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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

March 13, 2006

Notice 06-17

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Banking Agencies Issue Final
Community Reinvestment Act Guidance
DETAILS
The Board of Governors of the Federal Reserve System, Office of the Comptroller of the
Currency, and Federal Deposit Insurance Corporation (the agencies) have published revised
guidance (Questions and Answers) relating to the Community Reinvestment Act (CRA). The
Questions and Answers primarily addresses topics included in the revisions that the agencies
made to their CRA regulations, which became effective September 1, 2005.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 12424–34, Vol. 71, No. 47 of the
Federal Register dated March 10, 2006, is attached.
MORE INFORMATION
For more information, please contact Diane van Gelder, Banking Supervision Department,
(214) 922-6282. Previous Federal Reserve Bank notices are available on our web site at
www.dallasfed.org/banking/notices/index.html or by contacting the Public Affairs Department
at (214) 922-5254.

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.

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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
[Docket No. 06–03]

FEDERAL RESERVE SYSTEM
[Docket No. OP–1240]

FEDERAL DEPOSIT INSURANCE
CORPORATION

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Community Reinvestment Act;
Interagency Questions and Answers
Regarding Community Reinvestment;
Notice
Office of the Comptroller of
the Currency, Treasury (OCC); Board of
Governors of the Federal Reserve

AGENCIES:

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Federal Register / Vol. 71, No. 47 / Friday, March 10, 2006 / Notices
System (Board); Federal Deposit
Insurance Corporation (FDIC).
ACTION: Notice.
SUMMARY: The OCC, Board, and FDIC
(collectively, ‘‘the Agencies’’) are
publishing revised guidance (Questions
and Answers) relating to the
Community Reinvestment Act (‘‘the
Act’’ or ‘‘CRA’’). The Questions and
Answers primarily addresses topics
included in the revisions that the
Agencies made to their CRA regulations,
which became effective September 1,
2005.
DATES:

Effective Date: March 10, 2006.

FOR FURTHER INFORMATION CONTACT:

OCC: Margaret Hesse, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; or Karen
Tucker, National Bank Examiner,
Compliance Policy Division, (202) 874–
4428, Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: Anjanette M. Kichline,
Supervisory Consumer Financial
Services Analyst, (202) 785–6054;
Catherine M.J. Gates, Senior
Supervisory Consumer Financial
Services Analyst, (202) 452–3946;
Kathleen C. Ryan, Counsel, (202) 452–
3667; or Dan S. Sokolov, Counsel, (202)
452–2412, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System, 20th
Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Pamela Freeman, Policy
Analyst, (202) 898–6568, CRA and Fair
Lending Policy Section, Division of
Supervision and Consumer Protection;
or Susan van den Toorn, Counsel, Legal
Division, (202) 898–8707, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:

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Background
On August 2, 2005, the OCC, Board,
and FDIC published in the Federal
Register a joint final rule revising their
Community Reinvestment Act
regulations (70 FR 44256). The joint
final rule became effective September 1,
2005.
The joint final rule addressed
regulatory burden on banks with assets
between $250 million and $1 billion by
exempting them from CRA loan data
collection and reporting obligations. It
also made such banks, called
intermediate small banks, eligible for
evaluation under the small bank lending
test and a flexible new community
development test, rather than the
lending, investment and service tests
that are used to evaluate larger banks.

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Holding company affiliation is no longer
a factor in determining which CRA
evaluation standards apply to a bank.
The joint final rule also revised the
term ‘‘community development’’ to
include banks’ activities that revitalize
or stabilize designated distressed or
underserved nonmetropolitan middleincome areas or designated disaster
areas. Finally, the rule addressed the
impact on a bank’s CRA rating of
evidence of discrimination or other
credit practices that violate an
applicable law, rule, or regulation.
To help financial institutions meet
their responsibilities under the CRA and
to increase public understanding of the
CRA regulations, the staffs of the OCC,
Board, FDIC, and Office of Thrift
Supervision have previously published
answers to the most frequently asked
questions about the community
reinvestment regulations of the four
Federal financial regulatory agencies.
This guidance has been intended to
provide informal staff guidance for use
by examiners and other agency
personnel, financial institutions, and
the public, and is supplemented
periodically. The four agencies’
Interagency Questions and Answers
Regarding Community Reinvestment
(2001 Interagency Questions and
Answers) were last published July 12,
2001 (65 FR 36620).
On November 10, 2005, the staffs of
the OCC, Board, and FDIC jointly
published for comment in the Federal
Register proposed Questions and
Answers to provide additional guidance
specific to the new OCC, Board, and
FDIC rules issued on August 2, 2005,
that apply to their institutions. (Because
the OTS’s CRA regulation varies from
the OCC’s, Board’s, and FDIC’s CRA
regulations, the proposed Questions and
Answers were not, and this final
guidance is not, applicable to thrifts
regulated by OTS.)
In response to the Agencies’ request
for comment on the proposed Questions
and Answers, the OCC received 193
letters, the Board received 182 letters,
and the FDIC received 183 letters. Most
commenters submitted letters to all
three Agencies. Comment letters were
submitted by community organizations,
individuals, banks and financial
institution trade organizations, and state
and local governments.
The Agencies carefully considered the
comments received. As discussed
below, some of the proposed questions
and answers have been revised in this
final guidance to address suggestions by
commenters, while other questions and
answers are being adopted as proposed.
The Questions and Answers that are
being adopted today are grouped by the

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provision of the CRA regulations that
they discuss, are presented in the same
order as the regulatory provisions, and
employ the same abbreviated method to
cite to the regulations. 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; and for
nonmember state banks, at 12 CFR
345.26. Accordingly, the citation in this
document would be to § ll.26. Each
question is numbered using a system
that consists of the regulatory citation
(as described above) and a number,
connected by a dash. For example, the
first question addressing § ll.12(g)(4)
would be identified as § ll.12(g)(4)–1.
As a result of technical changes made
to the Agencies’ regulations (70 FR
15570 (March 28, 2005)) and the
substantive regulatory revisions
mentioned above (70 FR 44256 (August
2, 2005)), some of the citation
numbering in the 2001 Interagency
Questions and Answers does not
correspond to the current section
citations of the revised regulations. In
this final guidance, if a reference is
made to guidance in the 2001
Interagency Questions and Answers, the
number of the question and answer, as
published in the 2001 Interagency
Questions and Answers, is given, even
if that reference does not reflect the
current regulatory citation. The
Agencies’ staffs are working to update
the 2001 Interagency Questions and
Answers to reflect the revisions to the
regulations made by the three Agencies,
as discussed above, and will correct the
citation references in the next
publication of the Interagency Questions
and Answers. When the 2001
Interagency Questions and Answers
document is revised and republished
later this year, the Agencies will publish
an integrated document containing the
questions and answers that are being
published in this final guidance and the
revised 2001 interagency guidance.
Discussion of Final Guidance and
Comments Received
All of the questions and answers that
were proposed in November are being
adopted today, either as proposed or
with revisions. In addition, one of the
proposed questions and answers
(§ ll.12(g)(4)(iii)–3) has been divided
into two questions and answers for
purposes of clarity.
§ ll.12(g)(4)–1:
This proposed question and answer
stated that the new definition of
‘‘community development’’ applies to
all banks, and not to intermediate small
banks only. The Agencies received very

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few comments on this proposed
question and answer; all commenters
were in agreement with the proposed
guidance. The guidance is adopted as
proposed.
§ ll.12(g)(4)–2:
This proposed question and answer
addressed whether activities that
provide housing for middle- and upperincome individuals may qualify for
favorable consideration as community
development activities when they help
to revitalize or stabilize designated
disaster areas or designated distressed
or underserved nonmetropolitan
middle-income geographies. The
Agencies received comments primarily
from representatives of community
organizations in connection with this
guidance. These commenters opposed
aspects of the proposed guidance.
Commenters asserted that projects that
provided housing for only middle- and
upper-income individuals should not
receive favorable consideration for CRA
purposes in designated disaster areas or
designated distressed nonmetropolitan
middle-income geographies even when
such development was part of a bona
fide revitalization plan that would
provide long-term benefits to the entire
community, such as in connection with
attracting a new employer that would
provide jobs to low- and moderateincome individuals. Some of the
community organization commenters
stated that it would be appropriate to
provide favorable consideration to
mixed-income housing, which may
include housing for middle- or upperincome individuals. Only one
commenter from an industry trade
organization commented on this
proposed guidance. That commenter
supported the proposed guidance. No
commenters disagreed with the
guidance addressing the provision of
housing in underserved
nonmetropolitan middle-income areas.
The Agencies have carefully
considered these comments and revised
the proposed question and answer to
address the concerns that have been
raised. The question and answer, as
adopted, clarifies that an activity that
provides housing for middle- or upperincome individuals qualifies as an
activity that revitalizes or stabilizes a
distressed nonmetropolitan middleincome geography or a designated
disaster area if the housing directly
helps to revitalize or stabilize the
community by attracting new, or
retaining existing, businesses or
residents and, in the case of a
designated disaster area, is related to
disaster recovery. The Agencies
generally will consider all activities that
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nonmetropolitan middle-income
geography or designated disaster area,
but will give greater weight to those
activities that are most responsive to
community needs, including needs of
low- or moderate-income individuals or
neighborhoods. Thus, for example, a
loan solely for middle- or upper-income
housing in a community in need of
financing for low- and moderate-income
housing would be given very little
weight if there is only a short-term
benefit to low- and moderate-income
individuals in the community through
the creation of temporary construction
jobs. An activity will be presumed to
revitalize or stabilize such a geography
or area if the activity is consistent with
a bona fide government revitalization or
stabilization plan or disaster recovery
plan.
The portion of the answer addressing
underserved nonmetropolitan middleincome geographies is adopted as
proposed.
§ ll.12(g)(4)(ii)–1:
This proposed question and answer
provided guidance on what is meant by
a ‘‘designated disaster area.’’ The
proposed guidance stated that a
‘‘designated disaster area’’ would be a
disaster area designated by Federal or
state government. The Agencies have
further reviewed how, when, and for
what purposes disaster areas are
designated. State disasters or
emergencies are usually declared as a
prerequisite for Federal disaster
assistance. Thus, the Agencies have
determined that restricting the term
‘‘designated disaster area’’ to federally
designated disaster areas would not
limit the scope of that term in any
meaningful way. Some Federal disaster
area designations are solely for the
purpose of providing short-term public
assistance to address debris removal or
emergency protective measures
immediately following an incident—
specifically, Federal Emergency
Management Agency (FEMA) Public
Assistance Emergency Work Category A
(Debris Removal) and Category B
(Emergency Protective Measures). The
Agencies believe that designations for
these purposes do not exhibit the type
of conditions that would require
sustained disaster recovery-related
revitalization or stabilization activities.
Therefore, based on comments
received and information from FEMA
staff, the Agencies are revising the
guidance to state that a ‘‘designated
disaster area’’ is a major disaster area
designated by the Federal government.
Such disaster designations include, in
particular, Major Disaster Declarations
administered by FEMA, but exclude
counties designated to receive only

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FEMA Public Assistance Emergency
Work Category A (Debris Removal) and/
or Category B (Emergency Protective
Measures).
The proposed guidance also described
a ‘‘lag period’’ following the expiration
of a ‘‘designated disaster,’’ during which
a bank’s revitalization and stabilization
activities would continue to receive
consideration as community
development activities. The Agencies
asked for specific comment on the
description of the duration of a
designated disaster and the
appropriateness of the proposed lag
period.
Most community organization
commenters agreed that a one-year lag
period would be appropriate,
particularly if a bank’s revitalization or
stabilization activity commenced during
the duration of the disaster period.
Some other commenters, including
some banks and bank trade
organizations, believed a longer lag
period, generally three years or longer,
would be appropriate because it often
takes a number of years for a community
to recover from the economic impact of
a disaster, particularly a major disaster.
As to the description of the disaster
designation, several community
organization commenters and one
industry trade organization commenter
believed that the proposed use of the
official governmental designation of the
start and expiration of the disaster
would be appropriate. On the other
hand, one bank commenter indicated
that, after looking at government Web
sites, it was impossible to determine
when a local disaster designation
expired. This commenter suggested that,
at a minimum, the Agencies should
provide guidance on specific reference
sites where at least the Federal disaster
designation information could be
located.
Although FEMA makes a public
announcement of a disaster designation,
FEMA generally does not announce an
‘‘expiration’’ of the disaster designation,
nor do its regulations provide for the
designation’s ‘‘expiration.’’ FEMA’s
regulations and practices entail different
stages relevant to a disaster designation
period, such as the incident period, the
application period, the work completion
deadlines, and the period that a joint
field office is open, but these periods
may vary from incident to incident, and
may not be relevant to all designated
disasters. FEMA’s regulations establish
a requirement that permanent public
assistance work relating to a major
disaster must be completed within 18
months of the disaster designation (44
CFR 206.204(c)) unless FEMA grants an
extension.

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After carefully considering this
information and the comments received,
the Agencies have revised the proposed
guidance addressing the period of time
that a bank’s activities will receive
consideration in a designated disaster
area. The final guidance states that the
Agencies have determined to consider
disaster recovery-related activities that
help to revitalize or stabilize a
designated disaster area for 36 months
following the date of designation by the
Federal government. The Agencies
believe that providing a uniform 36month period following disaster
designation, during which a bank will
receive CRA consideration of disaster
recovery-related activities that help to
revitalize or stabilize a disaster area,
generally should be adequate to address
the variety of community revitalization
or stabilization needs that may arise
depending on the nature, extent and
severity of the particular disaster. Where
there is a demonstrable community
need to extend the period for
recognizing revitalization or
stabilization activities in a particular
disaster area to assist in long-term
recovery efforts, this time period may be
extended.
Finally, the Agencies plan to extend
substantially the time periods for
recovery-related activities in the Gulf
Coast areas designated as disaster areas
because of hurricanes Katrina and Rita
beyond 36 months from the dates of the
disaster designations because of the
demonstrated community need for longterm involvement by financial
institutions in helping to address the
widespread devastation caused by these
hurricanes.
§ ll.12(g)(4)(ii)–2:
This proposed question and answer
discussed how revitalization or
stabilization activities in a designated
disaster area would be considered. The
proposed guidance stated that bank
activities in designated disaster areas
would be evaluated in the same manner
as they would be evaluated in a low- or
moderate-income geography or a
designated distressed nonmetropolitan
middle-income geography. It explained
that examiners would determine
whether the activities have a primary
purpose of community development by
helping to attract and retain residents
and businesses (including by providing
jobs) or are part of a bona fide plan to
revitalize or stabilize the geography. The
proposed guidance also stated that
examiners would give greater weight to
those activities that are most responsive
to community needs, including those of
low- or moderate-income individuals or
neighborhoods. The proposed guidance
also clarified that investments in

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entities that provide community
services for, and direct loans and
financial services provided to,
individuals in designated disaster areas
and to individuals who are displaced by
disasters also receive consideration
under the CRA and cited previous
interagency guidance.
Many commenters addressed this
proposed guidance. Community
organizations generally urged the
Agencies to give the greatest weight to
activities that benefit low- and
moderate-income individuals and
neighborhoods.
Two financial institution trade
organizations, on the other hand,
emphasized that the entire community,
without regard to income, is affected by
most natural disasters and the recovery
of the entire community through
housing, job creation, and investments
is critical. These commenters urged the
Agencies not to unnecessarily restrict
CRA consideration of recovery-related
efforts to those activities that benefit
only low- and moderate-income
individuals or communities.
Finally, several commenters favorably
addressed the portion of the answer
stating that bank activities that provide
assistance to persons displaced by
disasters would receive consideration.
The Agencies have revised this
question and answer to address
commenters’ concerns and to provide
consistent guidance on the standards
that apply to what qualifies as
revitalization or stabilization activities.
The revised answer states that the
Agencies generally will consider an
activity to revitalize or stabilize a
designated disaster area if it helps to
attract new, or retain existing,
businesses or residents and is related to
disaster recovery. An activity will be
presumed to revitalize or stabilize the
area if the activity is consistent with a
bona fide government revitalization and
stabilization plan or disaster recovery
plan. The Agencies generally will
consider all activities related to disaster
recovery that revitalize or stabilize a
designated disaster area, but will give
greater weight to those activities that are
most responsive to community needs,
including needs of low- or moderateincome individuals or neighborhoods.
In response to commenters, the
question and answer provides
additional examples of activities that
will be considered to revitalize or
stabilize a designated disaster area.
Qualifying activities may include, for
example, providing financing to help
retain businesses in the area that
employ local residents, including lowand moderate-income individuals;
providing financing to attract a major

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new employer that will create long-term
job opportunities, including for lowand moderate-income individuals;
activities that provide financing or other
assistance for essential community-wide
infrastructure, community services, and
rebuilding needs; and activities that
provide housing, financial assistance,
and services to individuals in
designated disaster areas and to
individuals who have been displaced
from those areas, including low- and
moderate-income individuals.
§ ll.12(g)(4)(iii)–1:
This proposed question and answer
explained what criteria the Agencies
would use to designate nonmetropolitan
middle-income geographies that are
‘‘distressed’’ or ‘‘underserved.’’ The
proposed guidance also stated that the
Agencies will publish data source
information along with the list of
designated census tracts on the Federal
Financial Institutions Examination
Council (FFIEC) Web site (http://
www.ffiec.gov).
The Agencies received very few
comments on this proposed guidance.
One commenter suggested that the
distressed areas designated for CRA
purposes should be the same as
Community Development Financial
Institution (CDFI) Fund distressed areas.
Although the Agencies considered using
CDFI Fund distressed areas, the
Agencies learned that the CDFI Fund
designates distressed areas based on
data that is not updated annually.
Because data sources are available that
provide updated data annually, the
Agencies decided to designate
distressed nonmetropolitan middleincome geographies based on the more
current data.
Another commenter suggested that
the criteria used to identify distressed or
underserved areas would serve to
exclude needy areas because they are
based on a relatively large geographic
unit, the census tract. This commenter
pointed out that rural census tracts are
relatively large and contain a wide
variety of types of populations, with
pockets of distress encompassed within
relatively better-off areas. The
commenter suggested that basing the
distressed or underserved designation at
the block group level, rather than at the
census tract level, would be more
effective in identifying distressed areas.
This suggestion is not adopted because
the regulation refers to ‘‘distressed or
underserved nonmetropolitan middleincome geographies’’
(§ .ll12(g)(4)(iii)), and a ‘‘geography’’
is defined in the Agencies’’ regulations
as ‘‘a census tract delineated by the
United States Bureau of the Census in
the most recent decennial census.’’

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The question and answer is adopted
as proposed.
§ ll.12(g)(4)(iii)–2:
This proposed question and answer
stated that the Agencies will update the
list of designated distressed and
underserved nonmetropolitan middleincome geographies annually and will
publish the list on the FFIEC Web site
(http://www.ffiec.gov). The Agencies
also proposed a twelve-month ‘‘lag
period’’ immediately after a census tract
is reclassified as no longer distressed or
underserved. During the lag period,
revitalization and stabilization activities
would receive consideration as
community development if the activities
would have been considered to have a
primary purpose of community
development if the census tract in
which they were located were still
designated as distressed or underserved.
The Agencies specifically asked for
comment on the appropriateness of the
lag period.
The Agencies received several
comments on this proposed guidance.
One commenter believed that no lag
period was necessary, but if a lag period
were adopted, then one year should be
the maximum length considered.
Several commenters believed that a oneyear lag period would be appropriate,
while several other commenters,
including representatives of financial
institutions, urged the Agencies to
provide a lag period of three or more
years.
One commenter asked whether the
Agencies would publish the list of
designated distressed or underserved
nonmetropolitan middle-income
geographies more frequently than
annually. The Agencies will update the
list annually based on annual changes
in source data; the list will be published
continuously on the FFIEC Web site.
The proposed question and answer is
being adopted with a twelve-month lag
period. In addition, the Agencies will
indicate which designated census tracts
are in their lag periods.
§ ll.12(g)(4)(iii)–3:
This proposed question and answer
explained how revitalization and
stabilization activities in designated
distressed or underserved
nonmetropolitan middle-income
geographies would be evaluated.
Several commenters asserted that the
proposed question and answer was too
complicated because there was one
answer for designated distressed
nonmetropolitan middle-income areas
and another answer for designated
underserved nonmetropolitan middleincome areas. To help clarify the
guidance, the issues are addressed in
separate questions and answers—one

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addressing designated distressed
nonmetropolitan middle-income areas
(§ ll.12(g)(4)(iii)–3), and the other
addressing designated underserved
nonmetropolitan middle-income areas
(§ ll.12(g)(4)(iii)–4).
As proposed, in designated distressed
nonmetropolitan middle-income
geographies, examiners would
determine whether the activities have a
primary purpose of community
development by helping to attract and
retain residents and businesses
(including by providing jobs) or are part
of a bona fide plan to revitalize or
stabilize the geography. The activities
must have had a long-term direct benefit
to the entire community, including lowand moderate-income individuals and
neighborhoods.
Similar to the comments addressing
the proposed guidance dealing with
revitalization or stabilization activities
in designated disaster areas, some
community organization commenters
were concerned that not enough
emphasis was placed on benefits to lowand moderate-income individuals in
designated distressed nonmetropolitan
middle-income geographies. The
question and answer as adopted revises
and clarifies the guidance addressing
revitalization or stabilization activities
in distressed nonmetropolitan middleincome geographies to make it
consistent with the similar guidance
applicable to banks’ revitalization and
stabilization activities in designated
disaster areas. The guidance specifically
states that examiners will give greater
weight to those activities that are most
responsive to community needs,
including the needs of low-or moderateincome individuals or neighborhoods.
The proposed guidance addressing
evaluation of revitalization or
stabilization activities in underserved
nonmetropolitan middle-income
geographies stated that bank activities
that facilitate the construction,
expansion, improvement, maintenance,
or operation of essential infrastructure
or facilities for health services,
education, public safety, public
services, industrial parks, or affordable
housing generally would be considered
to meet essential community needs and
qualify for consideration as a
community development activity, so
long as the infrastructure, facility, or
affordable housing serves low- and
moderate-income individuals. One
commenter asked how much benefit to
low-or moderate-income individuals
there must be for an activity in an
underserved nonmetropolitan middleincome area to qualify for consideration.
Another commenter suggested that a
significant percentage of the people that

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benefit from the activity should be lowor moderate-income. Other commenters
suggested that the Agencies should give
more weight to revitalization or
stabilization activities that benefit lowor moderate-income individuals in
underserved nonmetropolitan middleincome geographies.
The question and answer has been
revised to include a restatement of the
standard that appears in the regulations,
that is, that activities revitalize or
stabilize an underserved
nonmetropolitan middle-income
geography if they help to meet essential
community needs, including the needs
of low-or moderate-income individuals.
Activities such as financing for the
construction, expansion, improvement,
maintenance, or operation of essential
infrastructure or facilities for health
services, education, public safety,
public services, industrial parks, or
affordable housing, will be evaluated
under these criteria to determine if they
qualify for revitalization or stabilization
consideration.
§ ll.12(i)–3:
The proposal would have revised the
existing question and answer from the
2001 Interagency Questions and
Answers, which lists examples of
community development services, to
add two new examples. The first new
example stated that providing financial
services to low-or moderate-income
individuals through branches and other
facilities in low-or moderate-income
areas is a community development
service (unless the provision of such
services has been considered in the
evaluation of a bank’s retail banking
services under § ll.24(d)).
Commenters were generally in favor
of this revision and the Agencies are
adopting this revision as proposed.
The second example of a community
development service that was proposed
was providing international remittances
services that increase access to financial
services by low- and moderate-income
persons (for example, by offering
reasonably priced international
remittances services in connection with
a low-cost account). Commenters were
generally in favor of this proposed
revision. Therefore, the revision to this
guidance is adopted as proposed.
§ ll.12(t)–1:
This proposed question and answer
addressed consideration for prior-period
investments when examiners evaluate
qualified investments. It stated that
examiners would consider investments
that were made prior to the current
examination, but are still outstanding.
Qualitative factors would affect the
weight given to both current period and

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outstanding prior-period qualified
investments.
Several community organizations and
affiliates of community organizations
commented on this proposed guidance.
These commenters stressed that banks
should not be able to compensate for
low levels of current-period qualified
investments with prior-period
investments. Some of these commenters
also believed that consideration of prior
period investments should be limited to
investments that are particularly
innovative, complex, or responsive to
community needs.
The guidance is adopted as proposed.
Although prior-period investments may
receive consideration in a bank’s current
evaluation, examiners typically
distinguish between current-period and
prior-period investments when listing
the amounts of a bank’s investments in
the institution’s performance
evaluation. Further, examiners use
qualitative factors to determine how
much consideration a bank receives for
any given qualified investment. Greater
weight is given to investments that are
responsive to community needs,
innovative, or complex, as applicable.
One commenter stated that this
guidance should apply to all sizes and
types of banks because some
investments not only have significant
impact, they also continue to utilize
bank assets and represent a continuing
financial commitment by the bank to the
community. This question and answer
clarifies that the guidance applies to all
banks.
§ ll.12(t)–4:
The proposal would have added
investments in Rural Business
Investment Companies to the question
and answer from the 2001 Interagency
Questions and Answers that lists
examples of qualified investments. The
Agencies received only a few comments
on this proposal. All of the comments
favored the proposed addition.
Therefore, the guidance is adopted as
proposed.
§ ll.12(u)(2)–1:
This proposed question and answer
stated that adjustments to the asset-size
thresholds for small banks and
intermediate small banks will be made
annually based on changes to the
Consumer Price Index. It also stated that
changes in the asset-size thresholds
would be published in the Federal
Register.
The Agencies received very few
comments on this proposed guidance.
One financial institution trade
organization commented that
publication of adjustments in the
Federal Register is important.

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The question and answer is adopted
as proposed.
§ ll.26–1:
This proposed question and answer
stated that, when evaluating a small
bank or intermediate small bank,
examiners will consider, at the bank’s
request, retail and community
development loans originated or
purchased by an affiliate, qualified
investments made by an affiliate, or
community development services
provided by an affiliate. The bank must
maintain sufficient information so that
examiners may evaluate these activities
under the appropriate performance
criteria and ensure that another
institution does not claim the activities.
The constraints applicable to affiliate
activities claimed by large institutions
would also apply to affiliate activities
claimed by small banks and
intermediate small banks. In addition,
examiners would not include affiliate
lending in calculating the percentage of
loans and, as appropriate, other lendingrelated activities located in a bank’s
assessment area.
Very few comments addressing this
proposed guidance were received. All
comments were favorable. Although the
question has been rephrased for
purposes of clarity, the answer is
adopted as proposed.
§ ll.26(c)–1:
This proposed question and answer
discussed how the community
development test would be applied
flexibly for intermediate small banks. It
described how intermediate small banks
engage in a combination of community
development loans, qualified
investments, and community
development services that are evaluated
under the community development test.
It stated that a bank may not simply
ignore one or more of these categories of
community development, nor do the
regulations prescribe a required
threshold for community development
loans, qualified investments, or
community development services. A
bank would have the flexibility to
allocate its resources among community
development loans, qualified
investments, and community
development services in amounts it
reasonably determines are most
responsive to community development
needs and opportunities.
The Agencies received several letters
commenting on this proposed guidance.
Most of the comments were from
community organizations, although a
few were from financial industry trade
organizations.
Community organization commenters
agreed that intermediate small banks
should not ignore any category of

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community development activities.
Many of these commenters expressed
concern that qualitative factors, such as
those considered in a bank’s
performance context, would be used to
excuse low levels of community
development lending, qualified
investments, or community
development services. One bank trade
organization, on the other hand,
asserted that appropriate levels of each
type of community development
activity would depend on the bank, the
community, and the local needs and
opportunities.
A number of community organization
commenters discussed the difference
between community needs and
opportunities for community
development activities. Generally, these
commenters stressed that community
needs, rather than opportunities for
engaging in community development
activities, must be the main
consideration.
The question and answer is adopted
as proposed. The guidance provides
appropriate balance between the
flexibility of banks to allocate their
resources in a manner that is most
responsive to community needs with
the expectation that banks will engage
in community development activities
(loans, investments, and services)
consistent with those needs and
opportunities.
One financial institution trade
organization expressed concern that the
proposed guidance imposed a ‘‘needs
assessment’’ requirement on
intermediate small banks. The Agencies
do not intend that intermediate small
banks prepare a particular ‘‘needs
assessment’’ solely for purposes of its
CRA evaluation under the community
development test. If intermediate small
banks prepare business plans and
market analyses that reflect community
needs and opportunities, they may rely
on such information, as well as other
currently available information, when
assessing community development
needs in their assessment areas.
§ ll.26(c)(3)–1:
This proposed question and answer
stated that examiners will consider not
only the types of services provided to
benefit low- and moderate-income
individuals, but also the provision and
availability of services to low- and
moderate-income individuals, including
through branches and other facilities
located in low- and moderate-income
areas.
A large number of letters from
community organizations commented
on this proposed guidance. Most of
these commenters asserted that
intermediate small banks should be

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evaluated on the number and percent of
branches located in low- and moderateincome geographies. The revised
regulations do not include a retail
banking service test for intermediate
small banks that evaluates the number
and percent of an intermediate small
bank’s branches located in low- and
moderate-income geographies.
However, in response to the
commenters, the guidance is being
revised to clarify that the presence of
branches located in low- and moderateincome geographies helps to
demonstrate the availability of banking
services to low- and moderate-income
individuals.
§ ll.26(c)(4)–1:
This proposed question and answer
discussed what examiners would
consider when reviewing the
responsiveness of community
development lending, qualified
investments, and community
development services by an
intermediate small bank to the
community development needs of the
area. It stated that, in addition to
quantitative measures such as the
number and amount of community
development loans, qualified
investments, and community
development services, examiners would
also consider qualitative aspects of
performance. In particular, examiners
would evaluate the responsiveness of
the bank’s community development
activities in light of the bank’s capacity,
business strategy, the needs of the
community, and the number and types
of opportunities for each type of
community development activity. The
proposed guidance also stated that
activities would be considered
particularly responsive to community
development needs if they benefit lowand moderate-income individuals in
low- and moderate-income areas,
designated disaster areas, or designated
distressed or underserved
nonmetropolitan middle-income
geographies.
Only a few commenters addressed
this proposed guidance. Most of these
comments were generally in agreement
with the proposed question and answer.
One commenter was concerned,
however, that qualitative factors might
be used to explain a bank’s low numbers
and amounts of community
development activities and that ‘‘lack of
opportunity’’ may be used to excuse
limited performance even when
community needs exist.
The question and answer is adopted
as proposed. Agency examiners will
apply the qualitative factors in the
context of intermediate small banks in
a manner that appropriately considers

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the needs of the community, as well as
other relevant information, including
the expertise of the bank, its business
plan, the bank’s capacity, and any
constraints that would prevent the bank
from engaging in community
development activities.
Other Comments
The Agencies requested comments on
any issues raised by the CRA and the
2001 Interagency Questions and
Answers. Commenters provided
comments on a number of topics that
were unrelated to the proposed
questions and answers. The Agencies’
staffs will consider these comments in
their general review of the 2001
Interagency Questions and Answers.
The Agencies received a number of
comments suggesting specific types of
investments and services that should be
listed in the questions and answers as
examples of qualified investments and
community development services. The
Agencies will consider these
suggestions during their general update
of the 2001 Interagency Questions and
Answers.
One issue that the Agencies anticipate
addressing in proposed revisions to the
2001 Interagency Questions and
Answers concerns whether intermediate
small banks’ small business loans, small
farm loans, or home mortgage loans may
be considered as community
development loans, if the loans have a
primary purpose of ‘‘community
development,’’ as that term is defined in
the regulations. Under the regulations’
definition of ‘‘community development
loan,’’ a loan that has been reported as
a small business loan or small farm loan
as required by the CRA regulations, or
as a mortgage loan under the Home
Mortgage Disclosure Act (HMDA), is not
a community development loan, even if
the loan has a primary purpose of
community development. Small banks,
however, are not required by the CRA
regulations to report small business
loans or small farm loans; and some
small banks, as well as some large
banks, are not required by HMDA to
report home mortgage loans. Thus, after
the definition of ‘‘community
development loan’’ was adopted, a
question arose as to its application to
banks that are not required to report
home mortgage loans, small business
loans, or small farm loans. In response
to that question, the Agencies adopted
Q&A §§ ll.12(i) & 563e.12(h)–2,
which indicates that examiners will not
consider a loan by a small bank that
meets the definition of either a ‘‘small
business loan’’ or a ‘‘small farm loan’’ as
a community development loan
regardless of the purpose of the loan,

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even though the regulation does not
require a small bank to report small
business or small farm loans. Similarly,
the question and answer also states that
examiners will not treat any loan that
meets the definition of a HMDAreportable mortgage loan as a
community development loan even if
the bank that made the loan is not
required by HMDA to report mortgage
loans (with the exception of multifamily
dwelling loans). The Agencies
anticipate that they will seek comment
on whether this guidance is appropriate
for intermediate small banks, which,
unlike large banks, are not required to
report small business or small farm
loans and, unless they opt to be
evaluated as large banks, have their
community development activities,
including community development
loans, evaluated in a separate
community development test.
Meanwhile, evaluations of small banks,
including intermediate small banks, will
continue to be governed by the guidance
in Q&A §§ ll.12(i) & 563e.12(h)–2.
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 OCC and
FDIC certified that their proposed CRA
rule would not have a significant
economic impact on a substantial
number of small entities and invited
comments on that determination. The
Board did not so certify, and requested
comments in several areas. See 70 FR
12148, 12154 (March 11, 2005). In
connection with the joint final rule, the
FDIC and OCC certified that the joint
final rule would not have a significant
impact on a substantial number of small
entities. In response to public comments
it received, the Board prepared a final
regulatory flexibility analysis and
described how the final rule minimizes
the economic impact on small entities
by making the twelve affected state
member banks eligible for the
streamlined CRA process. See 70 FR at
44264–65 (August 2, 2005).
In accordance with section 212 of the
SBREFA and the Agencies’ continuing
efforts to provide clear, understandable
regulations, staffs of the Agencies have
compiled these interagency Questions
and Answers. The interagency
Questions and Answers serve the same
purpose as the compliance guide
described in the SBREFA by providing

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guidance on a variety of issues of
particular concern to small banks.
The text of the Interagency Questions
and Answers Regarding Community
Reinvestment follows:
§ ll.12(g)(4) Activities That
Revitalize or Stabilize—
§ ll.12(g)(4)–1: Is the revised
definition of community development,
effective September 1, 2005, applicable
to all banks or only to intermediate
small banks?
A1: The revised definition of
community development is applicable
to all banks.
§ .ll12(g)(4)–2: Will activities that
provide housing for middle-income and
upper-income persons qualify for
favorable consideration as community
development activities when they help
to revitalize or stabilize a distressed or
underserved nonmetropolitan middleincome geography or designated
disaster areas?
A2: An activity that provides housing
for middle- or upper-income individuals
qualifies as an activity that revitalizes or
stabilizes a distressed nonmetropolitan
middle-income geography or a
designated disaster area if the housing
directly helps to revitalize or stabilize
the community by attracting new, or
retaining existing, businesses or
residents and, in the case of a
designated disaster area, is related to
disaster recovery. The Agencies
generally will consider all activities that
revitalize or stabilize a distressed
nonmetropolitan middle-income
geography or designated disaster area,
but will give greater weight to those
activities that are most responsive to
community needs, including needs of
low- or moderate-income individuals or
neighborhoods. Thus, for example, a
loan solely to develop middle- or upperincome housing in a community in need
of low- and moderate-income housing
would be given very little weight if
there is only a short-term benefit to lowand moderate-income individuals in the
community through the creation of
temporary construction jobs. (A
housing-related loan is not evaluated as
a ‘‘community development loan’’ if it
has been reported or collected by the
institution or its affiliate as a home
mortgage loan, unless it is a multifamily
dwelling loan. See § ll.12(i)(2)(i) and
Q&A §§ ll.12(i) & 563e.12(h)–2.) An
activity will be presumed to revitalize or
stabilize such a geography or area if the
activity is consistent with a bona fide
government revitalization or
stabilization plan or disaster recovery
plan. See Q&As §§ ll.12(h)(4) &
563e.12(g)(4)–1 and §§ ll.12(i) &
563e.12(h)–4.

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In underserved nonmetropolitan
middle-income geographies, activities
that provide housing for middle- and
upper-income individuals may qualify
as activities that revitalize or stabilize
such underserved areas if the activities
also provide housing for low- or
moderate-income individuals. For
example, a loan to build a mixedincome housing development that
provides housing for middle- and
upper-income individuals in an
underserved nonmetropolitan middleincome geography would receive
positive consideration if it also provides
housing for low- or moderate-income
individuals.
§ ll.12(g)(4)(ii) Activities That
Revitalize or Stabilize Designated
Disaster Areas.
§ .ll12(g)(4)(ii)–1: What is a
‘‘designated disaster area’’ and how
long does it last?
A1: A ‘‘designated disaster area’’ is a
major disaster area designated by the
Federal Government. Such disaster
designations include, in particular,
Major Disaster Declarations
administered by the Federal Emergency
Management Agency (FEMA) (http://
www.fema.gov ), but excludes counties
designated to receive only FEMA Public
Assistance Emergency Work Category A
(Debris Removal) and/or Category B
(Emergency Protective Measures).
Examiners will consider bank
activities related to disaster recovery
that revitalize or stabilize a designated
disaster area for 36 months following
the date of designation. Where there is
a demonstrable community need to
extend the period for recognizing
revitalization or stabilization activities
in a particular disaster area to assist in
long-term recovery efforts, this time
period may be extended.
§ ll.12(g)(4)(ii)–2 : What activities
are considered to ‘‘revitalize or
stabilize’’ a designated disaster area,
and how are those activities considered?
A2: The Agencies generally will
consider an activity to revitalize or
stabilize a designated disaster area if it
helps to attract new, or retain existing,
businesses or residents and is related to
disaster recovery. An activity will be
presumed to revitalize or stabilize the
area if the activity is consistent with a
bona fide government revitalization or
stabilization plan or disaster recovery
plan. The Agencies generally will
consider all activities relating to disaster
recovery that revitalize or stabilize a
designated disaster area, but will give
greater weight to those activities that are
most responsive to community needs,
including the needs of low- or
moderate-income individuals or
neighborhoods. Qualifying activities

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may include, for example, providing
financing to help retain businesses in
the area that employs local residents,
including low- and moderate-income
individuals; providing financing to
attract a major new employer that will
create long-term job opportunities,
including for low- and moderate-income
individuals; providing financing or
other assistance for essential
community-wide infrastructure,
community services, and rebuilding
needs; and activities that provide
housing, financial assistance, and
services to individuals in designated
disaster areas and to individuals who
have been displaced from those areas,
including low- and moderate-income
individuals (see, e.g., Q&As § ll.12(j)
& 563e.12(i)–3; § ll.12(s) &
563e.12(r)–4; § ll.22(b)(2) & (3)–4;
§ ll.22(b)(2) & (3)–5; and
§ ll.24(d)(3)–1).
§ ll.12(g)(4)(iii) Activities That
Revitalize or Stabilize Distressed or
Underserved Nonmetropolitan Middleincome Geographies.
§ ll.12(g)(4)(iii)–1: What criteria are
used to identify distressed or
underserved nonmetropolitan middleincome geographies?
A1: Eligible nonmetropolitan middleincome geographies are those
designated by the Agencies as being in
distress or that could have difficulty
meeting essential community needs
(underserved). A particular geography
could be designated as both distressed
and underserved. As defined in
§ ll.12(k), a geography is a census
tract delineated by the United States
Bureau of the Census.
A nonmetropolitan middle-income
geography will be designated as
distressed if it is in a county that meets
one or more of the following triggers: (1)
An unemployment rate of at least 1.5
times the national average, (2) a poverty
rate of 20 percent or more, or (3) a
population loss of 10 percent or more
between the previous and most recent
decennial census or a net migration loss
of five percent or more over the fiveyear period preceding the most recent
census.
A nonmetropolitan middle-income
geography will be designated as
underserved if it meets criteria for
population size, density, and dispersion
that indicate the area’s population is
sufficiently small, thin, and distant from
a population center that the tract is
likely to have difficulty financing the
fixed costs of meeting essential
community needs. The Agencies will
use as the basis for these designations
the ‘‘urban influence codes,’’ numbered
‘‘7,’’ ‘‘10,’’ ‘‘11,’’ and ‘‘12,’’ maintained
by the Economic Research Service of the

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United States Department of
Agriculture.
The Agencies will publish data source
information along with the list of
eligible nonmetropolitan census tracts
on the Federal Financial Institutions
Examination Council Web site (http://
www.ffiec.gov ).
§ ll.12(g)(4)(iii)–2: How often will
the Agencies update the list of
designated distressed and underserved
nonmetropolitan middle-income
geographies?
A2: The Agencies will review and
update the list annually as needed. The
list will be published on the Federal
Financial Institutions Examination
Council Web site (http://www.ffiec.gov ).
To the extent that changes to the
designated census tracts occur, the
Agencies have determined to adopt a
one-year ‘‘lag period.’’ This lag period
will be in effect for the twelve months
immediately following the date when a
census tract that was designated as
distressed or underserved is removed
from the designated list. Revitalization
or stabilization activities undertaken
during the lag period will receive
consideration as community
development activities if they would
have been considered to have a primary
purpose of community development if
the census tract in which they were
located were still designated as
distressed or underserved.
§ ll.12(g)(4)(iii)–3: What activities
are considered to ‘‘revitalize or
stabilize’’ a distressed nonmetropolitan
middle-income geography, and how are
those activities evaluated?
A3: An activity revitalizes or
stabilizes a distressed nonmetropolitan
middle-income geography if it helps to
attract new, or retain existing,
businesses or residents. An activity will
be presumed to revitalize or stabilize the
area if the activity is consistent with a
bona fide government revitalization or
stabilization plan. The Agencies
generally will consider all activities that
revitalize or stabilize a distressed
nonmetropolitan middle-income
geography, but will give greater weight
to those activities that are most
responsive to community needs,
including needs of low- or moderateincome individuals or neighborhoods.
Qualifying activities may include, for
example, providing financing to attract
a major new employer that will create
long-term job opportunities, including
for low- and moderate-income
individuals, and activities that provide
financing or other assistance for
essential infrastructure or facilities
necessary to attract or retain businesses
or residents. See Q&As §§ ll.12(h)(4)

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& 563e.12(g)(4)–1 and §§ ll.12(i) and
563e.12(h)–4.
§ ll.12(g)(4)(iii)–4: What activities
are considered to ‘‘revitalize or
stabilize’’ an underserved
nonmetropolitan middle-income
geography, and how are those activities
evaluated?
A4: The regulation provides that
activities revitalize or stabilize an
underserved nonmetropolitan middleincome geography if they help to meet
essential community needs, including
needs of low- or moderate-income
individuals. Activities such as financing
for the construction, expansion,
improvement, maintenance, or
operation of essential infrastructure or
facilities for health services, education,
public safety, public services, industrial
parks, or affordable housing, will be
evaluated under these criteria to
determine if they qualify for
revitalization or stabilization
consideration. Examples of the types of
projects that qualify as meeting essential
community needs, including needs of
low- or moderate-income individuals,
would be a new or expanded hospital
that serves the entire county, including
low- and moderate-income residents; an
industrial park for businesses whose
employees include low- or moderateincome individuals; a new or
rehabilitated sewer line that serves
community residents, including low- or
moderate-income residents; a mixedincome housing development that
includes affordable housing for low- and
moderate-income families; or a
renovated elementary school that serves
children from the community, including
children from low- and moderateincome families. Other activities in the
area, such as financing a project to build
a sewer line spur that connects services
to a middle- or upper-income housing
development while bypassing a low- or
moderate-income development that also
needs the sewer services, generally
would not qualify for revitalization or
stabilization consideration in
geographies designated as underserved.
However, if an underserved geography
is also designated as distressed or a
disaster area, additional activities may
be considered to revitalize or stabilize
the geography, as explained in Q&As
§ ll.12(g)(4)(ii)–2 and
§ ll.12(g)(4)(iii)–3.
§ ll.12(i) Community Development
Service
§ ll.12(i)–3: What are examples of
community development services?
A3: Examples of community
development services include, but are
not limited to:
• Providing financial services to lowand moderate-income individuals

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through branches and other facilities
located in low- and moderate-income
areas, unless the provision of such
services has been considered in the
evaluation of a bank’s retail banking
services under § ll.24(d);
• 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;
• Providing international remittances
services that increase access to financial
services by low- and moderate-income
persons (for example, by offering
reasonably priced international
remittances services in connection with
a low-cost account); 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;

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• 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.
§ ll.12(t) Qualified Investment
§ ll.12(t)–1: When evaluating a
qualified investment, what
consideration will be given for priorperiod investments?
A1: When evaluating a bank’s
qualified investment record, examiners
will consider investments that were
made prior to the current examination,
but that are still outstanding. Qualitative
factors will affect the weighting given to
both current period and outstanding
prior-period qualified investments. For
example, a prior-period outstanding
investment with a multi-year impact
that addresses assessment area
community development needs may
receive more consideration than a
current period investment of a
comparable amount that is less
responsive to area community
development needs.
§ ll.12(t)–4: What are examples of
qualified investments?
A4. Examples of qualified
investments include, but are not limited
to, investments, grants, deposits or
shares in or to:
• Financial intermediaries (including,
Community Development Financial
Institutions (CDFIs), Community
Development Corporations (CDCs),
minority- and women-owned financial
institutions, community loan funds, and
low-income or community development
credit unions) that primarily lend or
facilitate lending in low- or moderateincome areas or to low- and moderateincome 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), specialized SBICs,
and Rural Business Investment
Companies (RBICs), 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

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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.
§ ll.12(u)(2): Small Bank
Adjustment
§ ll.12(u)(2)–1: How often will the
asset size thresholds for small banks
and intermediate small banks be
changed, and how will these
adjustments be communicated?
A1: The asset size thresholds for
‘‘small banks’’ and ‘‘intermediate small
banks’’ will be adjusted annually based
on changes to the Consumer Price
Index. More specifically, the dollar
thresholds will be adjusted annually
based on the year-to-year change in the
average of the Consumer Price Index for
Urban Wage Earners and Clerical
Workers, not seasonally adjusted for
each twelve-month period ending in
November, with rounding to the nearest
million. Any changes in the asset size
thresholds will be published in the
Federal Register.
§ ll.26: Small Bank Performance
Standards
§ ll.26–1: When evaluating a small
or intermediate small bank’s
performance, will examiners consider,
at the institution’s request, retail and
community development loans
originated or purchased by affiliates,
qualified investments made by affiliates,
or community development services
provided by affiliates?
A1: Yes. However, a small institution
that elects to have examiners consider
affiliate activities must maintain
sufficient information that the
examiners may evaluate these activities
under the appropriate performance
criteria and ensure that the activities are
not claimed by another institution. The
constraints applicable to affiliate
activities claimed by large institutions
also apply to small and intermediate
small institutions. See Q&A
§ ll.22(c)(2) and related guidance
provided to large institutions regarding

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affiliate activities. Examiners will not
include affiliate lending in calculating
the percentage of loans and, as
appropriate, other lending-related
activities located in a bank’s assessment
area.
§ ll.26(c) Intermediate Small Bank
Community Development Test
§ ll.26(c)–1: How will the
community development test be applied
flexibly for intermediate small banks?
A1: Generally, intermediate small
banks engage in a combination of
community development loans,
qualified investments, and community
development services. A bank may not
simply ignore one or more of these
categories of community development,
nor do the regulations prescribe a
required threshold for community
development loans, qualified
investments, and community
development services. Instead, based on
the bank’s assessment of community
development needs in its assessment
area(s), it may engage in different
categories of community development
activities that are responsive to those
needs and consistent with the bank’s
capacity.
An intermediate small bank has the
flexibility to allocate its resources
among community development loans,
qualified investments, and community
development services in amounts that it
reasonably determines are most
responsive to community development
needs and opportunities. Appropriate
levels of each of these activities would
depend on the capacity and business
strategy of the bank, community needs,
and number and types of opportunities
for community development.
§ ll.26(c)(3) Community
Development Services under
Intermediate Small Bank Community
Development Test
§ ll.26(c)(3)–1: What will examiners
consider when evaluating the provision
of community development services by
an intermediate small bank?
A1: Examiners will consider not only
the types of services provided to benefit
low- and moderate-income individuals,
such as low-cost bank checking
accounts and low-cost remittance
services, but also the provision and
availability of services to low- and
moderate-income individuals, including
through branches and other facilities
located in low- and moderate-income
areas. Generally, the presence of
branches located in low- and moderateincome geographies will help to
demonstrate the availability of banking
services to low- and moderate-income
individuals.
§ ll.26(c)(4) Responsiveness to
Community Development Needs under

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Federal Register / Vol. 71, No. 47 / Friday, March 10, 2006 / Notices

Intermediate Small Bank Community
Development Test
§ ll.26(c)(4)–1: When evaluating an
Intermediate Small Bank’s community
development record, what will
examiners consider when reviewing the
responsiveness of community
development lending, qualified
investments, and community
development services to the community
development needs of the area?
A1: When evaluating an Intermediate
Small Bank’s community development
record, examiners will consider not only
quantitative measures of performance,
such as the number and amount of
community development loans,
qualified investments, and community
development services, but also
qualitative aspects of performance. In
particular, examiners will evaluate the
responsiveness of the bank’s community
development activities in light of the
bank’s capacity, business strategy, the
needs of the community, and the
number and types of opportunities for
each type of community development
activity (its performance context).
Examiners also will consider the results
of any assessment by the institution of
community development needs, and
how the bank’s activities respond to
those needs.
An evaluation of the degree of
responsiveness considers the following
factors: The volume, mix, and
qualitative aspects of community
development loans, qualified
investments, and community
development services. Consideration of
the qualitative aspects of performance
recognizes that community
development activities sometimes
require special expertise or effort on the
part of the institution or provide a
benefit to the community that would not
otherwise be made available. (However,
‘‘innovativeness’’ and ‘‘complexity,’’
factors examiners consider when
evaluating a large bank under the
lending, investment, and service tests,
are not criteria in the intermediate small
banks’ community development test.) In
some cases, a smaller loan may have
more qualitative benefit to a community
than a larger loan. Activities are
considered particularly responsive to
community development needs if they
benefit low- and moderate-income
individuals in low- or moderate-income
geographies, designated disaster areas,
or distressed or underserved
nonmetropolitan middle-income
geographies. Activities are also
considered particularly responsive to
community development needs if they
benefit low- or moderate-income
geographies.

This concludes the text of the
Interagency Questions and Answers
Regarding Community Reinvestment.
Dated: March 1, 2006.
John C. Dugan,
Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, March 1, 2006.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this second day
of March, 2006.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 06–2188 Filed 3–9–06; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P

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