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l l★K

Federal Reserve Bank
of Dallas

ROBERT D. McTEER, JR.
PRESIDENT
AND CHIEF EXECUTIVE OFFICER

May 19, 1999

DALLAS, TEXAS
75265-5906

Notice 99-33
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Interagency Questions and Answers
Regarding Community Reinvestment
DETAILS
The Consumer Compliance Task Force of the Federal Financial Institutions Examination
Council (FFIEC) is supplementing, amending, and republishing its Interagency Questions and
Answers Regarding Community Reinvestment. The publication answers questions most frequently
asked about community reinvestment.
Public comment is requested on the proposed questions and answers, on any of the new
or revised questions and answers, and on community reinvestment issues that are not addressed in the
document.
The FFIEC must receive comments by July 2, 1999. Please address comments to Keith
J. Todd, Executive Secretary, Federal Financial Institutions Examination Council, 2000 K Street,
NW, Suite 310, Washington, DC 20006. Also, comments can be sent by facsimile to (202)
872-7501.
ATTACHMENT
A copy of the FFIEC’s notice as it appears on pages 23618–48, Vol. 64, No. 84 of the
Federal Register dated May 3, 1999, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201. For additional
copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254.
Sincerely yours,

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

23618

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

Insecticide. Active ingredient:
Pymetrozine: 1,2,4-triazin-3(2H)one,4,5-dihydro-6-methyl-4-[(3pyridinyl methylene)amino] at 98.3%.
Proposed classification/Use: None. For
use only in the manufacture of EPA
registered insecticidal formulations.
(PM 4)
6. File Symbol: 100–OER. Applicant:
Novartis Crop Protection. Product
Name: Acibenzolar-S-Methyl Technical.
Plant activator. Active ingredient: Benzo
(1,2,3) thiadiazole-7-carbothioic acid-Smethyl ester at 98.6%. Proposed
classification/Use: None. For
formulation into end-use fungicide
products. (PM 22)
7. File Symbol: 100–OEE. Applicant:
Novartis Crop Protection. Product
Name: Actigard 50WG. Plant activator.
Active ingredient: Benzo (1,2,3)
thiadiazole-7-carbothioic acid-S-methyl
ester at 50%. Proposed classification/
Use: None. For protection against
certain diseases of leafy vegetables,
tomato, and tobacco. (PM 22)
Notice of approval or denial of an
application to register a pesticide
product will be announced in the
Federal Register. The procedure for
requesting data will be given in the
Federal Register if an application is
approved.
Comments received within the
specified time period will be considered
before a final decision is made;
comments received after the time
specified will be considered only to the
extent possible without delaying
processing of the application.
II. Public Record and Electronic
Submissions
The official record for this notice, as
well as the public version, has been
established for this notice under docket
number [OPP–30477] (including
comments and data submitted
electronically as described below). A
public version of this record, including
printed, paper versions of electronic
comments, which does not include any
information claimed as CBI, is available
for inspection from 8:30 a.m. to 4 p.m.,
Monday through Friday, excluding legal
holidays. The official notice record is
located at the address in ‘‘ADDRESSES’’
at the beginning of this document.
Electronic comments can be sent
directly to EPA at:
opp-docket@epamail.epa.gov

Electronic comments must be
submitted as an ASCII file avoiding the
use of special characters and any form
of encryption. Comment and data will
also be accepted on disks in
Wordperfect 5.1/6.1 or ASCII file
format. All comments and data in

electronic form must be identified by
the docket number [OPP–30477].
Electronic comments on this notice may
be filed online at many Federal
Depository Libraries.
Authority: 7 U.S.C. 136.

List of Subjects
Environmental protection, Pesticides
and pest, Product registration.
Dated: April 22, 1999.
James Jones,
Director, Registration Division, Office of
Pesticide Programs.
[FR Doc. 99–11042 Filed 4–30–99; 8:45 am]
BILLING CODE 6560–50–F

FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL
Community Reinvestment Act;
Interagency Questions and Answers
Regarding Community Reinvestment
Federal Financial Institutions
Examination Council.
ACTION: Notice and request for comment.
AGENCY:

The Consumer Compliance
Task Force (we) of the Federal Financial
Institutions Examination Council
(FFIEC) is supplementing, amending,
and republishing its Interagency
Questions and Answers Regarding
Community Reinvestment, as well as
proposing for comment three new or
revised questions and answers. The
Interagency Questions and Answers
have been prepared by staff of the Office
of the Comptroller of the Currency
(OCC), the Board of Governors of the
Federal Reserve System (Board), the
Federal Deposit Insurance Corporation
(FDIC), and the Office of Thrift
Supervision (OTS) (collectively, the
agencies) to answer frequently asked
questions about community
reinvestment. These Interagency
Questions and Answers contain
informal staff guidance for agency
personnel, financial institutions, and
the public. We seek public comment on
the proposed questions and answers. In
addition, we invite public comment on
any of the new and revised questions
and answers, as well as other
community reinvestment issues that are
not addressed in these Interagency
Questions and Answers.
DATES: Effective date of amended
Interagency Questions and Answers on
Community Reinvestment: May 3, 1999.
We request that comments on the
proposed questions and answers be
submitted on or before: July 2, 1999.
SUMMARY:

Questions and comments
may be sent to Keith J. Todd, Executive
Secretary, Federal Financial Institutions
Examination Council, 2000 K Street,
NW, Suite 310, Washington, DC 20006,
or by facsimile transmission to (202)
872–7501.
FOR FURTHER INFORMATION CONTACT:
OCC: Malloy Harris, National Bank
Examiner, Community and Consumer
Policy Division, (202) 874–4446; or
Margaret Hesse, Senior Attorney,
Community and Consumer Law
Division, (202) 874–5750, Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
Board: Catherine M.J. Gates, Senior
Review Examiner, (202) 452–3946;
James H. Mann, Attorney, (202) 452–
2412; or Kathleen C. Ryan, Attorney,
(202) 452–3667, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Robert W. Mooney, Senior Fair
Lending Specialist, Division of
Compliance and Consumer Affairs,
(202) 942–3090; or A. Ann Johnson,
Counsel, Legal Division, (202) 898–
3573, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OTS: Theresa A. Stark, Project
Manager, Compliance Policy, (202) 906–
7054; or Richard R. Riese, Project
Manager, Compliance Policy, (202) 906–
6134, Office of Thrift Supervision, 1700
G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
ADDRESSES:

Background
In 1995, the agencies revised the
Community Reinvestment Act (CRA)
regulations by issuing a joint final rule,
which was published on May 4, 1995
(60 FR 22156). See 12 CFR parts 25, 228,
345 and 563e, implementing 12 U.S.C.
2901 et seq. The agencies published
related clarifying documents on
December 20, 1995 (60 FR 66048) and
May 10, 1996 (61 FR 21362).
The revised regulations are
interpreted primarily through
‘‘Interagency Questions and Answers
Regarding Community Reinvestment,’’
which provide informal staff guidance
for use by agency personnel, financial
institutions, and the public, and which
are supplemented periodically. We
published our most recent guidance on
October 7, 1997 (1997 Interagency
Questions and Answers). See 62 FR
52105. In addition to issuing the 1997
Interagency Questions and Answers, we
proposed several questions and answers
in the accompanying supplementary
information. These questions and
answers were proposed to clarify what

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
is meant by ‘‘primary purpose of
community development.’’ We
specifically requested comment
addressing the proposed questions and
answers, as well as general comments
and questions regarding the CRA
regulations. See 62 FR at 52108–09.
We received 44 letters in response to
our request for comments in the 1997
Interagency Questions and Answers.
Comments came from financial
institutions (16), community groups
(14), trade associations (6), federal
entities (6), and state/local agencies (2).
This document supplements, revises,
and republishes the 1997 Interagency
Questions and Answers based, in part,
on questions and comments received
from examiners, financial institutions,
and other interested parties, and on
comments received in response to our
request for comments.
This document adopts the four
questions and answers proposed in 1997
and thirteen new questions and
answers, revises seven other questions
and answers, and proposes three new or
revised questions and answers for
comment. A discussion of these
questions and answers follows.
Questions and answers are grouped
by the provision of the CRA regulations
that they discuss and are presented in
the same order as the regulatory
provisions. The Interagency Questions
and Answers employ an abbreviated
method to cite to the regulations.
Because the regulations of the four
agencies are substantially identical,
corresponding sections of the different
regulations usually bear the same suffix.
Therefore, the Interagency Questions
and Answers typically cite only to the
suffix. For example, the small bank
performance standards for national
banks appear at 12 CFR 25.26; for
Federal Reserve System member banks
supervised by the Board, they appear at
12 CFR 228.26; for nonmember state
banks, at 12 CFR 345.26; and for thrifts,
at 12 CFR 563e.26. Accordingly, the
citation in this document would be to
§
.26. In the few instances in which
the suffix in one of the regulations is
different, the specific citation for that
regulation is provided.
Adopting Questions and Answers
Proposed in 1997
We are adopting the four questions
and answers addressing ‘‘primary
purpose’’ of community development
activities that were proposed in 1997.
The definitions of ‘‘community
development loan,’’ ‘‘community
development service,’’ and ‘‘qualified
investment’’ all require a ‘‘primary
purpose of community development.’’
See 12 CFR 25.12 (i)(1), (j)(1), and (s);

228.12 (i)(1), (j)(1), and (s); 345.12 (i)(1),
(j)(1), and (s); and 563e.12 (h)(1), (i)(1),
and (r). In response to inquiries about
whether certain activities have the
necessary ‘‘primary purpose’’ of
community development to qualify as a
community development loan, qualified
investment or community development
service, we proposed four questions and
answers (Q&As) to explain what is
meant by ‘‘primary purpose.’’ With one
clarifying change, which is discussed
below, we are adopting the previously
proposed Q&A7 addressing §§
.12(i)
and 563e.12(h), Q&A1 addressing
§
.22(b)(4), Q&A1 addressing
§
.23(e), and Q&A3 addressing
§
.42(b)(2).
Twenty commenters addressed topics
related to the proposed Q&As. The
commenters were generally in favor of
the proposed Q&As. Seven commenters
supported greater flexibility for
examiners when considering whether to
give CRA consideration to certain loans.
(These seven commenters also raised
issues regarding the definition of
‘‘community development’’ in the
regulations, which is discussed below.)
Three commenters, however, felt that
examiners rely too heavily on
mathematical formulas in making this
determination, such as the amount of
the low- or moderate-income set-aside,
the number of units constructed, or the
number of jobs for low-income persons
actually created. Six commenters
supported giving CRA consideration to
community development loans, even if
50% or less of the proceeds are used for
community development purposes. One
commenter suggested, however, that an
institution should receive CRA
consideration only for that portion of a
loan or investment expressly devoted to
the community development purpose.
The agencies have generally stated
that a ‘‘primary purpose’’ of community
development exists when the loan,
investment or service is divisible and
measurable in terms of the number of
dollars spent, housing units built, or
individuals benefited, and when an
identifiable majority of the dollars
expended, units built or individuals
benefited is clearly attributable to one of
the community development purposes
enumerated in the regulations.
However, this answer does not address
other activities that are subject to certain
legal or market restraints, such that they
do not reach this threshold, even though
they have community development as
their purpose and result in real, longterm community development benefits.
Many of these projects are ‘‘designed for
the express purpose’’ of achieving a
qualifying community development
purpose, even though less than half the

23619

dollars involved in the entire project are
concentrated on that purpose. For
example, federal tax-incentive
affordable housing projects, where less
than half the units or half the dollars go
into the portion of the project that
represents affordable housing for low- or
moderate-income persons, fall into this
category. Accordingly, we are adopting
without change the proposed guidance
that emphasizes the quantitative and
qualitative distinctions to be made
when evaluating eligible community
development loans, qualified
investments, or community
development services.
Q&A 7 addressing §§
.12(i) and
563e.12(h) is based on the preamble to
the final rule set forth at 60 FR 22,156,
22,159 (May 4, 1995), which states that
activities not designed for the express
purpose of community development (as
defined in the regulations) are not
eligible for consideration as community
development loans or services or
qualified investments. The preamble
further states that providing indirect or
short-term benefits to low- or moderateincome persons does not make an
activity community development. In
addition to incorporating this guidance
into these Interagency Questions and
Answers, the answer identifies the kind
of information used to determine
whether an activity was designed for the
express purpose of community
development. The answer adopts a
simplified threshold rule (i.e., majority)
and an alternative approach for finding
sufficient bases to conclude that an
activity possesses the requisite primary
purpose.
We are also adopting Q&A1
addressing §
.22(b)(4) and Q&A1
addressing §
.23(e), which provide
guidance on the evaluation of activities
that have a primary purpose of
community development, as well as the
reporting of community development
loans. This additional guidance
emphasizes that once loans or
investments are found to possess a
primary purpose of community
development, examiners may
differentiate among community
development loans or qualified
investments under the relevant
performance criteria. This
differentiation may be based not only on
the differing dollar amounts attributable
to the underlying community
development purpose, but also on a
loan’s innovation or complexity under
§
.22(b)(4) or an investment’s
innovation, complexity, responsiveness
or non-routine characteristics under
§
.23(e).
Finally, we are adopting Q&A3
addressing §
.42(b)(2), which

23620

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

explains that a loan may be reported as
a community development loan if its
express primary purpose is to finance an
affordable housing project for low- or
moderate-income individuals, although,
for example, only 40% of the project’s
units will actually be occupied by
individuals or families with low or
moderate incomes. Although an
institution would report the entire
amount of the loan, we are expanding
upon the answer proposed in 1997 to
clarify that examiners may make
qualitative distinctions among
community development loans on the
basis of how well each loan advances its
community development purpose.
New Questions and Answers
What is ‘‘affordable’’ housing?
Institutions and others have asked how
to determine whether a housing
development will provide ‘‘affordable’’
housing for low- and moderate-income
individuals, particularly in a new
project where the units are not yet
leased or sold, or in other projects
where the income of renters cannot be
verified. It has been suggested that a
simple formula might be appropriate,
such as if the mortgage payments or
rental expenses amount to less than
30% of the income of individuals or
families who are low- or moderateincome (i.e., have an income that is less
than 80% of the area median income).
We believe, however, that the critical
consideration is the extent to which a
project is or likely will be utilized by
low- or moderate-income individuals. A
formula based solely on rents as a
percentage of median family income
may determine this accurately in some
circumstances, but may fail to do so in
others. For example, in an area with
relatively low-cost housing, such a
formula may result in a calculation
above even the median housing cost for
the area. Therefore, we believe that it is
appropriate to look at several factors,
such as median rents of the assessment
area and the project, the median home
value of either the assessment area, lowand moderate-income geographies or the
project, the low- and moderate-income
population in the area of the project, or
the past performance record of the
organization(s) undertaking the project
in determining whether a housing
development does or likely will benefit
low- and moderate-income individuals.
To clarify this position, we are
adopting Q&A1 addressing
§§
.12(h)(1) and 563e.12(g)(1),
which discusses the types of factors that
examiners consider when determining
whether housing is ‘‘affordable’’ to lowand moderate-income individuals.

Do institutions receive consideration
for originating or purchasing loans that
are fully guaranteed? We are adopting a
new Q&A, designated as Q&A4
addressing §
.22(a)(2), to stress that
the lending test evaluates an
institution’s record of helping to meet
the credit needs of its assessment area(s)
through the origination and purchase of
specified types of loans, but that the test
criteria do not take into account
whether or not the loans are guaranteed.
What is the range of practices that
examiners may consider in evaluating
the innovativeness, complexity, or
flexibility of an institution’s lending?
We have been asked whether
contracting programs, under which
institutions may commit to contracting
with small business borrowers, may
receive consideration under the CRA
regulations. To date, examiners
generally have not been considering
such programs in reviewing an
institution’s CRA performance. New
Q&A1 addressing §
.22(b)(5)
discusses the range of factors that
examiners may consider in evaluating
the innovativeness and flexibility of an
institution’s lending practices (and the
complexity and innovativeness of its
community development lending). It
makes clear that, even though
contracting programs are not, standing
alone, considered in connection with a
CRA evaluation, such programs may
enhance the success and effectiveness of
a related lending program. Therefore,
certain contracting programs may
warrant consideration as examiners
review the innovativeness, complexity,
and flexibility of an institution’s lending
practices. The Q&A also provides
another example of when examiners
may consider related program activities
in connection with an evaluation of an
institution’s lending performance.
May an institution receive
consideration for a qualified investment
if it invests indirectly through a fund
with a community development
purpose, as that is defined in the CRA
regulations? We are adopting a new
Q&A, designated as Q&A1 addressing
§
.23(a), that incorporates guidance
previously provided in interagency staff
interpretive letters. See, e.g., Interagency
Staff CRA Interpretive Letter, published
as OCC Interpretive Letter No. 800,
(1997 Transfer Binder) Fed. Banking L.
Rep. (CCH), ¶ 81–227 (Sept. 11, 1997).
In those letters, staff stated that the
direct or indirect nature of a qualified
investment does not affect whether an
institution will receive consideration for
the investment during its CRA
evaluation. As long as the primary
purpose of the investment is community
development, as defined in the CRA

regulations, an institution’s investment
in a fund, which in turn invests in a
community development project (e.g.,
affordable housing for low- and
moderate-income individuals that
benefits the institution’s assessment
area(s) or a broader statewide or regional
area that includes one or more of the
institution’s assessment area(s)), is a
qualified investment.
How do examiners evaluate an
institution’s qualified investment in a
fund, the primary purpose of which is
community development, as that is
defined in the CRA regulations? Many
financial institutions have made
qualified investments in community
development funds that operate
regionally or nationally. Examiners,
institutions, and the funds have asked
for guidance on how to evaluate these
investments. We are adopting a new
Q&A, designated as Q&A2 addressing
§
.23(e), reiterating guidance
previously provided in an interagency
staff CRA interpretive letter. See
Interagency Staff CRA Interpretive
Letter, published as OCC Interpretive
Letter No. 800, supra.
The new Q&A explains that
examiners evaluate investments that
benefit an institution’s assessment
area(s) or a broader statewide or regional
area that includes its assessment area(s)
using the investment test’s four
performance criteria. When determining
the dollar amount of the investment (the
first criterion), examiners rely on the
figures the institution records according
to generally accepted accounting
principles. Even though different
institutions may employ different
investment strategies, institutions
making the same dollar amount of
investments over the same number of
years, all other performance criteria
being equal, would receive the same
level of consideration.
The remaining three performance
criteria—the ‘‘qualitative’’ criteria of
innovativeness and complexity,
responsiveness, and the degree to which
the investment is not routinely provided
by private investors—will provide the
basis for examiner differentiation among
investments. Examiners also will
consider factors relevant to the
institution’s CRA performance context,
such as the effect of outstanding longterm qualified investments, the pay-in
schedule, and the amount of any cash
call, on the capacity of the institution to
make new investments.
How do examiners evaluate an
institution’s activities in connection
with ‘‘Individual Development
Accounts’’? Individual Development
Accounts (IDAs) generally are matched
savings accounts designed to help low-

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
and moderate-income families
accumulate savings for education or job
training, down-payment and closing
costs on a new home, or start-up capital
for a small business. Once IDA
participants have successfully funded
an IDA, their personal IDA savings are
matched by a public or private entity,
such as a state or local government,
church, foundation, or financial
institution. Participating depositors
often receive training in the basics of
money management, including
budgeting, saving, and credit repair. In
addition, an entity, such as a
community organization, typically
monitors participants’ withdrawals from
their IDAs.
Financial institutions may participate
in IDA programs in a number of ways,
including: offering accounts, which may
be structured as traditional savings
accounts; enhancing accounts by
offering special account benefits,
including higher interest rates, ATM
services, or waived minimum balance
requirements; providing funding in the
form of matching funds for participants
or operating support for community
organizations running the IDA program;
helping to design and implement IDA
programs, including developing and
teaching financial literacy courses; and
making loans to participants once they
have achieved their savings goals.
The extent of each financial
institution’s involvement in IDAs and
the products and services offered in
connection with the accounts will vary.
Therefore, examiners will evaluate the
actual services and products provided
by each institution in connection with
the IDA programs as one or more of the
following: community development
services, retail banking services,
qualified investments, home mortgage
loans, small business loans, consumer
loans, or community development
loans. We are adopting a Q&A,
designated as Q&A2 addressing
§
.24(d), which articulates this
opinion.
How do examiners evaluate a
wholesale or limited purpose
institution’s qualified investment in a
fund that invests in projects nationwide,
the purpose of which is community
development, as that term is defined in
the CRA regulations? We are adopting a
new Q&A, designated as Q&A1
addressing §
.25(e), memorializing
guidance previously provided in
interagency staff interpretive letters,
which clarifies how examiners evaluate
qualified investments made by
wholesale or limited purpose
institutions in a community
development fund that invests in
projects nationwide. See, e.g.,

Interagency Staff CRA Interpretive
Letter, published as OCC Interpretive
Letter No. 801, (1997 Transfer Binder)
Fed. Banking L. Rep. (CCH), ¶ 81–228
(Sept. 11, 1997). Examiners first
determine whether the institution has
adequately addressed the needs of its
assessment area(s). In doing so,
examiners also consider qualified
investments that benefit a broader
statewide or regional area that includes
the institution’s assessment area(s). If
examiners find that the institution has
adequately addressed the needs of its
assessment area(s), they will give
consideration to nationwide qualified
investments, community development
loans, and community development
services.
Are innovative loan products,
innovative or complex qualified
investments, and innovative community
development services necessary for a
‘‘satisfactory’’ or ‘‘outstanding’’ CRA
rating? Two commenters expressed
concern that examiners might discount
community development loans if they
are not considered to be ‘‘innovative.’’
As one commenter stated, innovation is
only one of the four criteria considered
when examiners evaluate an
institution’s responsiveness to
community development needs.
We are adopting a new Q&A1,
addressing §
.28, to clarify that
innovative practices are not required for
an ‘‘outstanding’’ or ‘‘satisfactory’’
rating. Innovative loan products,
innovative or complex qualified
investments, and innovative community
development services may augment
consideration of an institution’s
performance under the quantitative
criteria of the performance tests,
resulting in a higher level of
performance and rating. The Q&A also
makes clear that the lack of innovative
or complex investments, loans, or
services alone will not result in a
‘‘needs to improve’’ rating.
How is performance under the
quantitative and qualitative
performance criteria weighed when
examiners assign a CRA rating? The
lending, investment, and service tests
each contain a number of performance
criteria designed to measure whether an
institution is effectively helping to meet
the credit needs of its entire community,
including low- and moderate-income
neighborhoods, in a safe and sound
manner. Some of these criteria are
quantitative (number and amount),
while others are qualitative
(innovativeness, complexity,
responsiveness, or flexibility). The
qualitative performance criteria
recognize that certain loans, qualified
investments, and community

23621

development services sometimes require
special expertise and effort on the part
of the institution and provide a direct
benefit to the community that would not
otherwise be possible.
We are adopting a new Q&A,
designated as Q&A2 addressing
§
.28, which explains that the
agencies consider the qualitative aspects
of an institution’s activities when
measuring the benefits received by the
community. These qualitative aspects of
an institution’s performance may
augment the consideration given to an
institution’s performance under the
quantitative criteria of the regulations,
resulting in a higher level of
performance and rating.
When collecting and reporting, if
applicable, the gross annual revenue or
income of small business or farm or
consumer borrowers, do institutions use
the gross annual or the adjusted gross
annual revenue or income? In response
to questions from financial institutions,
we are adopting two new Q&As
clarifying that institutions should
collect and report gross annual revenue
(for small businesses and small farms)
and gross annual income (for
consumers) rather than adjusted gross
annual revenue or income. The new
Q&As are designated as Q&A4
addressing §
.42(a)(4) and Q&A3
addressing §
.42(c)(1)(iv).
The purpose of collecting and
reporting gross annual revenue data for
small businesses and small farms is to
enable examiners and the public to
judge whether an institution is lending
to small businesses and farms, or
whether it is only making small loans to
larger businesses and farms. Similarly,
gross annual income information is
collected from consumer borrowers to
help examiners determine the
distribution of the institution’s
consumer loans based on borrower
characteristics, including the number
and amount of consumer loans to low-,
moderate-, middle-, and upper-income
borrowers.
May an institution keep the compact
disc that contains its CRA Disclosure
Statement, which is distributed by the
FFIEC, in its public file, rather than a
paper copy of the information? Several
institutions asked whether they may
retain the compact disc that contains the
CRA Disclosure Statement provided by
the FFIEC in its public file rather than
a paper copy. We are adopting a new
Q&A2 addressing §
.43(b)(1), which
clarifies that an institution may keep the
compact disc (or a duplicate of the
compact disc) in its public file at its
main office and the designated branch
in each state as long as the institution

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can readily print the information upon
request.
Must an institution’s performance fit
each aspect of a particular rating profile
in order to receive that rating? We are
adopting a new Q&A1 addressing
Appendix A to Part
—Ratings to
clarify that exceptionally strong
performance by an institution in some
aspects of a particular rating profile may
compensate for weak performance in
others, thus permitting the institution to
earn that rating. The Q&A describes
retail institutions that use non-branch
delivery systems to obtain deposits and
to deliver loans, as an example. Almost
all of the loans originated by such an
institution may be outside of its
assessment area(s). The Q&A assumes,
for purposes of illustration, that
examiners may find, after considering
the institution’s performance context
and other regulatory considerations, that
such an institution shows weak
performance under the lending test
criteria applicable to lending activity,
geographic distribution, and borrower
characteristics within the assessment
area. It clarifies that the institution may
compensate for such weak performance
by exceptionally strong performance in
community development lending in its
assessment area or a broader statewide
or regional area that includes its
assessment area.
Revised Questions and Answers
What does ‘‘promote economic
development’’ mean? The CRA
regulations define the term ‘‘community
development’’ to include ‘‘activities that
promote economic development by
financing businesses or farms that meet
the size eligibility standards of the
Small Business Administration’s
Development Company (SBDC) or Small
Business Investment Company (SBIC)
programs (13 CFR 121.301) or have
gross annual revenues of $1 million or
less.’’ 12 CFR 25.12(h)(3), 228.12(h)(3),
345.12(h)(3) and 563e.12(g)(3).
The 1996 Interagency Questions and
Answers included a Q&A, Q&A1
addressing §§
.12(h)(3) and
563e.12(g)(3), concerning whether all
activities that finance small businesses
or farms promote economic
development. The 1997 Interagency
Questions and Answers revised that
Q&A in response to public comments.
Since publication of the 1997
Interagency Questions and Answers, we
have received 11 comments about this
revised Q&A.
One commenter asserted that the
description of the purpose test, i.e., that
the activity must promote economic
development, was too restrictive.
Specifically, the commenter believed

that limiting the purpose test to
activities that, for example, provide jobs
in low- and moderate-income areas
targeted for redevelopment by the
government would exclude financing to
open a facility in a low- or moderateincome area that is not targeted by the
government for redevelopment.
We determined that the explanation
of the purpose test in the 1997
Interagency Questions and Answers was
incomplete. We are revising the answer
to be less restrictive by stating that an
activity promotes economic
development if it supports ‘‘permanent
job creation, retention, and/or
improvement for persons who are
currently low- or moderate-income, or
supports permanent job creation,
retention, and/or improvement either in
low- or moderate-income geographies or
in areas targeted for redevelopment by
Federal, state, local or tribal
governments.’’
Examiners will continue to presume
that any loan or investment in or to a
SBDC or SBIC promotes economic
development. Funding provided in
connection with other SBA programs, as
well as similar state and local programs,
may also promote economic
development; however, examiners will
make their determinations based on
business types, funding purposes, and
other relevant information.
Consistent with Q&A2 addressing
§
.28, Q&A1 addressing
§§
.12(h)(3) and 563e.12(g)(3) also
clarifies that examiners will make
qualitative assessments in connection
with an institution’s community
development activities in addition to
the quantitative assessment of its
activities.
Does ‘‘rehabilitation of affordable
housing or community facilities’’
include the abatement of environmental
hazards, such as lead-based paint, that
are present in the housing or facilities?
Three commenters asked us to state that
loans for the removal of environmental
hazards (particularly lead-based paint)
may be community development loans.
We believe the abatement of
environmental hazards could be a part
of rehabilitating affordable housing or
community facilities targeted to lowand moderate-income individuals;
rehabilitation of these facilities has
already been identified as an example of
a community development purpose. To
clarify this position, we are adding a
sentence to Q&A1 addressing
§§
.12(i) and 563e.12(h).
Are an institution’s activities in
connection with the Federal Home Loan
Banks’ Affordable Housing Program
(AHP) considered when the institution’s
CRA performance is evaluated? We have

consistently stated that the mere
purchase of stock in the Federal Home
Loan Banks (FHLBs) does not have a
sufficient connection to community
development to be considered as a
qualified investment.
Institutions, however, have asked us
about how their activities in connection
with certain specific AHP projects are
considered during their CRA
evaluations. Institutions that are
members of a FHLB typically provide a
high level of technical assistance to
prospective borrowers in preparing the
application for AHP funds and ensuring
that the borrower meets the eligibility
criteria. Although an institution does
not necessarily provide a loan in
connection with an AHP project, it does
disburse the funds for the FHLB and
monitor the continued qualified use of
the funds. We believe these activities to
be community development services
and are revising the second bullet in
Q&A 3 addressing §§
.12(j) and
563e.12(i) to so state.
If an institution’s employees develop
or teach financial education curricula
for low- or moderate-income students,
are such activities community
development services? We are revising
the fifth bullet of Q&A3 addressing
§§
.12(j) and 563e.12(i) to
incorporate guidance previously
provided in interagency staff
interpretive letters. See, e.g., Interagency
Staff CRA Interpretive Letter, published
as OCC Interpretive Letter No. 802,
(1997 Transfer Binder) Fed. Banking L.
Rep. (CCH), ¶ 81–229 (Sept. 17, 1997).
Specifically, we are clarifying that
institutions may receive CRA
consideration for the services provided
by its employees in developing financial
education curricula or teaching
financial education courses to low- or
moderate-income students.
Is providing Electronic Transfer
Accounts pursuant to the Debt
Collection Improvement Act of 1996 a
community development service? The
terms, costs, and features of low-cost
accounts offered by financial
institutions may vary depending on the
particular needs of the institutions’ lowand moderate-income customers. In
response to an inquiry we received
concerning whether a particular account
for federal benefits payments would be
considered to be a community
development service, we are revising
Q&A3 addressing §§
.12(j) and
563e.12(i) by amending the seventh
bullet to provide an example of one lowcost transaction account targeted to lowand moderate-income individuals.
Under the provisions of the Debt
Collection Improvement Act of 1996
relating to electronic payment of federal

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
benefits payments (EFT ‘‘99), codified at
31 U.S.C. 3332, insured depository
institutions may offer basic, low-cost
‘‘electronic transfer accounts’’ (ETAs)
specified in Treasury Department
regulations (63 FR 51490) to recipients
of federal benefits payments. These
accounts are designed to attract lowincome persons who do not currently
have account relationships with insured
depository institutions. A demographic
and market analysis commissioned by
the Treasury Department in connection
with EFT ‘‘99 concluded that ETA
account holders are likely to be
primarily individuals with less than
$10,000 in annual income. Therefore,
the ETA is an account targeted to lowand moderate-income individuals and
providing such accounts qualifies as a
community development service.
Under the lending test, how will
examiners evaluate home mortgage
loans to middle- or upper-income
individuals in a low- or moderateincome geography? We received 24
letters commenting on Q&A5 addressing
§
.22(b) (2) & (3). The commenters
generally were in agreement that loans
to middle- or upper-income individuals
in a low- or moderate-income geography
should receive CRA consideration.
Some commenters were concerned that
requiring that there be a revitalization or
stabilization plan for the area may be
too restrictive, especially in rural
communities, where a formal plan may
not exist. However, a ‘‘formal’’ plan is
not necessary. An informal plan, such as
town council resolutions, or a plan
developed by a private entity, such as a
community-based development
organization, may be sufficient
evidence, so long as it offers evidence of
a plan for development designed to
ensure economic diversity among the
prospective residents and not just
displacement of low- and moderateincome individuals.
One commenter stated that examiners
should compare an institution’s
percentage of lending to low- and
moderate-income households to the
aggregate percentage of lending by all
reporting institutions to these
households and to the percentage of
low- and moderate-income households
in the area. The agencies’ examination
procedures already suggest that
examiners may perform these types of
comparisons and others, if appropriate,
to help them explain examination
findings.
One commenter asked whether
multifamily housing loans in low- and
moderate-income geographies would be
considered in the same fashion as loans
for single family housing. In response to
the comment, we are clarifying the

answer by adding the phrase, ‘‘or
multifamily housing.’’ In addition,
examiners may also consider loans for
multifamily housing as community
development loans if they are targeted
to low- and moderate-income
individuals, or if they benefit middle- or
upper-income borrowers as part of a
plan to encourage attracting mixedincome residents to stabilize and create
an economically diverse area out of a
low- or moderate-income geography.
How should an institution collect and
report the location of a loan made to a
small business or small farm if the
borrower provides an address consisting
of a post office box number or rural
route and box number?
We adopted Q&A10 addressing
§
.42(a) in the 1997 Interagency
Questions and Answers answering this
question. In response to this Q&A, we
received nine comments. Several
commenters questioned the accuracy
and usefulness of data collected and/or
reported without the census tract or
block numbering area (BNA). One
commenter stated that we should allow
institutions more lead time when
providing interpretations of data
collection and reporting provisions to
allow the institutions to change their
reporting systems, if necessary. We
believe that data collection according to
this Q&A results in the most accurate
data, even though in some cases no
information about census tract or BNA
is provided, but agree that sufficient
time should be provided to implement
changes to data collection procedures,
whenever possible.
In addition to formal comments on
the Q&As, regulated institutions
requested clarification about whether an
institution should report the census
tract or block numbering area (BNA) of
a location, if known, even if there is no
street address for that location. We are
amending Q&A10 addressing
§
.42(a) to clarify that if the census
tract or BNA is known, it should be
reported, even if the institution does not
know the street address for that
particular location (or there is no street
address). We are also revising the Q&A
to delete obsolete 1997 data collection
instructions.
What small business and small farm
data should be reported?
We are making a technical change to
Q&A1 addressing §
.42(b)(1). The
regulations define a ‘‘small farm loan’’
as those included in ‘‘loans to small
farms’’ as defined in the instructions for
preparation of the Consolidated Report
of Condition and Income or the Thrift
Financial Report. These instructions
define such loans as having original
amounts of $500,000 or less.

23623

Accordingly, we are clarifying in Q&A1
that institutions need not report small
farm loan data as to loans having
original amounts greater than $500,000.
What are the data requirements
regarding consumer loans?
We have revised Q&A1 addressing
§
.42(c)(1) to clarify that our
questions and answers written with
respect to data collection (and reporting)
in connection with small business and
small farm loans also apply to the
collection of consumer loan data.
Discussion of Other Comments
Received
We received several other comments
that are not addressed by specific
questions and answers.
Community development. Several
commenters suggested that the current
definition of ‘‘community development’’
does not include all the types of
activities that institutions engage in and
that should be considered as having a
community development purpose.
Before adopting the definition of
‘‘community development’’ in the
revised regulations in 1995, the agencies
received and considered a number of
comments on the characteristics of
activities with community development
purposes. The agencies also committed
to conduct a complete review of the
regulations in 2002. See 60 FR 22,177.
We will ensure that comments on the
definition of ‘‘community development’’
are considered at that time.
Loan-to-deposit ratio. Two
commenters raised issues regarding the
use of a loan-to-deposit ratio as a
measure of performance in the small
institution performance test. One stated
that the loan-to-deposit ratio should not
be the only indicator of performance.
The other suggested that, due to their
volatility, public funds should be
subtracted from the deposit side of the
ratio prior to calculation.
The first concern, the relative
importance of the loan-to-deposit ratio
in the overall rating of a small
institution, is one that the agencies
routinely address in examiner training.
As a general matter, we agree that the
loan-to-deposit ratio is not the only
indicator of lending activity
performance. However, there may be
cases in which a loan-to-deposit ratio is
so low that it indicates that the
institution is not lending. In such cases,
the proportion of lending inside the
institution’s assessment area, together
with the geographic and borrower
distribution of those loans, will not
excuse the low level of lending overall.
The second concern, the subtraction
of public funds from the calculations of
loan-to-deposit ratios, is a performance

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

context issue. We believe that examiners
have the flexibility to consider the level
of public funds on deposit, and their
volatility, in determining whether a
particular loan-to-deposit ratio is
reasonable.
Letters of credit. One commenter
asserted that lenders should receive
consideration under the CRA
regulations for providing letters of credit
because institutions often use letters of
credit to meet small business needs.
Q&A1 addressing §
.22(a)(2)
specifically addresses this issue and
permits information about letters of
credit to be used by examiners to
enhance their understanding of an
institution’s performance.
Loans to nonprofit organizations. One
commenter suggested that loans under
$1 million for business purposes, or
under $500,000 for farm purposes, made
to nonprofit organizations, should be
considered community development
loans even though they are secured by
real property. Under the CRA
regulations, these loans often must be
counted as loans to small businesses or
small farms rather than community
development loans, depending on the
type of property securing the loan.
Q&A1 addressing §
.12(u) addresses
instances in which loans to nonprofit
organizations may be considered as
community development loans.
The number and dollar amount of
community development loans is a
criterion under the lending test that is
meant to capture any loans for a
community development purpose that
are otherwise not reported as home
mortgage, small business or small farm
loans. Institutions may wish to highlight
the community development purpose of
particular loans that are considered as
home mortgage, small business or small
farm loans during an examination. Such
information may be relevant to the
examiners’ evaluation of qualitative
lending test criteria or to the
performance context within which
community development loans are
evaluated. The regulation is clear,
however, that, except for loans for
multifamily housing targeted for lowand moderate-income individuals, home
mortgage, small farm, and small
business loans may not be reported as
community development loans.
Assessment areas and non-branch
delivery systems. We received several
letters requesting clarification of how
examiners evaluate a retail institution’s
lending, investment, and service
activities outside the institution’s
assessment area(s) and the broader
statewide or regional area that includes
its assessment area(s). This question has
been of special concern to commenters

in the context of institutions that obtain
deposits and deliver products and
services through non-branch systems,
such as the Internet. We are adopting
Q&A1 addressing Appendix A to Part
—Ratings, and are proposing a
revision to Q&A5 addressing
§§
.12(i) and 563e.12(h), which may
be particularly relevant to issues arising
in this context. Furthermore, we expect
to address comments relating to out-ofassessment area activities through
materials issued for public comment
later this year.
Proposed Questions and Answers and
Request for Comment
Must there be some immediate or
direct benefit to the institution’s
assessment area(s) to satisfy the
regulations’ requirement that qualified
investments and community
development loans or services benefit an
institution’s assessment area(s) or a
broader statewide or regional area that
includes the assessment area(s)? Q&A5
addressing §§
.12(i) and 563e.12(h)
in the 1997 Interagency Questions and
Answers states that there does not need
to be a direct benefit to the institution’s
assessment area(s) to satisfy the
regulation’s requirement that qualified
investments and community
development loans or services benefit
an institution’s assessment area(s) or a
broader statewide or regional area that
includes the institution’s assessment
area, provided the purpose, mandate, or
function of the organization or activity
includes serving geographies or
individuals located within the
institution’s assessment area.
The Q&A addresses organizations and
activities, operating statewide or
regionally, that may ultimately have a
direct benefit on an assessment area.
However, it does not specifically
address local community development
organizations or activities serving a
locale somewhere in the broader
statewide or regional area surrounding
an institution’s assessment area(s),
which may not benefit low- and
moderate-income areas or individuals
located inside the assessment area(s).
We are proposing to revise that Q&A to
address both types of organizations or
activities. The proposed Q&A would
clarify that an institution’s assessment
area(s) need not receive an immediate or
direct benefit from the institution’s
specific participation in a community
development organization or activity
provided the purpose, mandate, or
activity benefits the broader statewide
or regional area by servicing geographies
or individuals located somewhere
within the broader statewide or regional

area that includes the institution’s
assessment area(s).
The text of the proposed Q&A follows:
Sections
.12(i) and 563e.12(h)
Proposed Q5. Must there be some
immediate or direct benefit to the
institution’s assessment area(s) to
satisfy the regulations’ requirement that
qualified investments and community
development loans or services benefit an
institution’s assessment area(s) or a
broader statewide or regional area that
includes the institution’s assessment
area(s)?
Proposed A5. No. The regulations, for
example, recognize that community
development organizations and
programs are frequently efficient and
effective ways for institutions to
promote community development.
These organizations and programs often
operate on a local, statewide, or even
multi-state basis. Therefore, an
institution’s activity is considered a
community development loan or service
or a qualified investment if it supports
an organization or activity that covers
an area that is larger than, but is located
in, the broader statewide or regional
area that includes the institution’s
assessment area(s). The institution’s
assessment area need not receive an
immediate or direct benefit from the
institution’s specific participation in the
broader organization or activity,
provided the purpose, mandate, or
function of the organization or activity
includes serving geographies or
individuals located within the statewide
or regional area that includes the
institution’s assessment area.
Furthermore, the regulations permit a
wholesale or limited purpose institution
to consider community development
loans, community development
services, and qualified investments
wherever they are located, as long as the
institution has otherwise adequately
addressed the credit needs within its
assessment area(s).
In addition to general comments
agreeing or disagreeing with the
proposed revisions to this Q&A, we
would like comments on whether
community development organizations
and programs that operate on a local,
statewide, or even multi-state basis
ultimately provide benefit to all
surrounding areas.
May an institution receive
consideration under the investment test
for mortgage-backed securities backed
by home mortgages that the same
institution originated or purchased? We
have received inquiries about whether
examiners will consider as qualified
investments mortgage-backed securities
backed by home mortgages to low- and

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
moderate-income individuals that the
investing institution initially originated
or purchased.
The revised regulations, at 12 CFR
.23(b), provide that activities
considered under the lending or service
tests may not be considered under the
investment test. Examiners consider the
home mortgages underlying mortgagebacked securities, if originated or
purchased by the institution, under the
lending test when they examine an
institution. Therefore, examiners would
not be permitted also to consider as
qualified investments mortgage-backed
securities, purchased or securitized by
an institution, that are backed primarily
or exclusively by loans that the
institution originated or purchased,
because the examiners would be
considering the same activities under
both the lending and investment tests.
To clarify our opinion, we are
proposing, and requesting public
comment specifically on, the following
question and answer:
Section
.23(b)
Proposed Q2: If home mortgage loans
to low-and moderate-income borrowers
have been considered under an
institution’s lending test, may the
institution that originated or purchased
them also receive consideration under
the investment test if it subsequently
purchases mortgage-backed securities
that are primarily or exclusively backed
by such loans?
Proposed A2: No. Because the
institution received lending test
consideration for the loans that underlie
the securities, the institution may not
also receive consideration under the
investment test for its purchase of the
securities. Of course, an institution may
receive investment test consideration for
purchases of mortgage-backed securities
that are backed by loans to low-and
moderate-income individuals as long as
the securities are not backed primarily
or exclusively by loans that the same
institution originated or purchased.
Should renewals and refinancings of
small business and small farm loans be
collected and reported? Six commenters
inquired whether loans to small
businesses and small farms, when
renewed or refinanced, should be
reported for CRA purposes. The 1997
Interagency Questions and Answers, at
Q&A5 addressing §
.42(a), provided
guidance that ‘‘refinancing’’ such loans
should be reported as originations, but
that ‘‘renewing’’ them should not.
According to the guidance, the primary
distinction between ‘‘refinancing’’ and
‘‘renewing’’ a loan is that, in connection
with a loan refinancing, the existing
obligation or note is satisfied, and a new

note is written. Distinguishing
refinancings and renewals on this basis
is consistent with the guidance
provided by the Board in connection
with home mortgage loan data reporting
pursuant to the Home Mortgage
Disclosure Act (HMDA) regulation (12
CFR part 203).
Commenters asserted that small
business and small farm lending
practices are sufficiently different from
home mortgage lending practices that
renewals and refinancings of small
business and small farm loans should be
treated differently from renewals and
refinancings of home mortgage loans for
CRA reporting and evaluation purposes.
Further, they suggested that there is
very little distinction between
refinancings and renewals of small
business and small farm loans. Based on
these comments and other inquiries
from financial institutions, we propose
that refinancings and renewals of small
business and small farm loans be treated
uniformly for CRA purposes. To that
end, we are proposing two alternative
revised Q&A5s addressing §
.42(a).
Alternative I: The first proposed Q&A
states that, for CRA purposes, financial
institutions should report neither
renewals nor refinancings of small
business and small farm loans as loan
originations. However, if institutions
increase the amount of a small business
or small farm loan or line of credit, the
amount of the increase should be
reported as a loan origination.
Institutions should continue to report
home mortgage loans according to the
instructions provided in 12 CFR part
203.
Reporting neither renewals nor
refinancings of small business or small
loans reflects that the lending test’s
performance criteria emphasize loan
originations and purchases. Renewals
and refinancings, especially if made
frequently, would inflate the actual
amounts of small business and small
farm lending. In addition, we believe
that recordkeeping and reporting burden
of large institutions will be lessened if
they need not collect and report
information about small business and
small farm loan refinancings and
renewals.
If this proposed Q&A is adopted,
institutions would not collect or report
as loan originations data on either small
business and small farm loan
refinancings or renewals. However, any
institution could bring to its examiners’
attention data on small business and
small farm loan refinancing or renewals
by providing ‘‘other loan data’’ pursuant
to §
.22(a)(2), including information
about its small business and small farm

23625

loans outstanding. The text of the first
alternative proposed Q&A follows:
Section

.42(a)—Alternative I:

Proposed Q5: Should institutions
collect and report data about small
business and small farm loans that are
refinanced or renewed?
Proposed A5: No. When an institution
extends the term of one of its existing
small business or small farm loans in
the same or a lesser amount as the
existing obligation, the institution
should not report this event as a small
business or small farm loan origination.
If an institution increases the amount of
a small business or small farm loan
when it extends the term of the loan,
however, it should report the amount of
the increase as a small business or small
farm loan origination. The institution
should report only the amount of the
increase; the original or remaining
amount of the loan is not reported again
as an origination. For example, a
financial institution extends a loan (as
opposed to a line of credit) for $25,000;
principal payments have resulted in a
present outstanding balance of $15,000.
The customer requests an additional
$5,000, which is approved, and a new
note is written for $20,000. In this
example, the institution should report
the $5,000 increase.
An institution may provide ‘‘other
loan data,’’ including information about
small business or small farm loans
outstanding, to examiners for
consideration as part of the institution’s
lending test performance evaluation.
Alternative II: Several institutions
have stressed that ongoing credit
availability is important to the economic
condition of small businesses and small
farms, as well as the community as a
whole. These institutions suggested that
both refinancings and renewals of small
business and small farm loans should be
considered by examiners when
evaluating an institution’s small
business and small farm lending
performance. The second alternative
proposed Q&A would take these
concerns into consideration.
Because small business and small
farm loan refinancings and renewals are
nearly indistinguishable, Alternative II,
like Alternative I, would not treat small
business and small farm refinancings
and renewals differently. Institutions
would collect and report data about
both refinancings and renewals as loan
originations. However, because
institutions often write small business
and small farm loans for short terms and
refinance or renew them at the end of
the term, in order to avoid inflation of
amounts actually lent, institutions

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

would be limited to reporting only one
origination per year.
The text of the second alternative
proposed Q&A follows:
Section
.42(a)—Alternative II:
Proposed Q5: Should institutions
collect and report data about small
business and small farm loans that are
refinanced or renewed?
Proposed A5: An institution should
collect information about small business
and small farm loans that they refinance
or renew as loan originations. (A
refinancing generally occurs when the
existing loan obligation or note is
satisfied, and a new note is written,
while a renewal refers to an extension
of the term of a loan.) When reporting
small business and small farm loan data,
however, an institution may only report
one origination per loan per year unless
an increase in the loan amount is
granted.
If an institution increases the amount
of a small business or small farm loan
when it extends the term of the loan, it
should always report the amount of the
increase as a small business or small
farm loan origination. The institution
should report only the amount of the
increase if the original or remaining
amount of the loan has already been
reported one time that year. For
example, a financial institution makes a
loan (as opposed to a line of credit) for
$25,000; principal payments have
resulted in a present outstanding
balance of $15,000. The customer
requests an additional $5,000, which is
approved, and a new note is written for
$20,000. In this example, the institution
should report the $5,000 increase. The
bank may also report the renewal or
refinancing of the $15,000 balance one
time that year.
An institution may provide ‘‘other
loan data,’’ including information about
small business or small farm loans
outstanding, to examiners for
consideration as part of the institution’s
lending test performance evaluation.
In addition to general comments
about these proposed questions and
answers, we would also appreciate
receiving your views on the following
questions:
• Are there other fair and meaningful
alternative methods of collecting data
on small business and small farm loan
renewals and refinancings? If so, please
describe.
• Does allowing collection and
reporting data of one renewal or
refinancing per year make sense?
• Will these proposed questions and
answers increase or decrease
substantially the data collection and
reporting burden of financial

institutions? Which alternative is less
burdensome?
• Which alternative (including the
guidance currently in effect) best
promotes accurate data that reflects the
actual lending activity of financial
institutions?
Depending on what final guidance we
eventually adopt, we understand that
we may have to make conforming
changes to other Q&As.
Until a new Q&A has been adopted
through publication in the Federal
Register, the existing Q&A5 addressing
§
.42(a) remains in effect. This
means that, for the time being, financial
institutions will continue to collect and
report data about small business and
small farm loan refinancings, but not
renewals.
General Comments
In addition to the specific request for
comments on the proposed questions
and answers, we invite public comment
on the new and revised questions and
answers. We also invite public comment
on a continuing basis on any issues
raised by the CRA and these Interagency
Questions and Answers. If, after reading
the Interagency Questions and Answers,
financial institutions, examiners,
community organizations, or other
interested parties have unanswered
questions or comments about the
agencies’ community reinvestment
regulations, they should submit them to
the agencies or the FFIEC. We will
consider addressing such questions in
future revisions to the Interagency
Questions and Answers.
Small Business Regulatory Enforcement
Fairness Act of 1996 (SBREFA)
The SBREFA requires an agency, for
each rule for which it prepares a final
regulatory flexibility analysis, to publish
one or more compliance guides to help
small entities understand how to
comply with the rule.
Pursuant to section 605(b) of the
Regulatory Flexibility Act, the agencies
certified that their proposed CRA rule
would not have a significant economic
impact on a substantial number of small
entities and invited public comments on
that determination. See 58 FR 67478
(Dec. 21, 1993); 59 FR 51250 (Oct. 7,
1994). In response to public comment,
the agencies voluntarily prepared a final
regulatory flexibility analysis for the
joint final rule, although the analysis
was not required because it supported
the agencies’ earlier certification
regarding the proposed rule. Because a
regulatory flexibility analysis was not
required, section 212 of the SBREFA
does not apply to the final CRA rule.
However, in their continuing efforts to

provide clear, understandable
regulations and to comply with the
spirit of the SBREFA, the agencies have
compiled the Interagency Questions and
Answers. The Interagency Questions
and Answers serve the same purpose as
the compliance guide described in the
SBREFA by providing guidance on a
variety of issues of particular concern to
small banks and thrifts.
The text of the Interagency Questions
and Answers follows:
Text of the Interagency Questions and
Answers
Interagency Questions and Answers
Regarding Community Reinvestment
Table of Contents
This document provides answers to
questions pertaining to the following
provisions and topics of the CRA regulations:
§

.11—Authority, Purposes, and Scope

§

.11(c) Scope
§§ 25.11(c)(3), 228.11(c)(3) & 345.11(c)(3)
Certain special purpose banks

§

.12—Definitions

§
§§
§§

.12(a) Affiliate
.12(f) & 563e.12(e) Branch
.12(h) & 563e.12(g) Community
development
§§
.12(h)(1) & 563e.12(g)(1) Affordable
housing (including multifamily rental
housing) for low- or moderate-income
individuals
§§
.12(h)(3) & 563e.12(g)(3) Activities
that promote economic development by
financing businesses or farms that meet
certain size eligibility standards
§§
.12(i) & 563e.12(h) Community
development loan
§§
.12(j) & 563e.12(i) Community
development service
§§
.12(k) & 563e.12(j) Consumer loan
§§
.12(m) & 563e.12(l) Home mortgage
loan
§§
.12(n) & 563e.12(m) Income level
§§
.12(o) & 563e.12(n) Limited purpose
institution
§§
.12(s) & 563e.12(r) Qualified
investment
§
.12(t) Small institution
§
.12(u) Small business loan
§
.12(w) Wholesale institution
§
.21—Performance Tests, Standards,
and Ratings, in General
§
§

.21(a) Performance tests and standards
.21(b) Performance context
§
.21(b)(2) Information maintained by
the institution or obtained from
community contacts
§
.21(b)(4) Institutional capacity and
constraints
§
.21(b)(5) Institution’s past
performance and the performance of
similarly situated lenders

§

.22—Lending Test

§
§

.22(a) Scope of test
.22(a)(1) Types of loans considered

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
§
§
§
§
§
§
§
§
§
§

§

§

.22(a)(2) Loan originations and
purchases/other loan data
.22(b) Performance criteria
.22(b)(1) Lending activity
.22(b)(2) & (3) Geographic
distribution and borrower characteristics
.22(b)(4) Community development
lending
.22(b)(5) Innovative or flexible
lending practices
.22(c) Affiliate lending
.22(c)(1) In general
.22(c)(2) Constraints on affiliate
lending
.22(c)(2)(i) No affiliate may claim a
loan origination or loan purchase if
another institution claims the same loan
origination or purchase
.22(c)(2)(ii) If an institution elects to
have its supervisory agency consider
loans within a particular lending
category made by one or more of the
institution’s affiliates in a particular
assessment area, the institution shall
elect to have the agency consider all
loans within that lending category in that
particular assessment area made by all of
the institution’s affiliates
.22(d) Lending by a consortium or a
third party

§

.23—Investment Test

§
§
§

.24—Service Test

§
§
§
§
§

§
§
§
§
§
§
§
§

.23(a) Scope of test
.23(b) Exclusion
.23(e) Performance criteria

§

§
§
§

§

.24(d) Performance criteria—retail
banking services
§
.24(d)(3) Availability and
effectiveness of alternative systems for
delivering retail banking services

§
.25—Community Development Test for
Wholesale or Limited Purpose Institutions
§
§
§

.25(d) Indirect activities
.25(e) Benefit to assessment area(s)
.25(f) Community development
performance rating

§
.26—Small Institution Performance
Standards
§

.26(a) Performance criteria
.26(a)(1) Loan-to-deposit ratio
.26(a)(2) Percentage of lending within
assessment area(s)
§
.26(a)(3) and (4) Distribution of
lending within assessment area(s) by
borrower income and geographic
location
§
.26(b) Performance rating
§
§

§
§
§
§
§
§
§
§

.27—Strategic Plan
.27(c) Plans in general
.27(f) Plan content
.27(f)(1) Measurable goals
.27(g) Plan approval
.27(g)(2) Public participation
.28—Assigned Ratings
.28(a) Ratings in general

§
.29—Effect of CRA Performance on
Applications
§
.29(a) CRA performance
§
.29(b) Interested parties

§
§
§
§
§

.41—Assessment Area Delineation
.41(a) In general
.41(c) Geographic area(s) for
institutions other than wholesale or
limited purpose institutions
.41(c)(1) Generally consist of one or
more MSAs or one or more contiguous
political subdivisions
.41(d) Adjustments to geographic
area(s)
.41(e) Limitations on delineation of an
assessment area
.41(e)(3) May not arbitrarily exclude
low- or moderate-income geographies
.41(e)(4) May not extend
substantially beyond a CMSA boundary
or beyond a state boundary unless
located in a multistate MSA
.42(a) Loan information required to be
collected and maintained
.42(a)(2) Loan amount at origination
.42(a)(3) The loan location
.42(a)(4) Indicator of gross annual
revenue
.42(b) Loan information required to be
reported
.42(b)(1) Small business and small
farm loan data
.42(b)(2) Community development
loan data
.42(b)(3) Home mortgage loans
.42(c) Optional data collection and
maintenance
.42(c)(1) Consumer loans
.42(c)(1)(iv) Income of borrower
.42(c)(2) Other loan data
.42(d) Data on affiliate lending

§
.43—Content and Availability of Public
File
§
.43(a) Information available to the
public
§
.43(a)(1) Public comments
§
.43(b) Additional information available
to the public
§
.43(b)(1) Institutions other than small
institutions
§
.43(c) Location of public information
§

.44—Public Notice by Institutions

§
.45—Publication of Planned
Examination Schedule
Appendix A to Part

—Ratings

Appendix B to Part

—CRA Notice

The body of the Interagency
Questions and Answers Regarding
Community Reinvestment follows:
§
.11—Authority, Purposes, and
Scope
§

.11(c) Scope
§ 25.11(c)(3), 228.11(c)(3) &
345.11(c)(3) Certain special purpose
banks.
Q1. Is the list of special purpose
banks exclusive?
A1. No, there may be other examples
of special purpose banks. These banks
engage in specialized activities that do
not involve granting credit to the public
in the ordinary course of business.
Special purpose banks typically serve as

23627

correspondent banks, trust companies,
or clearing agents or engage only in
specialized services, such as cash
management controlled disbursement
services. A financial institution,
however, does not become a special
purpose bank merely by ceasing to make
loans and, instead, making investments
and providing other retail banking
services.
Q2. To be a special purpose bank,
must a bank limit its activities in its
charter?
A2. No. A special purpose bank may,
but is not required to, limit the scope of
its activities in its charter, articles of
association or other corporate
organizational documents. A bank that
does not have legal limitations on its
activities, but has voluntarily limited its
activities, however, would no longer be
exempt from Community Reinvestment
Act (CRA) requirements if it
subsequently engaged in activities that
involve granting credit to the public in
the ordinary course of business. A bank
that believes it is exempt from CRA as
a special purpose bank should seek
confirmation of this status from its
supervisory agency.
§

.12—Definitions

§

.12(a) Affiliate

Q1. Does the definition of ‘‘affiliate’’
include subsidiaries of an institution?
A1. Yes, ‘‘affiliate’’ includes any
company that controls, is controlled by,
or is under common control with
another company. An institution’s
subsidiary is controlled by the
institution and is, therefore, an affiliate.
§§

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

Q1. Do the definitions of ‘‘branch,’’
‘‘automated teller machine (ATM),’’ and
‘‘remote service facility (RSF)’’ include
mobile branches, ATMs, and RSFs?
A1. Yes. Staffed mobile offices that
are authorized as branches are
considered ‘‘branches’’ and mobile
ATMs and RSFs are considered ‘‘ATMs’’
and ‘‘RSFs.’’
Q2. Are loan production offices
(LPOs) branches for purposes of the
CRA?
A2. LPOs and other offices are not
‘‘branches’’ unless they are authorized
as branches of the institution through
the regulatory approval process of the
institution’s supervisory agency.
§§
.12(h) & 563e.12(g) Community
Development
Q1. Are community development
activities limited to those that promote
economic development?
A1. No. Although the definition of
‘‘community development’’ includes

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

activities that promote economic
development by financing small
businesses or farms, the rule does not
limit community development loans
and services and qualified investments
to those activities. Community
development also includes communityor tribal-based child care, educational,
health, or social services targeted to
low- or moderate-income persons,
affordable housing for low- or moderateincome individuals, and activities that
revitalize or stabilize low- or moderateincome areas.
Q2. Must a community development
activity occur inside a low- or moderateincome area in order for an institution
to receive CRA consideration for the
activity?
A2. No. Community development
includes activities outside of low- and
moderate-income areas that provide
affordable housing for, or community
services targeted to, low- or moderateincome individuals and activities that
promote economic development by
financing small businesses and farms.
Activities that stabilize or revitalize
particular low- or moderate-income
areas (including by creating, retaining,
or improving jobs for low- or moderateincome persons) also qualify as
community development, even if the
activities are not located in these lowor moderate-income areas. One example
is financing a supermarket that serves as
an anchor store in a small strip mall
located at the edge of a middle-income
area, if the mall stabilizes the adjacent
low-income community by providing
needed shopping services that are not
otherwise available in the low-income
community.
Q3. Does the regulation provide
flexibility in considering performance in
high-cost areas?
A3. Yes, the flexibility of the
performance standards allows
examiners to account in their
evaluations for conditions in high-cost
areas. Examiners consider lending and
services to individuals and geographies
of all income levels and businesses of
all sizes and revenues. In addition, the
flexibility in the requirement that
community development loans,
community development services, and
qualified investments have as their
‘‘primary’’ purpose community
development allows examiners to
account for conditions in high-cost
areas. For example, examiners could
take into account the fact that activities
address a credit shortage among middleincome people or areas caused by the
disproportionately high cost of building,
maintaining or acquiring a house when
determining whether an institution’s
loan to or investment in an organization

§§
.12(h)(1) & 563e.12(g)(1)
Affordable Housing (Including
Multifamily Rental Housing) for Low- or
Moderate-Income Individuals
Q1. When determining whether a
project is ‘‘affordable housing for low- or
moderate-income individuals,’’ thereby
meeting the definition of ‘‘community
development,’’ will it be sufficient to use
a formula that relates the cost of
ownership, rental or borrowing to the
income levels in the area as the only
factor, regardless of whether the users,
likely users, or beneficiaries of that
affordable housing are low- or
moderate-income individuals?
A1. The concept of ‘‘affordable
housing’’ for low- or moderate-income
individuals does hinge on whether lowor moderate-income individuals benefit,
or are likely to benefit, from the
housing. It would be inappropriate to
give consideration to a project that
exclusively or predominately houses
families that are not low- or moderateincome simply because the rents or
housing prices are set according to a
particular formula.
For projects that do not yet have
occupants, and for which the income of
the potential occupants is not knowable
in advance, examiners will review
factors such as demographic, economic
and market data to determine the
likelihood that the housing will
‘‘primarily’’ accommodate low- or
moderate-income individuals. For
example, examiners may look at median
rents of the assessment area and the
project; the median home value of either
the assessment area, low- or moderateincome geographies or the project; the
low- or moderate-income population in
the area of the project; or the past
performance record of the
organization(s) undertaking the project.
Further, such a project could receive
consideration if its express, bona fide
intent, as stated, for example, in a
prospectus, loan proposal or community
action plan, is community development.

farms that meet these size eligibility
standards considered to be community
development?
A1. No. To be considered as
‘‘community development’’ under
§§ ——.12(h)(3) and 563e.12(g)(3), a
loan, investment or service, whether
made directly or through an
intermediary, must meet both a size test
and a purpose test. An activity meets
the size requirement if it finances
entities that either meet the size
eligibility standards of the Small
Business Administration’s Development
Company (SBDC) or Small Business
Investment Company (SBIC) programs,
or have gross annual revenues of $1
million or less. To meet the purpose
test, the activity must promote
economic development. An activity is
considered to promote economic
development if it supports permanent
job creation, retention, and/or
improvement for persons who are
currently low- or moderate-income, or
supports permanent job creation,
retention, and/or improvement either in
low- or moderate-income geographies or
in areas targeted for redevelopment by
Federal, state, local or tribal
governments. The agencies will
presume that any loan to or investment
in a SBDC or SBIC promotes economic
development.
In addition to their quantitative
assessment of the amount of a financial
institution’s community development
activities, examiners must make
qualitative assessments of an
institution’s leadership in community
development matters and the
complexity, responsiveness, and impact
of the community development
activities of the institution. In reaching
a conclusion about the impact of an
institution’s community development
activities, examiners may, for example,
determine that a loan to a small
business in a low- or moderate-income
geography that provides needed jobs
and services in that area may have a
greater impact and be more responsive
to the community credit needs than
does a loan to a small business in the
same geography that does not directly
provide additional jobs or services to
the community.

§§
.12(h)(3) and 563e.12(g)(3)
Activities That Promote Economic
Development by Financing Businesses
or Farms That Meet Certain Size
Eligibility Standards
Q1. ‘‘Community development’’
includes activities that promote
economic development by financing
businesses or farms that meet certain
size eligibility standards. Are all
activities that finance businesses and

§§
.12(i) and 563e.12(h) Community
Development Loan
Q1. What are examples of community
development loans?
A1. Examples of community
development loans include, but are not
limited to, loans to:
• Borrowers for affordable housing
rehabilitation and construction,
including construction and permanent
financing of multifamily rental property

that funds affordable housing for
middle-income people or areas, as well
as low- and moderate-income people or
areas, has as its primary purpose
community development.

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
serving low- and moderate-income
persons;
• Not-for-profit organizations serving
primarily low- and moderate-income
housing or other community
development needs;
• Borrowers to construct or
rehabilitate community facilities that
are located in low- and moderateincome areas or that serve primarily
low- and moderate-income individuals;
• Financial intermediaries including
Community Development Financial
Institutions (CDFIs), Community
Development Corporations (CDCs),
minority- and women-owned financial
institutions, community loan funds or
pools, and low-income or community
development credit unions that
primarily lend or facilitate lending to
promote community development.
• Local, state, and tribal governments
for community development activities;
and
• Borrowers to finance environmental
clean-up or redevelopment of an
industrial site as part of an effort to
revitalize the low- or moderate-income
community in which the property is
located.
The rehabilitation of affordable
housing or community facilities,
referred to above, may include the
abatement of environmental hazards,
such as lead-based paint, that are
present in the housing or facilities.
Q2. If a retail institution that is not
required to report under the Home
Mortgage Disclosure Act (HMDA) makes
affordable home mortgage loans that
would be HMDA-reportable home
mortgage loans if it were a reporting
institution, or if a small institution that
is not required to collect and report loan
data under CRA makes small business
and small farm loans and consumer
loans that would be collected and/or
reported if the institution were a large
institution, may the institution have
these loans considered as community
development loans?
A2. No. Although small institutions
are not required to report or collect
information on small business and small
farm loans and consumer loans, and
some institutions are not required to
report information about their home
mortgage loans under HMDA, if these
institutions are retail institutions, the
agencies will consider in their CRA
evaluations the institutions’ originations
and purchases of loans that would have
been collected or reported as small
business, small farm, consumer or home
mortgage loans, had the institution been
a collecting and reporting institution
under the CRA or the HMDA. Therefore,
these loans will not be considered as
community development loans.

Multifamily dwelling loans, however,
may be considered as community
development loans as well as home
mortgage loans. See also Q&A2
addressing §
.42(b)(2).
Q3. Do secured credit cards or other
credit card programs targeted to low- or
moderate-income individuals qualify as
community development loans?
A3. No. Credit cards issued to low- or
moderate-income individuals for
household, family, or other personal
expenditures, whether as part of a
program targeted to such individuals or
otherwise, do not qualify as community
development loans because they do not
have as their primary purpose any of the
activities included in the definition of
‘‘community development.’’
Q4. The regulation indicates that
community development includes
‘‘activities that revitalize or stabilize
low- or moderate-income geographies.’’
Do all loans in a low- to moderateincome geography have a stabilizing
effect?
A4. No. Some loans may provide only
indirect or short-term benefits to low- or
moderate-income individuals in a lowor moderate-income geography. These
loans are not considered to have a
community development purpose. For
example, a loan for upper-income
housing in a distressed area is not
considered to have a community
development purpose simply because of
the indirect benefit to low- or moderateincome persons from construction jobs
or the increase in the local tax base that
supports enhanced services to low- and
moderate-income area residents. On the
other hand, a loan for an anchor
business in a distressed area (or a
nearby area), that employs or serves
residents of the area, and thus stabilizes
the area, may be considered to have a
community development purpose. For
example, in an underserved, distressed
area, a loan for a pharmacy that
employs, and provides supplies to,
residents of the area promotes
community development.
Q5. Must there be some immediate or
direct benefit to the institution’s
assessment area(s) to satisfy the
regulations’ requirement that qualified
investments and community
development loans or services benefit an
institution’s assessment area(s) or a
broader statewide or regional area that
includes the institution’s assessment
area(s)?
A5. No. The regulations, for example,
recognize that community development
organizations and programs are
frequently efficient and effective ways
for institutions to promote community
development. These organizations and
programs often operate on a statewide or

23629

even multi-state basis. Therefore, an
institution’s activity is considered a
community development loan or service
or a qualified investment if it supports
an organization or activity that covers
an area that is larger than, but includes,
the institution’s assessment area(s). The
institution’s assessment area need not
receive an immediate or direct benefit
from the institution’s specific
participation in the broader organization
or activity, provided the purpose,
mandate, or function of the organization
or activity includes serving geographies
or individuals located within the
institution’s assessment area.
Furthermore, the regulations permit a
wholesale or limited purpose institution
to consider community development
loans, community development
services, and qualified investments
wherever they are located, as long as the
institution has otherwise adequately
addressed the credit needs within its
assessment area(s).
Q6. What is meant by a ‘‘regional
area’’ in the requirement that a
community development loan must
benefit the institution’s assessment
area(s) or a broader statewide or
regional area that includes the
institution’s assessment area(s)?
A6. A ‘‘regional area’’ may be as small
as a city or county or as large as a
multistate area. For example, the ‘‘midAtlantic states’’ may comprise a regional
area. When examiners evaluate
community development loans that
benefit a regional area that includes the
institution’s assessment area, however,
the examiners will consider the size of
the regional area and the actual or
potential benefit to the institution’s
assessment area(s). In most cases, the
larger the regional area, the more diffuse
the benefit will be to the institution’s
assessment area(s). Examiners may view
loans with more direct benefits to an
institution’s assessment area(s) as more
responsive to the credit needs of the
area(s) than loans for which the actual
benefit to the assessment area(s) is
uncertain or for which the benefit is
diffused throughout a larger area that
includes the assessment area(s).
Q7. What is meant by the term
‘‘primary purpose’’ as that term is used
to define what constitutes a community
development loan, a qualified
investment or a community
development service?
A7. A loan, investment or service has
as its primary purpose community
development when it is designed for the
express purpose of revitalizing or
stabilizing low- or moderate-income
areas, providing affordable housing for,
or community services targeted to, lowor moderate-income persons, or

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

promoting economic development by
financing small businesses and farms
that meet the requirements set forth in
§§
.12(h) or 563e.12(g). To
determine whether an activity is
designed for an express community
development purpose, the agencies
apply one of two approaches. First, if a
majority of the dollars or beneficiaries of
the activity are identifiable to one or
more of the enumerated community
development purposes, then the activity
will be considered to possess the
requisite primary purpose.
Alternatively, where the measurable
portion of any benefit bestowed or
dollars applied to the community
development purpose is less than a
majority of the entire activity’s benefits
or dollar value, then the activity may
still be considered to possess the
requisite primary purpose if (1) the
express, bona fide intent of the activity,
as stated, for example, in a prospectus,
loan proposal, or community action
plan, is primarily one or more of the
enumerated community development
purposes; (2) the activity is specifically
structured (given any relevant market or
legal constraints or performance context
factors) to achieve the expressed
community development purpose; and
(3) the activity accomplishes, or is
reasonably certain to accomplish, the
community development purpose
involved. The fact that an activity
provides indirect or short-term benefits
to low- or moderate-income persons
does not make the activity community
development, nor does the mere
presence of such indirect or short-term
benefits constitute a primary purpose of
community development. Financial
institutions that want examiners to
consider certain activities under either
approach should be prepared to
demonstrate the activities’
qualifications.
§§
.12(j) and 563e.12(i) Community
Development Service
Q1. In addition to meeting the
definition of ‘‘community development’’
in the regulation, community
development services must also be
related to the provision of financial
services. What is meant by ‘‘provision of
financial services’’?
A1. Providing financial services
means providing services of the type
generally provided by the financial
services industry. Providing financial
services often involves informing
community members about how to get
or use credit or otherwise providing
credit services or information to the
community. For example, service on the
board of directors of an organization
that promotes credit availability or

finances affordable housing is related to
the provision of financial services.
Providing technical assistance about
financial services to community-based
groups, local or tribal government
agencies, or intermediaries that help to
meet the credit needs of low- and
moderate-income individuals or small
businesses and farms is also providing
financial services. By contrast, activities
that do not take advantage of the
employees’ financial expertise, such as
neighborhood cleanups, do not involve
the provision of financial services.
Q2. Are personal charitable activities
provided by an institution’s employees
or directors outside the ordinary course
of their employment considered
community development services?
A2. No. Services must be provided as
a representative of the institution. For
example, if a financial institution’s
director, on her own time and not as a
representative of the institution,
volunteers one evening a week at a local
community development corporation’s
financial counseling program, the
institution may not consider this
activity a community development
service.
Q3. What are examples of community
development services?
A3. Examples of community
development services include, but are
not limited to, the following:
• Providing technical assistance on
financial matters to nonprofit, tribal or
government organizations serving lowand moderate-income housing or
economic revitalization and
development needs;
• Providing technical assistance on
financial matters to small businesses or
community development organizations,
including organizations and individuals
who apply for loans or grants under the
Federal Home Loan Banks’ Affordable
Housing Program;
• Lending employees to provide
financial services for organizations
facilitating affordable housing
construction and rehabilitation or
development of affordable housing;
• Providing credit counseling, homebuyer and home-maintenance
counseling, financial planning or other
financial services education to promote
community development and affordable
housing;
• Establishing school savings
programs and developing or teaching
financial education curricula for low- or
moderate-income individuals;
• Providing electronic benefits
transfer and point of sale terminal
systems to improve access to financial
services, such as by decreasing costs, for
low- or moderate-income individuals;
and

• Providing other financial services
with the primary purpose of community
development, such as low-cost bank
accounts, including ‘‘Electronic Transfer
Accounts’’ provided pursuant to the
Debt Collection Improvement Act of
1996, or free government check cashing
that increases access to financial
services for low- or moderate-income
individuals.
Examples of technical assistance
activities that might be provided to
community development organizations
include:
• Serving on a loan review
committee;
• Developing loan application and
underwriting standards;
• Developing loan processing
systems;
• Developing secondary market
vehicles or programs;
• Assisting in marketing financial
services, including development of
advertising and promotions,
publications, workshops and
conferences;
• Furnishing financial services
training for staff and management;
• Contributing accounting/
bookkeeping services; and
• Assisting in fund raising, including
soliciting or arranging investments.
§

.12(k) & 563e.12(j) Consumer Loan
Q1. Are home equity loans considered
‘‘consumer loans’’?
A1. Home equity loans made for
purposes other than home purchase,
home improvement or refinancing home
purchase or home improvement loans
are consumer loans if they are extended
to one or more individuals for
household, family, or other personal
expenditures.
Q2. May a home equity line of credit
be considered a ‘‘consumer loan’’ even
if part of the line is for home
improvement purposes?
A2. If the predominant purpose of the
line is home improvement, the line may
only be reported under HMDA and may
not be considered a consumer loan.
However, the full amount of the line
may be considered a ‘‘consumer loan’’ if
its predominant purpose is for
household, family, or other personal
expenditures, and to a lesser extent
home improvement, and the full amount
of the line has not been reported under
HMDA. This is the case even though
there may be ‘‘double counting’’ because
part of the line may also have been
reported under HMDA.
Q3. How should an institution collect
or report information on loans the
proceeds of which will be used for
multiple purposes?
A3. If an institution makes a single
loan or provides a line of credit to a

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
customer to be used for both consumer
and small business purposes, consistent
with the Call Report and TFR
instructions, the institution should
determine the major (predominant)
component of the loan or the credit line
and collect or report the entire loan or
credit line in accordance with the
regulation’s specifications for that loan
type.
§
.12(m) & 563e.12(l) Home
Mortgage Loan
Q1. Does the term ‘‘home mortgage
loan’’ include loans other than ‘‘home
purchase loans’’?
A1. Yes. ‘‘Home mortgage loan’’
includes a ‘‘home improvement loan’’ as
well as a ‘‘home purchase loan,’’ as both
terms are defined in the HMDA
regulation, Regulation C, 12 CFR part
203. This definition also includes
multifamily (five-or-more families)
dwelling loans, loans for the purchase of
manufactured homes, and refinancings
of home improvement and home
purchase loans.
Q2. Some financial institutions broker
home mortgage loans. They typically
take the borrower’s application and
perform other settlement activities;
however, they do not make the credit
decision. The broker institutions may
also initially fund these mortgage loans,
then immediately assign them to
another lender. Because the broker
institution does not make the credit
decision, under Regulation C (HMDA),
they do not record the loans on their
HMDA–LARs, even if they fund the
loans. May an institution receive any
consideration under CRA for its home
mortgage loan brokerage activities?
A2. Yes. A financial institution that
funds home mortgage loans but
immediately assigns the loans to the
lender that made the credit decisions
may present information about these
loans to examiners for consideration
under the lending test as ‘‘other loan
data.’’ Under Regulation C, the broker
institution does not record the loans on
its HMDA–LAR because it does not
make the credit decisions, even if it
funds the loans. An institution electing
to have these home mortgage loans
considered must maintain information
about all of the home mortgage loans
that it has funded in this way.
Examiners will consider this other loan
data using the same criteria by which
home mortgage loans originated or
purchased by an institution are
evaluated.
Institutions that do not provide
funding but merely take applications
and provide settlement services for
another lender that makes the credit
decisions will receive consideration for

this service as a retail banking service.
Examiners will consider an institution’s
mortgage brokerage services when
evaluating the range of services
provided to low-, moderate-, middleand upper-income geographies and the
degree to which the services are tailored
to meet the needs of those geographies.
Alternatively, an institution’s mortgage
brokerage service may be considered a
community development service if the
primary purpose of the service is
community development. An institution
wishing to have its mortgage brokerage
service considered as a community
development service must provide
sufficient information to substantiate
that its primary purpose is community
development and to establish the extent
of the services provided.
§

.12(n) & 563e.12(m) Income Level
Q1. Where do institutions find income
level data for geographies and
individuals?
A1. The income levels for
geographies, i.e., census tracts and block
numbering areas, are derived from
Census Bureau information and are
updated every ten years. Institutions
may contact their regional Census
Bureau office or the Census Bureau’s
Income Statistics Office at (301) 763–
8576 to obtain income levels for
geographies. See Appendix A of these
Interagency Questions and Answers for
a list of the regional Census Bureau
offices. The income levels for
individuals are derived from
information calculated by the
Department of Housing and Urban
Development (HUD) and updated
annually. Institutions may contact HUD
at (800) 245–2691 to request a copy of
‘‘FY [year number, e.g., 1996] Median
Family Incomes for States and their
Metropolitan and Nonmetropolitan
Portions.’’
Alternatively, institutions may obtain
a list of the 1990 Census Bureaucalculated and the annually updated
HUD median family incomes for
metropolitan statistical areas (MSAs)
and statewide nonmetropolitan areas by
calling the Federal Financial Institution
Examination Council’s (FFIEC’s) HMDA
Help Line at (202) 452–2016. A free
copy will be faxed to the caller through
the ‘‘fax-back’’ system. Institutions may
also call this number to have ‘‘faxedback’’ an order form, from which they
may order a list providing the median
family income level, as a percentage of
the appropriate MSA or
nonmetropolitan median family income,
of every census tract and block
numbering area (BNA). This list costs
$50. Institutions may also obtain the list
of MSA and statewide nonmetropolitan

23631

area median family incomes or an order
form through the FFIEC’s home page on
the Internet at ‘‘http://www.ffiec.gov/’’.
§

.12(o) & 563e.12(n) Limited

Purpose Institution

Q1. What constitutes a ‘‘narrow
product line’’ in the definition of
‘‘limited purpose institution’’?
A1. An institution offers a narrow
product line by limiting its lending
activities to a product line other than a
traditional retail product line required
to be evaluated under the lending test
(i.e., home mortgage, small business,
and small farm loans). Thus, an
institution engaged only in making
credit card or motor vehicle loans offers
a narrow product line, while an
institution limiting its lending activities
to home mortgages is not offering a
narrow product line.
Q2. What factors will the agencies
consider to determine whether an
institution that, if limited purpose,
makes loans outside a narrow product
line, or, if wholesale, engages in retail
lending, will lose its limited purpose or
wholesale designation because of too
much other lending?
A2. Wholesale institutions may
engage in some retail lending without
losing their designation if this activity is
incidental and done on an
accommodation basis. Similarly, limited
purpose institutions continue to meet
the narrow product line requirement if
they provide other types of loans on an
infrequent basis. In reviewing other
lending activities by these institutions,
the agencies will consider the following
factors:
• Is the other lending provided as an
incident to the institution’s wholesale
lending?
• Are the loans provided as an
accommodation to the institution’s
wholesale customers?
• Are the loans made only
infrequently to the limited purpose
institution’s customers?
• Does only an insignificant portion
of the institution’s total assets and
income result from the other lending?
• How significant a role does the
institution play in providing that type(s)
of loan(s) in the institution’s assessment
area(s)?
• Does the institution hold itself out
as offering that type(s) of loan(s)?
• Does the lending test or the
community development test present a
more accurate picture of the
institution’s CRA performance?
Q3. Do ‘‘niche institutions’’ qualify as
limited purpose (or wholesale)
institutions?
A3. Generally, no. Institutions that are
in the business of lending to the public,

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

but specialize in certain types of retail
loans (for example, home mortgage or
small business loans) to certain types of
borrowers (for example, to high-end
income level customers or to
corporations or partnerships of licensed
professional practitioners) (‘‘niche
institutions’’) generally would not
qualify as limited purpose (or
wholesale) institutions.
§
.12(s) & 563e.12(r) Qualified
Investment
Q1. Does the CRA regulation provide
authority for institutions to make
investments?
A1. No. The CRA regulation does not
provide authority for institutions to
make investments that are not otherwise
allowed by Federal law.
Q2. Are mortgage-backed securities or
municipal bonds ‘‘qualified
investments’’?
A2. As a general rule, mortgagebacked securities and municipal bonds
are not qualified investments because
they do not have as their primary
purpose community development, as
defined in the CRA regulations.
Nonetheless, mortgage-backed securities
or municipal bonds designed primarily
to finance community development
generally are qualified investments.
Municipal bonds or other securities
with a primary purpose of community
development need not be housingrelated. For example, a bond to fund a
community facility or park or to provide
sewage services as part of a plan to
redevelop a low-income neighborhood
is a qualified investment. Housingrelated bonds or securities must
primarily address affordable housing
(including multifamily rental housing)
needs in order to qualify.
Q3. Are Federal Home Loan Bank
stocks and membership reserves with
the Federal Reserve Banks ‘‘qualified
investments’’?
A3. No. Federal Home Loan Bank
(FHLB) stock and membership reserves
with the Federal Reserve Banks do not
have a sufficient connection to
community development to be qualified
investments. However, FHLB member
institutions may receive CRA
consideration for technical assistance
they provide on behalf of applicants and
recipients of funding from the FHLB’s
Affordable Housing Program. See Q&A 3
addressing §§
.12(j) and 563e.12(i).
Q4. What are examples of qualified
investments?
A4. Examples of qualified
investments include, but are not limited
to, investments, grants, deposits or
shares in or to:
• Financial intermediaries (including,
Community Development Financial

Institutions (CDFIs), Community
Development Corporations (CDCs),
minority- and women-owned financial
institutions, community loan funds, and
low- income or community
development credit unions) that
primarily lend or facilitate lending in
low- and moderate-income areas or to
low- and moderate-income individuals
in order to promote community
development, such as a CDFI that
promotes economic development on an
Indian reservation; Organizations
engaged in affordable housing
rehabilitation and construction,
including multifamily rental housing;
• Organizations, including, for
example, Small Business Investment
Companies (SBICs) and specialized
SBICs, that promote economic
development by financing small
businesses;
• Facilities that promote community
development in low- and moderateincome areas for low- and moderateincome individuals, such as youth
programs, homeless centers, soup
kitchens, health care facilities, battered
women’s centers, and alcohol and drug
recovery centers;
• Projects eligible for low-income
housing tax credits;
• State and municipal obligations,
such as revenue bonds, that specifically
support affordable housing or other
community development;
• Not-for-profit organizations serving
low- and moderate- income housing or
other community development needs,
such as counseling for credit, homeownership, home maintenance, and
other financial services education; and
• Organizations supporting activities
essential to the capacity of low- and
moderate-income individuals or
geographies to utilize credit or to
sustain economic development, such as,
for example, day care operations and job
training programs that enable people to
work.
Q5. Will an institution receive
consideration for charitable
contributions as ‘‘qualified
investments’’?
A5. Yes, provided they have as their
primary purpose community
development as defined in the
regulations. A charitable contribution,
whether in cash or an in-kind
contribution of property, is included in
the term ‘‘grant.’’ A qualified investment
is not disqualified because an
institution receives favorable treatment
for it (for example, as a tax deduction
or credit) under the Internal Revenue
Code.
Q6. An institution makes or
participates in a community
development loan. The institution

provided the loan at below-market
interest rates or ‘‘bought down’’ the
interest rate to the borrower. Is the lost
income resulting from the lower interest
rate or buy-down a qualified
investment?
A6. No. The agencies will, however,
consider the innovativeness and
complexity of the community
development loan within the bounds of
safe and sound banking practices.
Q7. Will the agencies consider as a
qualified investment the wages or other
compensation of an employee or
director who provides assistance to a
community development organization
on behalf of the institution?
A7. No. However, the agencies will
consider donated labor of employees or
directors of a financial institution in the
service test if the activity is a
community development service.
§

.12(t) Small Institution
Q1. How are the ‘‘total bank and thrift
assets’’ of a holding company
determined?
A1. ‘‘Total banking and thrift assets’’
of a holding company are determined by
combining the total assets of all banks
and/or thrifts that are majority-owned
by the holding company. An institution
is majority-owned if the holding
company directly or indirectly owns
more than 50 percent of its outstanding
voting stock.
Q2. How are Federal and State branch
assets of a foreign bank calculated for
purposes of the CRA?
A2. A Federal or State branch of a
foreign bank is considered a small
institution if the Federal or State branch
has less than $250 million in assets and
the total assets of the foreign bank’s or
its holding company’s U.S. bank and
thrift subsidiaries that are subject to the
CRA are less than $1 billion. This
calculation includes not only FDICinsured bank and thrift subsidiaries, but
also the assets of any FDIC-insured
branch of the foreign bank and the
assets of any uninsured Federal or State
branch (other than a limited branch or
a Federal agency) of the foreign bank
that results from an acquisition
described in section 5(a)(8) of the
International Banking Act of 1978 (12
U.S.C. 3103(a)(8)).
§

.12(u) Small Business Loan
Q1. Are loans to nonprofit
organizations considered small business
loans or are they considered community
development loans?
A1. To be considered a small business
loan, a loan must meet the definition of
‘‘loan to small business’’ in the
instructions in the ‘‘Consolidated
Reports of Conditions and Income’’ (Call

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
Report) and ‘‘Thrift Financial Reports’’
(TFR). In general, a loan to a nonprofit
organization, for business or farm
purposes, where the loan is secured by
nonfarm nonresidential property and
the original amount of the loan is $1
million or less, if a business loan, or
$500,000 or less, if a farm loan, would
be reported in the Call Report and TFR
as a small business or small farm loan.
If a loan to a nonprofit organization is
reportable as a small business or small
farm loan, it cannot also be considered
as a community development loan,
except by a wholesale or limited
purpose institution. Loans to nonprofit
organizations that are not small business
or small farm loans for Call Report and
TFR purposes may be considered as
community development loans if they
meet the regulatory definition.
Q2. Are loans secured by commercial
real estate considered small business
loans?
A2. Yes, depending on their principal
amount. Small business loans include
loans secured by ‘‘nonfarm
nonresidential properties,’’ as defined in
the Call Report and TFR, in amounts
less than $1 million.
Q3. Are loans secured by nonfarm
residential real estate to finance small
businesses ‘‘small business loans’?
A3. No. Loans secured by nonfarm
residential real estate that are used to
finance small businesses are not
included as ‘‘small business’’ loans for
Call Report and TFR purposes. The
agencies recognize that many small
businesses are financed by loans
secured by residential real estate. If
these loans promote community
development, as defined in the
regulation, they may be considered as
community development loans.
Otherwise, at an institution’s option, the
institution may collect and maintain
data separately concerning these loans
and request that the data be considered
in its CRA evaluation as ‘‘Other Secured
Lines/Loans for Purposes of Small
Business.’’
Q4. Are credit cards issued to small
businesses considered ‘‘small business
loans’’?
A4. Credit cards issued to a small
business or to individuals to be used,
with the institution’s knowledge, as
business accounts are small business
loans if they meet the definitional
requirements in the Call Report or TFR
instructions.
§

.12(w) Wholesale Institution

Q1. What factors will the agencies
consider in determining whether an
institution is in the business of
extending home mortgage, small

business, small farm, or consumer loans
to retail customers?
A1. The agencies will consider
whether:
• The institution holds itself out to
the retail public as providing such
loans; and
• The institution’s revenues from
extending such loans are significant
when compared to its overall
operations.
A wholesale institution may make
some retail loans without losing its
wholesale designation as described
above in Q&A2 addressing §§
.12(o)
and 563e.12(n).
§
.21—Performance Tests,
Standards, and Ratings, in General
§
.21(a) Performance Tests and
Standards
Q1. Are all community development
activities weighted equally by
examiners?
A1. No. Examiners will consider the
responsiveness to credit and community
development needs, as well as the
innovativeness and complexity of an
institution’s community development
lending, qualified investments, and
community development services.
These criteria include consideration of
the degree to which they serve as a
catalyst for other community
development activities. The criteria are
designed to add a qualitative element to
the evaluation of an institution’s
performance.
§

.21(b) Performance Context

Q1. Is the performance context
essentially the same as the former
regulation’s needs assessment?
A1. No. The performance context is a
broad range of economic, demographic,
and institution- and community-specific
information that an examiner reviews to
understand the context in which an
institution’s record of performance
should be evaluated. The agencies will
provide examiners with much of this
information prior to the examination.
The performance context is not a formal
or written assessment of community
credit needs.
§
.21(b)(2) Information Maintained
by the Institution or Obtained From
Community Contacts
Q1. Will examiners consider
performance context information
provided by institutions?
A1. Yes. An institution may provide
examiners with any information it
deems relevant, including information
on the lending, investment, and service
opportunities in its assessment area(s).
This information may include data on

23633

the business opportunities addressed by
lenders not subject to the CRA.
Institutions are not required, however,
to prepare a needs assessment. If an
institution provides information to
examiners, the agencies will not expect
information other than what the
institution normally would develop to
prepare a business plan or to identify
potential markets and customers,
including low- and moderate-income
persons and geographies in its
assessment area(s). The agencies will
not evaluate an institution’s efforts to
ascertain community credit needs or
rate an institution on the quality of any
information it provides.
Q2. Will examiners conduct
community contact interviews as part of
the examination process?
A2. Yes. Examiners will consider
information obtained from interviews
with local community, civic, and
government leaders. These interviews
provide examiners with knowledge
regarding the local community, its
economic base, and community
development initiatives. To ensure that
information from local leaders is
considered—particularly in areas where
the number of potential contacts may be
limited—examiners may use
information obtained through an
interview with a single community
contact for examinations of more than
one institution in a given market. In
addition, the agencies will consider
information obtained from interviews
conducted by other agency staff and by
the other agencies. In order to augment
contacts previously used by the agencies
and foster a wider array of contacts, the
agencies will share community contact
information.
§
.21(b)(4) Institutional Capacity
and Constraints
Q1. Will examiners consider factors
outside of an institution’s control that
prevent it from engaging in certain
activities?
A1. Yes. Examiners will take into
account statutory and supervisory
limitations on an institution’s ability to
engage in any lending, investment, and
service activities. For example, a savings
association that has made few or no
qualified investments due to its limited
investment authority may still receive a
low satisfactory rating under the
investment test if it has a strong lending
record.
§
.21(b)(5) Institution’s Past
Performance and the Performance of
Similarly Situated Lenders
Q1. Can an institution’s assigned
rating be adversely affected by poor past
performance?

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

A1. Yes. The agencies will consider
an institution’s past performance in its
overall evaluation. For example, an
institution’s past performance may
support a rating of ‘‘substantial
noncompliance’’ if the institution has
not improved performance rated as
‘‘needs to improve.’’
Q2. How will examiners consider the
performance of similarly situated
lenders?
A2. The performance context section
of the regulation permits the
performance of similarly situated
lenders to be considered, for example,
as one of a number of considerations in
evaluating the geographic distribution of
an institution’s loans to low, moderate-,
middle-, and upper-income geographies.
This analysis, as well as other analyses,
may be used, for example, where groups
of contiguous geographies within an
institution’s assessment area(s) exhibit
abnormally low penetration. In this
regard, the performance of similarly
situated lenders may be analyzed if such
an analysis would provide accurate
insight into the institution’s lack of
performance in those areas. The
regulation does not require the use of a
specific type of analysis under these
circumstances. Moreover, no ratio
developed from any type of analysis is
linked to any lending test rating.
§

.22—Lending Test

§

.22(a) Scope of Test

§
.22(a)(1) Types of Loans
Considered
Q1. If a large retail institution is not
required to collect and report home
mortgage data under the HMDA, will the
agencies still evaluate the institution’s
home mortgage lending performance?
A1. Yes. The agencies will sample the
institution’s home mortgage loan files in
order to assess its performance under
the lending test criteria.
Q2. When will examiners consider
consumer loans as part of an
institution’s CRA evaluation?
A2. Consumer loans will be evaluated
if the institution so elects; and an
institution that elects not to have its
consumer loans evaluated will not be
viewed less favorably by examiners than
one that does. However, if consumer
loans constitute a substantial majority of
the institution’s business, the agencies
will evaluate them even if the
institution does not so elect. The
agencies interpret ‘‘substantial majority’’
to be so significant a portion of the
institution’s lending activity by number
or dollar volume of loans that the
lending test evaluation would not
meaningfully reflect its lending

performance if consumer loans were
excluded.
§
.22(a)(2) Loan Originations and
Purchases/Other Loan Data
Q1. How are lending commitments
(such as letters of credit) evaluated
under the regulation?
A1. The agencies consider lending
commitments (such as letters of credit)
only at the option of the institution.
Commitments must be legally binding
between an institution and a borrower
in order to be considered. Information
about lending commitments will be
used by examiners to enhance their
understanding of an institution’s
performance.
Q2. Will examiners review application
data as part of the lending test?
A2. Application activity is not a
performance criterion of the lending
test. However, examiners may consider
this information in the performance
context analysis because this
information may give examiners insight
on, for example, the demand for loans.
Q3. May a financial institution receive
consideration under CRA for
modification, extension, and
consolidation agreements (MECAs), in
which it obtains loans from other
institutions without actually purchasing
or refinancing the loans, as those terms
have been interpreted under CRA?
A3. Yes. In some states, MECAs,
which are not considered loan
refinancings because the existing loan
obligations are not satisfied and
replaced, are common. Although these
transactions are not considered to be
purchases or refinancings, as those
terms have been interpreted under CRA,
they do achieve the same results. An
institution may present information
about its MECA activities to examiners
for consideration under the lending test
as ‘‘other loan data.’’
Q4: Do institutions receive
consideration for originating or
purchasing loans that are fully
guaranteed?
A4: Yes. The lending test evaluates an
institution’s record of helping to meet
the credit needs of its assessment area(s)
through the origination or purchase of
specified types of loans. The test does
not take into account whether or not
such loans are guaranteed.
§

.22(b) Performance Criteria
Q1. How will examiners apply the
performance criteria in the lending test?
A1. Examiners will apply the
performance criteria reasonably and
fairly, in accord with the regulations,
the examination procedures, and this
Guidance. In doing so, examiners will
disregard efforts by an institution to

manipulate business operations or
present information in an artificial light
that does not accurately reflect an
institution’s overall record of lending
performance.
§

.22(b)(1) Lending Activity
Q1. How will the agencies apply the
lending activity criterion to discourage
an institution from originating loans
that are viewed favorably under CRA in
the institution itself and referring other
loans, which are not viewed as
favorably, for origination by an affiliate?
A1. Examiners will review closely
institutions with (1) a small number and
amount of home mortgage loans with an
unusually good distribution among lowand moderate-income areas and lowand moderate-income borrowers and (2)
a policy of referring most, but not all, of
their home mortgage loans to affiliated
institutions. If an institution is making
loans mostly to low- and moderateincome individuals and areas and
referring the rest of the loan applicants
to an affiliate for the purpose of
receiving a favorable CRA rating,
examiners may conclude that the
institution’s lending activity is not
satisfactory because it has
inappropriately attempted to influence
the rating. In evaluating an institution’s
lending, examiners will consider
legitimate business reasons for the
allocation of the lending activity.
§
.22(b)(2) & (3) Geographic
Distribution and Borrower
Characteristics
Q1. How do the geographic
distribution of loans and the
distribution of lending by borrower
characteristics interact in the lending
test?
A1. Examiners generally will consider
both the distribution of an institution’s
loans among geographies of different
income levels and among borrowers of
different income levels and businesses
of different sizes. The importance of the
borrower distribution criterion,
particularly in relation to the geographic
distribution criterion, will depend on
the performance context. For example,
distribution among borrowers with
different income levels may be more
important in areas without identifiable
geographies of different income
categories. On the other hand,
geographic distribution may be more
important in areas with the full range of
geographies of different income
categories.
Q2. Must an institution lend to all
portions of its assessment area?
A2. The term ‘‘assessment area’’
describes the geographic area within
which the agencies assess how well an

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
institution has met the specific
performance tests and standards in the
rule. The agencies do not expect that
simply because a census tract or block
numbering area is within an
institution’s assessment area(s) the
institution must lend to that census tract
or block numbering area. Rather the
agencies will be concerned with
conspicuous gaps in loan distribution
that are not explained by the
performance context. Similarly, if an
institution delineated the entire county
in which it is located as its assessment
area, but could have delineated its
assessment area as only a portion of the
county, it will not be penalized for
lending only in that portion of the
county, so long as that portion does not
reflect illegal discrimination or
arbitrarily exclude low- or moderateincome geographies. The capacity and
constraints of an institution, its business
decisions about how it can best help to
meet the needs of its assessment area(s),
including those of low- and moderateincome neighborhoods, and other
aspects of the performance context, are
all relevant to explain why the
institution is serving or not serving
portions of its assessment area(s).
Q3. Will examiners take into account
loans made by affiliates when
evaluating the proportion of an
institution’s lending in its assessment
area(s)?
A3. Examiners will not take into
account loans made by affiliates when
determining the proportion of an
institution’s lending in its assessment
area(s), even if the institution elects to
have its affiliate lending considered in
the remainder of the lending test
evaluation. However, examiners may
consider an institution’s business
strategy of conducting lending through
an affiliate in order to determine
whether a low proportion of lending in
the assessment area(s) should adversely
affect the institution’s lending test
rating.
Q4. When will examiners consider
loans (other than community
development loans) made outside an
institution’s assessment area(s)?
A4. Consideration will be given for
loans to low- and moderate-income
persons and small business and farm
loans outside of an institution’s
assessment area(s), provided the
institution has adequately addressed the
needs of borrowers within its
assessment area(s). The agencies will
apply this consideration not only to
loans made by large retail institutions
being evaluated under the lending test,
but also to loans made by small
institutions being evaluated under the
small institution performance standards.

Loans to low- and moderate-income
persons and small businesses and farms
outside of an institution’s assessment
area(s), however, will not compensate
for poor lending performance within the
institution’s assessment area(s).
Q5. Under the lending test, how will
examiners evaluate home mortgage
loans to middle- or upper-income
individuals in a low- or moderateincome geography?
A5. Examiners will consider these
home mortgage loans under the
performance criteria of the lending test,
i.e., by number and amount of home
mortgage loans, whether they are inside
or outside the financial institution’s
assessment area(s), their geographic
distribution, and the income levels of
the borrowers. Examiners will use
information regarding the financial
institution’s performance context to
determine how to evaluate the loans
under these performance criteria.
Depending on the performance context,
examiners could view home mortgage
loans to middle-income individuals in a
low-income geography very differently.
For example, if the loans are for homes
or multifamily housing located in an
area for which the local, state, tribal, or
Federal government or a communitybased development organization has
developed a revitalization or
stabilization plan (such as a Federal
enterprise community or empowerment
zone) that includes attracting mixedincome residents to establish a
stabilized, economically diverse
neighborhood, examiners may give more
consideration to such loans, which may
be viewed as serving the low- or
moderate-income community’s needs as
well as serving those of the middle- or
upper-income borrowers. If, on the other
hand, no such plan exists and there is
no other evidence of governmental
support for a revitalization or
stabilization project in the area and the
loans to middle- or upper-income
borrowers significantly disadvantage or
primarily have the effect of displacing
low- or moderate-income residents,
examiners may view these loans simply
as home mortgage loans to middle- or
upper-income borrowers who happen to
reside in a low- or moderate-income
geography and weigh them accordingly
in their evaluation of the institution.
§
.22(b)(4) Community Development
Lending
Q1. When evaluating an institution’s
record of community development
lending, may an examiner distinguish
among community development loans
on the basis of the actual amount of the
loan that advances the community
development purpose?

23635

A1. Yes. When evaluating the
institution’s record of community
development lending under
§
.22(b)(4), it is appropriate to give
greater weight to the amount of the loan
that is targeted to the intended
community development purpose. For
example, consider two $10 million
projects (with a total of 100 units each)
that have as their express primary
purpose affordable housing and are
located in the same community. One of
these projects sets aside 40% of its units
for low-income residents and the other
project allocates 65% of its units for
low-income residents. An institution
would report both loans as $10 million
community development loans under
the §
.42(b)(2) aggregate reporting
obligation. However, transaction
complexity, innovation and all other
relevant considerations being equal, an
examiner should also take into account
that the 65% project provides more
affordable housing for more people per
dollar expended.
Under §
.22(b)(4), the extent of
CRA consideration an institution
receives for its community development
loans should bear a direct relation to the
benefits received by the community and
the innovation or complexity of the
loans required to accomplish the
activity, not simply to the dollar amount
expended on a particular transaction. By
applying all lending test performance
criteria, a community development loan
of a lower dollar amount could meet the
credit needs of the institution’s
community to a greater extent than a
community development loan with a
higher dollar amount, but with less
innovation, complexity, or impact on
the community.
§
.22(b)(5) Innovative or Flexible
Lending Practices
Q1. What is the range of practices that
examiners may consider in evaluating
the innovativeness or flexibility of an
institution’s lending?
A1. In evaluating the innovativeness
or flexibility of an institution’s lending
practices (and the complexity and
innovativeness of its community
development lending), examiners will
not be limited to reviewing the overall
variety and specific terms and
conditions of the credit products
themselves. In connection with the
evaluation of an institution’s lending,
examiners also may give consideration
to related innovations when they
augment the success and effectiveness
of the institution’s lending under its
community development loan programs
or, more generally, its lending under its
loan programs that address the credit
needs of low- and moderate-income

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geographies or individuals. For
example:
• In connection with a community
development loan program, a bank may
establish a technical assistance program
under which the bank, directly or
through third parties, provides
affordable housing developers and other
loan recipients with financial consulting
services. Such a technical assistance
program may, by itself, constitute a
community development service
eligible for consideration under the
service test of the CRA regulations. In
addition, the technical assistance may
be favorably considered as an
innovation that augments the success
and effectiveness of the related
community development loan program.
• In connection with a small business
lending program in a low- or moderateincome area and consistent with safe
and sound lending practices, a bank
may implement a program under which,
in addition to providing financing, the
bank also contracts with the small
business borrowers. Such a contracting
arrangement would not, standing alone,
qualify for CRA consideration. However,
it may be favorably considered as an
innovation that augments the loan
program’s success and effectiveness,
and improves the program’s ability to
serve community development purposes
by helping to promote economic
development through support of small
business activities and revitalization or
stabilization of low- or moderate-income
geographies.
§

.22(c) Affiliate Lending

§

.22(c)(1) In General
Q1. If an institution elects to have
loans by its affiliate(s) considered, may
it elect to have only certain categories of
loans considered?
A1. Yes. An institution may elect to
have only a particular category of its
affiliate’s lending considered. The basic
categories of loans are home mortgage
loans, small business loans, small farm
loans, community development loans,
and the five categories of consumer
loans (motor vehicle loans, credit card
loans, home equity loans, other secured
loans, and other unsecured loans).
§
.22(c)(2) Constraints on Affiliate
Lending
§
.22(c)(2)(i) No Affiliate May Claim
a Loan Origination or Loan Purchase if
Another Institution Claims the Same
Loan Origination or Purchase
Q1. How is this constraint on affiliate
lending applied?
A1. This constraint prohibits one
affiliate from claiming a loan origination
or purchase claimed by another affiliate.

However, an institution can count as a
purchase a loan originated by an
affiliate that the institution
subsequently purchases, or count as an
origination a loan later sold to an
affiliate, provided the same loans are
not sold several times to inflate their
value for CRA purposes.
§
.22(c)(2)(ii) If an institution
elects to have its supervisory agency
consider loans within a particular
lending category made by one or more
of the institution’s affiliates in a
particular assessment area, the
institution shall elect to have the agency
consider all loans within that lending
category in that particular assessment
area made by all of the institution’s
affiliates.
Q1. How is this constraint on affiliate
lending applied?
A1. This constraint prohibits ‘‘cherrypicking’’ affiliate loans within any one
category of loans. The constraint
requires an institution that elects to
have a particular category of affiliate
lending in a particular assessment area
considered to include all loans of that
type made by all of its affiliates in that
particular assessment area. For example,
assume that an institution has one or
more affiliates, such as a mortgage bank
that makes loans in the institution’s
assessment area. If the institution elects
to include the mortgage bank’s home
mortgage loans, it must include all of
mortgage bank’s home mortgage loans
made in its assessment area. The
institution cannot elect to include only
those low- and moderate-income home
mortgage loans made by the mortgage
bank affiliate and not home mortgage
loans to middle- and upper-income
individuals or areas.
Q2. How is this constraint applied if
an institution’s affiliates are also
insured depository institutions subject
to the CRA?
A2. Strict application of this
constraint against ‘‘cherry-picking’’ to
loans of an affiliate that is also an
insured depository institution covered
by the CRA would produce the
anomalous result that the other
institution would, without its consent,
not be able to count its own loans.
Because the agencies did not intend to
deprive an institution subject to the
CRA of receiving consideration for its
own lending, the agencies read this
constraint slightly differently in cases
involving a group of affiliated
institutions, some of which are subject
to the CRA and share the same
assessment area(s). In those
circumstances, an institution that elects
to include all of its mortgage affiliate’s
home mortgage loans in its assessment
area would not automatically be

required to include all home mortgage
loans in its assessment area of another
affiliate institution subject to the CRA.
However, all loans of a particular type
made by any affiliate in the institution’s
assessment area(s) must either be
counted by the lending institution or by
another affiliate institution that is
subject to the CRA. This reading reflects
the fact that a holding company may, for
business reasons, choose to transact
different aspects of its business in
different subsidiary institutions.
However, the method by which loans
are allocated among the institutions for
CRA purposes must reflect actual
business decisions about the allocation
of banking activities among the
institutions and should not be designed
solely to enhance their CRA evaluations.
§
.22(d) Lending by a Consortium or
a Third Party
Q1. Will equity and equity-type
investments in a third party receive
consideration under the lending test?
A1. If an institution has made an
equity or equity-type investment in a
third party, community development
loans made by the third party may be
considered under the lending test. On
the other hand, asset-backed and debt
securities that do not represent an
equity-type interest in a third party will
not be considered under the lending test
unless the securities are booked by the
purchasing institution as a loan. For
example, if an institution purchases
stock in a community development
corporation (‘‘CDC’’) that primarily
lends in low- and moderate-income
areas or to low- and moderate-income
individuals in order to promote
community development, the institution
may claim a pro rata share of the CDC’s
loans as community development loans.
The institution’s pro rata share is based
on its percentage of equity ownership in
the CDC. Q&A1 addressing §
.23(b)
provides information concerning
consideration of an equity or equitytype investment under the investment
test and both the lending and
investment tests.
Q2. How will examiners evaluate
loans made by consortia or third parties
under the lending test?
A2. Loans originated or purchased by
consortia in which an institution
participates or by third parties in which
an institution invests will only be
considered if they qualify as community
development loans and will only be
considered under the community
development criterion of the lending
test. However, loans originated directly
on the books of an institution or
purchased by the institution are
considered to have been made or

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
purchased directly by the institution,
even if the institution originated or
purchased the loans as a result of its
participation in a loan consortium.
These loans would be considered under
all the lending test criteria appropriate
to them depending on the type of loan.
Q3. In some circumstances, an
institution may invest in a third party,
such as a community development
bank, that is also an insured depository
institution and is thus subject to CRA
requirements. If the investing institution
requests its supervisory agency to
consider its pro rata share of community
development loans made by the third
party, as allowed under 12 CFR
.22(d), may the third party also
receive consideration for these loans?
A3. Yes, as long as the financial
institution and the third party are not
affiliates. The regulations state, at 12
CFR
.22(c)(2)(i), that two affiliates
may not both claim the same loan
origination or loan purchase. However,
if the financial institution and the third
party are not affiliates, the third party
may receive consideration for the
community development loans it
originates, and the financial institution
that invested in the third party may also
receive consideration for its pro rata
share of the same community
development loans under 12 CFR
.22(d).
§
§

.23—Investment Test

.23(a) Scope of Test
Q1: May an institution receive
consideration under the CRA
regulations if it invests indirectly
through a fund, the purpose of which is
community development, as that is
defined in the CRA regulations?
A1. Yes, the direct or indirect nature
of the qualified investment does not
affect whether an institution will
receive consideration under the CRA
regulations because the regulations do
not distinguish between ‘‘direct’’ and
‘‘indirect’’ investments. Thus, an
institution’s investment in an equity
fund that, in turn, invests in projects
that, for example, provide affordable
housing to low- and moderate-income
individuals, would receive
consideration as a qualified investment
under the CRA regulations, provided the
investment benefits one or more of the
institution’s assessment area(s) or a
broader statewide or regional area(s)
that includes one or more of the
institution’s assessment area(s).
Similarly, an institution may receive
consideration for a direct qualified
investment in a nonprofit organization
that, for example, supports affordable
housing for low- and moderate-income

individuals in the institution’s
assessment area(s) or a broader
statewide or regional area(s) that
includes the institution’s assessment
area(s).
§

.23(b) Exclusion
Q1. Even though the regulations state
that an activity that is considered under
the lending or service tests cannot also
be considered under the investment test,
may parts of an activity be considered
under one test and other parts be
considered under another test?
A1. Yes, in some instances the nature
of an activity may make it eligible for
consideration under more than one of
the performance tests. For example,
certain investments and related support
provided by a large retail institution to
a CDC may be evaluated under the
lending, investment, and service tests.
Under the service test, the institution
may receive consideration for any
community development services that it
provides to the CDC, such as service by
an executive of the institution on the
CDC’s board of directors. If the
institution makes an investment in the
CDC that the CDC uses to make
community development loans, the
institution may receive consideration
under the lending test for its pro-rata
share of community development loans
made by the CDC. Alternatively, the
institution’s investment may be
considered under the investment test,
assuming it is a qualified investment. In
addition, an institution may elect to
have a part of its investment considered
under the lending test and the
remaining part considered under the
investment test. If the investing
institution opts to have a portion of its
investment evaluated under the lending
test by claiming a share of the CDC’s
community development loans, the
amount of investment considered under
the investment test will be offset by that
portion. Thus, the institution would
only receive consideration under the
investment test for the amount of its
investment multiplied by the percentage
of the CDC’s assets that meet the
definition of a qualified investment.
§

.23(e) Performance Criteria
Q1. When applying the performance
criteria of §
.23(e), may an examiner
distinguish among qualified investments
based on how much of the investment
actually supports the underlying
community development purpose?
A1. Yes. Although §
.23(e)(1)
speaks in terms of the dollar amount of
qualified investments, the criterion
permits an examiner to weight certain
investments differently or to make other
appropriate distinctions when

23637

evaluating an institution’s record of
making qualified investments. For
instance, an examiner should take into
account that a targeted mortgage-backed
security that qualifies as an affordable
housing issue that has only 60% of its
face value supported by loans to low- or
moderate-income borrowers would not
provide as much affordable housing for
low- and moderate-income individuals
as a targeted mortgage-backed security
with 100% of its face value supported
by affordable housing loans to low- and
moderate-income borrowers. The
examiner should describe any
differential weighting (or other
adjustment), and its basis in the Public
Evaluation. However, no matter how a
qualified investment is handled for
purposes of §
.23(e)(1), it will also
be evaluated with respect to the
qualitative performance criteria set forth
in §
.23(e)(2), (3) and (4). By
applying all criteria, a qualified
investment of a lower dollar amount
may be weighed more heavily under the
Investment Test than a qualified
investment with a higher dollar amount,
but with fewer qualitative
enhancements.
Q2: How do examiners evaluate an
institution’s qualified investment in a
fund, the primary purpose of which is
community development, as that is
defined in the CRA regulations?
A2. When evaluating qualified
investments that benefit an institution’s
assessment area(s) or a broader
statewide or regional area that includes
its assessment area(s), examiners will
look at the following four performance
criteria:
(1) The dollar amount of qualified
investments;
(2) The innovativeness or complexity
of qualified investments;
(3) The responsiveness of qualified
investments to credit and community
development needs; and
(4) The degree to which the qualified
investments are not routinely provided
by private investors.
With respect to the first criterion,
examiners will determine the dollar
amount of qualified investments by
relying on the figures recorded by the
institution according to generally
accepted accounting principles (GAAP).
Although institutions may exercise a
range of investment strategies, including
short-term investments, long-term
investments, investments that are
immediately funded, and investments
with a binding, up-front commitment
that are funded over a period of time,
institutions making the same dollar
amount of investments over the same
number of years, all other performance
criteria being equal, would receive the

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

institution participation in IDA
programs comes in a variety of forms,
including providing retail banking
services to IDA account holders,
providing matching dollars or operating
funds to an IDA program, designing or
implementing IDA programs, providing
consumer financial education to IDA
account holders or prospective account
holders, or other means. The extent of
financial institutions’ involvement in
IDAs and the products and services they
offer in connection with the accounts
will vary. Thus, subject to §
.23(b),
examiners evaluate the actual services
and products provided by an institution
in connection with IDA programs as one
or more of the following: community
development services, retail banking
services, qualified investments, home
mortgage loans, small business loans,
consumer loans, or community
development loans.

§

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

.24—Service Test

§
.24(d) Performance Criteria—
Retail Banking Services
Q1. How do examiners evaluate the
availability and effectiveness of an
institution’s systems for delivering retail
banking services?
A1. Convenient access to full service
branches within a community is an
important factor in determining the
availability of credit and non-credit
services. Therefore, the service test
performance standards place primary
emphasis on full service branches while
still considering alternative systems,
such as automated teller machines
(‘‘ATMs’’). The principal focus is on an
institution’s current distribution of
branches; therefore, an institution is not
required to expand its branch network
or operate unprofitable branches. Under
the service test, alternative systems for
delivering retail banking services, such
as ATMs, are considered only to the
extent that they are effective alternatives
in providing needed services to lowand moderate-income areas and
individuals.
Q2. How do examiners evaluate an
institution’s activities in connection
with Individual Development Accounts
(IDAs)?
A2. Although there is no standard
IDA program, IDAs typically are deposit
accounts targeted to low- and moderateincome families that are designed to
help them accumulate savings for
education or job-training, downpayment and closing costs on a new
home, or start-up capital for a small
business. Once participants have
successfully funded an IDA, their
personal IDA savings are matched by a
public or private entity. Financial

Q1. How will examiners evaluate
alternative systems for delivering retail
banking services?
A1. The regulation recognizes the
multitude of ways in which an
institution can provide services, for
example, ATMs, banking by telephone
or computer, and bank-by-mail
programs. Delivery systems other than
branches will be considered under the
regulation to the extent that they are
effective alternatives to branches in
providing needed services to low- and
moderate-income areas and individuals.
The list of systems in the regulation is
not intended to be inclusive.
Q2. Are debit cards considered under
the service test as an alternative delivery
system?
A2. By themselves, no. However, if
debit cards are a part of a larger
combination of products, such as a
comprehensive electronic banking
service, that allows an institution to
deliver needed services to low- and
moderate-income areas and individuals
in its community, the overall delivery
system that includes the debit card
feature would be considered an
alternative delivery system.
§
.25 Community Development Test
for Wholesale or Limited Purpose
Institutions
§

.25(d) Indirect Activities

Q1. How are investments in third
party community development
organizations considered under the
community development test?
A1. Similar to the lending test for
retail institutions, investments in third

party community development
organizations may be considered as
qualified investments or as community
development loans or both (provided
there is no double counting), at the
institution’s option, as described above
in the discussion regarding §§
.22(d)
and
.23(b).
§
.25(e) Benefit to Assessment
Area(s)
Q1. How do examiners evaluate a
wholesale or limited purpose
institution’s qualified investment in a
fund that invests in projects nationwide
and which has a primary purpose of
community development, as that is
defined in the regulations?
A1. If examiners find that a wholesale
or limited purpose institution has
adequately addressed the needs of its
assessment area(s), they will give
consideration to qualified investments,
as well as community development
loans and community development
services, by that institution nationwide.
In determining whether an institution
has adequately addressed the needs of
its assessment area(s), examiners will
consider qualified investments that
benefit a broader statewide or regional
area that includes the institution’s
assessment area(s).
§
.25(f) Community Development
Performance Rating
Q1. Must a wholesale or limited
purpose institution engage in all three
categories of community development
activities (lending, investment and
service) to perform well under the
community development test?
A1. No, a wholesale or limited
purpose institution may perform well
under the community development test
by engaging in one or more of these
activities.
§
.26—Small Institution
Performance Standards
§

.26(a) Performance Criteria

Q1. May examiners consider, under
one or more of the performance criteria
of the small institution performance
standards, lending-related activities,
such as community development loans
and lending-related qualified
investments, when evaluating a small
institution?
A1. Yes. Examiners can consider
‘‘lending-related activities,’’ including
community development loans and
lending-related qualified investments,
when evaluating the first four
performance criteria of the small
institution performance test. Although
lending-related activities are specifically
mentioned in the regulation in

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
connection with only the first three
criteria (i.e., loan-to-deposit ratio,
percentage of loans in the institution’s
assessment area, and lending to
borrowers of different incomes and
businesses of different sizes), examiners
can also consider these activities when
they evaluate the fourth criteria—
geographic distribution of the
institution’s loans.
Q2. What is meant by ‘‘as
appropriate’’ when referring to the fact
that lending-related activities will be
considered, ‘‘as appropriate,’’ under the
various small institution performance
criteria?
A2. ‘‘As appropriate’’ means that
lending-related activities will be
considered when it is necessary to
determine whether an institution meets
or exceeds the standards for a
satisfactory rating. Examiners will also
consider other lending-related activities
at an institution’s request.
Q3. When evaluating a small
institution’s lending performance, will
examiners consider, at the institution’s
request, community development loans
originated or purchased by a consortium
in which the institution participates or
by a third party in which the institution
has invested?
A3. Yes. However, a small institution
that elects to have examiners consider
community development loans
originated or purchased by a consortium
or third party must maintain sufficient
information on its share of the
community development loans so that
the examiners may evaluate these loans
under the small institution performance
criteria.
Q4. Under the small institution
performance standards, will examiners
consider both loan originations and
purchases?
A4. Yes, consistent with the other
assessment methods in the regulation,
examiners will consider both loans
originated and purchased by the
institution. Likewise, examiners may
consider any other loan data the small
institution chooses to provide,
including data on loans outstanding,
commitments and letters of credit.
Q5. Under the small institution
performance standards, how will
qualified investments be considered for
purposes of determining whether a
small institution receives a satisfactory
CRA rating?
A5. The small institution performance
standards focus on lending and other
lending-related activities. Therefore,
examiners will consider only lendingrelated qualified investments for the
purposes of determining whether the
small institution receives a satisfactory
CRA rating.

§

.26(a)(1) Loan-to-deposit Ratio

Q1. How is the loan-to-deposit ratio
calculated?
A1. A small institution’s loan-todeposit ratio is calculated in the same
manner that the Uniform Bank
Performance Report/Uniform Thrift
Performance Report (UBPR/UTPR)
determines the ratio. It is calculated by
dividing the institution’s net loans and
leases by its total deposits. The ratio is
found in the Liquidity and Investment
Portfolio section of the UBPR and
UTPR. Examiners will use this ratio to
calculate an average since the last
examination by adding the quarterly
loan-to-deposit ratios and dividing the
total by the number of quarters.
Q2. How is the ‘‘reasonableness’’ of a
loan-to-deposit ratio evaluated?
A2. No specific ratio is reasonable in
every circumstance, and each small
institution’s ratio is evaluated in light of
information from the performance
context, including the institution’s
capacity to lend, demographic and
economic factors present in the
assessment area, and the lending
opportunities available in the
assessment area(s). If a small
institution’s loan-to-deposit ratio
appears unreasonable after considering
this information, lending performance
may still be satisfactory under this
criterion taking into consideration the
number and the dollar volume of loans
sold to the secondary market or the
number and amount and innovativeness
or complexity of community
development loans and lending-related
qualified investments.
Q3. If an institution makes a large
number of loans off-shore, will
examiners segregate the domestic loanto-deposit ratio from the foreign loan-todeposit ratio?
A3. No. Examiners will look at the
institution’s net loan-to-deposit ratio for
the whole institution, without any
adjustments.
§
.26(a)(2) Percentage of Lending
Within Assessment Area(s)
Q1. Must a small institution have a
majority of its lending in its assessment
area(s) to receive a satisfactory
performance rating?
A1. No. The percentage of loans and,
as appropriate, other lending-related
activities located in the bank’s
assessment area(s) is but one of the
performance criteria upon which small
institutions are evaluated. If the
percentage of loans and other lending
related activities in an institution’s
assessment area(s) is less than a
majority, then the institution does not
meet the standards for satisfactory

23639

performance only under this criterion.
The effect on the overall performance
rating of the institution, however, is
considered in light of the performance
context, including information
regarding economic conditions, loan
demand, the institution’s size, financial
condition and business strategies, and
branching network and other aspects of
the institution’s lending record.
§
.26(a)(3) & (4) Distribution of
Lending Within Assessment Area(s) by
Borrower Income and Geographic
Location
Q1. How will a small institution’s
performance be assessed under these
lending distribution criteria?
A1. Distribution of loans, like other
small institution performance criteria, is
considered in light of the performance
context. For example, a small institution
is not required to lend evenly
throughout its assessment area(s) or in
any particular geography. However, in
order to meet the standards for
satisfactory performance under this
criterion, conspicuous gaps in a small
institution’s loan distribution must be
adequately explained by performance
context factors such as lending
opportunities in the institution’s
assessment area(s), the institution’s
product offerings and business strategy,
and institutional capacity and
constraints. In addition, it may be
impracticable to review the geographic
distribution of the lending of an
institution with few demographically
distinct geographies within an
assessment area. If sufficient
information on the income levels of
individual borrowers or the revenues or
sizes of business borrowers is not
available, examiners may use proxies
such as loan size for estimating
borrower characteristics, where
appropriate.
§

.26(b) Performance Rating
Q1. How can a small institution
achieve an ‘‘outstanding’’ performance
rating?
A1. A small institution that meets
each of the standards for a ‘‘satisfactory’’
rating and exceeds some or all of those
standards may warrant an
‘‘outstanding’’ performance rating. In
assessing performance at the
‘‘outstanding’’ level, the agencies
consider the extent to which the
institution exceeds each of the
performance standards and, at the
institution’s option, its performance in
making qualified investments and
providing services that enhance credit
availability in its assessment area(s). In
some cases, a small institution may
qualify for an ‘‘outstanding’’

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

performance rating solely on the basis of
its lending activities, but only if its
performance materially exceeds the
standards for a ‘‘satisfactory’’ rating,
particularly with respect to the
penetration of borrowers at all income
levels and the dispersion of loans
throughout the geographies in its
assessment area(s) that display income
variation. An institution with a high
loan-to-deposit ratio and a high
percentage of loans in its assessment
area(s), but with only a reasonable
penetration of borrowers at all income
levels or a reasonable dispersion of
loans throughout geographies of
differing income levels in its assessment
area(s), generally will not be rated
‘‘outstanding’’ based only on its lending
performance. However, the institution’s
performance in making qualified
investments and its performance in
providing branches and other services
and delivery systems that enhance
credit availability in its assessment
area(s) may augment the institution’s
satisfactory rating to the extent that it
may be rated ‘‘outstanding.’’
Q2. Will a small institution’s qualified
investments, community development
loans, and community development
services be considered if they do not
directly benefit its assessment area(s)?
A2. Yes. These activities are eligible
for consideration if they benefit a
broader statewide or regional area that
includes a small institution’s
assessment area(s), as discussed more
fully in Q&A6 addressing §§
.12(i)
and 563e.12(h).
§

.27—Strategic Plan

§

.27(c) Plans in General

Q1. To what extent will the agencies
provide guidance to an institution
during the development of its strategic
plan?
A1. An institution will have an
opportunity to consult with and provide
information to the agencies on a
proposed strategic plan. Through this
process, an institution is provided
guidance on procedures and on the
information necessary to ensure a
complete submission. For example, the
agencies will provide guidance on
whether the level of detail as set out in
the proposed plan would be sufficient to
permit agency evaluation of the plan.
However, the agencies’ guidance during
plan development and, particularly,
prior to the public comment period, will
not include commenting on the merits
of a proposed strategic plan or on the
adequacy of measurable goals.
Q2. How will a joint strategic plan be
reviewed if the affiliates have different
primary Federal supervisors?

A2. The agencies will coordinate
review of and action on the joint plan.
Each agency will evaluate the
measurable goals for those affiliates for
which it is the primary regulator.
§

.27(f) Plan Content

§

.27(f)(1) Measurable Goals

Q1. How should ‘‘measurable goals’’
be specified in a strategic plan?
A1. Measurable goals (e.g., number of
loans, dollar amount, geographic
location of activity, and benefit to lowand moderate-income areas or
individuals) must be stated with
sufficient specificity to permit the
public and the agencies to quantify what
performance will be expected. However,
institutions are provided flexibility in
specifying goals. For example, an
institution may provide ranges of
lending amounts in different categories
of loans. Measurable goals may also be
linked to funding requirements of
certain public programs or indexed to
other external factors as long as these
mechanisms provide a quantifiable
standard.
§

.27(g) Plan Approval

§

.27(g)(2) Public Participation

Q1. How will the public receive notice
of a proposed strategic plan?
A1. An institution submitting a
strategic plan for approval by the
agencies is required to solicit public
comment on the plan for a period of
thirty (30) days after publishing notice
of the plan at least once in a newspaper
of general circulation. The notice should
be sufficiently prominent to attract
public attention and should make clear
that public comment is desired. An
institution may, in addition, provide
notice to the public in any other manner
it chooses.
§

.28—Assigned Ratings

Q1. Are innovative lending practices,
innovative or complex qualified
investments, and innovative community
development services required for a
‘‘satisfactory’’ or ‘‘outstanding’’ CRA
rating?
A1. No. Moreover, the lack of
innovative lending practices, innovative
or complex qualified investments, or
innovative community development
services alone will not result in a
‘‘needs to improve’’ CRA rating.
However, the use of innovative lending
practices, innovative or complex
qualified investments, and innovative
community development services may
augment the consideration given to an
institution’s performance under the
quantitative criteria of the regulations,

resulting in a higher level of
performance rating.
Q2. How is performance under the
quantitative and qualitative
performance criteria weighed when
examiners assign a CRA rating?
A2. The lending, investment, and
service tests each contain a number of
performance criteria designed to
measure whether an institution is
effectively helping to meet the credit
needs of its entire community,
including low- and moderate-income
neighborhoods, in a safe and sound
manner. Some of these performance
criteria are quantitative, such as number
and amount, and others, such as the use
of innovative or flexible lending
practices, the innovativeness or
complexity of qualified investments,
and the innovativeness and
responsiveness of community
development services, are qualitative.
The performance criteria that deal with
these qualitative aspects of performance
recognize that these loans, qualified
investments, and community
development services sometimes require
special expertise and effort on the part
of the institution and provide a benefit
to the community that would not
otherwise be possible. As such, the
agencies consider the qualitative aspects
of an institution’s activities when
measuring the benefits received by a
community. An institution’s
performance under these qualitative
criteria may augment the consideration
given to an institution’s performance
under the quantitative criteria of the
regulations, resulting in a higher level of
performance and rating.
§

.28(a) Ratings in General
Q1. How are institutions with
domestic branches in more than one
state assigned a rating?
A1. The evaluation of an institution
that maintains domestic branches in
more than one state (‘‘multistate
institution’’) will include a written
evaluation and rating of its CRA record
of performance as a whole and in each
state in which it has a domestic branch.
The written evaluation will contain a
separate presentation on a multistate
institution’s performance for each
metropolitan statistical area and the
nonmetropolitan area within each state,
if it maintains one or more domestic
branch offices in these areas. This
separate presentation will contain
conclusions, supported by facts and
data, on performance under the
performance tests and standards in the
regulation. The evaluation of a
multistate institution that maintains a
domestic branch in two or more states
in a multistate metropolitan area will

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
include a written evaluation (containing
the same information described above)
and rating of its CRA record of
performance in the multistate
metropolitan area. In such cases, the
statewide evaluation and rating will be
adjusted to reflect performance in the
portion of the state not within the
multistate metropolitan statistical area.
Q2. How are institutions that operate
within only a single state assigned a
rating?
A2. An institution that operates
within only a single state (‘‘single-state
institution’’) will be assigned a rating of
its CRA record based on its performance
within that state. In assigning this
rating, the agencies will separately
present a single-state institution’s
performance for each metropolitan area
in which the institution maintains one
or more domestic branch offices. This
separate presentation will contain
conclusions, supported by facts and
data, on the single-state institution’s
performance under the performance
tests and standards in the regulation.
Q3. How do the agencies weight
performance under the lending,
investment and service test for large
retail institutions?
A3. A rating of ‘‘outstanding,’’ ‘‘high
satisfactory,’’ ‘‘low satisfactory,’’ ‘‘needs
to improve,’’ or ‘‘substantial
noncompliance,’’ based on a judgment
supported by facts and data, will be
assigned under each performance test.
Points will then be assigned to each
rating as described in the first matrix set
forth below. A large retail institution’s
overall rating under the lending,
investment and service tests will then
be calculated in accordance with the
second matrix set forth below, which
incorporates the rating principles in the
regulation.

POINTS ASSIGNED FOR PERFORMANCE
UNDER LENDING, INVESTMENT AND
SERVICE TESTS
Lending
Outstanding ......
High Satisfactory
Low Satisfactory
Needs to Improve .............
Substantial Noncompliance ....

Service

Investment

12
9
6

6
4
3

6
4
3

3

1

1

0

0

0

COMPOSITE RATING POINT
REQUIREMENTS
[Add points from three tests]
Rating
Outstanding .......................

Total points
20 or over.

COMPOSITE RATING POINT
REQUIREMENTS—Continued
[Add points from three tests]
Rating
Satisfactory ........................
Needs to Improve ..............
Substantial Noncompliance

Total points
11 through 19.
5 through 10
0 through 4.

Note: There is one exception to the Composite Rating matrix. An institution may not receive a rating of ‘‘satisfactory’’ unless it receives at least ‘‘low satisfactory’’ on the lending test. Therefore, the total points are capped
at three times the lending test score.

§
.29—Effect of CRA Performance
on Applications
§

.29(a) CRA Performance

Q1. What weight is given to an
institution’s CRA performance
examination in reviewing an
application?
A1. In cases in which CRA
performance is a relevant factor,
information from a CRA performance
examination of the institution is a
particularly important consideration in
the applications process because it
represents a detailed evaluation of the
institution’s CRA performance by its
Federal supervisory agency. In this
light, an examination is an important,
and often controlling, factor in the
consideration of an institution’s record.
In some cases, however, the
examination may not be recent or a
specific issue raised in the application
process, such as progress in addressing
weaknesses noted by examiners,
progress in implementing commitments
previously made to the reviewing
agency, or a supported allegation from
a commenter, is relevant to CRA
performance under the regulation and
was not addressed in the examination.
In these circumstances, the applicant
should present sufficient information to
supplement its record of performance
and to respond to the substantive issues
raised in the application proceeding.
Q2. What consideration is given to an
institution’s commitments for future
action in reviewing an application by
those agencies that consider such
commitments?
A2. Commitments for future action
are not viewed as part of the CRA record
of performance. In general, institutions
cannot use commitments made in the
applications process to overcome a
seriously deficient record of CRA
performance. However, commitments
for improvements in an institution’s
performance may be appropriate to
address specific weaknesses in an
otherwise satisfactory record or to
address CRA performance when a

23641

financially troubled institution is being
acquired.
§

.29(b) Interested Parties

Q1. What consideration is given to
comments from interested parties in
reviewing an application?
A1. Materials relating to CRA
performance received during the
applications process can provide
valuable information. Written
comments, which may express either
support for or opposition to the
application, are made a part of the
record in accordance with the agencies’
procedures, and are carefully
considered in making the agencies’
decision. Comments should be
supported by facts about the applicant’s
performance and should be as specific
as possible in explaining the basis for
supporting or opposing the application.
These comments must be submitted
within the time limits provided under
the agencies’ procedures.
Q2. Is an institution required to enter
into agreements with private parties?
A2. No. Although communications
between an institution and members of
its community may provide a valuable
method for the institution to assess how
best to address the credit needs of the
community, the CRA does not require
an institution to enter into agreements
with private parties. These agreements
are not monitored or enforced by the
agencies.
§
.41—Assessment Area
Delineation
§

.41(a) In General

Q1. How do the agencies evaluate
‘‘assessment areas’’ under the revised
CRA regulations compared to how they
evaluated ‘‘local communities’’ that
institutions delineated under the
original CRA regulations?
A1. The revised rule focuses on the
distribution and level of an institution’s
lending, investments, and services
rather than on how and why an
institution delineated its ‘‘local
community’’ or assessment area(s) in a
particular manner. Therefore, the
agencies will not evaluate an
institution’s delineation of its
assessment area(s) as a separate
performance criterion as they did under
the original regulation. Rather, the
agencies will only review whether the
assessment area delineated by the
institution complies with the limitations
set forth in the regulations at
§
.41(e).
Q2. If an institution elects to have the
agencies consider affiliate lending, will
this decision affect the institution’s
assessment area(s)?

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

A2. If an institution elects to have the
lending activities of its affiliates
considered in the evaluation of the
institution’s lending, the geographies in
which the affiliate lends do not affect
the institution’s delineation of
assessment area(s).
Q3. Can a financial institution
identify a specific ethnic group rather
than a geographic area as its assessment
area?
A3. No, assessment areas must be
based on geography.
§
.41(c) Geographic Area(s) for
Institutions Other Than Wholesale or
Limited Purpose Institutions
§
.41(c)(1) Generally Consist of One
or More MSAs or One or More
Contiguous Political Subdivisions
Q1. Besides cities, towns, and
counties, what other units of local
government are political subdivisions
for CRA purposes?
A1. Townships and Indian
reservations are political subdivisions
for CRA purposes. Institutions should
be aware that the boundaries of
townships and Indian reservations may
not be consistent with the boundaries of
the census tracts or block numbering
areas (‘‘geographies’’) in the area. In
these cases, institutions must ensure
that their assessment area(s) consists
only of whole geographies by adding
any portions of the geographies that lie
outside the political subdivision to the
delineated assessment area(s).
Q2. Are wards, school districts, voting
districts, and water districts political
subdivisions for CRA purposes?
A2. No. However, an institution that
determines that it predominantly serves
an area that is smaller than a city, town
or other political subdivision may
delineate as its assessment area the
larger political subdivision and then, in
accordance with §
.41(d), adjust the
boundaries of the assessment area to
include only the portion of the political
subdivision that it reasonably can be
expected to serve. The smaller area that
the institution delineates must consist
of entire geographies, may not reflect
illegal discrimination, and may not
arbitrarily exclude low- or moderateincome geographies.

entire political subdivisions. Because
census tracts and block numbering areas
are the common geographic areas used
consistently nationwide for data
collection, the agencies require that
assessment areas be made up of whole
geographies. If including an entire
political subdivision would create an
area that is larger than the area the
institution can reasonably be expected
to serve, an institution may, but is not
required to, adjust the boundaries of its
assessment area to include only portions
of the political subdivision. For
example, this adjustment is appropriate
if the assessment area would otherwise
be extremely large, of unusual
configuration, or divided by significant
geographic barriers (such as a river,
mountain, or major highway system).
When adjusting the boundaries of their
assessment areas, institutions must not
arbitrarily exclude low- or moderateincome geographies or set boundaries
that reflect illegal discrimination.
§
.41(e) Limitations on Delineation
of an Assessment Area
§
.41(e)(3) May Not Arbitrarily
Exclude Low- or Moderate-income
Geographies
Q1. How will examiners determine
whether an institution has arbitrarily
excluded low- or moderate-income
geographies?
A1. Examiners will make this
determination on a case-by-case basis
after considering the facts relevant to
the institution’s assessment area
delineation. Information that examiners
will consider may include:
• Income levels in the institution’s
assessment area(s) and surrounding
geographies;
• Locations of branches and deposittaking ATMs;
• Loan distribution in the
institution’s assessment area(s) and
surrounding geographies;
• The institution’s size;
• The institution’s financial
condition; and
• The business strategy, corporate
structure and product offerings of the
institution.

§
.41(d) Adjustments to Geographic
Area(s)

§
.41(e)(4) May Not Extend
Substantially Beyond a CMSA Boundary
or Beyond a State Boundary Unless
Located in a Multistate MSA

Q1. When may an institution adjust
the boundaries of an assessment area to
include only a portion of a political
subdivision?
A1. Institutions must include whole
geographies (i.e., census tracts or block
numbering areas) in their assessment
areas and generally should include

Q1. What are the maximum limits on
the size of an assessment area?
A1. An institution shall not delineate
an assessment area extending
substantially across the boundaries of a
consolidated metropolitan statistical
area (CMSA) or the boundaries of an
MSA, if the MSA is not located in a

CMSA. Similarly, an assessment area
may not extend substantially across
state boundaries unless the assessment
area is located in a multistate MSA. An
institution may not delineate a whole
state as its assessment area unless the
entire state is contained within a CMSA.
These limitations apply to wholesale
and limited purpose institutions as well
as other institutions.
An institution shall delineate separate
assessment areas for the areas inside
and outside a CMSA (or MSA if the
MSA is not located in a CMSA) if the
area served by the institution’s branches
outside the CMSA (or MSA) extends
substantially beyond the CMSA (or
MSA) boundary. Similarly, the
institution shall delineate separate
assessment areas for the areas inside
and outside of a state if the institution’s
branches extend substantially beyond
the boundary of one state (unless the
assessment area is located in a
multistate MSA). In addition, the
institution should also delineate
separate assessment areas if it has
branches in areas within the same state
that are widely separate and not at all
contiguous. For example, an institution
that has its main office in New York
City and a branch in Buffalo, New York,
and each office serves only the
immediate areas around it, should
delineate two separate assessment areas.
Q2. Can an institution delineate one
assessment area that consists of an MSA
and two large counties that abut the
MSA but are not adjacent to each other?
A2. As a general rule, an institution’s
assessment area should not extend
substantially beyond the boundary of an
MSA if the MSA is not located in a
CMSA. Therefore, the MSA would be a
separate assessment area, and because
the two abutting counties are not
adjacent to each other and, in this
example, extend substantially beyond
the boundary of the MSA, the
institution would delineate each county
as a separate assessment area (so, in this
example, there would be three
assessment areas). However, if the MSA
and the two counties were in the same
CMSA, then the institution could
delineate only one assessment area
including them all.
§
.42—Data Collection, Reporting,
and Disclosure
Q1. When must an institution collect
and report data under the CRA
regulations?
A1. All institutions except small
institutions are subject to data collection
and reporting requirements. A small
institution is a bank or thrift that, as of
December 31 of either of the prior two
calendar years, had total assets of less

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
than $250 million and was independent
or an affiliate of a holding company
that, as of December 31 of either of the
prior two calendar years, had total
banking and thrift assets of less than $1
billion.
For example:
Institution’s
asset size
($ million)

Date

12/31/94
12/31/95
12/31/96
12/31/97
12/31/98

.....
.....
.....
.....
.....

$240
260
230
280
260

Data collection
required for following calendar
year?
(million)
No.
No.
No.
No.
Yes, beginning
1/01/99.

All institutions that are subject to the
data collection and reporting
requirements must report the data for a
calendar year by March 1 of the
subsequent year. In the example, above,
the institution would report the data
collected for calendar year 1999 by
March 1, 2000.
The Board of Governors of the Federal
Reserve System is handling the
processing of the reports for all of the
primary regulators. The reports should
be submitted in a prescribed electronic
format on a timely basis. The mailing
address for submitting these reports is:
Attention: CRA Processing, Board of
Governors of the Federal Reserve
System, 1709 New York Avenue, N.W.,
5th Floor, Washington, DC 20006.
Q2. Should an institution develop its
own program for data collection, or will
the regulators require a certain format?
A2. An institution may use the free
software that is provided by the FFIEC
to reporting institutions for data
collection and reporting or develop its
own program. Those institutions that
develop their own programs must
follow the precise format for the new
CRA data collection and reporting rules.
This format may be obtained by
contacting the CRA Assistance Line at
(202) 872–7584.
Q3. How should an institution report
data on lines of credit?
A3. Institutions must collect and
report data on lines of credit in the same
way that they provide data on loan
originations. Lines of credit are
considered originated at the time the
line is approved or increased; and an
increase is considered a new
origination. Generally, the full amount
of the credit line is the amount that is
considered originated. In the case of an
increase to an existing line, the amount
of the increase is the amount that is
considered originated and that amount
should be reported.

Q4. Should renewals of lines of credit
be reported?
A4. No. Similar to loan renewals,
renewals of lines of credit are not
considered loan originations and should
not be reported.
Q5. When should merging institutions
collect data?
A5. Three scenarios of data collection
responsibilities for the calendar year of
a merger and subsequent data reporting
responsibilities are described below.
• Two institutions are exempt from
CRA collection and reporting
requirements because of asset size. The
institutions merge. No data collection is
required for the year in which the
merger takes place, regardless of the
resulting asset size. Data collection
would begin after two consecutive years
in which the combined institution had
year-end assets of at least $250 million
or was part of a holding company that
had year-end banking and thrift assets of
at least $1 billion.
• Institution A, an institution
required to collect and report the data,
and Institution B, an exempt institution,
merge. Institution A is the surviving
institution. For the year of the merger,
data collection is required for Institution
A’s transactions. Data collection is
optional for the transactions of the
previously exempt institution. For the
following year, all transactions of the
surviving institution must be collected
and reported.
• Two institutions that each are
required to collect and report the data
merge. Data collection is required for
the entire year of the merger and for
subsequent years so long as the
surviving institution is not exempt. The
surviving institution may file either a
consolidated submission or separate
submissions for the year of the merger
but must file a consolidated report for
subsequent years.
Q6. Can small institutions get a copy
of the data collection software even
though they are not required to collect
or report data?
A6. Yes. Any institution that is
interested in receiving a copy of the
software may send a written request to:
Attn.: CRA Processing, Board of
Governors of the Federal Reserve
System, 1709 New York Ave, N.W., 5th
Floor, Washington, DC 20006.
They may also call the CRA
Assistance Line at (202) 872–7584 or
send Internet e-mail to
CRAHELP@FRB.GOV.
Q7. If a small institution is designated
a wholesale or limited purpose
institution, must it collect data that it
would not otherwise be required to
collect because it is a small institution?

23643

A7. No. However, small institutions
must be prepared to identify those
loans, investments and services to be
evaluated under the community
development test.
§
.42(a) Loan Information Required
to be Collected and Maintained
Q1. Must institutions collect and
report data on all commercial loans
under $1 million at origination?
A1. No. Institutions that are not
exempt from data collection and
reporting are required to collect and
report only those commercial loans that
they capture in the Call Report,
Schedule RC–C, Part II, and in the TFR,
Schedule SB. Small business loans are
defined as those whose original
amounts are $1 million or less and that
were reported as either ‘‘Loans secured
by nonfarm or nonresidential real
estate’’ or ‘‘Commercial and Industrial
loans’’ in Part I of the Call Report or
TFR.
Q2. For loans defined as small
business loans, what information should
be collected and maintained?
A2. Institutions that are not exempt
from data collection and reporting are
required to collect and maintain in a
standardized, machine readable format
information on each small business loan
originated or purchased for each
calendar year:
• A unique number or alpha-numeric
symbol that can be used to identify the
relevant loan file;
• The loan amount at origination; The
loan location; and
• An indicator whether the loan was
to a business with gross annual
revenues of $1 million or less.
• The location of the loan must be
maintained by census tract or block
numbering area. In addition,
supplemental information contained in
the file specifications includes a date
associated with the origination or
purchase and whether a loan was
originated or purchased by an affiliate.
The same requirements apply to small
farm loans.
Q3. Will farm loans need to be
segregated from business loans?
A3. Yes.
Q4. Should institutions collect and
report data on all agricultural loans
under $500,000 at origination?
A4. Institutions are to report those
farm loans that they capture in the Call
Report, Schedule RC–C, Part II and
Schedule SB of the TFR. Small farm
loans are defined as those whose
original amounts are $500,000 or less
and were reported as either ‘‘Loans to
finance agricultural production and
other loans to farmers’’ or ‘‘Loans

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

secured by farmland’’ in Part I of the
Call Report and TFR.
Q5. Should institutions collect and
report data about small business and
small farm loans that are refinanced or
renewed?
A5. An institution collects and reports
information about refinancings but does
not collect and report information about
renewals. A refinancing typically
involves the satisfaction of an existing
obligation that is replaced by a new
obligation undertaken by the same
borrower. When an institution
refinances a loan, it is considered a new
origination, and loan data should be
collected and reported, if otherwise
required. Consistent with HMDA,
however, if under the original loan
agreement, the institution is
unconditionally obligated to refinance
the loan, or is obligated to refinance the
loan subject to conditions within the
borrower’s control, the institution
would not report these events as
originations.
For purposes of the CRA data
collection and reporting requirements,
an extension of the maturity of an
existing loan is a renewal, and is not
considered a loan origination.
Therefore, institutions should not
collect and report data on loan
renewals.
Q6. Does a loan to the ‘‘fishing
industry’’ come under the definition of
a small farm loan?
A6. Yes. Instructions for Part I of the
Call Report and Schedule SB of the TFR
include loans ‘‘made for the purpose of
financing fisheries and forestries,
including loans to commercial
fishermen’’ as a component of the
definition for ‘‘Loans to finance
agricultural production and other loans
to farmers.’’ Part II of Schedule RC–C of
the Call Report and Schedule SB of the
TFR, which serve as the basis of the
definition for small business and small
farm loans in the revised regulation,
capture both ‘‘Loans to finance
agricultural production and other loans
to farmers’’ and ‘‘Loans secured by
farmland.’’
Q7. How should an institution report
a home equity line of credit, part of
which is for home improvement
purposes, but the predominant part of
which is for small business purposes?
A7. The institution has the option of
reporting the portion of the home equity
line that is for home improvement
purposes under HMDA. That portion of
the loan would then be considered
when examiners evaluate home
mortgage lending. If the line meets the
regulatory definition of a ‘‘community
development loan,’’ the institution
should collect and report information

on the entire line as a community
development loan. If the line does not
qualify as a community development
loan, the institution has the option of
collecting and maintaining (but not
reporting) the entire line of credit as
‘‘Other Secured Lines/Loans for
Purposes of Small Business.’’
Q8. When collecting small business
and small farm data for CRA purposes,
may an institution collect and report
information about loans to small
businesses and small farms located
outside the United States?
A8. At an institution’s option, it may
collect data about small business and
small farm loans located outside the
United States; however, it cannot report
this data because the CRA data
collection software will not accept data
concerning loan locations outside the
United States.
Q9. Is an institution that has no small
farm or small business loans required to
report under CRA?
A9. Each institution subject to data
reporting requirements must, at a
minimum, submit a transmittal sheet,
definition of its assessment area(s), and
a record of its community development
loans. If the institution does not have
community development loans to
report, the record should be sent with
‘‘0’’ in the community development
loan composite data fields. An
institution that has not purchased or
originated any small business or small
farm loans during the reporting period
would not submit the composite loan
records for small business or small farm
loans.
Q10. How should an institution
collect and report the location of a loan
made to a small business or farm if the
borrower provides an address that
consists of a post office box number or
a rural route and box number?
A10. Prudent banking practices
dictate that an institution know the
location of its customers and loan
collateral. Therefore, institutions
typically will know the actual location
of their borrowers or loan collateral
beyond an address consisting only of a
post office box.
Many borrowers have street addresses
in addition to post office box numbers
or rural route and box numbers.
Institutions should ask their borrowers
to provide the street address of the main
business facility or farm or the location
where the loan proceeds otherwise will
be applied. Moreover, in many cases in
which the borrower’s address consists
only of a rural route number or post
office box, the institution knows the
location (i.e., the census tract or block
numbering area) of the borrower or loan
collateral. Once the institution has this

information available, it should assign a
census tract or block numbering area to
that location (geocode) and report that
information as required under the
regulation.
For loans originated or purchased in
1998 or later, if the institution cannot
determine the borrower’s street address,
and does not know the census tract or
block numbering area, the institution
should report the borrower’s state,
county, MSA, if applicable, and ‘‘NA,’’
for ‘‘not available,’’ in lieu of a census
tract or block numbering area code.
§
.42(a)(2) Loan Amount at
Origination
Q1. When an institution purchases a
small business or small farm loan,
which amount should the institution
collect and report—the original amount
of the loan or the amount at purchase?
A1. When collecting and reporting
information on purchased small
business and small farm loans, an
institution collects and reports the
amount of the loan at origination, not at
the time of purchase. This is consistent
with the Call Report’s and TFR’s use of
the ‘‘original amount of the loan’’ to
determine whether a loan should be
reported as a ‘‘loan to a small business’’
or a ‘‘loan to a small farm’’ and in which
loan size category a loan should be
reported. When assessing the volume of
small business and small farm loan
purchases for purposes of evaluating
lending test performance under CRA,
however, examiners will evaluate an
institution’s activity based on the
amounts at purchase.
Q2. How should an institution collect
data about multiple loan originations to
the same business?
A2. If an institution makes multiple
originations to the same business, the
loans should be collected and reported
as separate originations rather than
combined and reported as they are on
the Call Report or TFR, which reflect
loans outstanding, rather than
originations. However, if institutions
make multiple originations to the same
business solely to inflate artificially the
number or volume of loans evaluated for
CRA lending performance, the agencies
may combine these loans for purposes
of evaluation under the CRA.
Q3. How should an institution collect
data pertaining to credit cards issued to
small businesses?
A3. If an institution agrees to issue
credit cards to a business’ employees,
all of the credit card lines opened on a
particular date for that single business
should be reported as one small
business loan origination rather than
reporting each individual credit card
line, assuming the criteria in the ‘‘small

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
business loan’’ definition in the
regulation are met. The credit card
program’s ‘‘amount at origination’’ is the
sum of all of the employee/business
credit cards’’ credit limits opened on a
particular date. If subsequently issued
credit cards increase the small business
credit line, the added amount is
reported as a new origination.
§

.42(a)(3) The Loan Location
Q1. Which location should an
institution record if a small business
loan’s proceeds are used in a variety of
locations?
A1. The institution should record the
loan location by either the location of
the business headquarters or the
location where the greatest portion of
the proceeds are applied, as indicated
by the borrower.
§
.42(a)(4) Indicator of Gross
Annual Revenue
Q1. When indicating whether a small
business borrower had gross annual
revenues of $1 million or less, upon
what revenues should an institution
rely?
A1. Generally, an institution should
rely on the revenues that it considered
in making its credit decision. For
example, in the case of affiliated
businesses, such as a parent corporation
and its subsidiary, if the institution
considered the revenues of the entity’s
parent or a subsidiary corporation of the
parent as well, then the institution
would aggregate the revenues of both
corporations to determine whether the
revenues are $1 million or less.
Alternatively, if the institution
considered the revenues of only the
entity to which the loan is actually
extended, the institution should rely
solely upon whether gross annual
revenues are above or below $1 million
for that entity. However, if the
institution considered and relied on
revenues or income of a cosigner or
guarantor that is not an affiliate of the
borrower, the institution should not
adjust the borrower’s revenues for
reporting purposes.
Q2. If an institution that is not exempt
from data collection and reporting does
not request or consider revenue
information to make the credit decision
regarding a small business or small farm
loan, must the institution collect
revenue information in connection with
that loan?
A2. No. In those instances, the
institution should enter the code
indicating ‘‘revenues not known’’ on the
individual loan portion of the data
collection software or on an internally
developed system. Loans for which the
institution did not collect revenue

information may not be included in the
loans to businesses and farms with gross
annual revenues of $1 million or less
when reporting this data.
Q3. What gross revenue should an
institution use in determining the gross
annual revenue of a start-up business?
A3. The institution should use the
actual gross annual revenue to date
(including $0 if the new business has
had no revenue to date). Although a
start-up business will provide the
institution with pro forma projected
revenue figures, these figures may not
accurately reflect actual gross revenue.
Q4: When collecting and reporting the
gross annual revenue of small business
or farm borrowers, do institutions
collect and report the gross annual
revenue or the adjusted gross annual
revenue of its borrowers?
A4: Institutions collect and report the
gross annual revenue, rather than the
adjusted gross annual revenue, of their
small business or farm borrowers. The
purpose of this data collection is to
enable examiners and the public to
judge whether the institution is lending
to small businesses and farms or
whether it is only making small loans to
larger businesses and farms.
The regulation does not require
institutions to request or consider
revenue information when making a
loan; however, if institutions do gather
this information from their borrowers,
the agencies expect them to collect and
report the borrowers’ gross annual
revenue for purposes of CRA. The CRA
regulations similarly do not require
institutions to verify revenue amounts;
thus, institutions may rely on the gross
annual revenue amount provided by
borrowers in the ordinary course of
business. If an institution does not
collect gross annual revenue
information for its small business and
small farm borrowers, the institution
would not indicate on the CRA data
collection software that the gross annual
revenues of the borrower are $1 million
or less. (See Q&A2 regarding
§
.42(a)(4).)
§
.42(b) Loan Information Required
to be Reported
§
.42(b)(1) Small Business and
Small Farm Loan Data
Q1. For small business and small
farm loan information that is collected
and maintained, what data should be
reported?
A1. Each institution that is not
exempt from data collection and
reporting is required to report in
machine-readable form annually by
March 1 the following information,
aggregated for each census tract or block

23645

numbering area in which the institution
originated or purchased at least one
small business or small farm loan
during the prior year:
• The number and amount of loans
originated or purchased with original
amounts of $100,000 or less;
• The number and amount of loans
originated or purchased with original
amounts of more than $100,000 but less
than or equal to $250,000;
• The number and amount of loans
originated or purchased with original
amounts of more than $250,000 but not
more than $1 million, as to small
business loans, or $500,000, as to small
farm loans; and
• To the extent that information is
available, the number and amount of
loans to businesses and farms with gross
annual revenues of $1 million or less
(using the revenues the institution
considered in making its credit
decision).
§
.42(b)(2) Community Development
Loan Data
Q1. What information about
community development loans must
institutions report?
A1. Institutions subject to data
reporting requirements must report the
aggregate number and amount of
community development loans
originated and purchased during the
prior calendar year.
Q2. If a loan meets the definition of
a home mortgage, small business, or
small farm loan AND qualifies as a
community development loan, where
should it be reported? Can FHA, VA and
SBA loans be reported as community
development loans?
A2. Except for multifamily affordable
housing loans, which may be reported
by retail institutions both under HMDA
as home mortgage loans and as
community development loans, in order
to avoid double counting, retail
institutions must report loans that meet
the definitions of home mortgage, small
business, or small farm loans only in
those respective categories even if they
also meet the definition of community
development loans. As a practical
matter, this is not a disadvantage for
retail institutions because any affordable
housing mortgage, small business, small
farm or consumer loan that would
otherwise meet the definition of a
community development loan will be
considered elsewhere in the lending
test. Any of these types of loans that
occur outside the institution’s
assessment area can receive
consideration under the borrower
characteristic criteria of the lending test.
See Q&A4 under §
.22(b)(2) & (3).

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Limited purpose and wholesale
institutions also must report loans that
meet the definitions of home mortgage,
small business, or small farm loans in
those respective categories; however,
they must also report any loans from
those categories that meet the regulatory
definition of ‘‘community development
loans’’ as community development
loans. There is no double counting
because wholesale and limited purpose
institutions are not subject to the
lending test and, therefore, are not
evaluated on their level and distribution
of home mortgage, small business, small
farm and consumer loans.
Q3. When the primary purpose of a
loan is to finance an affordable housing
project for low-or moderate-income
individuals, but, for example, only 40%
of the units in question will actually be
occupied by individuals or families with
low or moderate incomes, should the
entire loan amount be reported as a
community development loan?
A3. Yes. As long as the primary
purpose of the loan is a community
development purpose, the full amount
of the institution’s loan should be
included in its reporting of aggregate
amounts of community development
lending. However, as noted in Q&A1
addressing §
.22(b)(4), examiners
may make qualitative distinctions
among community development loans
on the basis of the extent to which the
loan advances the community
development purpose.
§

.42(b)(3) Home Mortgage Loans

Q1. Must institutions that are not
required to collect home mortgage loan
data by the HMDA collect home
mortgage loan data for purposes of the
CRA?
A1. No. If an institution is not
required to collect home mortgage loan
data by the HMDA, the institution need
not collect home mortgage loan data
under the CRA. Examiners will sample
these loans to evaluate the institution’s
home mortgage lending. If an institution
wants to ensure that examiners consider
all of its home mortgage loans, the
institution may collect and maintain
data on these loans.
§
.42(c) Optional Data Collection
and Maintenance
§

.42(c)(1) Consumer Loans

Q1. What are the data requirements
regarding consumer loans?
A1. There are no data reporting
requirements for consumer loans.
Institutions may, however, opt to collect
and maintain data on consumer loans. If
an institution chooses to collect
information on consumer loans, it may

collect data for one or more of the
following categories of consumer loans:
motor vehicle, credit card, home equity,
other secured, and other unsecured. If
an institution collects data for loans in
a certain category, it must collect data
for all loans originated or purchased
within that category. The institution
must maintain these data separately for
each category for which it chooses to
collect data. The data collected and
maintained should include for each
loan:
• A unique number or alpha-numeric
symbol that can be used to identify the
relevant loan file;
• The loan amount at origination or
purchase;
• The loan location; and
• The gross annual income of the
borrower that the institution considered
in making its credit decision.
Generally, guidance given with
respect to data collection of small
business and small farm loans,
including, for example, guidance
regarding collecting loan location data,
and whether to collect data in
connection with refinanced or renewed
loans, will also apply to consumer
loans.
§

.42(c)(1)(iv) Income of Borrower
Q1. If an institution does not consider
income when making an underwriting
decision in connection with a consumer
loan, must it collect income
information?
A1. No. Further, if the institution
routinely collects, but does not verify, a
borrower’s income when making a
credit decision, it need not verify the
income for purposes of data
maintenance.
Q2. May an institution list ‘‘0’’ in the
income field on consumer loans made
to employees when collecting data for
CRA purposes as the institution would
be permitted to do under HMDA?
A2. Yes.
Q3. When collecting the gross annual
income of consumer borrowers, do
institutions collect the gross annual
income or the adjusted gross annual
income of the borrowers?
A3. Institutions collect the gross
annual income, rather than the adjusted
gross annual income, of consumer
borrowers. The purpose of income data
collection in connection with consumer
loans is to enable examiners to
determine the distribution, particularly
in the institution’s assessment area(s), of
the institution’s consumer loans, based
on borrower characteristics, including
the number and amount of consumer
loans to low-, moderate-, middle-, and
upper-income borrowers, as determined
on the basis of gross annual income.

The regulation does not require
institutions to request or consider
income information when making a
loan; however, if institutions do gather
this information from their borrowers,
the agencies expect them to collect the
borrowers’ gross annual income for
purposes of CRA. The CRA regulations
similarly do not require institutions to
verify income amounts; thus,
institutions may rely on the gross
annual income amount provided by
borrowers in the ordinary course of
business.
§

.42(c)(2) Other Loan Data
Q1. Schedule RC–C, Part II of the Call
Report and schedule SB of the TFR do
not allow financial institutions to report
loans for commercial and industrial
purposes that are secured by residential
real estate. Loans extended to small
businesses with gross annual revenues
of $1 million or less may, however, be
secured by residential real estate. Is
there a way to collect this information
on the software to supplement an
institution’s small business lending data
at the time of examination?
A1. Yes. If these loans promote
community development, as defined in
the regulation, the institution should
collect and report information about
these loans as community development
loans. Otherwise, at an institution’s
option, it may collect and maintain data
concerning loans, purchases, and lines
of credit extended to small businesses
and secured by residential real estate for
consideration in the CRA evaluation of
its small business lending. To facilitate
this optional data collection, the
software distributed free-of-charge by
the FFIEC provides that an institution
may collect this information to
supplement its small business lending
data by choosing loan type, ‘‘Other
Secured Lines/Loans for Purposes of
Small Business,’’ in the individual loan
data. (The title of the loan type, ‘‘Other
Secured Lines of Credit for Purposes of
Small Business,’’ which was found in
the instructions accompanying the 1996
data collection software, is being
changed to ‘‘Other Secured Lines/Loans
for Purposes of Small Business’’ in order
to accurately reflect that lines of credit
and loans may be reported under this
loan type.) This information should be
maintained at the institution but should
not be submitted for central reporting
purposes.
Q2. Must an institution collect data
on loan commitments and letters of
credit?
A2. No. Institutions are not required
to collect data on loan commitments
and letters of credit. Institutions may,
however, provide for examiner

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Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices
consideration information on letters of
credit and commitments.
Q3. Are commercial and consumer
leases considered loans for purposes of
CRA data collection?
A3. Commercial and consumer leases
are not considered small business or
small farm loans or consumer loans for
purposes of the data collection
requirements in 12 CFR §
.42(a) &
(c)(1). However, if an institution wishes
to collect and maintain data about
leases, the institution may provide this
data to examiners as ‘‘other loan data’’
under 12 CFR §
.42(c)(2) for
consideration under the lending test.
§

.42(d) Data on affiliate lending
Q1. If an institution elects to have an
affiliate’s home mortgage lending
considered in its CRA evaluation, what
data must the institution make available
to examiners?
A1. If the affiliate is a HMDA reporter,
the institution must identify those loans
reported by its affiliate under 12 CFR
part 203 (Regulation C, implementing
HMDA). At its option, the institution
may either provide examiners with the
affiliate’s entire HMDA Disclosure
Statement or just those portions
covering the loans in its assessment
area(s) that it is electing to consider. If
the affiliate is not required by HMDA to
report home mortgage loans, the
institution must provide sufficient data
concerning the affiliate’s home mortgage
loans for the examiners to apply the
performance tests.
§
.43—Content and Availability of
Public File
§
.43(a) Information Available to the
Public
§

.43(a)(1) Public Comments
Q1. What happens to comments
received by the agencies?
A1. Comments received by a Federal
financial supervisory agency will be on
file at the agency for use by examiners.
Those comments are also available to
the public unless they are exempt from
disclosure under the Freedom of
Information Act.
Q2. Is an institution required to
respond to public comments?
A2. No. All institutions should review
comments and complaints carefully to
determine whether any response or
other action is warranted. A small
institution subject to the small
institution performance standards is
specifically evaluated on its record of
taking action, if warranted, in response
to written complaints about its
performance in helping to meet the
credit needs in its assessment area(s)
(§
.26(a)(5)). For all institutions,

responding to comments may help to
foster a dialogue with members of the
community or to present relevant
information to an institution’s Federal
financial supervisory agency. If an
institution responds in writing to a
letter in the public file, the response
must also be placed in that file, unless
the response reflects adversely on any
person or placing it in the public file
violates a law.
Q3. May an institution include a
response to its CRA Performance
Evaluation in its public file?
A3. Yes. However, the format and
content of the evaluation, as transmitted
by the supervisory agency, may not be
altered or abridged in any manner. In
addition, an institution that received a
less than satisfactory rating during its
most recent examination must include
in its public file a description of its
current efforts to improve its
performance in helping to meet the
credit needs of its entire community.
The institution must update the
description on a quarterly basis.
§
.43(b) Additional Information
Available to the Public
§
.43(b)(1) Institutions Other Than
Small Institutions
Q1. Must an institution that elects to
have affiliate lending considered
include data on this lending in its
public file?
A1. Yes. The lending data to be
contained in an institution’s public file
covers the lending of the institution’s
affiliates, as well as of the institution
itself, considered in the assessment of
the institution’s CRA performance. An
institution that has elected to have
mortgage loans of an affiliate considered
must include either the affiliate’s
HMDA Disclosure Statements for the
two prior years or the parts of the
Disclosure Statements that relate to the
institution’s assessment area(s), at the
institution’s option.
Q2. May an institution retain the
compact disc provided by the Federal
Financial Institution Examination
Council that contains its CRA
Disclosure Statement in its public file,
rather than printing a hard copy of the
CRA Disclosure Statement for retention
in its public file?
A2. Yes, if the institution can readily
print out from the compact disc (or a
duplicate of the compact disc) its CRA
Disclosure Statement for a consumer
when the public file is requested. If the
request is at a branch other than the
main office or the one designated
branch in each state that holds the
complete public file, the bank should
provide the CRA Disclosure Statement

in a paper copy, or in another format
acceptable to the requestor, within 5
calendar days, as required by
§
.43(c)(2)(ii).
§
.43(c) Location of Public
Information
Q1. What is an institution’s ‘‘main
office’’?
A1. An institution’s main office is the
main, home, or principal office as
designated in its charter.
§

.44—Public Notice by Institutions

Q1. Are there any placement or size
requirements for an institution’s public
notice?
A1. The notice must be placed in the
institution’s public lobby, but the size
and placement may vary. The notice
should be placed in a location and be of
a sufficient size that customers can
easily see and read it.
§
.45—Publication of Planned
Examination Schedule
Q1. Where will the agencies publish
the planned examination schedule for
the upcoming calendar quarter?
A1. The agencies may use the Federal
Register, a press release, the Internet, or
other existing agency publications for
disseminating the list of the institutions
scheduled to for CRA examinations
during the upcoming calendar quarter.
Interested parties should contact the
appropriate Federal financial
supervisory agency for information on
how the agency is publishing the
planned examination schedule.
Q2. Is inclusion on the list of
institutions that are scheduled to
undergo CRA examinations in the next
calendar quarter determinative of
whether an institution will be examined
in that quarter?
A2. No. The agencies attempt to
determine as accurately as possible
which institutions will be examined
during the upcoming calendar quarter.
However, whether an institution’s name
appears on the published list does not
conclusively determine whether the
institution will be examined during that
quarter. The agencies may need to defer
a planned examination or conduct an
unforeseen examination because of
scheduling difficulties or other
circumstances.
Appendix A to Part

—Ratings

Q1. Must an institution’s performance
fit each aspect of a particular rating
profile in order to receive that rating?
A1. No. Exceptionally strong
performance in some aspects of a
particular rating profile may
compensate for weak performance in
others. For example, a retail institution

23648

Federal Register / Vol. 64, No. 84 / Monday, May 3, 1999 / Notices

that uses non-branch delivery systems
to obtain deposits and to deliver loans
may have almost all of its loans outside
the institution’s assessment area.
Assume that an examiner, after
consideration of performance context
and other applicable regulatory criteria,
concludes that the institution has weak
performance under the lending test
criteria applicable to lending activity,
geographic distribution, and borrower
characteristics within the assessment
area. The institution may compensate
for such weak performance by
exceptionally strong performance in
community development lending in its
assessment area or a broader statewide
or regional area that includes its
assessment area.

Louisiana, Mississippi, Texas

Appendix B to Part

New York
(212) 264–4730

—CRA Notice

Q1. What agency information should
be added to the CRA notice form?
A1. The following information should
be added to the form:
OCC-supervised institutions only: The
address of the deputy comptroller of the
district in which the institution is
located should be inserted in the
appropriate blank. These addresses can
be found at 12 CFR 4.5(a).
OCC-, FDIC-, and Board-supervised
institutions: ‘‘Officer in Charge of
Supervision’’ is the title of the
responsible official at the appropriate
Federal Reserve Bank.
Appendix A—Regional Offices of the Bureau
of the Census
To obtain median family income levels of
census tracts, MSAs, block numbering areas
and statewide nonmetropolitan areas, contact
the appropriate regional office of the Bureau
of the Census as indicated below. The list
shows the states covered by each regional
office.
Atlanta
(404) 730–3833
Alabama, Florida, Georgia
Boston
(617) 424–0510
Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, Vermont
Charlotte
(704) 344–6144
District of Columbia, Kentucky, North
Carolina, South Carolina, Tennessee,
Virginia
Chicago
(708) 562–1740
Illinois, Indiana, Wisconsin
Dallas
(214) 640–4470 or (800) 835–9752

Denver
(303) 969–7750
Arizona, Colorado, Nebraska, New Mexico,
North Dakota, South Dakota, Utah, Wyoming
Detroit
(313) 259–1875
Michigan, Ohio, West Virginia
Kansas City
(913) 551–6711
Arkansas, Iowa, Kansas, Minnesota,
Missouri, Oklahoma
Los Angeles
(818) 904–6339
California

must be received not later than May 18,
1999.
A. Federal Reserve Bank of Chicago
(Philip Jackson, Applications Officer)
230 South LaSalle Street, Chicago,
Illinois 60690-1413:
1. Edward Salomon, Chicago, Illinois
and Salvatore Scambiatterra (also
known as Sam Scott), Park Ridge,
Illinois, individually and as voting
trustees of shares in a voting trust), to
acquire additional voting shares of
Greater Chicago Financial Corp.,
Chicago, Illinois, and thereby indirectly
acquire Austin Bank of Chicago,
Chicago, Illinois.
Board of Governors of the Federal Reserve
System, April 28, 1999.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 99–11033 Filed 4–30–99; 8:45 am]

New York, Puerto Rico

BILLING CODE 6210–01–F

Philadelphia
(215) 597–8313 or (215) 597–8312

FEDERAL RESERVE SYSTEM

Delaware, Maryland, New Jersey,
Pennsylvania
Seattle
(206) 728–5314
Alaska, Hawaii, Idaho, Montana, Nevada,
Oregon, Washington

End of Text of the Interagency
Questions and Answers
Dated: April 27, 1999.
Keith J. Todd,
Executive Secretary, Federal Financial
Institutions Examination Council.
[FR Doc. 99–10841 Filed 4–30–99; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;
6720–01–P

FEDERAL RESERVE SYSTEM
Change in Bank Control Notices;
Acquisitions of Shares of Banks or
Bank Holding Companies
The notificants listed below have
applied under the Change in Bank
Control Act (12 U.S.C. 1817(j)) and §
225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire a bank or bank
holding company. The factors that are
considered in acting on the notices are
set forth in paragraph 7 of the Act (12
U.S.C. 1817(j)(7)).
The notices are available for
immediate inspection at the Federal
Reserve Bank indicated. The notices
also will be available for inspection at
the offices of the Board of Governors.
Interested persons may express their
views in writing to the Reserve Bank
indicated for that notice or to the offices
of the Board of Governors. Comments

Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR Part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The application also will be
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act.
Unless otherwise noted, nonbanking
activities will be conducted throughout
the United States.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than May 28, 1999.
A. Federal Reserve Bank of Atlanta
(Lois Berthaume, Vice President) 104


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102