativecommunity development services mayaugment the consideration given to aninstitution’s performance under thequantitative criteria of the regulations,resulting in a higher level ofperformance rating.

§ll.28–2: How is performanceunder the quantitative and qualitativeperformance criteria weighed whenexaminers assign a CRA rating?

A2. The lending, investment, andservice tests each contain a number ofperformance criteria designed tomeasure whether an institution iseffectively helping to meet the creditneeds of its entire community,including low- and moderate-incomeneighborhoods, in a safe and soundmanner. Some of these performancecriteria are quantitative, such as numberand amount, and others, such as the useof innovative or flexible lendingpractices, the innovativeness or

complexity of qualified investments,and the innovativeness andresponsiveness of communitydevelopment services, are qualitative.The performance criteria that deal withthese qualitative aspects of performancerecognize that these loans, qualifiedinvestments, and communitydevelopment services sometimes requirespecial expertise and effort on the partof the institution and provide a benefitto the community that would nototherwise be possible. As such, theagencies consider the qualitative aspectsof an institution’s activities whenmeasuring the benefits received by acommunity. An institution’sperformance under these qualitativecriteria may augment the considerationgiven to an institution’s performanceunder the quantitative criteria of theregulations, resulting in a higher level ofperformance and rating.

§ll.28(a) Ratings in General

§ll.28(a)–1: How are institutionswith domestic branches in more thanone state assigned a rating?

A1. The evaluation of an institutionthat maintains domestic branches inmore than one state (‘‘multistateinstitution’’) will include a writtenevaluation and rating of its CRA recordof performance as a whole and in eachstate in which it has a domestic branch.The written evaluation will contain aseparate presentation on a multistateinstitution’s performance for eachmetropolitan statistical area and thenonmetropolitan area within each state,if it maintains one or more domesticbranch offices in these areas. Thisseparate presentation will containconclusions, supported by facts anddata, on performance under theperformance tests and standards in theregulation. The evaluation of amultistate institution that maintains a

domestic branch in two or more statesin a multistate metropolitan area willinclude a written evaluation (containingthe same information described above)and rating of its CRA record ofperformance in the multistatemetropolitan area. In such cases, thestatewide evaluation and rating will beadjusted to reflect performance in theportion of the state not within themultistate metropolitan statistical area.

§ll.28(a)–2: How are institutionsthat operate within only a single stateassigned a rating?

A2. An institution that operateswithin only a single state (‘‘single-stateinstitution’’) will be assigned a rating ofits CRA record based on its performancewithin that state. In assigning thisrating, the agencies will separatelypresent a single-state institution’sperformance for each metropolitan areain which the institution maintains oneor more domestic branch offices. Thisseparate presentation will containconclusions, supported by facts anddata, on the single-state institution’sperformance under the performancetests and standards in the regulation.

§ll.28(a)–3: How do the agenciesweight performance under the lending,investment and service test for largeretail institutions?

A3. A rating of ‘‘outstanding,’’ ‘‘highsatisfactory,’’ ‘‘low satisfactory,’’ ‘‘needsto improve,’’ or ‘‘substantialnoncompliance,’’ based on a judgmentsupported by facts and data, will beassigned under each performance test.Points will then be assigned to eachrating as described in the first matrix setforth below. A large retail institution’soverall rating under the lending,investment and service tests will thenbe calculated in accordance with thesecond matrix set forth below, whichincorporates the rating principles in theregulation.

POINTS ASSIGNED FOR PERFORMANCE UNDER LENDING, INVESTMENT AND SERVICE TESTS

Lending Service Investment

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

COMPOSITE RATING POINT REQUIREMENTS

[Add points from three tests]

Rating Total points

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



Note: There is one exception to theComposite Rating matrix. An institution maynot receive a rating of ‘‘satisfactory’’ unlessit receives at least ‘‘low satisfactory’’ on thelending test. Therefore, the total points arecapped at three times the lending test score.

§ll.28(c) Effect of Evidence ofDiscriminatory or Other Illegal CreditPractices

§ll.28(c)–1: What is meant by‘‘discriminatory or other illegal creditpractices’’?

A1. An institution engages indiscriminatory credit practices if itdiscourages or discriminates againstcredit applicants or borrowers on aprohibited basis, in violation, forexample, of the Fair Housing Act or theEqual Credit Opportunity Act (asimplemented by Regulation B).Examples of other illegal creditpractices inconsistent with helping tomeet community credit needs includeviolations of:

• The Truth in Lending Act regardingrescission of certain mortgagetransactions and regarding disclosuresand certain loan term restrictions inconnection with credit transactions thatare subject to the Home Ownership andEquity Protection Act;

• The Real Estate SettlementProcedures Act regarding the giving andaccepting of referral fees, unearned feesor kickbacks in connection with certainmortgage transactions; and

• The Federal Trade Commission Actregarding unfair or deceptive acts orpractices. Examiners will determine theeffect of evidence of illegal creditpractices as set forth in examinationprocedures and §ll.28(c) of theregulation.

Violations of other provisions of theconsumer protection laws generally willnot adversely affect an institution’s CRArating, but may warrant the inclusion ofcomments in an institution’sperformance evaluation. Thesecomments may address the institution’spolicies, procedures, training programs,and internal assessment efforts.

§ll.29—Effect of CRA Performanceon Applications

§ll.29(a) CRA Performance§ll.29(a)–1: What weight is given to

an institution’s CRA performanceexamination in reviewing anapplication?

A1. In cases in which CRAperformance is a relevant factor,information from a CRA performanceexamination of the institution is aparticularly important consideration inthe applications process because itrepresents a detailed evaluation of theinstitution’s CRA performance by its

Federal supervisory agency. In thislight, an examination is an important,and often controlling, factor in theconsideration of an institution’s record.In some cases, however, theexamination may not be recent or aspecific issue raised in the applicationprocess, such as progress in addressingweaknesses noted by examiners,progress in implementing commitmentspreviously made to the reviewingagency, or a supported allegation froma commenter, is relevant to CRAperformance under the regulation andwas not addressed in the examination.In these circumstances, the applicantshould present sufficient information tosupplement its record of performanceand to respond to the substantive issuesraised in the application proceeding.

§ll.29(a)–2: What consideration isgiven to an institution’s commitmentsfor future action in reviewing anapplication by those agencies thatconsider such commitments?

A2. Commitments for future actionare not viewed as part of the CRA recordof performance. In general, institutionscannot use commitments made in theapplications process to overcome aseriously deficient record of CRAperformance. However, commitmentsfor improvements in an institution’sperformance may be appropriate toaddress specific weaknesses in anotherwise satisfactory record or toaddress CRA performance when afinancially troubled institution is beingacquired.

§ll.29(b) Interested Parties§ll.29(b)–1: What consideration is

given to comments from interestedparties in reviewing an application?

A1. Materials relating to CRAperformance received during theapplications process can providevaluable information. Writtencomments, which may express eithersupport for or opposition to theapplication, are made a part of therecord in accordance with the agencies’procedures, and are carefullyconsidered in making the agencies’decision. Comments should besupported by facts about the applicant’sperformance and should be as specificas possible in explaining the basis forsupporting or opposing the application.These comments must be submittedwithin the time limits provided underthe agencies’ procedures.

§ll.29(b)–2: Is an institutionrequired to enter into agreements withprivate parties?

A2. No. Although communicationsbetween an institution and members ofits community may provide a valuablemethod for the institution to assess how

best to address the credit needs of thecommunity, the CRA does not requirean institution to enter into agreementswith private parties. These agreementsare not monitored or enforced by theagencies.

§ll.41—Assessment AreaDelineation

§ll.41(a) In General§ll.41(a)–1: How do the agencies

evaluate ‘‘assessment areas’’ under therevised CRA regulations compared tohow they evaluated ‘‘localcommunities’’ that institutionsdelineated under the original CRAregulations?

A1. The revised rule focuses on thedistribution and level of an institution’slending, investments, and servicesrather than on how and why aninstitution delineated its ‘‘localcommunity’’ or assessment area(s) in aparticular manner. Therefore, theagencies will not evaluate aninstitution’s delineation of itsassessment area(s) as a separateperformance criterion as they did underthe original regulation. Rather, theagencies will only review whether theassessment area delineated by theinstitution complies with the limitationsset forth in the regulations at§ll.41(e).

§ll.41(a)–2: If an institution electsto have the agencies consider affiliatelending, will this decision affect theinstitution’s assessment area(s)?

A2. If an institution elects to have thelending activities of its affiliatesconsidered in the evaluation of theinstitution’s lending, the geographies inwhich the affiliate lends do not affectthe institution’s delineation ofassessment area(s).

§ll.41(a)–3: Can a financialinstitution identify a specific ethnicgroup rather than a geographic area asits assessment area?

A3. No, assessment areas must bebased on geography.

§ll.41(c) Geographic Area(s) forInstitutions Other than Wholesale orLimited Purpose Institutions

§ll.41(c)(1) Generally Consist ofone or More MSAs or one or MoreContiguous Political Subdivisions

§ll.41(c)(1)–1: Besides cities,towns, and counties, what other units oflocal government are politicalsubdivisions for CRA purposes?

A1. Townships and Indianreservations are political subdivisionsfor CRA purposes. Institutions shouldbe aware that the boundaries oftownships and Indian reservations maynot be consistent with the boundaries of



the census tracts or block numberingareas (‘‘geographies’’) in the area. Inthese cases, institutions must ensurethat their assessment area(s) consistsonly of whole geographies by addingany portions of the geographies that lieoutside the political subdivision to thedelineated assessment area(s).

§ll.41(c)(1)–2: Are wards, schooldistricts, voting districts, and waterdistricts political subdivisions for CRApurposes?

A2. No. However, an institution thatdetermines that it predominantly servesan area that is smaller than a city, townor other political subdivision maydelineate as its assessment area thelarger political subdivision and then, inaccordance with §ll.41(d), adjust theboundaries of the assessment area toinclude only the portion of the politicalsubdivision that it reasonably can beexpected to serve. The smaller area thatthe institution delineates must consistof entire geographies, may not reflectillegal discrimination, and may notarbitrarily exclude low- or moderate-income geographies.

§ll.41(d) Adjustments toGeographic Area(s)

§ll.41(d)–1: When may aninstitution adjust the boundaries of anassessment area to include only aportion of a political subdivision?

A1. Institutions must include wholegeographies (i.e., census tracts or blocknumbering areas) in their assessmentareas and generally should includeentire political subdivisions. Becausecensus tracts and block numbering areasare the common geographic areas usedconsistently nationwide for datacollection, the agencies require thatassessment areas be made up of wholegeographies. If including an entirepolitical subdivision would create anarea that is larger than the area theinstitution can reasonably be expectedto serve, an institution may, but is notrequired to, adjust the boundaries of itsassessment area to include only portionsof the political subdivision. Forexample, this adjustment is appropriateif the assessment area would otherwisebe extremely large, of unusualconfiguration, or divided by significantgeographic barriers (such as a river,mountain, or major highway system).When adjusting the boundaries of theirassessment areas, institutions must notarbitrarily exclude low- or moderate-income geographies or set boundariesthat reflect illegal discrimination.

§ll.41(e) Limitations on Delineationof an Assessment Area

§ll.41(e)(3) May not ArbitrarilyExclude Low- or Moderate-IncomeGeographies

§ll.41(e)(3)–1: How will examinersdetermine whether an institution hasarbitrarily excluded low- or moderate-income geographies?

A1. Examiners will make thisdetermination on a case-by-case basisafter considering the facts relevant tothe institution’s assessment areadelineation. Information that examinerswill consider may include:

• Income levels in the institution’sassessment area(s) and surroundinggeographies;

• Locations of branches and deposit-taking ATMs;

• Loan distribution in theinstitution’s assessment area(s) andsurrounding geographies;

• The institution’s size;• The institution’s financial

condition; and• The business strategy, corporate

structure and product offerings of theinstitution.

§ll.41(e)(4) May Not ExtendSubstantially Beyond a CMSA Boundaryor Beyond a State Boundary UnlessLocated in a Multistate MSA

§ll.41(e)(4)–1: What are themaximum limits on the size of anassessment area?

A1. An institution shall not delineatean assessment area extendingsubstantially across the boundaries of aconsolidated metropolitan statisticalarea (CMSA) or the boundaries of anMSA, if the MSA is not located in aCMSA. Similarly, an assessment areamay not extend substantially acrossstate boundaries unless the assessmentarea is located in a multistate MSA. Aninstitution may not delineate a wholestate as its assessment area unless theentire state is contained within a CMSA.These limitations apply to wholesaleand limited purpose institutions as wellas other institutions.

An institution shall delineate separateassessment areas for the areas insideand outside a CMSA (or MSA if theMSA is not located in a CMSA) if thearea served by the institution’s branchesoutside the CMSA (or MSA) extendssubstantially beyond the CMSA (orMSA) boundary. Similarly, theinstitution shall delineate separateassessment areas for the areas insideand outside of a state if the institution’sbranches extend substantially beyondthe boundary of one state (unless theassessment area is located in amultistate MSA). In addition, the

institution should also delineateseparate assessment areas if it hasbranches in areas within the same statethat are widely separate and not at allcontiguous. For example, an institutionthat has its main office in New YorkCity and a branch in Buffalo, New York,and each office serves only theimmediate areas around it, shoulddelineate two separate assessment areas.

§ll.41(e)(4)–2: Can an institutiondelineate one assessment area thatconsists of an MSA and two largecounties that abut the MSA but are notadjacent to each other?

A2. As a general rule, an institution’sassessment area should not extendsubstantially beyond the boundary of anMSA if the MSA is not located in aCMSA. Therefore, the MSA would be aseparate assessment area, and becausethe two abutting counties are notadjacent to each other and, in thisexample, extend substantially beyondthe boundary of the MSA, theinstitution would delineate each countyas a separate assessment area (so, in thisexample, there would be threeassessment areas). However, if the MSAand the two counties were in the sameCMSA, then the institution coulddelineate only one assessment areaincluding them all.

§ll.42—Data collection, reporting,and disclosure

§ll.42–1: When must an institutioncollect and report data under the CRAregulations?

A1. All institutions except smallinstitutions are subject to data collectionand reporting requirements. A smallinstitution is a bank or thrift that, as ofDecember 31 of either of the prior twocalendar years, had total assets of lessthan $250 million and was independentor an affiliate of a holding companythat, as of December 31 of either of theprior two calendar years, had totalbanking and thrift assets of less than $1billion.

For example:

DateInstitution’sasset size

(in millions)

Data collectionrequired for

following cal-endar 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, begin-

ning 1/01/99.

All institutions that are subject to thedata collection and reportingrequirements must report the data for acalendar year by March 1 of the



subsequent year. In the example, above,the institution would report the datacollected for calendar year 1999 byMarch 1, 2000.

The Board of Governors of the FederalReserve System is handling theprocessing of the reports for all of theprimary regulators. The reports shouldbe submitted in a prescribed electronicformat on a timely basis. The mailingaddress for submitting these reports is:Attention: CRA Processing, Board ofGovernors of the Federal ReserveSystem, 1709 New York Avenue, NW.,5th Floor, Washington, DC 20006.

§ll.42–2: Should an institutiondevelop its own program for datacollection, or will the regulators requirea certain format?

A2. An institution may use the freesoftware that is provided by the FFIECto reporting institutions for datacollection and reporting or develop itsown program. Those institutions thatdevelop their own programs mustfollow the precise format for the newCRA data collection and reporting rules.This format may be obtained bycontacting the CRA Assistance Line at(202) 872–7584.

§ll.42–3: How should aninstitution report data on lines of credit?

A3. Institutions must collect andreport data on lines of credit in the sameway that they provide data on loanoriginations. Lines of credit areconsidered originated at the time theline is approved or increased; and anincrease is considered a neworigination. Generally, the full amountof the credit line is the amount that isconsidered originated. In the case of anincrease to an existing line, the amountof the increase is the amount that isconsidered originated and that amountshould be reported. However, consistentwith the Call Report and TFRinstructions, institutions would notreport an increase to a small business orsmall farm line of credit if the increasewould cause the total line of credit toexceed $1 million, in the case of a smallbusiness line, or $500,000, in the caseof a small farm line. Of course,institutions may provide informationabout such line increases to examinersas ‘‘other loan data.’’

§ll.42–4: Should renewals of linesof credit be collected and/or reported?

A4. Renewals of lines of credit forsmall business, small farm or consumerpurposes should be collected andreported, if applicable, in the samemanner as renewals of small business orsmall farm loans. See §ll.42(a)–5.Institutions that are HMDA reporterscontinue to collect and report homeequity lines of credit at their option in

accordance with the requirements of 12CFR part 203.

§ll.42–5: When should merginginstitutions collect data?

A5. Three scenarios of data collectionresponsibilities for the calendar year ofa merger and subsequent data reportingresponsibilities are described below.

• Two institutions are exempt fromCRA collection and reportingrequirements because of asset size. Theinstitutions merge. No data collection isrequired for the year in which themerger takes place, regardless of theresulting asset size. Data collectionwould begin after two consecutive yearsin which the combined institution hadyear-end assets of at least $250 millionor was part of a holding company thathad year-end banking and thrift assets ofat least $1 billion.

• Institution A, an institutionrequired to collect and report the data,and Institution B, an exempt institution,merge. Institution A is the survivinginstitution. For the year of the merger,data collection is required for InstitutionA’s transactions. Data collection isoptional for the transactions of thepreviously exempt institution. For thefollowing year, all transactions of thesurviving institution must be collectedand reported.

• Two institutions that each arerequired to collect and report the datamerge. Data collection is required forthe entire year of the merger and forsubsequent years so long as thesurviving institution is not exempt. Thesurviving institution may file either aconsolidated submission or separatesubmissions for the year of the mergerbut must file a consolidated report forsubsequent years.

§ll.42–6: Can small institutions geta copy of the data collection softwareeven though they are not required tocollect or report data?

A6. Yes. Any institution that isinterested in receiving a copy of thesoftware may send a written request to:Attn.: CRA Processing, Board ofGovernors of the Federal ReserveSystem, 1709 New York Ave, NW., 5thFloor, Washington, DC 20006.

They may also call the CRAAssistance Line at (202) 872–7584 orsend Internet e-mail [email protected].

§ll.42–7: If a small institution isdesignated a wholesale or limitedpurpose institution, must it collect datathat it would not otherwise be requiredto collect because it is a smallinstitution?

A7. No. However, small institutionsmust be prepared to identify thoseloans, investments and services to be

evaluated under the communitydevelopment test.

§ll.42(a) Loan InformationRequired To Be Collected andMaintained

§ll.42(a)–1: Must institutionscollect and report data on allcommercial loans under $1 million atorigination?

A1. No. Institutions that are notexempt from data collection andreporting are required to collect andreport only those commercial loans thatthey capture in the Call Report,Schedule RC-C, Part II, and in the TFR,Schedule SB. Small business loans aredefined as those whose originalamounts are $1 million or less and thatwere reported as either ‘‘Loans securedby nonfarm or nonresidential realestate’’ or ‘‘Commercial and Industrialloans’’ in Part I of the Call Report orTFR.

§ll.42(a)–2: For loans defined assmall business loans, what informationshould be collected and maintained?

A2. Institutions that are not exemptfrom data collection and reporting arerequired to collect and maintain in astandardized, machine readable formatinformation on each small business loanoriginated or purchased for eachcalendar year:

• A unique number or alpha-numericsymbol that can be used to identify therelevant loan file;

• The loan amount at origination;• The loan location; and• An indicator whether the loan was

to a business with gross annualrevenues of $1 million or less.

The location of the loan must bemaintained by census tract or blocknumbering area. In addition,supplemental information contained inthe file specifications includes a dateassociated with the origination orpurchase and whether a loan wasoriginated or purchased by an affiliate.The same requirements apply to smallfarm loans.

§ll.42(a)–3: Will farm loans needto be segregated from business loans?

A3. Yes.§ll.42(a)–4: Should institutions

collect and report data on allagricultural loans under $500,000 atorigination?

A4. Institutions are to report thosefarm loans that they capture in the CallReport, Schedule RC–C, Part II andSchedule SB of the TFR. Small farmloans are defined as those whoseoriginal amounts are $500,000 or lessand were reported as either ‘‘Loans tofinance agricultural production andother loans to farmers’’ or ‘‘Loans



secured by farmland’’ in Part I of theCall Report and TFR.

§ll.42(a)–5: Should institutionscollect and report data about smallbusiness and small farm loans that arerefinanced or renewed?

A5. An institution should collectinformation about small business andsmall farm loans that it refinances orrenews as loan originations. (Arefinancing generally occurs when theexisting loan obligation or note issatisfied and a new note is written,while a renewal refers to an extensionof the term of a loan. However, forpurposes of small business and smallfarm CRA data collection and reporting,it is no longer necessary to distinguishbetween the two.) When reporting smallbusiness and small farm data, however,an institution may only report oneorigination (including a renewal orrefinancing treated as an origination)per loan per year, unless an increase inthe loan amount is granted.

If an institution increases the amountof a small business or small farm loanwhen it extends the term of the loan, itshould always report the amount of theincrease as a small business or smallfarm loan origination. The institutionshould report only the amount of theincrease if the original or remainingamount of the loan has already beenreported one time that year. Forexample, a financial institution makes aterm loan for $25,000; principalpayments have resulted in a presentoutstanding balance of $15,000. In thenext year, the customer requests anadditional $5,000, which is approved,and a new note is written for $20,000.In this example, the institution shouldreport both the $5,000 increase and therenewal or refinancing of the $15,000 asoriginations for that year. These twooriginations may be reported together asa single origination of $20,000.

§ll.42(a)–6: Does a loan to the‘‘fishing industry’’ come under thedefinition of a small farm loan?

A6. Yes. Instructions for Part I of theCall Report and Schedule SB of the TFRinclude loans ‘‘made for the purpose offinancing fisheries and forestries,including loans to commercialfishermen’’ as a component of thedefinition for ‘‘Loans to financeagricultural production and other loansto farmers.’’ Part II of Schedule RC–C ofthe Call Report and Schedule SB of theTFR, which serve as the basis of thedefinition for small business and smallfarm loans in the revised regulation,capture both ‘‘Loans to financeagricultural production and other loansto farmers’’ and ‘‘Loans secured byfarmland.’’

§ll.42(a)–7: How should aninstitution report a home equity line ofcredit, part of which is for homeimprovement purposes, but thepredominant part of which is for smallbusiness purposes?

A7. The institution has the option ofreporting the portion of the home equityline that is for home improvementpurposes under HMDA. That portion ofthe loan would then be consideredwhen examiners evaluate homemortgage lending. If the line meets theregulatory definition of a ‘‘communitydevelopment loan,’’ the institutionshould collect and report informationon the entire line as a communitydevelopment loan. If the line does notqualify as a community developmentloan, the institution has the option ofcollecting and maintaining (but notreporting) the entire line of credit as‘‘Other Secured Lines/Loans forPurposes of Small Business.’’

§ll.42(a)–8: When collecting smallbusiness and small farm data for CRApurposes, may an institution collect andreport information about loans to smallbusinesses and small farms locatedoutside the United States?

A8. At an institution’s option, it maycollect data about small business andsmall farm loans located outside theUnited States; however, it cannot reportthis data because the CRA datacollection software will not accept dataconcerning loan locations outside theUnited States.

§ll.42(a)–9: Is an institution thathas no small farm or small businessloans required to report under CRA?

A9. Each institution subject to datareporting requirements must, at aminimum, submit a transmittal sheet,definition of its assessment area(s), anda record of its community developmentloans. If the institution does not havecommunity development loans toreport, the record should be sent with‘‘0’’ in the community developmentloan composite data fields. Aninstitution that has not purchased ororiginated any small business or smallfarm loans during the reporting periodwould not submit the composite loanrecords for small business or small farmloans.

§ll.42(a)–10: How should aninstitution collect and report thelocation of a loan made to a smallbusiness or farm if the borrowerprovides an address that consists of apost office box number or a rural routeand box number?

A10. Prudent banking practicesdictate that an institution know thelocation of its customers and loancollateral. Therefore, institutionstypically will know the actual location

of their borrowers or loan collateralbeyond an address consisting only of apost office box.

Many borrowers have street addressesin addition to post office box numbersor rural route and box numbers.Institutions should ask their borrowersto provide the street address of the mainbusiness facility or farm or the locationwhere the loan proceeds otherwise willbe applied. Moreover, in many cases inwhich the borrower’s address consistsonly of a rural route number or postoffice box, the institution knows thelocation (i.e., the census tract or blocknumbering area) of the borrower or loancollateral. Once the institution has thisinformation available, it should assign acensus tract or block numbering area tothat location (geocode) and report thatinformation as required under theregulation.

For loans originated or purchased in1998 or later, if the institution cannotdetermine the borrower’s street address,and does not know the census tract orblock numbering area, the institutionshould report the borrower’s state,county, MSA, if applicable, and ‘‘NA,’’for ‘‘not available,’’ in lieu of a censustract or block numbering area code.

§ll.42(a)(2) Loan Amount atOrigination

§ll.42(a)(2)–1: When an institutionpurchases a small business or smallfarm loan, which amount should theinstitution collect and report—theoriginal amount of the loan or theamount at purchase?

A1. When collecting and reportinginformation on purchased smallbusiness and small farm loans, aninstitution collects and reports theamount of the loan at origination, not atthe time of purchase. This is consistentwith the Call Report’s and TFR’s use ofthe ‘‘original amount of the loan’’ todetermine whether a loan should bereported as a ‘‘loan to a small business’’or a ‘‘loan to a small farm’’ and in whichloan size category a loan should bereported. When assessing the volume ofsmall business and small farm loanpurchases for purposes of evaluatinglending test performance under CRA,however, examiners will evaluate aninstitution’s activity based on theamounts at purchase.

§ll.42(a)(2)–2: How should aninstitution collect data about multipleloan originations to the same business?

A2. If an institution makes multipleoriginations to the same business, theloans should be collected and reportedas separate originations rather thancombined and reported as they are onthe Call Report or TFR, which reflectloans outstanding, rather than



originations. However, if institutionsmake multiple originations to the samebusiness solely to inflate artificially thenumber or volume of loans evaluated forCRA lending performance, the agenciesmay combine these loans for purposesof evaluation under the CRA.

§ll.42(a)(2)–3: How should aninstitution collect data pertaining tocredit cards issued to small businesses?

A3. If an institution agrees to issuecredit cards to a business’ employees,all of the credit card lines opened on aparticular date for that single businessshould be reported as one smallbusiness loan origination rather thanreporting each individual credit cardline, assuming the criteria in the ‘‘smallbusiness loan’’ definition in theregulation are met. The credit cardprogram’s ‘‘amount at origination’’ is thesum of all of the employee/businesscredit cards’ credit limits opened on aparticular date. If subsequently issuedcredit cards increase the small businesscredit line, the added amount isreported as a new origination.

§ll.42(a)(3) The Loan Location§ll.42(a)(3)–1: Which location

should an institution record if a smallbusiness loan’s proceeds are used in avariety of locations?

A1. The institution should record theloan location by either the location ofthe business headquarters or thelocation where the greatest portion ofthe proceeds are applied, as indicatedby the borrower.

§ll.42(a)(4) Indicator of GrossAnnual Revenue

§ll.42(a)(4)–1: When indicatingwhether a small business borrower hadgross annual revenues of $1 million orless, upon what revenues should aninstitution rely?

A1. Generally, an institution shouldrely on the revenues that it consideredin making its credit decision. Forexample, in the case of affiliatedbusinesses, such as a parent corporationand its subsidiary, if the institutionconsidered the revenues of the entity’sparent or a subsidiary corporation of theparent as well, then the institutionwould aggregate the revenues of bothcorporations to determine whether therevenues are $1 million or less.Alternatively, if the institutionconsidered the revenues of only theentity to which the loan is actuallyextended, the institution should relysolely upon whether gross annualrevenues are above or below $1 millionfor that entity. However, if theinstitution considered and relied onrevenues or income of a cosigner orguarantor that is not an affiliate of the

borrower, such as a sole proprietor, theinstitution should not adjust theborrower’s revenues for reportingpurposes.

§ll.42(a)(4)–2: If an institution thatis not exempt from data collection andreporting does not request or considerrevenue information to make the creditdecision regarding a small business orsmall farm loan, must the institutioncollect revenue information inconnection with that loan?

A2. No. In those instances, theinstitution should enter the codeindicating ‘‘revenues not known’’ on theindividual loan portion of the datacollection software or on an internallydeveloped system. Loans for which theinstitution did not collect revenueinformation may not be included in theloans to businesses and farms with grossannual revenues of $1 million or lesswhen reporting this data.

§ll.42(a)(4)–3: What gross revenueshould an institution use in determiningthe gross annual revenue of a start-upbusiness?

A3. The institution should use theactual gross annual revenue to date(including $0 if the new business hashad no revenue to date). Although astart-up business will provide theinstitution with pro forma projectedrevenue figures, these figures may notaccurately reflect actual gross revenue.

§ll.42(a)(4)–4: When collecting andreporting the gross annual revenue ofsmall business or farm borrowers, doinstitutions collect and report the grossannual revenue or the adjusted grossannual revenue of its borrowers?

A4. Institutions collect and report thegross annual revenue, rather than theadjusted gross annual revenue, of theirsmall business or farm borrowers. Thepurpose of this data collection is toenable examiners and the public tojudge whether the institution is lendingto small businesses and farms orwhether it is only making small loans tolarger businesses and farms.

The regulation does not requireinstitutions to request or considerrevenue information when making aloan; however, if institutions do gatherthis information from their borrowers,the agencies expect them to collect andreport the borrowers’ gross annualrevenue for purposes of CRA. The CRAregulations similarly do not requireinstitutions to verify revenue amounts;thus, institutions may rely on the grossannual revenue amount provided byborrowers in the ordinary course ofbusiness. If an institution does notcollect gross annual revenueinformation for its small business andsmall farm borrowers, the institutionwould not indicate on the CRA data

collection software that the gross annualrevenues of the borrower are $1 millionor less. (See §ll.42(a)(4)–2.)

§ll.42(b) Loan InformationRequired To Be Reported

§ll.42(b)(1) Small Business andSmall Farm Loan Data

§ll.42(b)(1)–1: For small businessand small farm loan information that iscollected and maintained, what datashould be reported?

A1. Each institution that is notexempt from data collection andreporting is required to report inmachine-readable form annually byMarch 1 the following information,aggregated for each census tract or blocknumbering area in which the institutionoriginated or purchased at least onesmall business or small farm loanduring the prior year:

• The number and amount of loansoriginated or purchased with originalamounts of $100,000 or less;

• The number and amount of loansoriginated or purchased with originalamounts of more than $100,000 but lessthan or equal to $250,000;

• The number and amount of loansoriginated or purchased with originalamounts of more than $250,000 but notmore than $1 million, as to smallbusiness loans, or $500,000, as to smallfarm loans; and To the extent thatinformation is available, the numberand amount of loans to businesses andfarms with gross annual revenues of $1million or less (using the revenues theinstitution considered in making itscredit decision).

§ll.42(b)(2) CommunityDevelopment Loan Data

§ll.42(b)(2)–1: What informationabout community development loansmust institutions report?

A1. Institutions subject to datareporting requirements must report theaggregate number and amount ofcommunity development loansoriginated and purchased during theprior calendar year.

§ll.42(b)(2)–2: If a loan meets thedefinition of a home mortgage, smallbusiness, or small farm loan ANDqualifies as a community developmentloan, where should it be reported? CanFHA, VA and SBA loans be reported ascommunity development loans?

A2. Except for multifamily affordablehousing loans, which may be reportedby retail institutions both under HMDAas home mortgage loans and ascommunity development loans, in orderto avoid double counting, retailinstitutions must report loans that meetthe definitions of home mortgage, small



business, or small farm loans only inthose respective categories even if theyalso meet the definition of communitydevelopment loans. As a practicalmatter, this is not a disadvantage forretail institutions because any affordablehousing mortgage, small business, smallfarm or consumer loan that wouldotherwise meet the definition of acommunity development loan will beconsidered elsewhere in the lendingtest. Any of these types of loans thatoccur outside the institution’sassessment area can receiveconsideration under the borrowercharacteristic criteria of the lending test.See §ll.22(b)(2) & (3)–4.

Limited purpose and wholesaleinstitutions also must report loans thatmeet the definitions of home mortgage,small business, or small farm loans inthose respective categories; however,they must also report any loans fromthose categories that meet the regulatorydefinition of ‘‘community developmentloans’’ as community developmentloans. There is no double countingbecause wholesale and limited purposeinstitutions are not subject to thelending test and, therefore, are notevaluated on their level and distributionof home mortgage, small business, smallfarm and consumer loans.

§ll.42(b)(2)–3: When the primarypurpose of a loan is to finance anaffordable housing project for low-ormoderate-income individuals, but, forexample, only 40 percent of the units inquestion will actually be occupied byindividuals or families with low ormoderate incomes, should the entireloan amount be reported as acommunity development loan?

A3. Yes. As long as the primarypurpose of the loan is a communitydevelopment purpose, the full amountof the institution’s loan should beincluded in its reporting of aggregateamounts of community developmentlending. However, as noted in§ll.22(b)(4)–1, examiners may makequalitative distinctions amongcommunity development loans on thebasis of the extent to which the loanadvances the community developmentpurpose.

§ll.42(b)(3) Home Mortgage Loans§ll.42(b)(3)–1: Must institutions

that are not required to collect homemortgage loan data by the HMDA collecthome mortgage loan data for purposesof the CRA?

A1. No. If an institution is notrequired to collect home mortgage loandata by the HMDA, the institution neednot collect home mortgage loan dataunder the CRA. Examiners will samplethese loans to evaluate the institution’s

home mortgage lending. If an institutionwants to ensure that examiners considerall of its home mortgage loans, theinstitution may collect and maintaindata on these loans.

§ll.42(c) Optional Data Collectionand Maintenance

§ll.42(c)(1) Consumer Loans

§ll.42(c)(1)–1: What are the datarequirements regarding consumer loans?

A1. There are no data reportingrequirements for consumer loans.Institutions may, however, opt to collectand maintain data on consumer loans. Ifan institution chooses to collectinformation on consumer loans, it maycollect data for one or more of thefollowing categories of consumer loans:motor vehicle, credit card, home equity,other secured, and other unsecured. Ifan institution collects data for loans ina certain category, it must collect datafor all loans originated or purchasedwithin that category. The institutionmust maintain these data separately foreach category for which it chooses tocollect data. The data collected andmaintained should include for eachloan:

• A unique number or alpha-numericsymbol that can be used to identify therelevant loan file;

• The loan amount at origination orpurchase;

• The loan location; and• The gross annual income of the

borrower that the institution consideredin making its credit decision.

Generally, guidance given withrespect to data collection of smallbusiness and small farm loans,including, for example, guidanceregarding collecting loan location data,and whether to collect data inconnection with refinanced or renewedloans, will also apply to consumerloans.

§ll.42(c)(1)(iv) Income of Borrower

§ll.42(c)(1)(iv)–1: If an institutiondoes not consider income when makingan underwriting decision in connectionwith a consumer loan, must it collectincome information?

A1. No. Further, if the institutionroutinely collects, but does not verify, aborrower’s income when making acredit decision, it need not verify theincome for purposes of datamaintenance.

§ll.42(c)(1)(iv)–2: May aninstitution list ‘‘0’’ in the income fieldon consumer loans made to employeeswhen collecting data for CRA purposesas the institution would be permitted todo under HMDA?

A2. Yes.

§ll.42(c)(1)(iv)–3: When collectingthe gross annual income of consumerborrowers, do institutions collect thegross annual income or the adjustedgross annual income of the borrowers?

A3. Institutions collect the grossannual income, rather than the adjustedgross annual income, of consumerborrowers. The purpose of income datacollection in connection with consumerloans is to enable examiners todetermine the distribution, particularlyin the institution’s assessment area(s), ofthe institution’s consumer loans, basedon borrower characteristics, includingthe number and amount of consumerloans to low-, moderate-, middle-, andupper-income borrowers, as determinedon the basis of gross annual income.

The regulation does not requireinstitutions to request or considerincome information when making aloan; however, if institutions do gatherthis information from their borrowers,the agencies expect them to collect theborrowers’ gross annual income forpurposes of CRA. The CRA regulationssimilarly do not require institutions toverify income amounts; thus,institutions may rely on the grossannual income amount provided byborrowers in the ordinary course ofbusiness.

§§ll.42(c)(1)(iv)–4: Whose incomedoes an institution collect when aconsumer loan is made to more thanone borrower?

A4. An institution that chooses tocollect and maintain information onconsumer loans collects the grossannual income of all primary obligorsfor consumer loans, to the extent thatthe institution considered the income ofthe obligors when making the decisionto extend credit. Primary obligorsinclude co-applicants and co-borrowers,including co-signers. An institutiondoes not, however, collect the income ofguarantors on consumer loans, becauseguarantors are only secondarily liablefor the debt.

§ll.42(c)(2) Other Loan Data§ll.42(c)(2)–1: Schedule RC–C, Part

II of the Call Report does not allowbanks to report loans for commercialand industrial purposes that are securedby residential real estate, unless thesecurity interest in the nonfarmresidential real estate is taken only asan abundance of caution. (See§§ll.12(u) & 563e.12(t)–3.) Loansextended to small businesses with grossannual revenues of $1 million or lessmay, however, be secured by residentialreal estate. May a bank collect thisinformation to supplement its smallbusiness lending data at the time ofexamination?



A1. Yes. If these loans promotecommunity development, as defined inthe regulation, the bank should collectand report information about the loansas community development loans.Otherwise, at the bank’s option, it maycollect and maintain data concerningloans, purchases, and lines of creditextended to small businesses andsecured by nonfarm residential realestate for consideration in the CRAevaluation of its small business lending.A bank may collect this information as‘‘Other Secured Lines/Loans forPurposes of Small Business’’ in theindividual loan data. This informationshould be maintained at the bank butshould not be submitted for centralreporting purposes.

§ll.42(c)(2)–2: Must an institutioncollect data on loan commitments andletters of credit?

A2. No. Institutions are not requiredto collect data on loan commitmentsand letters of credit. Institutions may,however, provide for examinerconsideration information on letters ofcredit and commitments.

§ll.42(c)(2)–3: Are commercial andconsumer leases considered loans forpurposes of CRA data collection?

A3. Commercial and consumer leasesare not considered small business orsmall farm loans or consumer loans forpurposes of the data collectionrequirements in 12 CFR ll.42(a) &(c)(1). However, if an institution wishesto collect and maintain data aboutleases, the institution may provide thisdata to examiners as ‘‘other loan data’’under 12 CFR ll.42(c)(2) forconsideration under the lending test.

§ll.42(d) Data on Affiliate Lending

§ll.42(d)–1: If an institution electsto have an affiliate’s home mortgagelending considered in its CRAevaluation, what data must theinstitution make available to examiners?

A1. If the affiliate is a HMDA reporter,the institution must identify those loansreported by its affiliate under 12 CFRpart 203 (Regulation C, implementingHMDA). At its option, the institutionmay either provide examiners with theaffiliate’s entire HMDA DisclosureStatement or just those portionscovering the loans in its assessmentarea(s) that it is electing to consider. Ifthe affiliate is not required by HMDA toreport home mortgage loans, theinstitution must provide sufficient dataconcerning the affiliate’s home mortgageloans for the examiners to apply theperformance tests.

§ll.43—Content and Availability ofPublic File

§ll.43(a) Information Available tothe Public

§ll.43(a)(1) Public Comments

§ll.43(a)(1)–1: What happens tocomments received by the agencies?

A1. Comments received by a Federalfinancial supervisory agency will be onfile at the agency for use by examiners.Those comments are also available tothe public unless they are exempt fromdisclosure under the Freedom ofInformation Act.

§ll.43(a)(1)–2: Is an institutionrequired to respond to publiccomments?

A2. No. All institutions should reviewcomments and complaints carefully todetermine whether any response orother action is warranted. A smallinstitution subject to the smallinstitution performance standards isspecifically evaluated on its record oftaking action, if warranted, in responseto written complaints about itsperformance in helping to meet thecredit needs in its assessment area(s)(§ll.26(a)(5)). For all institutions,responding to comments may help tofoster a dialogue with members of thecommunity or to present relevantinformation to an institution’s Federalfinancial supervisory agency. If aninstitution responds in writing to aletter in the public file, the responsemust also be placed in that file, unlessthe response reflects adversely on anyperson or placing it in the public fileviolates a law.

§ll.43(a)(1)–3: May an institutioninclude a response to its CRAPerformance Evaluation in its publicfile?

A3. Yes. However, the format andcontent of the evaluation, as transmittedby the supervisory agency, may not bealtered or abridged in any manner. Inaddition, an institution that received aless than satisfactory rating during itmost recent examination must includein its public file a description of itscurrent efforts to improve itsperformance in helping to meet thecredit needs of its entire community.The institution must update thedescription on a quarterly basis.

§ll.43(b) Additional InformationAvailable to the Public

§ll.43(b)(1) Institutions Other ThanSmall Institutions

§ll.43(b)(1)–1: Must an institutionthat elects to have affiliate lendingconsidered include data on this lendingin its public file?

A1. Yes. The lending data to becontained in an institution’s public filecovers the lending of the institution’saffiliates, as well as of the institutionitself, considered in the assessment ofthe institution’s CRA performance. Aninstitution that has elected to havemortgage loans of an affiliate consideredmust include either the affiliate’sHMDA Disclosure Statements for thetwo prior years or the parts of theDisclosure Statements that relate to theinstitution’s assessment area(s), at theinstitution’s option.

§ll.43(b)(1)–2: May an institutionretain the compact disc provided by theFederal Financial InstitutionExamination Council that contains itsCRA Disclosure Statement in its publicfile, rather than printing a hard copy ofthe CRA Disclosure Statement forretention in its public file?

A2. Yes, if the institution can readilyprint out from the compact disc (or aduplicate of the compact disc) its CRADisclosure Statement for a consumerwhen the public file is requested. If therequest is at a branch other than themain office or the one designatedbranch in each state that holds thecomplete public file, the bank shouldprovide the CRA Disclosure Statementin a paper copy, or in another formatacceptable to the requestor, within 5calendar days, as required by§ll.43(c)(2)(ii).

§ll.43(c) Location of PublicInformation

§ll.43(c)–1: What is an institution’s‘‘main office’’?

A1. An institution’s main office is themain, home, or principal office asdesignated in its charter.

§ll.43(c)–2: May an institutionmaintain a copy of its public file on anintranet or the Internet?

A2. Yes, an institution may keep allor part of its public file on an intranetor the Internet, provided that theinstitution maintains all of theinformation, either in paper orelectronic form, that is required in§ll.43 of the regulations. Aninstitution that opts to keep part or allof its public file on an intranet or theInternet must follow the rules in§§ll.43(c)(1) and (2) as to whatinformation is required to be kept at amain office and at a branch. Theinstitution also must ensure that theinformation required to be maintainedat a main office and branch, if keptelectronically, can be readilydownloaded and printed for anymember of the public who requests ahard copy of the information.



§ll.44—Public Notice by Institutions

§ll.44–1: Are there any placementor size requirements for an institution’spublic notice?

A1. The notice must be placed in theinstitution’s public lobby, but the sizeand placement may vary. The noticeshould be placed in a location and be ofa sufficient size that customers caneasily see and read it.

§ll.45—Publication of PlannedExamination Schedule

§ll.45–1: Where will the agenciespublish the planned examinationschedule for the upcoming calendarquarter?

A1. The agencies may use the FederalRegister, a press release, the Internet, orother existing agency publications fordisseminating the list of the institutionsscheduled to for CRA examinationsduring the upcoming calendar quarter.Interested parties should contact theappropriate Federal financialsupervisory agency for information onhow the agency is publishing theplanned examination schedule.

§ll.45–2: Is inclusion on the list ofinstitutions that are scheduled toundergo CRA examinations in the nextcalendar quarter determinative ofwhether an institution will be examinedin that quarter?

A2. No. The agencies attempt todetermine as accurately as possiblewhich institutions will be examinedduring the upcoming calendar quarter.However, whether an institution’s nameappears on the published list does notconclusively determine whether theinstitution will be examined during thatquarter. The agencies may need to defera planned examination or conduct anunforeseen examination because ofscheduling difficulties or othercircumstances.

Appendix A to Part ll—Ratings

Appendix A to Part ll—1: Must aninstitution’s performance fit each aspect of aparticular rating profile in order to receivethat rating?

A1. No. Exceptionally strong performancein some aspects of a particular rating profilemay compensate for weak performance inothers. For example, a retail institution thatuses non-branch delivery systems to obtaindeposits and to deliver loans may havealmost all of its loans outside the institution’sassessment area. Assume that an examiner,after consideration of performance contextand other applicable regulatory criteria,concludes that the institution has weakperformance under the lending test criteriaapplicable to lending activity, geographicdistribution, and borrower characteristicswithin the assessment area. The institutionmay compensate for such weak performanceby exceptionally strong performance incommunity development lending in itsassessment area or a broader statewide orregional area that includes its assessmentarea.

Appendix B to Part ll—CRA Notice

Appendix B to Partll—1: What agencyinformation should be added to the CRAnotice form?

A1. The following information should beadded to the form:

OCC-supervised institutions only: Theaddress of the deputy comptroller of thedistrict in which the institution is locatedshould be inserted in the appropriate blank.These addresses can be found at 12 CFR4.5(a).

OCC-, FDIC-, and Board-supervisedinstitutions: ‘‘Officer in Charge ofSupervision’’ is the title of the responsibleofficial at the appropriate Federal ReserveBank.

Appendix A—Regional Offices of theBureau of the Census

To obtain median family incomelevels of census tracts, MSAs, blocknumbering areas and statewidenonmetropolitan areas, contact theappropriate regional office of the Bureauof the Census as indicated below. The

list shows the states covered by eachregional office.Atlanta

(404) 730–3833Alabama, Florida, Georgia

Boston(617) 424–0510Connecticut, Maine, Massachusetts,

New Hampshire, Rhode Island,Vermont

Charlotte(704) 344–6144Kentucky, North Carolina, South

Carolina, Tennessee, VirginiaChicago

(312) 353–9747Illinois, Indiana, Wisconsin

Dallas(214) 655–3050Louisiana, Mississippi, Texas

Denver(303) 969–7750Arizona, Colorado, Montana,

Nebraska, Nevada, New Mexico,North Dakota, South Dakota, Utah,Wyoming

Detroit(313) 259–1875Michigan, Ohio, West Virginia

Kansas City(913) 551–6711Arkansas, Iowa, Kansas, Minnesota,

Missouri, OklahomaLos Angeles

(818) 904–6339Southern California, Hawaii

New York(212) 264–4730New York, New Jersey—selected

countiesPhiladelphia

(215) 656–7578Delaware, District of Columbia,

Maryland, New Jersey—selectedcounties, Pennsylvania

Seattle(206) 553–5835Alaska, Northern California, Idaho,

Oregon, Washington

INDEX

Keyword Q & A

Affiliate lending ................................................................................................................................. §ll.22(b)(1)–1§ll.22(b)(2) & (3)–3§ll.22(c)(1)–1§ll.22(c)(2)(i)–1§ll.22(c)(2)(ii)–1§ll.41(a)–2§ll.42(d)–1§ll.43(b)(1)–1

Affiliates ............................................................................................................................................ §ll.12(a)–1§ll.27(c)–2

Affordable housing ........................................................................................................................... §§ll.12(h) & 563e.12(g)–1§§ll.12(h) & 563e.12(g)–2§§ll.12(h)(1) & 563e.12(g)(1)–1§ll.42(b)(2)–3



INDEX—Continued

Keyword Q & A

Alternative delivery systems ............................................................................................................ §ll.24(d)–1§ll.24(d)(3)–1§ll.24(d)(3)–2

Applications, corporate ..................................................................................................................... §ll.29(a)–1§ll.29(a)–2§ll.29(b)–1

Assessment area ............................................................................................................................. §ll.22(b)(2) & (3)–2§ll.22(b)(2) & (3)–3§ll.22(b)(2) & (3)–4§ll.26(a)(2)–1§ll.41(a)–1§ll.41(a)–2§ll.41(a)–3§ll.41(c)(1)–1§ll.41(c)(1)–2§ll.41(d)–1§ll.41(e)(3)–1§ll.41(e)(4)–1§ll.41(e)(4)–2

Assessment area, benefit to ............................................................................................................ §§ll.12(i) & 563e.12(h)–5§§ll.12(i) & 563e.12(h)–6§ll.25(e)–1§ll.26(b)–2

Assets ............................................................................................................................................... §§ll.12(t) & 563e.12(s)–1§§ll.12(t) & 563e.12(s)–2

ATMs ................................................................................................................................................ §§ll.12(f) & 563e.12(e)–1§ll.24(d)–1§ll.24(d)(3)–1§ll.41(e)(3)–1

Borrower characteristics ................................................................................................................... §ll.22(b)(2) & (3)–1§ll.22(b)(2) & (3)–5§ll.26(a)(3) & (4)–1§ll.42(c)(1)(iv)–3

Branch .............................................................................................................................................. §§ll.12(f) & 563e.12(e)–1§ll.28(a)–1§ll.41(e)(3)–1

Brokerage ......................................................................................................................................... §§ll.12(m) & 563e.12(l)–2CEBA credit card banks ................................................................................................................... §ll.25(a)–1Charitable contributions or activities ................................................................................................ §§ll.12(j) & 563e.12(i)–2

§§ll.12(s) & 563e.12(r)–4§§ll.12(s) & 563e.12(r)–5

Child care services ........................................................................................................................... §§ll.12(h) & 563e.12(g)–1Commercial loans ............................................................................................................................ §ll.12(u) & 563e.12(t)–2

§ll.42(a)–1§ll.42(c)(2)–1

Commitments ................................................................................................................................... §ll.22(a)(2)–1§ll.26(a)–4§ll.29(a)–2§ll.42(c)(2)–2

Community contact interviews ......................................................................................................... §ll.21(b)(2)–2Community development ................................................................................................................. §§ll.12(h) & 563e.12(g)–1

§§ll.12(h) & 563e.12(g)–2§§ll.12(h) & 563e.12(g)(3)–1§ll.42(b)(2)–3

Community development activities .................................................................................................. §ll.21(a)–1Community development loan ......................................................................................................... §§ll.12(i) & 563e.12(h)–1

§§ll.12(i) & 563e.12(h)–2§§ll.12(i) & 563e.12(h)–3§§ll.12(i) & 563e.12(h)–4§§ll.12(i) & 563e.12(h)–5§§ll.12(i) & 563e.12(h)–6§§ll.12(i) & 563e.12(h)–7§§ll.12(s) & 563e.12(r)–6§§ll.12(u) & 563e.12(t)–1§ll.22(b)(4)–1§ll.22(d)–3§ll.23(b)–1§ll.25(d)–1§ll.26(a)–1§ll.26(a)–3§ll.26(b)–2



INDEX—Continued

Keyword Q & A

§ll.42(b)(2)–1§ll.42(b)(2)–2§ll.42(b)(2)–3

Community development service ..................................................................................................... §§ll.12(i) & 563e.12(h)–5§§ll.12(i) & 563e.12(h)–7§§ll.12(j) & 563e.12(i)–1§§ll.12(j) & 563e.12(i)–2§§ll.12(j) & 563e.12(i)–3§§ll.12(s) & 563e.12(r)–7§ll.23(b)–1§ll.26(b)–2§ll.42(c)(2)–1

Community development test .......................................................................................................... §ll.25(f)–1Community services ......................................................................................................................... §§ll.12(h) & 563e.12(g)–2

§ll.25(d)–1Complexity ........................................................................................................................................ §ll.22(b)(5)–1

§ll.23(e)–2§ll.28–1

Consortia .......................................................................................................................................... §ll.22(d)–2§ll.26(a)–3

Consumer loan ................................................................................................................................. §§ll.12(k) & 563e.12(j)–1§§ll.12(k) & 563e.12(j)–2§§ll.12(k) & 563e.12(j)–3§ll.22(a)(1)–2§ll.42(c)(1)–1§ll.42(c)(1)(iv)–1§ll.42(c)(1)(iv)–2§§ll.42(c)(1)(iv)–4

CRA disclosure statement ............................................................................................................... §ll.43(b)(1)–2Credit cards ...................................................................................................................................... §§ll.12(i) & 563e.12(h)–3

§§ll.12(u) & 563e.12(t)–4§ll.42(a)(2)–3

Data collection .................................................................................................................................. §ll.42–1§ll.42–2§ll.42–5§ll.42–7§ll.42(a)–1§ll.42(a)–2§ll.42(a)–4§ll.42(a)–5§ll.42(a)–8§ll.42(a)–10§ll.42(a)(2)–1§ll.42(a)(2)–2§ll.42(a)(2)–3§ll.42(a)(3)–1§ll.42(a)(4)–2§ll.42(a)(4)–4§ll.42(b)(1)–1§ll.42(b)(3)–1§ll.42(c)(1)–1§ll.42(c)(1)(iv)–1§ll.42(c)(1)(iv)–2§ll.42(c)(1)(iv)–3§ll.42(c)(2)–1§ll.42(c)(2)–2

Data reporting .................................................................................................................................. §ll.42–1§ll.42–3§ll.42–4§ll.42(a)–1§ll.42(a)–5§ll.42(a)–8§ll.42(a)–9§ll.42(a)–10§ll.42(a)(2)–1§ll.42(a)(4)–4§ll.42(b)(1)–1§ll.42(b)(2)–1§ll.42(b)(2)–2§ll.42(b)(2)–3

Debit cards ....................................................................................................................................... §ll.42(d)(3)–2



INDEX—Continued

Keyword Q & A

Economic development .................................................................................................................... §§ll.12(h) & 563e.12(g)–2Educational services ........................................................................................................................ §§ll.12(h) & 563e.12(g)–1Employees’ charitable activities ....................................................................................................... §§ll.12(j) & 563e.12(i)–2Employees’ income .......................................................................................................................... §ll.42(c)(1)(iv)–2Examination schedule ...................................................................................................................... §ll.45–1

§ll.45–2Federal branch ................................................................................................................................. §§ll.12(t) & 563e.12(s)–2Federal Home Loan Bank ................................................................................................................ §§ll.12(s) & 563e.12(r)–3Federal Reserve Bank membership reserves ................................................................................. §§ll.12(s) & 563e.12(r)–3Financial services, provision of ........................................................................................................ §§ll.12(j) & 563e.12(i)–1Fisheries ........................................................................................................................................... §ll.42(a)–6Flexibility ........................................................................................................................................... §ll.22(b)(5)–1Forestries ......................................................................................................................................... §ll.42(a)–6Geographic distribution .................................................................................................................... §ll.22(b)(2) & (3)–1

§ll.22(b)(2) & (3)–2§ll.22(b)(2) & (3)–3§ll.22(b)(2) & (3)–4§ll.26(a)(3) & (4)–1

Geography ........................................................................................................................................ §ll.41(d)–1Guaranteed loans ............................................................................................................................. §ll.22(a)(2)–4Guarantor ......................................................................................................................................... §§ll.42(c)(1)(iv)–4Health services ................................................................................................................................. §§ll.12(h) & 563e.12(g)–1High cost area .................................................................................................................................. §§ll.12(h) & 563e.12(g)–3HMDA reporting ............................................................................................................................... §§ll.12(i) & 563e.12(h)–2

§ll.42(b)(3)–1Home equity line of credit ................................................................................................................ §§ll.12(k) & 563e.12(j)–2

§ll.42(a)–7Home equity loan ............................................................................................................................. §§ll.12(k) & 563e.12(j)–1Home mortgage lending ................................................................................................................... §§ll.22(a)(1)–1

§ll.42(d)–1Home mortgage loan ....................................................................................................................... §§ll.12(m) & 563e.12(1)–1

§§ll.12(m) & 563e.12(1)–2§ll.23(b)–2§ll.42(b)(2)–2§ll.42(b)(3)–1

Illegal credit practices ...................................................................................................................... §ll.28(c)–1Income .............................................................................................................................................. §ll.42(c)(1)(iv)–1

§ll.42(c)(1)(iv)–2§ll.42(c)(1)(iv)–3

Income level ..................................................................................................................................... §§ll.12(n) & 563e.12(m)–1Indirect investments ......................................................................................................................... §ll.23(a)–1Individual development accounts (IDAs) ......................................................................................... §ll.24(d)–2Innovativeness ................................................................................................................................. §ll.22(b)(5)–1

§ll.23(e)–2§ll.28–1

Institutional capacity and constraints ............................................................................................... §ll.21(b)(4)–1Internet ............................................................................................................................................. §ll.43(c)–2Intranet ............................................................................................................................................. §ll.43(c)–2Leases .............................................................................................................................................. §ll.42(c)(2)–3Lending activity ................................................................................................................................ §ll.22(b)(1)–1Lending distribution .......................................................................................................................... §ll.26(a)(3) & (4)–1Lending within assessment area ..................................................................................................... §ll.22(b)(2) & (3)–3

§ll.26(a)(2)–1§ll.26(a)(3) & (4)–1

Letters of credit ................................................................................................................................ §ll.22(a)(2)–1§ll.26(a)–4§ll.42(c)(2)–2

Limited purpose institution ............................................................................................................... §§ll.12(o) & 563e.12(n)–1§§ll.12(o) & 563e.12(n)–2§§ll.12(o) & 563e.12(n)–3§ll.42–7

Lines of credit ................................................................................................................................... §ll.42–3§ll.42–4

Loan amount .................................................................................................................................... §ll.42(a)(2)–1Loan application activity ................................................................................................................... §ll.22(a)(2)–2Loan location .................................................................................................................................... §ll.42(a)–10

§ll.42(a)(3)–1Loan originations, multiple ............................................................................................................... §ll.42(a)(2)–2Loan production office (LPO) ........................................................................................................... §§ll.12(f) & 563e.12(e)–2Loans, outside-assessment area ..................................................................................................... §ll.22(b)(2) & (3)–4



INDEX—Continued

Keyword Q & A

Loan-to-deposit ratio ........................................................................................................................ §ll.26(a)(1)–1§ll.26(a)(1)–2§ll.26(a)(1)–3

Main office ........................................................................................................................................ §ll.43(c)–1Measurable goals ............................................................................................................................. §ll.27(f)(1)–1MECAs ............................................................................................................................................. §ll.22(a)(2)–3Merging institutions .......................................................................................................................... §ll.42–5Mortgage-backed securities ............................................................................................................. §§ll.12(s) & 563e.12(r)–2

§ll.23(b)–2Multi-purpose loan ............................................................................................................................ §§ll.12(k) & 563e.12(j)–3

§ll.42(a)–7Municipal bonds ............................................................................................................................... §§ll.12(s) & 563e.12(r)–2National fund .................................................................................................................................... §ll.25(e)–1New Markets Venture Capital Company ......................................................................................... §§ll.12(h)(3) & 563e.12(g)(3)–1Niche institution ................................................................................................................................ §§ll.12(o) & 563e.12(n)–3Nonprofit organization ...................................................................................................................... §§ll.12(u) & 563e.12(t)–1Past performance ............................................................................................................................. §ll.21(b)(5)–1Performance context ........................................................................................................................ §ll.21(b)–1

§ll.21(b)(2)–1§ll.21(b)(2)–2§ll.21(b)(4)–1§ll.21(b)(5)–1§ll.21(b)(5)–2

Performance criteria ......................................................................................................................... §ll.22(b)–1§ll.23(e)–1§ll.23(e)–2§ll.26(a)–1§ll.26(a)–2§ll.28–2

Performance evaluation ................................................................................................................... §ll.43(a)(1)–3Performance rating ........................................................................................................................... §ll.26(a)–2

§ll.26(a)–5§ll.26(b)–1§ll.28–1§ll.28–2§ll.28(a)–1§ll.28(a)–2§ll.28(a)–3Appendix A to Part ll–1

Political subdivision .......................................................................................................................... §ll.41(c)(1)–1§ll.41(c)(1)–2§ll.41(d)–1

Primary purpose ............................................................................................................................... §§ll.12(i) & 563e.12(h)–7§ll.42(b)(2)–3

Public comment ................................................................................................................................ §ll.27(g)(2)–1§ll.29(b)–1§ll.29(b)–2§ll.43(a)(1)–1§ll.43(a)(1)–2

Public file .......................................................................................................................................... §ll.43(a)(1)–2§ll.43(a)(1)–3§ll.43(b)(1)–1§ll.43(b)(1)–2§ll.43(c)–2

Public notice ..................................................................................................................................... §ll.44–1Appendix B to Part ll–1

Qualified investment ......................................................................................................................... §§ll.12(i) & 563e.12(h)–5§§ll.12(i) & 563e.12(h)–7§§ll.12(s) & 563e.12(r)–1§§ll.12(s) & 563e.12(r)–2§§ll.12(s) & 563e.12(r)–3§§ll.12(s) & 563e.12(r)–4§§ll.12(s) & 563e.12(r)–5§§ll.12(s) & 563e.12(r)–6



INDEX—Continued

Keyword Q & A

§§ll.12(s) & 563e.12(r)–7§ll.23(b)–1§ll.23(b)–2§ll.23(e)–1§ll.23(e)–2§ll.25(d)–1§ll.26(a)–1§ll.26(a)–5§ll.26(b)–2

Qualitative factors ............................................................................................................................ §ll.21(a)–1§ll.22(b)(4)–1§ll.22(b)(5)–1§ll.23(e)–1§ll.23(e)–2§ll.28–1§ll.28–2

Ratings matrix .................................................................................................................................. §ll.28(a)–3Refinancings ..................................................................................................................................... §ll.42(a)–5Regional area ................................................................................................................................... §§ll.12(i) & 563e.12(h)–6Remote service facility (RSF) .......................................................................................................... §§ll.12(f) & 563e.12(e)–1Renewals .......................................................................................................................................... §ll.42–4

§ll.42(a)–5Responsiveness ............................................................................................................................... §ll.22(a)–1

§ll.23(e)–2Retail banking services .................................................................................................................... §ll.24(d)–1Revenue ........................................................................................................................................... §ll.42(a)(4)–1

§ll.42(a)(4)–2§ll.42(a)(4)–3§ll.42(a)(4)–4

Revitalize or stabilize ....................................................................................................................... §§ll.12(h) & 563e.12(g)–1§§ll.12(h) & 563e.12(g)–2§§ll.12(h)(4) & 563e.12(g)(4)–1§§ll.12(i) & 563e.12(h)–4

SBIC or SBDC ................................................................................................................................. §ll.12(h)(3)ll563e.12(g)(3)–1Similarly situated lenders ................................................................................................................. §ll.21(b)(5)–2Small business loan ......................................................................................................................... §§ll.12(u) & 563e.12(t)–1

§§ll.12(u) & 563e.12(t)–2§§ll.12(u) & 563e.12(t)–3§§ll.12(u) & 563e.12(t)–4§ll.42(a)–2§ll.42(a)–3§ll.42(a)–5§ll.42(a)–8§ll.42(a)(2)–1§ll.42(a)(2)–3§ll.42(a)(3)–1§ll.42(a)(4)–1§ll.42(a)(4)–2§ll.42(a)(4)–4§ll.42(b)(1)–1§ll.42(b)(2)–2§ll.42(c)(2)–1

Small farm loan ................................................................................................................................ §ll.42(a)–3§ll.42(a)–4§ll.42(a)–5§ll.42(a)–6§ll.42(a)–8§ll.42(a)(2)–1§ll.42(a)(4)–2§ll.42(a)(4)–4§ll.42(b)(1)–1§ll.42(a)(2)–2

Small institution ................................................................................................................................ §§ll.12(t) & 563e.12(s)–1§§ll.12(t) & 563e.12(s)–2§ll.42–6§ll.42–7



INDEX—Continued

Keyword Q & A

Small institution performance standards .......................................................................................... §ll.26(a)–1§ll.26(a)–2§ll.26(a)–3§ll.26(a)–4§ll.26(a)–5§ll.26(a)(3) & (4)–1§ll.26(b)–1§ll.26(b)–2

Social services ................................................................................................................................. §§ll.12(h) & 563e.12(g)–1Software for data collection and reporting ....................................................................................... §ll.42–2

§ll.42–6§ll.42(c)(2)–1

Special purpose insitution ................................................................................................................ §§ll.11(c)(3) & 563e.11(c)(2)–1§§ll.11(c)(3) & 563e.11(c)(2)–2

State branch ..................................................................................................................................... §§ll.12(t) & 563e.12(s)–2Strategic plan ................................................................................................................................... §ll.27(c)–1

§ll.27(c)–2§ll.27(f)(1)–1§ll.27(g)(2)–1

Subsidiary ......................................................................................................................................... §ll.12(a)–1Third party investments .................................................................................................................... §ll.22(d)–1

§ll.22(d)–2§ll.22(d)–3§ll.25(d)–1§ll.26(a)–3

Wholesale institution ........................................................................................................................ §§ll.12(o) & 563e.12(n)–2§§ll.12(w) & 563e.12(v)–1§ll.42–7

End of text of the Interagency Questionsand Answers

Dated: July 5, 2001.Joanne Giese,Assistant Executive Secretary, FederalFinancial 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


Documents

Interagency Questions and Answers Regarding Community - ffiec