CRA - Part 1 Flashcards

Question

What is the fourth step in the comparison of Credit Extended Inside and Outside of the Assessment Area(s)? [XI. 2.1 Community Reinvestment Act—Small Bank]

Answer 1

4. Discuss preliminary findings with management

Answer 2

5. Summarize in workpapers conclusions regarding the institution’s level of lending or other lending related activities inside and outside of its assessment area(s).

Answer 3

1. Determine if the number and income distribution of geographies in the AA(s) are sufficient for a meaningful analysis of the geographic distribution of the institution's loans in its AA

Answer 4

2. If a geographic distribution analysis of the institution's loans would be meaningful and the necessary geographic information (street address or census tract numbers) is collected by the institution in the ordinary course of business, determine the distribution of the institution's loans in its AAs among low -, moderate -, middle -, and upper-income geographies. Where possible, use the same data used for the inside/outside analysis.

Answer 5

3. If a geographic distribution analysis of loans inside the AA is performed, identify groups of geographies, by income categories, in which there is little or no loan penetration. Note that institutions are not expected to loan in every geography.

Answer 6

4. To the extent information about the borrower income (individuals) or revenues (businesses) is collected by the institution in the ordinary course of business, determine the distribution of loans inside the AA by borrower income and business revenues. Where possible, use the same data used for the inside/outside analysis.

Answer 7

5. Identify categories of borrowers by income or business revenue for which there is little or no loan penetration.

Answer 8

6. If an analysis of geographic distribution would not be meaningful or an analysis of borrower profile could not be performed, consider possible proxies to use for analysis of the institution's distribution of credit: analyzing geographic distribution by street address rather than geography, or by using loan size as a proxy for income (think: loan size as a proxy for GAR for PPP loans) for borrower profile

Answer 9

7. If there are categories of low penetration (by income level of the tract or of the borrower), form conclusions about the reasons for that low penetration. Consider available information from the performance context, including: a) Information about the institution's size, branch network, financial condition, supervisory restrictions (if any), and prior CRA record b) Information from discussions with management, loan officers, and members of the community c) Information about economic conditions, especially inside of the AA (think: inability of SSB to lend) d) Information about demographic or other characteristics of particular geographies that could affect loan demand, such as the existence of a prison or college e) Information about other lenders serving the same or similar AAs

Answer 10

8. Discuss the preliminary findings in this section with management

Answer 11

9. Summarize in workpapers conclusions about the geographic distribution of loans and the distribution of loans by borrower characteristics in the institution's AA

Answer 12

1. Review all complaints relating to the institution's CRA performance received by the institution (these should all be contained in the institution's public file) and those that were received by its supervisory agency

Answer 13

2. If there were any complaints, review the institutions record of taking action, if warranted, in response to written complaints about its CRA performance.

Answer 14

3. If there were any complaints, discuss the preliminary findings in this section with management.

Answer 15

4. If there were any complaints, summarize in workpapers conclusions regarding the institution's record of taking action, if warranted, in response to written complaints in response to written complaints about its CRA performance. Include the total number of complaints and resolutions with examples that illustrate the nature, responsiveness to, and resolution of, the complaints.

Answer 16

1. If the institution chooses, review its performance in making qualified investments and providing branches and other and delivery systems that enhance credit availability in its AA. Performance with respect to qualified investments and services may be used to enhance an institution's overall rating of "Satisfactory," but cannot be used to lower a rating that otherwise would have been assigned.

Answer 17

2. To evaluate the institution's performance in making qualified investments that enhance credit availability in the AA, consider: a) the dollar amount of qualified investments, by type and location b) the impact of those investments on the institution's AA; and c) the innovativeness or complexity of the investments

Answer 18

1. Group the analyses of AAs examined by MSA *8The reference to MSA may also reference MD* and nonmetropolitan areas within each state that the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the AAs that are in that MSA.

Answer 19

2. Summarize conclusions about the institution's performance in each MSA and the nonmetropolitan portion of each state in which an AA received a full-scope review. If two or more AAs in an MSA or in a nonmetropolitan portion of a state received full scope reviews, weigh the different AAs considering such factors as: a) The significance of the institution's activities in each compared to the institution's overall activities b) The lending opportunities in each c) The importance of the institution in providing loans to each d) Demographic and economic conditions in each.

Answer 20

3. For AAs in MSAs and nonmetropolitan areas that were not examined using the full scope procedures, consider facts and data related to the institution's lending to ensure that performance in those AAs is is not inconsistent (is consistent) based on the AAs that received full scope examinations

Answer 21

4. For institutions only operating in one multi-state MSA or one state, assign one of the four preliminary ratings - Satisfactory, Outstanding, Needs to Improve, and Substantial Noncompliance - in accordance with step 6 below. To determine the relative significance of each MSA and nonmetropolitan area to the institution's preliminary rating, consider: a) the significance of the institution's activities in each compared to the institution's overall activities b) the lending opportunities in each c) the importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each d) Demographic and economic conditions in each

Answer 22

5. For other institutions, assign one of the four preliminary ratings - Satisfactory, Outstanding, Needs to Improve, and Substantial Noncompliance - for each state in which the institution has at least one branch and for each multi-state MSA in which the institution has branches in two or more states in accordance with step #6 below. To determine the relative significance of each MSA and the nonmetropolitan area on the institution's preliminary rating, consider:

Answer 23

6. Consult the small institution's ratings matrix and information in workpapers to assign a preliminary rating of: a) Satisfactory - If the institution's performance meets each of the standards for a satisfactory rating or if the exceptionally strong performance with respect to to some of the standards compensates for weak performance in others b) Needs to Improve or Substantial Noncompliance - if the institution's performance fails to meet the standards for satisfactory performance. Whether a rating is needs to improve or substantial noncompliance will depend upon the degree to which the institution's performance has failed to meet the standards for a satisfactory rating, or: c) Outstanding - if the institution meets the rating descriptions and standards for each of the five criteria, and materially exceeds the standards for Satisfactory for some or all of the criteria to the extent that an outstanding rating is warranted, or if the institution's performance with respect to the five core criteria generally exceeds “Satisfactory” and its performance in making qualified investments and providing branches and other services and delivery systems in the assessment area(s) supplement its performance under the five core criteria sufficiently to warrant an overall rating of “Outstanding”

Answer 24

7. For an institution with branches in more than one state or multistate MSA, assign a preliminary rating to the institution as a whole taking into account the institution's record in different states and multistate MSAs by considering: a) the significance of the institution's activities in each compared to the institution's overall activities b) the lending opportunities in each c) the importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each d) Demographic and economic conditions in each d)

Answer 25

Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s overall CRA rating or, if applicable, its CRA rating in any state or multi-state MSA. *9 “Evidence of discriminatory or other illegal credit practices” includes, but is not limited to: (a) Discrimination against applicants on a prohibited basis in violation, for example, of the Equal Credit Opportunity Act or the Fair Housing Act; (b) Violations of the Home Ownership and Equity Protection Act; (c) Violations of section 5 of the Federal Trade Commission Act; (d)Violations of section 8 of the Real Estate Settlement Procedures Act; and (e) Violations of the Truth in Lending Act regarding a consumer’s right of rescission.* If evidence of discrimination or other illegal credit practices in any geography by the institution, or in any assessment area by any affiliate whose loans have been considered as part of the institution’s lending performance, was found, consider: a. The nature, extent, and strength of the evidence of the practices; b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices; c. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and d. Any other relevant information

Answer 26

Assign a final rating for the institution as a whole and, if applicable, each state in which the institution has at least one branch and each multi-state MSA in which it has branches in two or more states, considering: a. The institution’s preliminary rating; and b. Any evidence of discriminatory or other illegal credit practices (see #8 above).

Answer 27

Discuss conclusions with management

Answer 28

Write an evaluation of the institution’s performance for | the examination report and the public evaluation.

Answer 29

Prepare recommendations for a supervisory strategy and for matters that require attention or follow-up activities.

Answer 30

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files should be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations, its branching structure and changes to it since its last examination, complaints about the institution’s compliance with the public file requirements, and any other relevant information.

Answer 31

2. In any review of the public file undertaken, determine, as needed, whether branches display an accurate public notice in their lobbies, a complete public file is available in the institution’s main office and at least one branch in each state, and the public file available in the main office and in a branch in each state contains: a. All written comments from the public relating to the institution’s CRA performance and responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution; b. The institution’s most recent CRA Public Performance Evaluation; c. A map of each assessment area showing its boundaries and, on the map or in a separate list, the geographies contained within the assessment area; d. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, e. The HMDA Disclosure Statement for the prior two calendar years, if applicable; f. The institution’s loan-to-deposit ratio for each quarter of the prior calendar year; g. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating during its most recent CRA examination; and h. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services among locations.

Answer 32

3. In any branch review undertaken, determine whether the branch provides the most recent public evaluation and a list of services available at the branch or a description of material differences from the services generally available at the institution’s other branches.

Answer 33

Determine that the appropriate CRA public notice is | displayed as required by § 345.44 and Appendix B.

Answer 34

``` The loan-to-deposit ratio is more than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs. ```

Answer 35

``` The loan-to-deposit ratio is reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs. ```

Answer 36

``` The loan-to-deposit ratio is less than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs. ```

Answer 37

``` The loan-to-deposit ratio is unreasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs. ```

Answer 38

``` A substantial majority of loans and other lending related activities are in the institution’s assessment area(s). ```

Answer 39

``` A majority of loans and other lending related activities are in the institution’s assessment area(s). ```

Answer 40

``` A majority of loans and other lending related activities are outside the institution’s assessment area(s) ```

Answer 41

``` other lending related activities are outside the institution’s assessment area(s) A substantial majority of loans and other lending related activities are outside the institution’s assessment area(s) ```

Answer 42

``` The geographic distribution of loans reflects excellent dispersion throughout the assessment area(s). ```

Answer 43

``` The geographic distribution of loans reflects reasonable dispersion throughout the assessment area(s). ```

Answer 44

``` The geographic distribution of loans reflects poor dispersion throughout the assessment area(s). ```

Answer 45

``` The geographic distribution of loans reflects very poor dispersion throughout the assessment area(s). ```

Answer 46

``` The distribution of borrowers reflects, given the demographics of the assessment area(s), excellent penetration among individuals of different income levels (including low- and moderate- income) and businesses of different sizes. ```

Answer 47

``` The distribution of borrowers reflects, given the demographics of the assessment area(s), reasonable penetration among individuals of different income levels (including low- and moderate- income) and businesses of different sizes. ```

Answer 48

``` The distribution of borrowers reflects, given the demographics of the assessment area(s), poor penetration among individuals of different income levels (including low- and moderateincome) and businesses of different sizes. ```

Answer 49

``` The distribution of borrowers reflects, given the demographics of the assessment area(s), very poor penetration among individuals of different income levels (including low- and moderateincome) and businesses of different sizes. ```

Answer 50

``` The institution has taken noteworthy, creative action in response to substantiated complaints about its performance in meeting assessment area credit needs. ```

Answer 51

``` The institution has taken appropriate action in response to substantiated complaints about its performance in meeting assessment area credit needs. ```

Answer 52

``` The institution has taken inadequate action in response to substantiated complaints about its performance in meeting assessment area credit needs. ```

Answer 53

``` The institution is unresponsive to substantiated complaints about its performance in meeting assessment area credit needs. ```

Answer 54

``` The institution’s investment record enhances credit availability in its assessment area. ```

Answer 55

July 19, 2005, the FDIC, FRB, and OCC jointly approved amendments to the CRA regulations which took effect on September 1, 2005. Among the revisions to the regulations, “intermediate small banks” are defined under §345.12 (u) These banks are evaluated under two tests: the small bank lending test and a community development test.

Answer 56

No, intermediate small institutions are not required to collect and report CRA loan data for small business, small farm, and community development loans. . Nevertheless, the CRA regulations continue to allow small institutions, including intermediate small institutions, to opt for an evaluation under the (large bank) lending, investment, and service tests, provided the data is collected and reported.

Answer 57

To evaluate the distribution of loans under intermediate small bank procedures, examiners should review loan files, bank reports, or any other information or analyses a bank may provide.

Answer 58

To evaluate community development loans, investments, and services under the intermediate small bank community development test, examiners will review (1) any information a bank may provide, including the results of any assessment of community development needs or opportunities if conducted by the bank, and (2) performance context information obtained by examiners from community, government, civic or other sources.

Answer 59

1. The total number and dollar amount of community development loans, qualified investments, and community development services, including: a. The total number and dollar amount of community development activities on an annual basis, and b. Complete listings of loans, investments, and services or consistent summary listings (by category such as affordable housing, economic development, etc.) of community development activities. 3.

Answer 60

2. A determination of the opportunity and need for community development activities, including: a. Information on any self-assessment performed by the bank, b. Information from the examiner’s assessment based, for example, on review of current economic and demographic conditions, and c. Activities of similarly situated banks based, for example, on review of recent public evaluations and information obtained from community contacts.

Answer 61

An analysis of the institution’s capacity to meet the community development needs of the assessment area(s), including the use of quantitative performance measures such as: a. The ratio of community development loans to net loans, b. The ratio of community development investments to total investments or total assets, and c. Any other performance ratios which support the analysis.

Answer 62

``` For institutions (interstate and intrastate) with more than one assessment area, identify assessment areas for a full scope review. A full scope review is accomplished when examiners complete all of the procedures for an assessment area. For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate MSA/MD, must be reviewed using the full scope examination procedures. ```

Answer 63

To identify assessment areas for full scope review, review prior CRA performance evaluations, available community contact materials, and reported lending data and demographic data on each assessment area. Consider factors such as: a. The retail lending and community development opportunities in the different assessment areas, particularly areas where the need for credit and community development activities is significant; b. The level of the institution’s activity in the different assessment areas, including in low- and moderate income areas, designated disaster areas, or distressed or underserved non-metropolitan middle-income geographies designated by the Agencies based on (a) rates of poverty, unemployment, and population loss or (b) population size, density, and dispersion; c. The number of other institutions in the different assessment areas and the importance of the institution under examination in serving the different areas, particularly any areas with h relatively few other providers of financial services; d. The existence of apparent anomalies in the reported data for any particular assessment area(s); e. The length of time since the assessment area(s) was last examined using a full scope review; f. The institution’s prior CRA performance in different assessment areas; g. Examiners’ knowledge of the same or similar assessment areas; and h. Comments from the public regarding the institution’s CRA performance.

Answer 64

Select one or more assessment areas in each state, and one or more assessment areas in any multi-state MSA, for examination using these procedures. This is required because for interstate institutions, a rating must be assigned for each state where the institution has a branch and for each multi-state MSA/MD where the institution has branches in two or more states that comprise that MSA/MD.

Answer 65

Review standardized worksheets and other agency information sources to obtain relevant demographic, economic, and loan data, to the extent available, for each assessment area under review.

Answer 66

Obtain for review the Consolidated Reports of Condition (Call Reports), Uniform Bank Performance Reports (UBPRs), annual reports, supervisory reports, and prior CRA evaluations of the institution under examination to help understand the institution’s ability and capacity, including any limitations imposed by size, financial condition, or statutory, regulatory, economic or other constraints, to respond to safe and sound opportunities in the assessment area(s) for retail loans, and community development loans, qualified investments and community development services.

Answer 67

Discuss with the institution, and consider, any information the institution may provide about its local community and economy, including community development needs and opportunities, its business strategy, its lending capacity, or information that otherwise assists in the evaluation of the institution

Answer 68

Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution. Contact local community, governmental or economic development representatives to update or supplement this information. Refer to the Community Contact Procedures for more detail.

Answer 69

5. Review any comments received by the institution or the agency since the last CRA examination.

Answer 70

6. By reviewing the public evaluations and other financial data, determine whether any similarly situated institutions (in terms of size, financial condition, product offerings, and business strategy) serve the same or similar assessment area(s) and would provide relevant and accurate information for evaluating the institution’s CRA performance. Consider, for example, whether the information could help identify: a) Lending and community development opportunities available in the institution’s assessment area(s) that are compatible with the institution’s business strategy and consistent with safe and sound banking practices; b) Constraints affecting the opportunities to make safe and sound retail loans, community development loans, qualified investments, and community development services compatible with the institution’s business c) Successful CRA-related product offerings or activities utilized by other lenders serving the same or similar assessment area(s). strategy in the assessment area(s); and d) Document the performance context information, particularly community development needs and opportunities, gathered for use in evaluating the institution’s performance.

Answer 71

Document the performance context information, particularly community development needs and opportunities, gathered for use in evaluating the institution’s performance.

Answer 72

1. Review the institution's stated assessment areas(s) to ensure that it: a. Consists of one or more MSAs/MDs or contiguous political subdivisions (e.g., counties, cities, or towns); b. Includes the geographies where the institution has its main office, branches, and deposit-taking ATMs, as well as the surrounding geographies in which the institution originated or purchased a substantial portion of its loans; c. Consists only of whole census tracts; d. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is located in a multistate MSA/MD; e. Does not reflect illegal discrimination; and f. Does not arbitrarily exclude any low- or moderate income area(s), taking into account the institution’s size, branching structure, and financial condition.

Answer 73

2. If an institution’s assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers

Answer 74

If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Answer 75

After determining the scope (assessment area(s) for review) & performance context, perform the lending test (see criteria in flashcards).

Answer 76

1. the Loan to Deposit (ratio) Analysis

Answer 77

1. From data contained in Call Reports or UBPRs, calculate the average loan-to-deposit ratio since the last examination by adding the quarterly loan-to-deposit ratios and dividing by the number of quarters.

Answer 78

2. Evaluate whether the institution’s average loan-to-deposit ratio is reasonable in light of information from the performance context including, as applicable, the institution’s capacity to lend, the capacity of other similarly situated institutions to lend in the assessment area(s), demographic and economic factors present in the assessment area(s), and the lending opportunities available in the institution’s assessment area(s).

Answer 79

3. If the loan-to-deposit ratio does not appear reasonable in light of the performance context, consider whether the number and the dollar amount of loans sold to the secondary market compensate for a low loan-to-deposit ratio or supplement the institution’s lending performance.

Answer 80

4. Summarize in work papers conclusions regarding the | institution’s loan-to-deposit ratio.

Answer 81

The second ISB lending test performance criteria is the comparison of credit extended inside and outside of the assessment area (inside/outside analysis AKA AA Concentration).

Answer 82

If available, review HMDA data, automated loan reports, - think - CRA Wiz Table - and any other reports that may have been generated by the institution to analyze the extent of lending inside and outside of the assessment area(s). If a report generated by the institution is used, test the accuracy of the output.

Answer 83

If loan reports or data analyzing lending inside and outside of the assessment area(s) are not available or comprehensive, or if their accuracy cannot be verified, use sampling guidelines to select a sample of loans originated, purchased or committed to calculate the percentage (by number and dollar volume) located within the assessment area(s).

Answer 84

3. If the percentage of loans or other lending related activities in the assessment area is less than a majority, then the institution does not meet the standards for “Satisfactory” under this performance criterion. In this case, consider information from the performance context, such as information about economic conditions, loan demand, the institution’s size, financial condition, branching network, and business strategies when determining the effect of not meeting the standards for satisfactory for this criterion on the overall rating for the institution.

Answer 85

4. Summarize in work papers conclusions regarding the institution’s level of lending or other lending related activities inside and outside of its assessment area(s).

Answer 86

Distribution of Credit within the Assessment Area(s)

Answer 87

A. Geographic Distribution | B. Borrower Profile

Answer 88

Determine whether the number and income distribution of geographies in the assessment area(s) are sufficient for a meaningful analysis of the geographic distribution of the institution’s loans in its assessment area(s).

Answer 89

If a geographic distribution analysis of the institution’s loans would be meaningful and the necessary geographic information (street address or census tract number) is collected by the institution in the ordinary course of its business [and geocode, or we can], determine the distribution of the institution’s loans in its assessment area(s) among low-, moderate-, middle-, and upper-income geographies. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area. area(s).

Answer 90

If a geographic analysis of loans in the assessment area(s) is performed, identify groups of geographies, by income categories, in which there is little or no loan penetration. Note that institutions are not expected to lend in every geography.

Answer 91

To the extent information about borrower income (individuals) or revenues (businesses) is collected by the institution in the ordinary course of its business, determine the distribution of loans in the assessment area(s) by borrower income and by business revenues. Where possible, use the same loan reports, loan data, or sample used to compare credit extended inside and outside the assessment area(s).

Answer 92

5. Identify categories of borrowers by income or business revenue for which there is little or no loan penetration.

Answer 93

6. If an analysis of the distribution of loans among geographies of different income levels would not be meaningful (e.g., very few geographies in the assessment area(s)) or an analysis of lending to borrowers of different income or revenues could not be performed (e.g., income data are not collected for certain loans), consider possible proxies to use for analysis of the institution’s distribution of credit. Possibilities include analyzing geographic distribution by street address rather than geography (if data are available and the analysis would be meaningful) or analyzing the distribution by loan size as a proxy for income or revenue of the borrower.

Answer 94

7. If there are categories of low penetration, form conclusions about the reasons for that low penetration. Consider available information from the performance context, including: a) Information about the institution’s size, branch network, financial condition, supervisory restrictions (if any) and prior CRA record; b) Information from discussions with management, loan officers, and members of the community; c) Information about economic conditions, particularly in the assessment area(s); d) Information about demographic or other characteristics of particular geographies that could affect loan demand, such as the existence of a prison or college; and e) Information about other lenders serving the same or similar assessment area(s).

Answer 95

``` 8. Summarize in work papers conclusions concerning the geographic distribution of loans and the distribution of loans by borrower characteristics in the institution’s assessment area(s). ```

Answer 96

Review of Complaints

Answer 97

1. Review all complaints relating to the institution’s CRA performance received by the institution (these should all be contained in the institution’s public file) and those that were received by its supervisory agency. 2. If there were any complaints, evaluate the institution’s record of taking action, if warranted, in response to written complaints about its CRA performance. 3. If there were any complaints, discuss the preliminary findings in this section with management. 4. If there were any complaints, summarize in work papers conclusions regarding the institution’s record of taking action, if warranted, in response to written complaints about its CRA performance. Include the total number of complaints and resolutions with examples that illustrate the nature, responsiveness to, and resolution of, the complaints. 5. Discuss the preliminary findings in the lending test section with management.

Answer 98

The loan-to-deposit ratio is more than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.

Answer 99

The loan-to-deposit ratio is reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.

Answer 100

The loan-to-deposit ratio is less than reasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.

Answer 101

The loan-to-deposit ratio is unreasonable (considering seasonal variations and taking into account lending related activities) given the institution’s size, financial condition, and assessment area credit needs.

Answer 102

A substantial majority of loans and other lending related | activities are in the institution’s assessment area(s).

Answer 103

A majority of loans and other lending related activities are in the institution’s assessment area(s).

Answer 104

A majority of loans and other lending related activities are outside the institution’s assessment area(s).

Answer 105

A substantial majority of loans and other lending related | activities are outside the institution’s assessment area(s)

Answer 106

The geographic distribution of loans reflects excellent | dispersion throughout the assessment area(s).

Answer 107

The geographic distribution of loans reflects reasonable | dispersion throughout the assessment area(s).

Answer 108

The geographic distribution of loans reflects poor dispersion throughout the assessment area(s).

Answer 109

The geographic distribution of loans reflects very poor | dispersion throughout the assessment area(s)

Answer 110

The distribution of borrowers reflects, given the demographics of the assessment area(s), excellent penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.

Answer 111

The distribution of borrowers reflects, given the demographics of the assessment area(s), reasonable penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.

Answer 112

The distribution of borrowers reflects, given the demographics of the assessment area(s), poor penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes.

Answer 113

The distribution of borrowers reflects, given the demographics of the assessment area(s), very poor penetration among individuals of different income levels (including low- and moderate-income) and businesses of different sizes

Answer 114

The institution has taken noteworthy, creative action in response to substantiated complaints about its performance in meeting assessment area credit needs.

Answer 115

The institution has taken appropriate action in response to substantiated complaints about its performance in meeting assessment area credit needs.

Answer 116

The institution has taken inadequate action in response to substantiated complaints about its performance in meeting assessment area credit needs.

Answer 117

The institution is unresponsive to substantiated | complaints about its performance in meeting assessment area credit needs.

Answer 118

An institution should appropriately assess the needs in its community, engage in different types of community development activities based on those needs and the institution’s capacities, and take reasonable steps to apply its community development resources strategically to meet those needs. The flexibility inherent in the community development test allows intermediate small institutions to focus on meeting the substance of community needs through these activities. Examiners will consider the results of any assessment by the institution of community needs along with information from community, government, civic, and other sources to gain a working knowledge of community needs.

Answer 119

1. Identify the number and amount of the institution’s community development loans, qualified investments, and community development services. Obtain this information through discussions with management, HMDA data collected by the institution, as applicable; investment portfolios; any other relevant financial records; and materials available to the public. Include, at the institution’s option: a. Community development loans, qualified investments, and community development services provided by affiliates, if they are not claimed by any other institution; and b. Community development lending by consortia or third parties.

Answer 120

2. Review community development loans, qualified | investments, and community development services to verify that they qualify as community development.

Answer 121

3. If the institution participates in community development lending by consortia or third parties, or claims activities provided by affiliates, review records provided to the institution by the consortia or third parties or affiliates to ensure that the community development loans claimed by the institution do not account for more than the institution’s share (based on the level of its participation or investment) of the total loans originated by the consortium or third party.

Answer 122

4. Considering the institution’s capacity and constraints and other information obtained through the performance context review, form conclusions about: a. The number and amount of community development loans and qualified investments; b. The extent to which the institution provides community development services, including the provision and availability of services to low- and moderate-income people, including through branches and other facilities in low- and moderate-income areas; c. The responsiveness to the opportunities for community development lending, qualified investments, and community development services, considering: 1) The results of any assessment of community development needs and opportunities provided by the institution; 2) The examiner’s review of performance context information from community, government, civic, and other sources; and 3) Whether the amount and combination of community development loans, qualified investments, and community development services, along with their qualitative aspects, are responsive to community needs and opportunities.

Answer 123

5. Summarize conclusions regarding the institution’s community development performance and retain in the work papers.

Answer 124

The institution’s community development performance demonstrates excellent responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s)

Answer 125

The institution’s community development performance demonstrates adequate responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).

Answer 126

The institution’s community development performance demonstrates poor responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).

Answer 127

The institution’s community development performance demonstrates very poor responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the institution’s capacity and the need and availability of such opportunities for community development in the institution’s assessment area(s).

Answer 128

1. Group the analyses of the assessment areas examined by MSA and non-MSA areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas that are in that MSA.

Answer 129

2. Summarize conclusions about the institution’s performance in each MSA and the non-MSA portion of each state in which an assessment area received a full scope review. If two or more assessment areas in an MSA or in the non-MSA portion of a state received full scope reviews, weigh the different assessment areas considering such factors as: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The retail lending and community development opportunities in each; c. The importance of the institution in providing loans and community development activities to each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each

Answer 130

3. For assessment areas in MSAs and non-MSA areas that were not examined using these procedures, consider facts and data related to the institution’s lending and community development activities to ensure that performance in those assessment areas is not inconsistent with the conclusions based on the assessment areas which received full scope reviews

Answer 131

4. For institutions operating in only one multi-state MSA or one state, assign one of the four preliminary ratings – “Satisfactory,” “Outstanding,” “Needs to Improve,” or “Substantial Noncompliance”—in accordance with step 6 below. To determine the relative significance of each MSA and non-MSA area to the institution’s preliminary rating, consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities b. The retail lending and community development opportunities in each; c. The importance of the institution to each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 132

For other institutions, assign one of the four preliminary ratings—“Satisfactory,” “Outstanding,” “Needs to Improve,” or “Substantial Noncompliance”—for each state in which the institution has at least one branch and for each multi-state MSA in which the institution has branches in two or more states in accordance with step #6 below. To determine the relative significance of each MSA and the non-MSA area on the institution’s preliminary state rating, consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The retail lending and community development opportunities in each; c. The importance of the institution in each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each

Answer 133

“Satisfactory” if the institution’s performance is rated as “Satisfactory” in each test. b. “Needs to Improve” or “Substantial Noncompliance,” depending upon the degree to which the institution’s performance has failed to meet the standards for a “Satisfactory” rating on a test; or c. “Outstanding” if the institution is rated an ”Outstanding” on both tests; or “Outstanding” on one test and the extent to which the institution meets or exceeds the “Satisfactory” criteria on the other test.

Answer 134

For an institution with branches in more than one state or multi-state MSA, assign a preliminary rating to the institution as a whole taking into account the institution’s record in different states or multi-state MSAs by considering: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The retail lending and community development opportunities in each; c. The importance of the institution in providing loans to each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 135

8. Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices should lower the institution’s overall CRA rating or, if applicable, its CRA rating in any state or multi-state MSA. If evidence of discrimination or other illegal credit practices in any geography by the institution, or in any assessment area by any affiliate whose loans were XI. Community Reinvestment Act — Intermediate Small Bank FDIC Consumer Compliance Examination Manual — September 2015 XI–3.9 considered as part of the institution’s lending performance, was found, consider: a. The nature, extent, and strength of the evidence of the practices; b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices; c. Any corrective action that the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; a

Answer 136

Assign a final rating for the institution as a whole and, if applicable, each state in which the institution has at least one branch and each multi-state MSA in which it has branches in two or more states, considering: a. The institution’s preliminary rating; and b. Any evidence of discriminatory or other illegal credit practices.

Answer 137

10. Discuss conclusions with management.

Answer 138

11. Write an evaluation of the institution’s performance | for the examination report and the public evaluation.

Answer 139

12. Prepare recommendations for a supervisory strategy and for matters that require attention or follow-up activities.

Answer 140

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files should be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations, its branching structure and changes to it since its last examination, complaints about the institution’s compliance with the public file requirements, and any other relevant information.

Answer 141

2. In any review of the public file undertaken, determine whether branches display an accurate public notice in their lobbies, a complete public file is available in the institution’s main office and at least one branch in each state, and the public file(s) in the main office and in each state contain: a. All written comments from the public relating to the institution’s CRA performance and any responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution); b. The institution’s most recent CRA Performance Evaluation; c. A map of each assessment area showing its boundaries and, on the map or in a separate list, the geographies contained within the assessment area; d. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, their street addresses and geographies; e. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services between those locations; f. The institution’s loan-to-deposit ratio for each quarter of the prior calendar year; g. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating during its most recent CRA examination; and h. HMDA Disclosure Statements for the prior two calendar years for the institution and for each non-depository affiliate the institution has elected to include in assessment of its CRA record, if applicable.

Answer 142

3. In any branch review undertaken, determine whether the branch provides the most recent public evaluation and a list of services generally available at its branches and a description of any material differences in the availability or cost of services at the branch (or a list of services available at the branch).

Answer 143

Determine that the appropriate CRA public notice is | displayed as required by § 345.44 and Appendix B.

Answer 144

1. Lending test 2. Investment test 3. Service test

Answer 145

1. Wholesale 2. Limited purpose 3. Strategic Plan

Answer 146

They cannot be examined under the large | institution examination procedures until they have at least one full year of data collected.

Answer 147

In addition, any size institution may opt to be examined as a large institution provided it has collected and reported the required CRA loan data.

Answer 148

Determining the examination scope

Answer 149

For institutions (interstate and intrastate) with more than one assessment area, identify assessment areas for a full scope review. A full scope review is accomplished when examiners complete all of the procedures for an assessment area. For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate metropolitan statistical area/metropolitan division (MSA/MD), must be reviewed using the full scope examination procedures.

Answer 150

1. Review prior CRA performance evaluations, available | community contact materials, HMDA and CRA

Answer 151

2. Select assessment areas for full scope review by considering the factors below. a. The lending, investment, and service opportunities in the different assessment areas, particularly areas where the need for bank credit, investments and services is significant; b. The level of the institution’s lending, investment, and service activity in the different assessment areas, including in low- and moderate-income areas, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies designated by the Agencies based on a) rates of poverty, unemployment, and population loss or b) population size, density, and dispersion c. The number of other institutions in the different assessment areas and the importance of the institution under examination in serving the different areas, particularly any areas with relatively few other providers of financial services; d. Comments and feedback received from community groups and the public regarding the institution’s CRA performance; e. The size of the population; f. The existence of apparent anomalies in the reported CRA or HMDA data for any particular assessment area(s); g. The length of time since the assessment t area(s) was last examined using a full scope review; h. The institution’s prior CRA performance in different assessment areas; i. Examiners’ knowledge of the same or similar assessment areas; and j. Issues raised in CRA examinations of other institutions and prior community contacts in the institution’s assessment areas or similar assessment areas.

Answer 152

Review the performance context

Answer 153

1. Review standardized worksheets and other agency information sources to obtain relevant demographic, economic, and loan data, to the extent available, for each assessment area under review. Compare the data to similar data for the MSA/MD, county, or state to determine how any similarities or differences will help in evaluating lending, investment, and service opportunities and community and economic conditions in the assessment area. Also consider whether the area has housing costs that are particularly high given area median income.

Answer 154

Obtain for review the Consolidated Reports of Condition (Call Reports), Uniform Bank Performance Reports (UBPR), annual reports, supervisory reports, and prior CRA evaluations of the institution to help understand the institution’s ability and capacity, including any limitations imposed by size, financial condition, or statutory, regulatory, economic or other constraints, to respond to safe and sound opportunities in the assessment area(s) for retail loans, and community development loans, investments and services.

Answer 155

Discuss with the institution, and consider, any information the institution may provide about its local community and economy, including community development needs and opportunities, its business strategy, its lending capacity, or information that otherwise assists in the evaluation of the institution.

Answer 156

Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution. Contact local community, governmental or economic development representatives to update or supplement this information. Refer to the Community Contact Procedures for more detail.

Answer 157

5. Review the institution’s public file and any comments received by the institution or the agency since the last CRA performance evaluation for information that assists in the evaluation of the institution.

Answer 158

6. By reviewing performance evaluations and other financial data, determine whether any similarly situated institutions (in terms of size, financial condition, product offerings, and business strategy) serve the same or similar assessment area(s) and would provide relevant and accurate information for evaluating the institution’s CRA performance. Consider, for example, whether the information could help identify: a. Lending and community development opportunities available in the institution’s assessment area(s) that are compatible with the institution’s business strategy and consistent with safe and sound banking practices; b. Constraints affecting the opportunities to make safe and sound retail loans, community development loans, qualified investments and community development services compatible with the institution’s business strategy in the assessment area(s); and c. Successful CRA-related product offerings or activities utilized by other lenders serving the same or similar assessment area(s).

Answer 159

7. Document the performance context information, particularly community development needs and opportunities, gathered for use in evaluating the institution’s performance.

Answer 160

Assessment area compliance

Answer 161

1. Review the institution’s stated assessment area(s) to ensure that it: a. Consists of one or more MSAs/MDs or contiguous political subdivisions (i.e., counties, cities, or towns); b. Includes the geographies where the institution has its main office, branches, and deposit-taking (Automated Teller Machines (ATMs), as well as the surrounding geographies in which the institution originated or purchased a substantial portion of its loans; c. Consists only of whole census tracts; d. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is in a multistate MSA/MD; e. Does not reflect illegal discrimination; and f. Does not arbitrarily exclude any low- or moderate income area(s) taking into account the institution’s size, branching structure, and financial condition.

Answer 162

2. If the assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers.

Answer 163

3. If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Answer 164

1. Identify the institution’s loans to be evaluated by reviewing: a. The most recent HMDA and CRA Disclosure Statements, the interim HMDA Loan Application Register (LAR), and any interim CRA loan data collected by the institution; b. A sample of consumer loans if consumer lending represents a substantial majority of the institution’s business so that an accurate conclusion concerning the institution’s lending record could not be reached without a review of consumer loans; and c. Any other information the institution chooses to provide, such as small business loans secured by nonfarm residential real estate, home equity loans not reported for HMDA, unfunded commitments, any information on loans outstanding, and loan distribution analyses conducted by or for the institution, including any explanations for identified concerns or actions taken to address them.

Answer 165

2. Test a sample of loan files to verify the accuracy of data collected and/or reported by the institution. In addition, ensure that: a. Affiliate loans reported by the institution are not also attributed to the lending record of another affiliate subject to CRA. This can be accomplished by requesting the institution to identify how loans are attributed and how it ensures that all the loans within a given lending category (e.g., small business loans, home purchase loans, motor vehicle, credit card, home equity, other secured, and other unsecured loans) in a particular assessment area are reported for all of the institution’s affiliates if the institution elects to count any affiliate loans; b. Loans reported as community development loans (including those originated or purchased by consortia or third parties) meet the definition of community development loans. Determine whether community development loans benefit the institution’s assessment area(s) or a broader statewide or regional area that includes the institution’s assessment area(s). Except for multifamily loans, ensure that community development loans have not also been reported by the institution or an affiliate as HMDA, small business or farm, or consumer loans. Review records provided to the institution by consortia or third parties or affiliates to ensure that the amount of the institution’s third party or consortia or affiliate lending does not account for more than the institution’s percentage share (based on the level of its participation or investment) of the total loans originated by the consortia, third parties, or affiliates; and c. All consumer loans in a particular loan category have been included when the institution collects and maintains the data for one or more loan categories and has elected to have the information evaluated.

Answer 166

3. Identify the volume, both in number and dollar amount, of each type of loan being evaluated that the institution has made or purchased within its assessment area. Evaluate the institution’s lending volume considering the institution’s resources and business strategy and other information from the performance context, such as population, income, housing, and business data. Note whether the institution conducts certain lending activities in the institution and other activities in an affiliate in a way that could inappropriately influence an evaluation of borrower or geographic distribution

Answer 167

4. Review any analyses prepared by or for and offered by the institution for insight into the reasonableness of the institution’s geographic distribution of lending. Test the accuracy of the data and determine if the analyses are reasonable. If areas of low or no penetration were identified, review explanations and determine whether action was taken to address disparities, if appropriate.

Answer 168

5. Supplement with an independent analysis of geographic distribution as necessary. As applicable, determine the extent to which the institution is serving geographies in each income category and whether there are conspicuous gaps unexplained by the performance context. Conclusions should recognize that institutions are not required to lend in every geography. The analysis should consider: a. (Excluding affiliate lending) the number, dollar amount, and percentage of the institution’s loans located within any of its assessment areas, as well as the number, dollar amount, and percentage of the institution’s loans located outside any of its assessment [AA Concentration] areas; b. The number, dollar amount, and percentage of each type of loan in the institution’s portfolio in each geography, and in each category of geography (low-, moderate-, middle-, and upper-income); [BP] c. The number of geographies penetrated in each income category, as determined in step (b), and the total number of geographies in each income category within the assessment area(s); d. The number and dollar amount of its home purchase, home refinancing, and home improvement loans, respectively in each geography compared to the number of one-to-four family owner-occupied units in each geography; e. The number and dollar amount of multifamily loans in each geography compared to the number of multifamily structures in each geography; f. The number and dollar amount of small business and farm loans in each geography compared to the number of small businesses/farms in each geography; and g. Whether any gaps exist in lending activity for each income category, by identifying groups of contiguous geographies that have no loans or those with low penetration relative to the other geographies.

Answer 169

6. If there are groups of contiguous geographies within the institution’s assessment area with abnormally low penetration, the examiner may determine if an analysis of the institution’s performance compared to other lenders for home mortgage loans (using reported HMDA data) and for small businesses and small farm loans (using data provided by lenders subject to CRA) would provide an insight into the institution’s lack of performance in those areas. This analysis is not required, but may provide insight if: a. The reported loan category is substantially related to the institution’s business strategies; b. The area under analysis substantially overlaps the institution’s assessment area(s); c. The analysis includes a sufficient number and volume of transactions, and an adequate number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s); and d. The assessment area data is free from anomalies that can cause distortions such as dominant lenders that are not subject to the CRA, a lender that dominates a part of an area used in calculating the overall lending, or there is an extraordinarily high level of performance, in the aggregate, by lenders in the institution’s assessment area(s).

Answer 170

7. Using the analysis from step #6, form a conclusion as to whether the institution’s abnormally low penetration in certain areas should constitute a negative consideration under the geographic distribution performance criteria of the lending test by considering: a. The institution’s share of reported loans made in low and moderate-income geographies versus its share of reported loans made in middle- and upper-income geographies within the assessment area(s); b. The number of lenders with assessment area(s) substantially overlapping the institution’s assessment area(s); c. The reasons for penetration of these areas by other lenders, if any, and the lack of penetration by the institution being examined that are developed through discussions with management and the community contact process; d. The institution’s ability to serve the subject area in light of (i) the demographic characteristics, economic condition, credit opportunities and demand; and (ii) the institution’s business strategy and its capacity and constraints; e. The degree to which penetration by the institution in the subject area in a different reported loan category compensates for the relative lack of penetration in the subject area; and f. The degree to which penetration by the institution in other low- and moderate-income geographies within the assessment area(s) in reported loan categories compensates for the relative lack of penetration in the subject area.

Answer 171

8. Review any analyses prepared by or for and offered by the institution for insight into the reasonableness of the institution’s distribution of lending by borrower characteristics. Test the accuracy of the data and determine if the analyses are reasonable. If areas of low or no penetration were identified, review explanations and determine whether action was taken to address disparities, if appropriate.

Answer 172

9. Supplement with an independent analysis of the distribution of the institution’s lending within the assessment area by borrower characteristics as necessary and applicable. Consider factors such as: a. The number, dollar amount, and percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper-income borrowers; b. The percentage of the institution’s total home mortgage loans and consumer loans, if included in the evaluation, to low-, moderate-, middle-, and upper- income borrowers compared to the percentage of the population within the assessment area who are low-, moderate-, middle-, and upper-income; c. The number and dollar amount of small loans originated to businesses or farms by loan size of less than $100,000; at least $100,000 but less than $250,000; and at least $250,000 but less than or equal to $1,000,000; d. The number and amount of the small loans to businesses or farms that had annual revenues of less than $1 million compared to the total reported number and amount of small loans to businesses or farms; and e. If the institution adequately serves borrowers within the assessment area(s), whether the distribution of the institution’s lending outside of the assessment area based on borrower characteristics would enhance the assessment of the institution’s overall performance.

Answer 173

10. Review data on the number and amount of the institution’s community development loans. Using information obtained in the performance context procedures, especially with regard to community credit needs and institutional capacity, evaluate the extent, innovativeness, and complexity of community development lending to determine: a. The number and amount of community development loans in: i. The institution’s assessment area(s); or ii. The broader statewide or regional area that includes the assessment area(s) that support organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the institution’s assessment area(s). b. The extent to which community development lending opportunities have been available to the institution; c. The institution’s responsiveness to the opportunities for community development lending; and d. The extent of leadership the institution has demonstrated in community development lending; and e. The innovativeness or complexity involved

Answer 174

11. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in step number 10, consider: a. The number and dollar amount of community development loans in the broader statewide or regional area that includes the assessment area(s), but: i. Will not benefit the assessment area(s); and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). b. The extent to which these loans enhance the institution’s performance.

Answer 175

12. Evaluate whether the institution’s performance under the lending test is enhanced by offering innovative loan products or products with more flexible terms to meet the credit needs of low-and moderate-income individuals or geographies. Consider: a. The degree to which the loans serve low- and moderate-income creditworthy borrowers in new ways or loans serve groups of creditworthy borrowers not previously served by the institution; and b. The success of each product, including number and dollar amount of loans originated during the review period.

Answer 176

13. Discuss with management the preliminary findings in this section.

Answer 177

14. Summarize your conclusions regarding the institution’s lending performance under the following criteria: a. Lending activity; b. Geographic distribution; c. Borrower characteristics; d. Community development lending; and e. Use of innovative or flexible lending practices.

Answer 178

15. Prepare comments for the performance evaluation and the compliance examination report. Refer to the appendix for guidance on addressing community development activities in the performance evaluation.

Answer 179

1. Identify qualified investments by reviewing the institution’s investment portfolio, and at the institution’s option, its affiliate’s investment portfolio. As necessary, obtain a prospectus, or other information that describes the investment(s) and the geographic area(s) or population(s) served. This review should encompass qualified investments, including investments in a broader statewide or regional area and in nationwide funds, that were made since the previous examination (including those that have been sold or have matured) and may consider qualified investments made prior to the previous examination still outstanding. Also, consider qualifying grants, donations, or in-kind contributions of property since the last examination that are for community development purposes. Determine: a. Whether the investments have been considered under the lending or service tests; and b. Whether an affiliate’s investments, if considered, have been claimed by another institution.

Answer 180

2. Evaluate investment performance using information obtained in the performance context procedures, especially with regard to community needs and institutional capacity. Determine: a. The number and amount of qualified investments in: i. The institution’s assessment area(s); or ii. The broader statewide or regional area that includes the assessment area(s) that support organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the institution’s assessment area(s). b. The extent to which qualified investment opportunities have been available to the institution; c. The institution’s responsiveness to opportunities for qualified investments; d. The use of any innovative or complex investments, in particular those that are not routinely provided by other investors; and e. The degree to which investments serve low- and moderate-income areas or individuals, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies, and the available opportunities for qualified investments.

Answer 181

3. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in step number 2, consider: a. The number and dollar amount of qualified investments in the broader statewide or regional area that includes the assessment area(s), but: i. Will not benefit the assessment area(s); and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). iii. The extent to which these investments enhance the institution’s performance

Answer 182

4. Discuss with management the preliminary findings in this section.

Answer 183

5. Summarize conclusions about the institution’s investment performance after considering: a. The number and dollar amount of qualified investments; b. The innovativeness and complexity of qualified investments; c. The degree to which qualified investments are not routinely provided by other private investors; and d. The responsiveness of qualified investments to available opportunities.

Answer 184

6. Prepare comments for the performance evaluation and the compliance examination report. Refer to the appendix for guidance on addressing community development activities in the performance evaluation.

Answer 185

1. Determine from information available in the institution’s Public File: a. The distribution of the institution’s branches among low-, moderate-, middle-, and upper-income geographies in the institution’s assessment area(s) [the geographic distribution of branches]; and b. Banking services, including hours of operation and available loan and deposit products.

Answer 186

1. Determine from information available in the institution’s Public File: a. The distribution of the institution’s branches among low-, moderate-, middle-, and upper-income geographies in the institution’s assessment area(s); and b. Banking services, including hours of operation and available loan and deposit products.

Answer 187

3. Evaluate the institution’s record of opening and closing branch offices since the previous examination and information that could indicate whether changes have had a positive or negative effect, particularly on low- and moderate-income geographies or individuals.

Answer 188

4. Evaluate the accessibility and use of alternative systems for delivering retail banking services, (e.g., proprietary and nonproprietary ATMs, loan production offices (LPOs), banking by telephone or computer, and bank-at- work or by-mail programs) in low- and moderate-income geographies and to low- and moderate-income individuals.

Answer 189

5. Assess the quantity, quality and accessibility of the institution’s service-delivery systems provided in low-, moderate-, middle-, and upper-income geographies. Consider the degree to which services are tailored to the convenience and needs of each geography (e.g., extended business hours, including weekends, evenings or by appointment, providing bi-lingual services in specific geographies, etc.).

Answer 190

CD Services - 6. Identify the institution’s community development services, including at the institution’s option, services through affiliates. Hold discussions with management and review materials. Determine: a. Whether services have been considered under the lending or investment tests; and b. If provided by affiliates of the institution, services are not claimed by other affiliated institutions

Answer 191

7. Evaluate performance using information obtained in the performance context procedures especially with regard to community needs and institutional capacity. Determine: a. The extent of community development services provided in: i. The institution’s assessment area(s); or ii. The broader statewide or regional area that includes the assessment area(s) that support organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals b. Their innovativeness, including whether they serve low- or moderate-income customers in new ways or serve groups of customers not previously served; and located within the institution’s assessment area(s). c. The degree to which they serve low- or moderateincome areas or individuals and their responsiveness to available opportunities for community development services.

Answer 192

8. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in step number 7, consider: a. The extent of community development services in the broader statewide or regional area that includes the assessment area(s), but: i. Will not benefit the assessment area(s); and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). b. The extent to which these services enhance the institution’s performance. NOTE: Refer to the appendix for additional guidance on addressing activities at the state or multistate MSA, or institution level.

Answer 193

9. Discuss with management the preliminary findings.

Answer 194

a. The distribution of branches among low-, moderate-, middle-, and upper-income geographies; b. The institution’s record of opening and closing branches, particularly branches located in low- or moderate-income geographies or primarily serving low or moderate-income individuals; c. The availability and effectiveness of alternative systems for delivering retail banking services; d. The extent to which the institution provides community development services; e. The innovativeness and responsiveness of community development services; and f. The range and accessibility of services provided in low-, moderate-, middle-, and upper-income geographies.

Answer 195

11. Prepare comments for the performance evaluation and the compliance examination report. Refer to the appendix for guidance on addressing community development activities in the performance evaluation.

Answer 196

1. Group the analyses of the assessment areas examined by MSA and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multistate MSA, group the assessment areas that are in that multistate MSA.

Answer 197

2. Summarize conclusions regarding the institution’s performance in each MSA and nonmetropolitan portion of each state with an assessment area that was examined using these procedures. If two or more assessment areas in an MSA or in a nonmetropolitan portion of a state were examined using these procedures, determine the relative significance of the institution’s performance in each assessment area by considering: a. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to: i. The institution’s overall activities; ii. The number of other institutions and the extent of their activities; and iii. The lending, investment, and service opportunities in each. b. Demographic and economic conditions in each.

Answer 198

3. Evaluate the institution’s performance in those assessment area(s) not selected for examination using the full scope procedures. a. Revisit the demographic and lending, investment, and service data considered in scoping the examination. Also, consider the institution’s operations (branches, lending portfolio mix, etc.) in the assessment area; b. Through a review of the public file(s), consider any services that are customized to the assessment area; and c. Consider any other information provided by the institution (e.g., CRA self-assessment) regarding its performance in the area.

Answer 199

4. For MSAs, and the nonmetropolitan portion of the state, where one or more assessment areas were examined using the full scope procedures, ensure that performance in the assessment area(s) not examined using the full scope procedures is consistent with the conclusions based on the assessment area(s) examined in step 2, above. Select one of the following options for inclusion in the performance evaluation: a. The institution’s [lending, investment, service] performance in [the assessment area/these assessment areas] is consistent with the institution’s [lending, investment, service] performance in the assessment areas within [the MSA/nonmetropolitan portion of the state] that were reviewed using the examination procedures; and b. The institution’s [lending/investment/service] performance in [the assessment area/these assessment areas] [exceeds/is below] the lending/investment/service] performance in the assessment areas within [the MSA/nonmetropolitan portion of the state] that were reviewed using the evaluation; however, it does not change the conclusion for the [MSA/nonmetropolitan portion of the state].

Answer 200

5. For MSA, and nonmetropolitan portions of the state, where no assessment area was examined using the full scope procedures, form a conclusion regarding the institution’s lending, investment, and service performance in the assessment area(s). When there are several assessment areas in the MSA, or the nonmetropolitan portion of the state, form a conclusion regarding the institution’s performance in the MSA, or the nonmetropolitan portion of the state. Determine the relative significance of the institution’s performance in each assessment area within the MSA, or the nonmetropolitan portion of the state, by considering: a. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to the institution’s overall activities; and b. Demographic and economic conditions in each.

Answer 201

6. Also, select one of the following options for inclusion in the performance evaluation: a. The institution’s [lending, investment, service] performance in [the assessment area/these assessment areas] is consistent with the institution’s[lending, investment, service] performance [overall/in the state]; and b. The institution’s [lending/investment/service] performance in [the assessment area/these assessment areas] [exceeds/is below] the [lending/investment/service] performance for the [institution/state], however, it does not change the [institution’s/state] rating.

Answer 202

7. Determine the relative significance of each MSA and nonmetropolitan area to the institution’s overall performance (institutions operating in one state) or statewide or multistate MSA performance (institutions operating in more than one state). Consider: a. The significance of the institution’s lending, qualified investments, and lending-related services in each compared to: i. The institution’s overall activities; ii. The number of other institutions and the extent of their activities; and iii. The lending, investment, and service opportunities in each. b. Demographic and economic conditions in each.

Answer 203

When determining the state or multistate MSA rating, as applicable, consider: a. Community development loans and services and qualified investments in the institution’s assessment area(s) in the state or multistate MSA; b. Community development loans and services and qualified investments: i. In the broader statewide or regional area that includes the institution’s assessment area(s) in the state or multistate MSA; and ii. That support organizations or activities with a purpose, mandate, or function that includes serving individuals or geographies in the institution’s assessment area(s); and c. If the institution has been responsive to community development needs and opportunities in its assessment area(s) based on the analysis in steps 8a and 8b, consider any community development loans and services and qualified investments in the broader statewide or regional area that includes the institution’s assessment area(s) in the state or multistate MSA that: i. Will not benefit the assessment area(s); and ii. Do not support organizations or activities with a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s).

Answer 204

9. Using the Component Test Ratings chart below, assign component ratings that reflect the institution’s lending, investment, and service performance. In the case of an institution with branches in just one state, one set of component ratings will be assigned to the institution. In the case of an institution with branches in two or more states and multistate MSAs, component ratings will be assigned for each state or multistate MSA reviewed.

Answer 205

10. Assign a preliminary composite rating for the institutions operating in only one state and a preliminary rating for each state or multistate MSA reviewed for institutions operating in more than one state. In assigning the rating, sum the numerical values of the component test ratings for the lending, investment and service tests and refer to the chart, below. No institution, however, may receive an assigned rating of “Satisfactory” or higher unless it receives a rating of at least “Low Satisfactory” on the lending test. In addition, an institution’s assigned rating can be no more than three times the score on the lending test.

Answer 206

11. Consider an institution’s past performance if the prior rating was “Needs to Improve.” If the poor performance has continued, an institution could be considered for a “Substantial Noncompliance” rating.

Answer 207

12. For institutions with branches in more than one state or multistate MSA, assign a preliminary overall rating. a. To determine the relative importance of each state and multistate MSA to the institution's overall rating, consider: a. To determine the relative importance of each state and multistate MSA to the institution's overall rating, consider: i. The significance of the institution's lending, qualified investments, and lending-related services in each compared to: 1. The institution's overall activities; 2. The number of other institutions and the extent of their activities in each; and 3. The lending, investment, and service opportunities in each. ii. Demographic and economic conditions in each. b. Consider the community development loans and services and qualified investments that meet the geographic requirements and that have not been considered in assigning state or multistate MSA ratings. For example, a qualified investment in a regional or nationwide fund that meets the geographic requirements and benefits more than one state, but was not considered because the benefits are not attributable to a particular state or multistate MSA, would be considered at the overall institution level.

Answer 208

Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s preliminary overall CRA rating, or the preliminary CRA rating for a state or multistate MSA.6 If evidence of discrimination or other illegal credit practices by the institution in any geography, or in any assessment are by any affiliate whose loans have been considered as part of the bank’s lending performance, was found, consider the following: a. The nature, extent, and strength of the evidence of the practices; b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices; c. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and d. Any other relevant information.

Answer 209

14. Assign final overall rating to the institution. Consider: a. The preliminary rating; and b. Any evidence of discriminatory or other illegal credit practices, and discuss conclusions with management.

Answer 210

15. Write comments and conclusions, and create charts and tables reflecting area demographics, the institution’s operation and its lending, investment and service activity in each assessment area for inclusion in the performance evaluation.

Answer 211

16. Prepare recommendations for supervisory strategy and matters that require attention for follow-up activities.

Answer 212

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files will be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations; its branching structure and changes to it since its last examination; complaints about the institution’s compliance with the public file requirements, and any other relevant information.

Answer 213

2. In any review of the public file undertaken, determine, as needed, whether branches display an accurate public notice in their lobbies and the file(s) in the main office and in each state contains: a. All written comments from the public relating to the institution’s CRA performance and responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution); b. The institution’s most recent CRA performance evaluation; c. A map of each assessment area showing its boundaries, and on the map or in a separate list, the geographies contained within the assessment area; d. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, and their street addresses and geographies; e. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services between these locations; f. The institution’s CRA disclosure statements for the prior two calendar years; g. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating in its most recent CRA performance evaluation; h. The HMDA Disclosure Statement for the prior two calendar years for the institution and for each non depository affiliate the institution has elected to include in assessment of its CRA record, if applicable; and i. If applicable, the number and amount of consumer loans made to the four income categories of borrowers and geographies (low, moderate, middle and upper), and the number and amount located inside and outside of the assessment area(s).

Answer 214

3. In any branch review undertaken, determine whether the branch provides the most recent performance evaluation and a list of services generally available at its branches and a description of any material differences in availability or cost of services at the branch (or a list of services available at the branch).

Answer 215

In order to be evaluated under the community development test, an institution must be designated as a wholesale or limited purpose institution following submission of a written request to and approval from its primary regulator. Once an institution has received a designation, it will not normally have to reapply for that designation. The designation will remain in effect until the institution requests that it be revoked or until one year after the agency determines that the institution no longer satisfies the criteria for designation and notifies the institution of this determination. As such, examiners should analyze the bank’s operations to determine whether or not any significant changes result in the institution no longer satisfying the criteria for designation.

Answer 216

- Community development lending, qualified investments, or community development services; - Use of innovative or complex qualified investments, community development loans, or community development services and the extent to which investments - Responsiveness to community credit and development needs.

Answer 217

Institutions need not engage in all three categories of community development activities to be considered satisfactory under the community development test. Community development loans, investments and services can be directed to a statewide or regional market that includes the institution’s assessment area(s) and still qualify for consideration under the community development test as benefiting the assessment area(s). Moreover, if an institution has a satisfactory community development record in its assessment area(s), all community development activities regardless of their locations should be considered.

Answer 218

1. 1. For institutions with more than one assessment area, identify assessment areas for full scope review. In making those selections, review prior performance evaluations, available community contact materials, reported lending data and demographic data on each assessment area and consider factors such as: a. The lending, investment, and service activity in the different assessment areas, particularly community development activities; b. The lending, investment, and service opportunities available in the different assessment areas, particularly community development opportunities; c. The length of time since the assessment area(s) received a full scope review; d. The institution’s prior CRA performance in different assessment areas; e. The number of other institutions in the assessment areas and the importance of the institution under examination in addressing community development needs in the different assessment areas, particularly in areas with a limited number of financial service providers; f. The existence of apparent anomalies in the reported HMDA data for any particular assessment area; g. Examiners’ knowledge of the same or similar assessment areas; and h. Comments from the public regarding the institution’s CRA performance.

Answer 219

2. For interstate institutions, a rating must be assigned for each state where the institution has a branch and for each multi-state metropolitan statistical areas/metropolitan divisions (MSA/MD) where the institution has branches in two or more of the states that comprise the multi-state MSA/MD. Select one or more assessment areas in each state for examination using the full scope procedures.

Answer 220

1. Review standardized worksheets and other agency information sources to obtain relevant demographic, economic, and loan data, to the extent available, for each assessment area under review. Consider, among other things, whether housing costs are particularly high in relation to area median income.

Answer 221

2. Consider any information the institution may provide on its local community and economy and its community development lending, qualified investment, and community development service capacity or that otherwise assists in the evaluation of the institution’s community development activities.

Answer 222

3. Review community contact forms prepared by the regulatory agencies to obtain information that assists in the evaluation of the institution’s community development activities. Contact local community, government, or economic development representatives to update or supplement information about community development activities in the assessment area(s) or the broader statewide or regional areas of which the assessment area(s) is a part.

Answer 223

4. Identify barriers, if any, to participation by the institution in local community development activities. For example, evaluate the institution’s ability and capacity to help meet the community development needs of its assessment area(s) through a review of the uniform bank performance report (UBPR), the consolidated report of condition (Call Report), annual reports, supervisory reports, prior CRA performance evaluations, and financial information for other wholesale/limited purpose institutions serving approximately the same assessment area(s).

Answer 224

5. Review the institution’s public file and any comments received by the institution or the agency since the last CRA performance evaluation for information that assists in the evaluation of the institution.

Answer 225

6. Document the performance context information gathered for use in evaluating the institution’s CRA record.

Answer 226

[the normal factors for technical compliance]: ensure that it: a. Consists of one or more MSAs/MDs or contiguous political subdivisions (i.e., counties, cities, or towns) where the institution has its main office, branches, and deposit-taking ATMs; b. Consists only of whole census tracts; c. Consists of separate delineations for areas that extend substantially across MSA/MD or state boundaries unless the assessment area is located in a multistate MSA/MD; d. Does not reflect illegal discrimination; and e. Does not arbitrarily exclude any low- or moderate income area(s) taking into account the institution’s size and financial condition

Answer 227

2. If the assessment area(s) does not coincide with the boundaries of an MSA/MD or political subdivision(s), assess whether the adjustments to the boundaries were made because the assessment area would otherwise be too large for the institution to reasonably serve, have an unusual configuration, or include significant geographic barriers.

Answer 228

3. If the assessment area(s) fails to comply with the applicable criteria described above, develop, based on discussions with management, a revised assessment area(s) that complies with the criteria. Use this assessment area(s) to evaluate the institution’s performance, but do not otherwise consider the revision in determining the institution’s rating.

Answer 229

1. Identify the number and amount of the institution’s community development loans, (originations and purchases of loans and any other data the institution chooses to provide), qualified investments, and community development services. Obtain this information through discussions with management, HMDA data collected by the institution, as applicable; investment portfolios; any other relevant financial records; and materials available to the public. Include, at the institution’s option: a. Community development loans, qualified investments, and community development services provided by affiliates, if they are not claimed by any other institution; and b. Community development lending by consortia or third parties.

Answer 230

2. Review community development loans, qualified | investments, and community development services to verify that they qualify as community development.

Answer 231

3. If the institution participates in community development lending by consortia or third parties, or claims activities provided by affiliates, review records provided to the institution by the consortia or third parties or affiliates to ensure that the community development loans claimed by the institution do not account for more than the institution’s share (based on the level of its participation or investment) of the total loans originated by the consortium or third party.

Answer 232

4. Considering the institution’s capacity and constraints and other information obtained through the performance context review, form conclusions about: a. The extent, by number and dollar amount of community development loans, services, and qualified investments; b. The degree of innovation in community development activities (e.g., serving low- or moderate-income borrowers in new ways or serving groups of creditworthy borrowers not previously served by the institution); c. The complexity of those community development activities, such as the use of enhancements or other features specifically designed to expand community development lending; d. The responsiveness to the opportunities for community development lending, qualified investments, and community development services; and e. The degree to which the institution’s qualified investments serve needs not routinely provided by other private investors. 5. Summarize conclusions regarding the institution’s community development performance and retain in the work papers.

Answer 233

``` 1. Review the analyses of the institution’s performance in each assessment area examined, considering only those community development activities that benefit the assessment area(s) and the broader statewide or regional area(s) that include the assessment area(s). ```

Answer 234

2. Group the analyses of the assessment areas examined by MSA and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas in that MSA

Answer 235

3. Summarize conclusions about the institution’s performance in each MSA and the nonmetropolitan portion of each state in which an assessment area was examined using these procedures. If two or more assessment areas in an MSA or in the nonmetropolitan portion of a state were examined using these procedures, determine the relative significance of the institution’s performance in each assessment area by considering: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The community development opportunities in each; c. The significance of the institution’s activities for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 236

4. For assessment areas in MSAs and nonmetropolitan areas that were not examined, consider facts and data related to the institution’s community development lending, investment, and service activities to ensure that performance in those areas is not inconsistent with the conclusions based on the assessment areas examined.

Answer 237

5. Assign a preliminary rating for an institution with operations in one state only using the Community Development Ratings Matrix. For an institution with operations in more than one state or multi-state MSA, assign a preliminary rating for each state, using the Community Development Ratings Matrix. To determine the relative significance of each MSA and nonmetropolitan area to the institution’s overall rating (institutions operating in only one state) or state-wide or multi-state MSA rating (institutions operating in more than one state), consider:

Answer 238

6. For institutions with operations in more than one state or multi-state MSA, assign a preliminary rating for the institution as a whole. To determine the relative significance of each state or multi-state MSA consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The community development opportunities in each; c. The significance of the institution’s activities for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each

Answer 239

7. If the institution is adequately meeting the community development needs of each of its assessment area(s), consider those community development activities, if any, that benefit areas outside of the assessment area(s) or a broader statewide or regional area that includes the assessment area(s). Determine whether those activities enhance the preliminary rating. If so, adjust the rating(s) accordingly.

Answer 240

8. Consider an institution’s past performance if the prior rating was “Needs to Improve.” If the poor performance has continued, an institution could be considered for a “Substantial Noncompliance” rating.

Answer 241

9. Review the results of the most recent compliance examination and determine whether evidence of discrimination or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s preliminary composite rating or the preliminary CRA rating for a state or multistate MSA. 2 If evidence of discrimination or other illegal credit practices by the institution in any geography, or in any assessment area by any affiliate whose loans have been considered as part of the bank’s lending performance, was found, consider the following: a. The nature, extent, and strength of the evidence of the practices; b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices; c. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and d. Any other relevant information 2 “ Evidence of discriminatory or other illegal credit practices” includes, but is not limited to: (a) Discrimination against applicants on a prohibited basis in violation, for example, of the Equal Credit Opportunity Act or the Fair Housing Act; (b) Violations of the Home Ownership and Equity Protection Act; (c) Violations of section 5 of the Federal Trade Commission Act; (d) Violations of section 8 of the Real Estate Settlement Procedures Act; and (e) Violations of the Truth in Lending Act regarding a consumer’s right of rescission.

Answer 242

10. Assign a final composite rating to the institution, considering the preliminary rating and any evidence of discriminatory or other illegal credit practices, and discuss conclusions with management.

Answer 243

11. Write comments for the public evaluation and examination report.

Answer 244

12. Prepare recommendations for supervisory strategy and matters that require attention for follow-up activities.

Answer 245

1. There is no need to review each branch or each complete public file during every examination. In determining the extent to which the institution’s public files should be reviewed, consider the institution’s record of compliance with the public file requirements in previous examinations, its branching structure and changes to it since its last examination, complaints about the institution’s compliance with the public file requirements, and any other relevant information.

Answer 246

2. In any review of the public file undertaken, determine whether branches display an accurate public notice in their lobbies [Public Notice Determine that the appropriate CRA public notice is displayed as required by § 345.44 and Appendix B.], a complete public file is available in the institution’s main office and at least one branch in each state, and the public file(s) in the main office and in each state contain: a. All written comments from the public relating to the institution’s CRA performance and any responses to them for the current and preceding two calendar years (except those that reflect adversely on the good name or reputation of any persons other than the institution); b. The institution’s most recent CRA Performance Evaluation; c. A map of each assessment area showing its boundaries and, on the map or in a separate list, the geographies contained within the assessment area; d. A list of the institution’s branches, branches opened and closed during the current and each of the prior two calendar years, their street addresses and geographies; e. A list of services (loan and deposit products and transaction fees generally offered, and hours of operation at the institution’s branches), including a description of any material differences in the availability or cost of services between those locations; f. The institution’s CRA Disclosure Statement(s) for the prior two calendar years; g. A quarterly report of the institution’s efforts to improve its record if it received a less than satisfactory rating during its most recent CRA examination; h. HMDA Disclosure Statements for the prior two calendar years and those of each non-depository affiliate the institution has elected to include in assessment of its CRA record, if applicable; and i. If applicable, the number and dollar amount of consumer loans made to the four income categories of borrowers and geographies (low-, moderate-, middle-, and upper-income), located inside and outside of the assessment area(s).

Answer 247

3. In any branch review undertaken, determine whether the branch provides the most recent public evaluation, and a list of services generally available at its branches, and a description of any material differences in the availability or cost of services at the branch (or a list of services available at the branch).

Answer 248

The first CD test characteristic is Investment, Loan, and Service Activity

Answer 249

The second CD test characteristic is investment, loan and service initiative

Answer 250

The third CD test characteristic is responsiveness to CD needs

Answer 251

The institution has a high level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors.

Answer 252

The institution has an adequate level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors.

Answer 253

``` The institution has a poor level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors. ```

Answer 254

The institution has few, if any, community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors.

Answer 255

The institution extensively uses innovative or complex qualified investments, community development loans, or community development services.

Answer 256

The institution occasionally uses innovative or complex qualified investments, community development loans, or community development services.

Answer 257

The institution rarely uses innovative or complex qualified investments, community development loans, or community development services.

Answer 258

The institution does not use innovative or complex qualified investments, community development loans, or community development services

Answer 259

The institution exhibits excellent responsiveness to credit and community economic development needs in its assessment area(s)

Answer 260

The institution exhibits adequate responsiveness to credit and community economic development needs in its assessment area(s).

Answer 261

The institution exhibits poor responsiveness to | credit and community economic needs in its assessment area(s).

Answer 262

The institution exhibits very poor responsiveness to credit and community economic development needs in its assessment area(s).

Answer 263

Yes: The regulations permit any institution to develop, and submit for approval by its primary supervisory agency, a strategic plan (Plan) for addressing its responsibilities with respect to CRA

Answer 264

A strategic plan enables the institution to tailor its CRA goals and objectives to address the needs of its community consistent with its business strategy, operational focus, and capacity and constraints.

Answer 265

The required contents of the strategic plan and the FDIC’s criteria for evaluating a strategic plan submission are set forth in Part 345 of the FDIC’s regulations; specifically, at 12 C.F.R. §345.27.

Answer 266

An important component in preparing a strategic plan is the requirement that the process include public review and comment.

Answer 267

The plan must include a copy of the public notice and the name(s) of the newspaper of general circulation in which the notice was published for each assessment area covered by the plan. The institution should provide verification in the plan that comments were solicited for a minimum period of 30 days. Copies of all written comments received during the formal comment period must be submitted. If the final plan submitted to the FDIC is different from the initial plan released for comment, a copy of that initial plan must also be submitted with the request. During the FDIC’s review process, the institution may need to revise the plan to respond to agency requests for additional information. These changes do not need to be released again for public comment unless they significantly alter the content of the original submission.

Answer 268

The institution can obtain public input in a variety of ways, such as holding meetings with community groups and other interested parties, seeking comments from customers through branch notifications, and mailing statement stuffers to customers.

Answer 269

The institution should also include copies of its response to the public comments. The public comments and the institution’s response(s) will be reviewed by the FDIC to determine whether the institution considered the input from the community, the degree of support for the institutions goals, and the appropriateness of the goals.

Answer 270

An institution must define assessment area(s) and list them in the plan.

Answer 271

1. Only whole geographies should be included: census tracts, block numbering areas or block groups. *Whole census tracts and block numbering areas should be included even if these geographies cross MSA and political subdivision boundaries.* 2. The assessment area should consist of one or more metropolitan statistical areas (MSAs) or one or more contiguous political subdivisions (e.g., counties, cities or towns); however, the assessment area may be adjusted if including the political subdivision would create a larger area than the institution can be reasonably expected to serve. 3. The institution should include those geographies in which it has its main office, branches and deposit taking remote service facilities such as ATMs and point-of-sale terminals. 4. The institution should also include the surrounding geographies in which it has originated or purchased a substantial amount of its loan portfolio, including home mortgage, small business and small farm loans, as well as any consumer loans, on which the institution chooses to have its performance assessed.

Answer 272

Each institution must determine not only which goals to include in the plan but also the levels at which these goals must be set to justify the proposed ratings. When an institution selects the strategic plan option, it should refer to both the examination procedures and those portions of the CRA regulations that establish the performance criteria for lending, investments, and services.

Answer 273

A. Extent and breadth of lending or lending-related activities, including geographic and borrower distribution of loans. B. Extent of community development lending. C. Use of innovative or flexible lending practices D. Amount, innovativeness, complexity and responsiveness of qualified investments. E. Availability and effectiveness of retail services and the extent and innovativeness of community development services.

Answer 274

The regulations state that the plan should include specific measurable goals to meet the credit needs of the assessment area, particularly the needs of low- and moderate-income geographies and individuals, through lending, investments and services.

Answer 275

Generally, the plan should emphasize lending and lending-related activity. Nonetheless, a different emphasis may still be appropriate, provided that this emphasis is clearly explained and substantiated based on the characteristics and needs of the assessment area and the institution’s financial capacity, product offerings and business focus. For example, there may be demonstrable intense loan competition within an assessment area, so the institution is concentrating its efforts on making qualified investments and providing community development services

Answer 276

With respect to affiliates, the plan must include the names of each institution joining in the plan and a description of how it is affiliated with the submitting institution. The FDIC will approve a joint plan only if the plan provides measurable goals for each depository institution. Activities may be allocated among institutions, at their option, provided that the same activities are not counted for more than one institution. A joint plan must appropriately address the credit needs of each institution’s assessment area(s).

Answer 277

If a proposed strategic plan is submitted on behalf of more than one institution, each institution must receive the approval of its own supervisory agency for those portions of the plan relating to that institution’s CRA responsibilities. If a strategic plan covering multiple institutions must be approved by more than one regulatory agency, each agency will issue a decision approving or denying the request with respect to the institution(s) for which that agency has primary supervisory responsibility.

Answer 278

Determining the adequacy of the projected goals necessitates that they be well-supported by facts and information presented in the performance context portion of the plan. Although past performance does indicate the institution’s ability to attain a certain goal, it does not necessarily denote whether the goal reflects the specific needs of the assessment area or is consistent with economic or market forecasts for the geographic area served by the institution.

Answer 279

Once an institution decides which goals should be included in its plan, it must establish levels for each of these goals. The balance is a delicate one: the goals must be realistic and achievable, yet sufficiently high to warrant the proposed Satisfactory or Outstanding ratings. In determining whether the goals are consistent with the ratings, the institution should take into account the factors typically considered during a CRA examination.

Answer 280

Essentially, this section of the plan should include any information developed in the institution's normal business planning that it would like the FDIC to consider regarding lending, investment and service opportunities for each assessment area covered by the plan. This information should include a description of any legal constraints or limitations that affect the type of loans, investments or services that the institution offers. Information submitted by the institution will be considered along with data that the FDIC has obtained from community, government, civic and other sources

Answer 281

The institution must set a term, not to exceed five years, during which the plan will be in effect. If the term is longer than one year, interim goals must be established for each year of the plan. These interim goals should reflect yearly adjustments based on information furnished in the performance context of the plan, which describes both the financial institutions capacity and local economic and demographic conditions. There should also be a reasonable relationship between past performance by the institution in the categories of lending, investments and services, and the proposed goals.

Answer 282

The plan should include a proposed effective date, which should be at least 90 days after the plan is submitted to the FDIC. The institution will not be evaluated under the strategic plan option until it has been operating under an approved plan that has been in effect for at least one year.

Answer 283

An institution may request confidential treatment of information that would be exempt from public disclosure under FOIA. The request must be submitted in writing concurrently with the filing of the strategic plan and must discuss in detail the justification for confidentiality. The institution should explain the harm that would result from public release of the information. Examples of the types of information that the institution may deem confidential include potential product offerings, marketing strategies and merger, acquisition or expansion plans. The FDIC will advise an institution of a decision to make information labeled Confidential available to the public.

Answer 284

The institution may elect in its plan to be evaluated under an alternative assessment method (e.g., the lending, investment and service tests for large institutions, the small institution performance standards or the community development test, as appropriate) if it fails to substantially meet the strategic plan goals for a Satisfactory rating.

Answer 285

During the term of the plan, mergers, acquisitions, branch expansions and closings or other events may occur that significantly change the context in which the institution operates. Moreover, there may be adverse impacts on the economic or market climate of the assessment area that hamper the institutions ability to meet the projected goals and activities in the plan. Consequently, an institution may request an amendment if material changes develop that were not anticipated in the initial performance context. Depending on the magnitude of these proposed changes, the amended plan may be required to undergo the public comment process.

Answer 286

The FDIC will act upon a plan within 60 calendar days after the FDIC receives the complete plan and other material required under the regulation. If the FDIC fails to act within this time period, the plan shall be deemed approved unless the FDIC extends the review period for good cause. The 60-day processing period will be suspended on the date that the FDIC requests that additional information be provided. If the institution cannot satisfactorily respond to the FDIC’s questions or cannot otherwise supply sufficient information to form a recommendation, the strategic plan submission may be returned to the institution as incomplete. Returning the strategic plan does not preclude a financial institution from submitting another request at a later date; however, this will start a new 60-day processing period. The FDIC will determine on a case-by-case basis whether additional public comment is needed. Generally, the submission of another plan would necessitate another public comment period If the plan is denied, the institution may request that the FDIC reconsider its decision within 30 days of its receipt of the notice of denial. The FDIC will determine whether the request for reconsideration sets forth substantive information that was not submitted for good cause in the original submission and whether there is justification to reverse the denial.

Answer 287

This approach to addressing an institution’s CRA responsibilities presents an opportunity for a very straightforward examination. The first question an examiner should investigate is whether the goals were met. If they were, the appropriate rating should be assigned. The appropriateness of the goals will have already been determined in the process of public comment and agency review and approval. The examination procedures permit an institution to receive a Satisfactory rating even if it has not fully met each of the goals in the plan. The examiners will consider whether the goals have been substantially met when assigning a rating. In determining whether an institution has substantially met its plan goals, the FDIC will consider circumstances beyond the control of the institution, such as economic conditions or other significant market factors or events that have adversely affected the institutions ability to perform. Examiners will review updated performance context and assessment area information to ascertain whether the institution’s performance is commensurate with either a Satisfactory or Outstanding rating. However, the examiner should approach an examination of an institution operating under a plan understanding that part of the purpose for these regulatory provisions was to give the institution significant latitude in designing a program that is appropriate to its own capabilities, business strategies and organizational framework, as well as to the communities that it serves. Consequently, the institution may develop plans for a single assessment area that it serves, for some, but not all, of the assessment areas that it serves, or for all of them. It may develop a plan that incorporates and coordinates the activities of various affiliates. It will be the examiner’s challenge to evaluate institutions operating under one plan or a number of plans in a way that accurately reflects the results achieved and that sensibly wraps that evaluation into the overall assessment of the institution. As with other aspects of the CRA examination, the examiner should first make the greatest use possible of information available from the agencies to evaluate performance under the plan. However, it is likely that some elements of a plan under review will not be reflected in public or other agency data. Consequently, the examiner may, of necessity, have to ask the institution for the data necessary to determine whether it has met its goals. The examiner should do so, to the greatest extent possible, by asking the institution to provide data for review prior to going on-site for the examination. The examiner should also seek to mitigate burden by, wherever possible, using data in the form maintained by the institution.

Answer 288

1. For institutions with more than one assessment area, identify assessment areas for full scope review. To select one or more assessment areas for full scope review, analyze prior performance evaluations, available community contact materials, reported lending data and demographic data on each assessment area and consider factors such as: a. The level of the institution’s lending, investment and service activity in the different assessment areas, including low- and moderate-income areas, designated disaster areas, or distressed or underserved nonmetropolitan middle-income geographies designated by the Agencies2 based on (a) rates of poverty, unemployment, and population loss or (b) population size, density, and dispersion3; b. The number of other institutions in the different assessment areas and the importance of the institution under examination in meeting credit needs in the different assessment areas, particularly in areas with a limited number of financial service providers; c. The existence of apparent anomalies in the reported lending data for any particular assessment area(s); d. The time since the assessment area(s) most recently received a full scope examination; e. Performance that falls short of plan goals based on a review of available data; f. The institution’s prior CRA performance in the different assessment areas; and g. Comments from the public regarding the institution’s CRA performance.

Answer 289

2. For interstate institutions, a rating must be assigned for each state where the institution has a branch and in every multistate MSA where the institution has branches in two or more of the states that comprise that multistate MSA. Select one or more assessment areas in each state for examination using these procedures.

Answer 290

1. Determine the exam scope (see the two steps)

Answer 291

2. Review the performance context

Answer 292

1. Review the institution’s public file for any comments received by the institution or the agency since the last CRA performance evaluation that assists in evaluating the institution’s record of meeting plan goals.

Answer 293

2. Consider any information that the institution provides on its record of meeting plan goals.

Answer 294

3. Contact local community, governmental or economic development representatives to update or supplement information about the institution’s record of meeting plan goals.

Answer 295

4. As necessary, consider any information the institution or others may provide on local community and economic conditions that may affect the institution’s ability to meet plan goals or otherwise assist in the evaluation of the institution.

Answer 296

3. Review the performance criteria

Answer 297

1. Review the following: a. The approved plan and approved amendments; b. The agency’s approval process files; and c. Written comments from the public that the institution or the agency received since the plan became effective.

Answer 298

2. Determine whether the institution achieved its performance goals for each assessment area examined. a. Review the plan’s measurable annual goals for each performance category and assessment area(s) to be reviewed. b. Obtain information and data about the institution’s actual performance for the period that has elapsed since the previous examination. c. Compare the plan goals for each assessment area reviewed to the institution’s actual performance since its last examination in each assessment area reviewed to determine if all of the plan’s goals have been met.

Answer 299

3. If any goals were not met, form a conclusion as to whether the plan goals were “substantially met.” In doing so, consider the number of unmet goals, the degree to which the goals were not met, the importance of those goals to the plan as a whole, and the reasons why the goals were not met (e.g., economic factors beyond the institution’s control).

Answer 300

4. Discuss preliminary findings with management.

Answer 301

5. Summarize conclusions about the institution’s performance.

Answer 302

These instructions assume that the strategic plan covers all of the institution’s assessment areas. If not, the analysis of performance for the assessment area(s) covered by the strategic plan must be combined with the analyses for assessment areas that were subject to other assessment method(s) in order to assign a rating

Answer 303

1. Group the analyses of the assessment areas examined by MSA4 and nonmetropolitan areas within each state where the institution has branches. If an institution has branches in two or more states of a multi-state MSA, group the assessment areas that are in that MSA.

Answer 304

2. If the institution has substantially met its plan goals for a satisfactory rating or, if applicable, an outstanding rating, in all assessment areas reviewed, summarize conclusions about the institution’s performance in each MSA and the nonmetropolitan area of each state in which an assessment area was examined using these procedures. Assign the appropriate preliminary rating for the institution and, as applicable, preliminary rating for the institution and, as applicable, each state or multistate MSA and proceed to Step 6, below.

Answer 305

3. If the institution did not substantially meet its plan goals in each assessment area, check to determine if the institution elected in its plan to be evaluated under an alternate assessment method. a. If the institution did not elect in the plan to be evaluated under an alternate assessment method, assign a “Needs to Improve” or “Substantial Noncompliance” rating to those assessment areas in which plan goals were not substantially met, depending on the number of goals missed, the extent to which they were missed, and their importance to the plan overall. - is this for AA or MSA? b. If the institution elected in its plan to be evaluated under an alternate assessment method, perform the appropriate procedures to evaluate and rate the institution’s performance in those assessment areas in which the institution did not meet plan goals.

Answer 306

4. For institutions operating in multiple assessment areas, determine the relative importance of the assessment areas reviewed in forming conclusions for each MSA and the nonmetropolitan area within each state and for any multistate MSA where the institution has branches in two or more states. In making that determination, consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The lending, service, and investment opportunities in each; c. The significance of the institution’s loans, qualified investments, and lending-related services, as applicable, for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 307

5. For an institution operating in multiple MSAs or nonmetropolitan areas in one or more states or multi-state MSAs, assign a preliminary rating for each state and multi-state MSA. To determine the relative significance of each MSA and nonmetropolitan area to the rating in a state, consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The lending, service, and investment opportunities in each; c. The significance of the institution’s loans, qualified investments, and lending-related services, as applicable, for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 308

6. For institutions with operations in more than one state, assign a preliminary overall rating. In determining the relative significance of the institution’s performance in each state or multistate MSA to its overall rating consider: a. The significance of the institution’s activities in each compared to the institution’s overall activities; b. The lending, service, and investment opportunities in each; c. The significance of the institution’s loans, qualified investments, and lending-related services, as applicable, for each, particularly in light of the number of other institutions and the extent of their activities in each; and d. Demographic and economic conditions in each.

Answer 309

7. Review the results of the most recent compliance examination and determine whether evidence of discriminatory or other illegal credit practices that violate an applicable law, rule, or regulation should lower the institution’s overall CRA rating or, if applicable, its CRA rating in any state or multi-state MSA.5 If evidence of discrimination or other illegal credit practices in any geography by the institution, or in any assessment area by any affiliate whose loans were considered as part of the institution’s lending performance, was found, consider: a. The nature, extent, and strength of the evidence of the practices; b. The policies and procedures that the institution (or affiliate, as applicable) has in place to prevent the practices; c. Any corrective action the institution (or affiliate, as applicable) has taken, or has committed to take, including voluntary corrective action resulting from self-assessment; and d. Any other relevant information.

Answer 310

8. Discuss conclusions with management and assign a final rating to the institution and state or multi-state MSA ratings, as applicable, considering the preliminary rating and any evidence of discrimination and other illegal credit practices.

Answer 311

9. Write comments for the public evaluation and the examination report.

Answer 312

In assigning a rating, the FDIC evaluates a bank’s performance under the applicable performance criteria in the regulation, in accordance with Section 345.21 and Section 345.28, which provides for adjustments on the basis of evidence of discriminatory or other illegal credit practices. A bank’s performance need not fit each aspect of a particular rating profile in order to receive that rating, and exceptionally strong performance with respect to some aspects may compensate for weak performance in others. The bank’s overall performance, however, must be consistent with safe and sound banking practices and generally with the appropriate profile as follows.

Answer 313

“Outstanding” An institution in this group has an outstanding record of helping to meet the credit needs of its assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities. Satisfactory” An institution in this group has a satisfactory record of helping to meet the credit needs of its assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities. “Needs to Improve” An institution in this group needs to improve its overall record of helping to meet the credit needs of its assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities “Substantial Noncompliance” An institution in this group has a substantially deficient record of helping to meet the credit needs of its assessment area, including low- and moderate-income neighborhoods, in a manner consistent with its resources and capabilities.

Answer 314

Outstanding: Outstanding. The FDIC rates a bank’s lending performance “outstanding” if, in general, it demonstrates: ° Excellent responsiveness to credit needs in its assessment area(s), taking into account the number and amount of home mortgage, small business, small farm, and consumer loans, if applicable, in its assessment area(s); ° A substantial majority of its loans are made in its assessment area(s); An excellent geographic distribution of loans in its assessment area(s); ° An excellent distribution, particularly in its assessment area(s), of loans among individuals of different income levels and businesses (including farms) of different sizes, given the product lines offered by the bank; ° An excellent record of serving the credit needs of highly economically disadvantaged areas in its assessment area(s), low-income individuals, or businesses (including farms) with gross annual revenues of $1 million or less, consistent with safe and sound operations; ° Extensive use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- or moderate-income individuals or geographies; and ° It is a leader in making community development loans.

Answer 315

High Satisfactory. The FDIC rates a bank’s lending performance “high satisfactory” if, in general, it demonstrates: ° Good responsiveness to credit needs in its assessment area(s), taking into account the number and amount of home mortgage, small business, small farm, and consumer loans (as applicable) in its assessment area(s); ° A high percentage of its loans are made in its assessment area(s); ° A good geographic distribution of loans in its assessment area(s); ° A good distribution, particularly in its assessment area(s), of loans among individuals of different income levels and businesses (including farms) of different sizes, given the product lines offered by the bank; ° A good record of serving the credit needs of highly economically disadvantaged areas in its assessment area(s), low-income individuals, or businesses (including farms) with gross annual revenues of $1 million or less, consistent with safe and sound operations; ° Use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- or moderate-income individuals or geographies; and ° It has made a relatively high level of community development loans.

Answer 316

Low Satisfactory. The FDIC rates a bank’s lending performance “low satisfactory” if, in general, it demonstrates: ° Adequate responsiveness to credit needs in its assessment area(s), taking into account the number and amount of home mortgage, small business, small farm, and consumer loans, if applicable, in its assessment area(s); ° An adequate percentage of its loans are made in its assessment area(s); ° An adequate geographic distribution of loans in its assessment area(s); ° An adequate distribution, particularly in its assessment area(s), of loans among individuals of different income levels and businesses (including farms) of different sizes, given the product lines offered by the bank; ° An adequate record of serving the credit needs of highly economically disadvantaged areas in its assessment area(s), low-income individuals, or businesses (including farms) with gross annual revenues of $1 million or less, consistent with safe and sound operations; ° Limited use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- or moderate-income individuals or geographies; and ° It has made an adequate level of community development loans.

Answer 317

• Needs to Improve. The FDIC rates a bank’s lending performance “needs to improve” if, in general, it demonstrates: ° Poor responsiveness to credit needs in its assessment area(s), taking into account the number and amount of home mortgage, small business, small farm, and consumer loans (as applicable) in its assessment area(s); ° A small percentage of its loans are made in its assessment area(s); ° A poor geographic distribution of loans, particularly to low- or moderate-income geographies, in its assessment area(s); ° A poor distribution, particularly in its assessment area(s), of loans among individuals of different income levels and businesses (including farms) of different sizes, given the product lines offered by the bank; ° A poor record of serving the credit needs of highly economically disadvantaged areas in its assessment area(s), low-income individuals, or businesses (including farms) with gross annual revenues of $1 million or less, consistent with safe and sound operations; ° Little use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- or moderate-income individuals or geographies; and It has made a limited number of community development loans.

Answer 318

Substantial Noncompliance. The FDIC rates a bank’s lending performance as being in “substantial noncompliance” if, in general, it demonstrates: ° A very poor responsiveness to credit needs in its assessment area(s), taking into account the number and amount of home mortgage, small business, small farm, and consumer loans, if applicable, in its assessment area(s); ° A very small percentage of its loans are made in its assessment area(s); ° A very poor geographic distribution of loans, particularly to low- or moderate-income geographies, in its assessment area(s); ° A very poor distribution, particularly in its assessment area(s), of loans among individuals of different income levels and businesses (including farms) of different sizes, given the product lines offered by the bank; ° A very poor record of serving the credit needs of highly economically disadvantaged areas in its assessment area(s), low-income individuals, or businesses (including farms) with gross annual revenues of $1 million or less, consistent with safe and sound operations; ° No use of innovative or flexible lending practices in a safe and sound manner to address the credit needs of low- or moderate-income individuals or geographies; and ° It has made few, if any, community development loans.

Answer 319

Outstanding. The FDIC rates a bank’s investment performance “outstanding” if, in general, it demonstrates: ° An excellent level of qualified investments, particularly those that are not routinely provided by private investors, often in a leadership position; ° Extensive use of innovative or complex qualified investments; and ° Excellent responsiveness to credit and community development needs.

Answer 320

High Satisfactory. The FDIC rates a bank’s investment performance “high satisfactory” if, in general, it demonstrates: ° A significant level of qualified investments, particularly those that are not routinely provided by private investors, occasionally in a leadership position;

Answer 321

Low Satisfactory. The FDIC rates a bank’s investment performance “low satisfactory” if, in general, it demonstrates: ° An adequate level of qualified investments, particularly those that are not routinely provided by private investors, although rarely in a leadership position; ° Occasional use of innovative or complex qualified investments; and ° Adequate responsiveness to credit and community development needs.

Answer 322

Needs to Improve. The FDIC rates a bank’s investment performance “needs to improve” if, in general, it demonstrates: ° A poor level of qualified investments, particularly those that are not routinely provided by private investors; ° Rare use of innovative or complex qualified investments; and ° Poor responsiveness to credit and community development needs.

Answer 323

Needs to Improve. The FDIC rates a bank’s investment performance “needs to improve” if, in general, it demonstrates: ° A poor level of qualified investments, particularly those that are not routinely provided by private investors; ° Rare use of innovative or complex qualified investments; and ° Poor responsiveness to credit and community development needs.

Answer 324

Outstanding. The FDIC rates a bank’s investment performance “outstanding” if, in general, it demonstrates: ° An excellent level of qualified investments, particularly those that are not routinely provided by private investors, often in a leadership position; ° Extensive use of innovative or complex qualified investments; and ° Excellent responsiveness to credit and community development needs.

Answer 325

High Satisfactory. The FDIC rates a bank’s investment performance “high satisfactory” if, in general, it demonstrates: ° A significant level of qualified investments, particularly those that are not routinely provided by private investors, occasionally in a leadership position; ° Significant use of innovative or complex qualified investments; and ° Good responsiveness to credit and community development needs.

Answer 326

Low Satisfactory. The FDIC rates a bank’s investment performance “low satisfactory” if, in general, it demonstrates: ° An adequate level of qualified investments, particularly those that are not routinely provided by private investors, although rarely in a leadership position; ° Occasional use of innovative or complex qualified investments; and ° Adequate responsiveness to credit and community development needs.

Answer 327

Needs to Improve. The FDIC rates a bank’s investment performance “needs to improve” if, in general, it demonstrates: ° A poor level of qualified investments, particularly those that are not routinely provided by private investors; ° Rare use of innovative or complex qualified investments; and ° Poor responsiveness to credit and community development needs.

Answer 328

Substantial Noncompliance. The FDIC rates a bank’s investment performance as being in “substantial noncompliance” if, in general, it demonstrates: ° Few, if any, qualified investments, particularly those that are not routinely provided by private investors; ° No use of innovative or complex qualified investments; and ° Very poor responsiveness to credit and community development needs.

Answer 329

Outstanding. The FDIC rates a bank’s service performance “outstanding” if, in general, the bank demonstrates: ° Its service delivery systems are readily accessible to geographies and individuals of different income levels in its assessment area(s); ° To the extent changes have been made, its record of opening and closing branches has improved the accessibility of its delivery systems, particularly in low- or moderate-income geographies or to low- or moderate-income individuals; Its services (including, where appropriate, business hours) are tailored to the convenience and needs of its assessment area(s), particularly low- or moderateincome geographies or low- or moderate-income individuals; and ° It is a leader in providing community development services.

Answer 330

High Satisfactory. The FDIC rates a bank’s service performance “high satisfactory” if, in general, the bank demonstrates: ° Its service delivery systems are accessible to geographies and individuals of different income levels in its assessment area(s); ° To the extent changes have been made, its record of opening and closing branches has not adversely affected the accessibility of its delivery systems, particularly in low- and moderate-income geographies and to low- and moderate-income individuals; ° Its services (including, where appropriate, business hours) do not vary in a way that inconveniences its assessment area(s), particularly low- and moderateincome geographies and low- and moderate-income individuals; and ° It provides a relatively high level of community development services.

Answer 331

Low Satisfactory. The FDIC rates a bank’s service performance “low satisfactory” if, in general, the bank demonstrates: ° Its service delivery systems are reasonably accessible to geographies and individuals of different income levels in its assessment area(s); ° To the extent changes have been made, its record of opening and closing branches has generally not adversely affected the accessibility of its delivery systems, particularly in low- and moderate-income geographies and to low- and moderate-income individuals; ° Its services (including, where appropriate, business hours) do not vary in a way that inconveniences its assessment area(s), particularly low- and moderateincome geographies and low- and moderate-income individuals; and ° It provides an adequate level of community development services.

Answer 332

• Needs to Improve. The FDIC rates a bank’s service performance “needs to improve” if, in general, the bank demonstrates: ° Its service delivery systems are unreasonably inaccessible to portions of its assessment area(s), particularly to low- or moderate-income geographies or to low- or moderate-income individuals; To the extent changes have been made, its record of opening and closing branches has adversely affected the accessibility of its delivery systems, particularly in low- or moderate-income geographies or to low- or moderate-income individuals; ° Its services (including, where appropriate, business hours) vary in a way that inconveniences its assessment area(s), particularly low- or moderateincome geographies or low- or moderate-income individuals; and ° It provides a limited level of community development services.

Answer 333

Substantial Noncompliance. The FDIC rates a bank’s service performance as being in “substantial noncompliance” if, in general, the bank demonstrates: ° Its service delivery systems are unreasonably inaccessible to significant portions of its assessment area(s), particularly to low- or moderate-income geographies or to low- or moderate-income individuals; ° To the extent changes have been made, its record of opening and closing branches has significantly adversely affected the accessibility of its delivery systems, particularly in low- or moderate-income geographies or to low- or moderate-income individuals; ° Its services (including, where appropriate, business hours) vary in a way that significantly inconveniences its assessment area(s), particularly low- or moderateincome geographies or low- or moderate-income individuals; and ° It provides few, if any, community development services.

Answer 334

Outstanding. The FDIC rates a wholesale or limitedpurpose bank’s community development performance “outstanding” if, in general, it demonstrates: ° A high level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors; ° Extensive use of innovative or complex qualified investments, community development loans, or community development services; and ° Excellent responsiveness to credit and community development needs in its assessment area(s).

Answer 335

Satisfactory. The FDIC rates a wholesale or limitedpurpose bank’s community development performance “satisfactory” if, in general, it demonstrates: ° An adequate level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors; ° Occasional use of innovative or complex qualified investments, community development loans, or community development services; and ° Adequate responsiveness to credit and community development needs in its assessment area(s).

Answer 336

• Needs to Improve. The FDIC rates a wholesale or limited-purpose bank’s community development performance as “needs to improve” if, in general, it demonstrates: ° A poor level of community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors; ° Rare use of innovative or complex qualified investments, community development loans, or community development services; and ° Poor responsiveness to credit and community development needs in its assessment area(s).

Answer 337

Substantial Noncompliance. The FDIC rates a wholesale or limited-purpose bank’s community development performance in “substantial noncompliance” if, in general, it demonstrates: ° Few, if any, community development loans, community development services, or qualified investments, particularly investments that are not routinely provided by private investors; ° No use of innovative or complex qualified investments, community development loans, or community development services; and ° Very poor responsiveness to credit and community development needs in its assessment area(s).

Answer 338

Eligibility for a Satisfactory lending test rating. The FDIC rates a small bank’s lending performance “satisfactory” if, in general, the bank demonstrates: ° A reasonable loan-to-deposit ratio (considering seasonal variations) given the bank’s size, financial condition, the credit needs of its assessment area(s), and taking into account, as appropriate, other lending related activities such as loan originations for sale to the secondary markets and community development loans and qualified investments; ° A majority of its loans and, as appropriate, other lending-related activities are in its assessment area(s); ° A distribution of loans to and, as appropriate, other lending related-activities for individuals of different income levels (including low- and moderate-income individuals) and businesses and farms of different sizes that is reasonable given the demographics of the bank’s assessment area(s); ° A record of taking appropriate action, as warranted, in response to written complaints, if any, about the bank’s performance in helping to meet the credit needs of its assessment area(s); and ° A reasonable geographic distribution of loans given the bank’s assessment area(s).

Answer 339

Eligibility for an Outstanding lending test rating. A small bank that meets each of the standards for a “satisfactory” rating under this paragraph and exceeds some or all of those standards may warrant consideration for a lending test rating of “outstanding.”

Answer 340

Needs to Improve or Substantial Noncompliance ratings. A small bank also may receive a lending test rating of “needs to improve” or “substantial noncompliance” depending on the degree to which its performance has failed to meet the standards for a “satisfactory” rating.

Answer 341

Eligibility for a Satisfactory community development test rating. The FDIC rates a an intermediate small bank’s community development performance “satisfactory” if the bank demonstrates adequate responsiveness to the community development needs of its assessment area(s) through community development loans, qualified investments, and community development services. The adequacy of the bank’s response will depend on its capacity for such community development activities, its assessment area’s need for such community development activities, and the availability of such opportunities for community development in the bank’s assessment area(s).

Answer 342

Eligibility for an Outstanding community development test rating. The FDIC rates an intermediate small bank’s community development performance “outstanding” if the bank demonstrates excellent responsiveness to community development needs in its assessment area(s) through community development loans, qualified investments, and community development services, as appropriate, considering the bank’s capacity and the need and availability of such opportunities for community development in the bank’s assessment area(s).

Answer 343

Needs to Improve or Substantial Noncompliance ratings. An intermediate small bank may also receive a community development test rating of “needs to improve” or “substantial noncompliance” depending on the degree to which its performance has failed to meet the standards for a “satisfactory” rating.

Answer 344

Eligibility for a Satisfactory overall rating. No intermediate small bank may receive an assigned overall rating of “satisfactory” unless it receives a rating of a least “satisfactory” on both the lending test and the community development test.

Answer 345

• Eligibility for an Outstanding overall rating. An intermediate small bank that receives an “outstanding” rating on one test and at least “satisfactory” on the other test may receive an assigned overall rating of “outstanding.”

Answer 346

Needs to Improve or Substantial Noncompliance overall ratings. A small bank may also receive a rating of “needs to improve” or “substantial noncompliance” depending on the degree to which its performance has failed to meet the standards for a “satisfactory” rating.

Answer 347

A small bank that is not an intermediate small bank that meets each of the standards for a “satisfactory” rating under the lending test and exceeds some or all of those standards may warrant consideration for an overall rating of “outstanding.” In assessing whether a bank’s performance is “outstanding,” the FDIC considers the extent to which the bank exceeds each of the performance standards for a “satisfactory” rating and its performance in making qualified investments and its performance in providing branches and other services and delivery systems that enhance credit availability in its assessment area(s).

Answer 348

The FDIC assesses the performance of a bank operating under an approved plan to determine if the bank has met its plan goals:

Answer 349

• Outstanding. If the bank exceeds it plan goals for a satisfactory rating and substantially achieves it plan goals for an outstanding rating, the FDIC will rate the bank’s performance under the plan as “outstanding”.

Answer 350

Satisfactory. If the bank substantially achieves its plan goals for a satisfactory rating, the FDIC will rate the bank’s performance as “satisfactory”.

Answer 351

depending on the extent to which it falls short of its plan goals, unless the bank elected in its plan to be rated otherwise, as provided in Section 345.27(f)(4).

Answer 352

2. AA Concentration 3. Geo. Distribution 4. Borrowers' Profile

Answer 353

- LTD ratio - Small - response to substantiated complaints - Small - (outstanding investments/services to improve rating) - Small - Lending Activity - Large - Responsiveness to credit needs of highly economically disadvantaged geographies and low income persons, small businesses - CD lending activities (Large) - product innovation - large

Answer 354

1. Lending activity 2. AA concentration* 3. Geographic Distribution* 4. Borrower's Profile* 5. Response to credit needs of highly economically disadvantaged geographies 6. CD Lending activities 7. Product innovation * 2, 3, and 4 are the same as a small bank's lending test*

Answer 355

1. Accessibility of delivery systems 2. Changes in branch locations 3. Reasonable of business hours and services in meeting assessment area needs 4. Community development services

Answer 356

1. Investment and grant activity 2. Responsiveness to credit and community development needs 3. Community development initiatives

Answer 357

1. A small bank is evaluated under the lending test. 2. An ISB is evaluated under a lending and CD test. --> An ISB's lending test is the same as a small bank's; they are both "small institutions" --> an ISB's CD test covers all three of a Large bank's individual tests in one: ((CD) Loans, qualified investments, and (CD) services) 3. a Large bank is evaluated under the Lending, Investment, and Service tests 4. A Large bank's Lending test has 3/7 factors in common with a small (including ISB's) Lending test: --> 2. AA concentration --> 3. Geographic distribution --> 4. Borrowers' Profile 4. A Wholesale/Limited purpose institution is evaluated under the CD test (like an ISB is, but it is not evaluated under a lending test) -the CD factors a wholesale/limited purpose institution is evaluated under are: investment, loan, and service activity; investment, loan, and service initiatives; and, responsiveness to CD needs --> a wholesale/limited purpose institution's investment, loan, and service activity CD test factor combines components of the lending, investment, and service test for a Large bank into one CD test factor --> a wholesale/limited purpose institution's investment, loan, and service initiatives has components of a Large Bank's service test component of (CD initiatives) --> a wholesale/limited purpose institution's responsiveness to CD needs has a component of a Large Bank's Investment test (responsiveness to credit and CD needs) 5. An institution with a strategic plan is evaluated by how it substantially meets its measurable goals, based on the following criteria: • Extent and breadth of lending or lending-related activities, including geographic and borrower distribution of loans. • Extent of community development lending. • Use of innovative or flexible lending practices. • Amount, innovativeness, complexity and responsiveness of qualified investments. • Availability and effectiveness of retail services and the extent and innovativeness of community development services. *kind of encapsulates the lending test factors of all of the CRA tests for institutions evaluated?*

Answer 358

GLBA Section 711 --> add Section 48 to the FDI Act: CRA Sunshine Requirements

Answer 359

Requires non-governmental entities or persons, insured depository institutions, and affiliates of insured depository institutions that are parties to certain agreements that are in fulfillment of the CRA to make the agreements available to the public and to the appropriate agency and to file certain reports concerning the agreements with the appropriate agency.

Answer 360

January 10, 2001

Answer 361

No: The GLBA CRA Sunshine Requirements and the implementing CRA Sunshine Regulations do not affect the Community Reinvestment Act of 1977, its implementing regulations, or the agencies’ interpretations or administration of that act or regulation

Answer 362

The CRA Sunshine Regulations identify the types of written agreements that are covered by the statute (referred to as covered agreements), define many of the terms used in the statute, describe how the parties to a covered agreement must make the agreement available to the public and the appropriate agencies, and explain the type of information that must be included in the annual report filed by a party to a covered agreement. However, neither GLBA nor the CRA Sunshine Regulations give the agencies any authority to enforce the provisions of any covered agreement.

Answer 363

To determine whether the institution: 1) is aware of its responsibilities under section 48 of the FDI Act and the implementing CRA Sunshine Regulation; 2) has identified any written agreements that would trigger the section 48 requirements; and 3) discloses covered agreements and files annual reports as required by the regulation

Answer 364

1. Determine whether the institution can appropriately identify any written contract, arrangement, or understanding covered under the CRA Sunshine Regulation. 2. With regard to covered agreements that the institution has identified, determine whether the institution discloses covered agreements to the public and the relevant supervisory agency in a timely manner and files annual reports relating to covered agreements in a timely manner. 3. Require appropriate corrective action. 4. Document findings

Answer 365

1) to gather information that may assist in the development of a community profile 2) to determine opportunities for participation by financial institutions in helping meet local credit needs 3) to understand perceptions on the performance of financial institutions in helping meet local credit needs 4) to provide a context on a community to assist in the evaluation of an institution's CRA performance

Answer 366

Assessment areas that are not reviewed using the full examination procedures are referred to as limited scope assessment areas.

Answer 367

In accordance with the interagency procedures, examiners identify assessment areas for a full scope review where the performance evaluation involves interstate and intrastate institutions with more than one assessment area

Answer 368

A full scope review is accomplished when examiners complete all of the steps outlined in the interagency procedures for an assessment area

Answer 369

For interstate institutions, a minimum of one assessment area from each state, and a minimum of one assessment area from each multistate metropolitan statistical area/metropolitan division (MSA/MD), must be reviewed using the full scope examination procedures.

Answer 370

The primary difference between full scope and limited scope assessment area reviews is the inclusion of qualitative factors and presentation of full performance context in the performance evaluation for full scope assessment areas.

Answer 371

Large institutions are required to collect and report CRA data, whereas small institutions (including intermediate small banks) are not required to collect data for CRA evaluation purposes.

Answer 372

No, not all institutions have to o collect and report home mortgage loans for purposes of the Home Mortgage Disclosure Act (HMDA). *Other institutions may choose to provide data regarding their loans, including the census tract locations and borrower incomes or business revenues, similar to the data requirement for large institutions and HMDA reporters.*

Answer 373

Examiners use the institution's data to analyze all of the lending test components for a small banking (including ISB) other than LTD ratio or complaint response - 1. inside/outside (AA concentration); 2. lending by income designation of the tract (GD); 3. lending by income level of the borrower Examiners also use the institution's data to analyze CD activities for ISBs/large banks

Answer 374

For institutions required to report HMDA and/or CRA data, and in other cases when the institution collects but is not required to report the data (collected/reported), examiners must validate the accuracy of the data.

Answer 375

For all loan types, the HMDA validation procedures should be followed, including for the scope of validation.

Answer 376

When validating loan data for CRA purposes only, examiners should validate the necessary fields needed for CRA analysis which include loan type, loan amount, location, and income/revenue. *There is always a FL review within the Compliance exam - so is this referring to validating small business data within the Retail Lending test? We don't validate CD activities, correct?

Answer 377

If loan data is considered accurate, all collected/reported data for each full calendar year since the previous CRA examination should be analyzed. This would include the year of the last examination. *There is an exception for small institutions; see the next card*

Answer 378

There is an exception for small institutions, which typically have a 48-72 month evaluation cycle (timeframe from date of previous CRA evaluation to date of current CRA evaluation). In this instance, examiners should analyze the most recent two full calendar years of HMDA and/or collected CRA data.

Answer 379

It would only be appropriate to analyze partial calendar year data when there is a short evaluation cycle, such as a previous adverse CRA rating or a de novo institution. In these cases, a separate analysis should be conducted for each partial year.

Answer 380

At a minimum, examiners should present the latest full calendar year of data for which aggregate data is available for geographic distribution and borrower profile (LTD ratio/complaints - N/A; AA concentration is more)

Answer 381

Presentation of additional years of data may be necessary to support conclusions and rating(s) and should be considered in cases such as a borderline overall rating, a significant overall ratings change, an unfavorable rating at any level, lending anomalies between years, CRA complaints or comments, or upon the request of bank management. Examiners should use their judgment when and for which assessment area(s) additional years of data should be presented. If only one year of data is being presented, the scope comment should make it clear that all applicable years were analyzed. Examiners should provide the rationale for including only one year, such as consistent performance between years.

Answer 382

Even though each assessment area must be analyzed separately, in some cases the presentation of multiple assessment areas may be combined within the CRA performance evaluation. For example, in instances where two or more assessment areas consist of non-contiguous portions in the non-metropolitan area of one state and no anomalies are present, these assessment areas may be combined for presentation purposes. This also applies in cases where there are multiple assessment areas in the same MSA or CSA. These guidelines apply to all institutions, not just institutions that have collected CRA and/or HMDA data.

Answer 383

For institutions where data is not collected for a particular product under review and sampling must be performed, the analysis (presentation) should cover the lending activity in the previous full calendar year that is prior to the start of the examination. Reasons to analyze and present additional years of data are a borderline overall rating, a significant overall ratings change, an unfavorable rating at any level, or CRA complaints. In addition, examiners should confirm with bank management that a one-year sample of a loan product would be representative of the entire evaluation period. In cases where more than one year will be analyzed, a separate analysis should be conducted for each year. Exceptions may exist to analyzing data by full calendar year, particularly for institutions that purge their loan system of paid off loans. In situations where the paid off loans are purged and using the previous full calendar year data would not capture the bank’s actual lending performance, a universe comprised of the most recent 12 months may be appropriate. Examiners should understand the nature of the bank’s lending when making this determination. If analyzing data that encompasses more than one calendar year, examiners should use the most recent available demographic data. If changes occur between years (for example, the release of American Community Survey Census data every five years), it is important to see how geographies are affected. In these situations, it would not be appropriate to combine lending between years if there are significant changes to the geographies because geographic and demographic data are different for each year.

Answer 384

Community development data (loans, investments, and services) should be reviewed for the entire CRA evaluation cycle. *The whole review period is presented too, correct?

Answer 385

The extent of validation that the activities qualify will depend on the number of activities. With large volumes, often the process of validation will include reviewing the process the bank goes through to qualify a particular activity and validating a sample following the CRA Sample Size table (this is separate than the HMDA sampling table? Who does this/when?). If the number of activities is smaller, often the entire universe should be reviewed to ensure the activities qualify as community development.

Answer 386

``` Small institutions (including intermediate small institutions) are not required to collect small business and small farm data for CRA evaluation purposes. In addition, not all institutions collect and report home mortgage loan data for purposes of HMDA. In these cases, it may be impractical or impossible to review all loan files when evaluating a particular loan product, especially if there is a large volume of lending. Examiners should use sampling to draw conclusions from a random subset of a universe for each loan type and apply such conclusions for the population as a whole. Generally, samples are selected on a bankwide basis. ``` In instances where collected data is found to be invalid, and the bank is unable to correct the data prior to the examination, examiners will need to rely on sampling to evaluate the institution’s CRA performance. In these cases, examiners should separately sample and analyze the most recent two full calendar years. *Is this sample also validated?

Answer 387

Non-collectors (inherently non-reporters); or collectors/reporters that don't collect for a certain loan product; or when data is invalid ``` Small institutions (including intermediate small institutions) are not required to collect small business and small farm data for CRA evaluation purposes. In addition, not all institutions collect and report home mortgage loan data for purposes of HMDA. In these cases, it may be impractical or impossible to review all loan files when evaluating a particular loan product, especially if there is a large volume of lending. Examiners should use sampling to draw conclusions from a random subset of a universe for each loan type and apply such conclusions for the population as a whole. Generally, samples are selected on a bankwide basis. Examiners should also sample at large institutions if data for a specific loan product has not been collected. For example, if a large institution has chosen not to collect consumer loan information, yet it comprises over 50 percent of the bank’s lending by both dollar and number, an examiner should review consumer loans and would need to sample. In instances where collected data is found to be invalid, and the bank is unable to correct the data prior to the examination, examiners will need to rely on sampling to evaluate the institution’s CRA performance. In these cases, examiners should separately sample and analyze the most recent two full calendar years. ```

Answer 388

- non-collector/reporter: analyze (present) most recent calendar year - collector/reporter but not for the particular loan product: analyze (present) most recent calendar year - data is invalid: analyze (present) two most recent calendar years

Answer 389

For small institutions (including intermediate small institutions), examiners should determine major product lines from which to select a sample. Examiners should take into account factors such as total volume of lending, the institution’s business strategy, and its areas of expertise when selecting product lines to sample. Initially, examiners may select for review from among the same categories of loans that are to be used when reviewing large institutions (home mortgage, small business loans, small farm loans, and consumer loans) In order to determine the number of loans for the sample (known as the sample size), examiners should determine the total number of loans in the universe for each product category by year. NOTE: The universe of loans is defined as the total number of loans, both originated and purchased by the institution in a calendar year, for a major product category. This should include outstanding and paid-off loans, including renewals. The definition of the loan category should dictate the universe of that lending product (i.e., small business loans are $1 million or less).

Answer 390

Next, examiners should determine the number of loans to be sampled for each year and product category by using the Sample Size Table below. Generally, sampling should be conducted at the institution level and not for each assessment area. The table indicates the sample size based on the universe of loans for each product at a 90 percent confidence level and the desired precision level. Initially, examiners should select samples based on a 10 percent precision level. This means that there is a 90 percent chance that the results from the sample will be within 10 percentage points of the true proportion for the criterion evaluated. For loan products requiring further investigation or greater scrutiny for any reason, a larger sample may be necessary because examiners may need results with a higher degree of reliability. Examples of circumstances when increased sample sizes should be chosen include: the receipt of CRA comments or complaints or if management states the selected sample is not indicative of its true lending performance. Examiners should use their judgment to determine which sample size to use based on the initial scoping of the examination and subsequent findings onsite. In addition, although examiners may draw conclusions based on a statistically valid sample, they may choose to consider a larger sample in cases where the institution has several assessment areas in order to avoid the result that only a few loans are selected from certain assessment areas in the sample. Increasing the level of precision will result in an expanded sample. Examiners may increase the sample to include additional loans up to the 5 percent precision level when a larger sample is necessary to ensure a sufficient number of loans per assessment area for geographic and borrower analysis. Alternatively, a sample could be chosen for each assessment area using a 10 percent precision. Regardless of sampling requirements, samples must be large enough to analyze and to draw meaningful conclusions. Therefore, analyze the entire universe when the number of loans is less than or equal to 30.

Answer 391

Once the number of loans in the sample is determined, examiners should select loans from the financial institution’s electronic data download or a loan trial as opposed to making a general request for loans and allowing bank management to select the loans for review. If an electronic data download is not available, examiners should select the sample using the financial institution’s loan trial. The Sampling Job Aid explains the procedures for selecting loan samples from the electronic data download or loan trial. Examiners should follow random selection methods as compared to those based on judgmental sampling. The use of random selection methods removes the potential for bias in results associated with the loan selection process.

Answer 392

Once the loans for each sample are identified, examiners should record relevant loan information. Data for each loan should include, at a minimum: • Institution’s internal loan ID number; • Loan type; • Loan dollar amount; • Location – In cases where the census tract of the loan is not readily available, examiners are expected to geocode the loans; • For the home mortgage and consumer loans sampled, the borrower income that was used to approve the loan; and • For the small business and small farm loans sampled, the business’s or farm’s gross annual revenue. When income information used in the analysis of the applicant is not readily apparent and tax returns are present, this information can usually be obtained from the “gross receipts;” or “gross farm rental income” and “gross income” fields, respectively. When data is missing, examiners should attempt to obtain this information through discussions with institution personnel. Obtaining information through these discussions can significantly reduce the number of records in the sample with “missing data” and thereby increase the validity of each sample.

CRA - Part 1 Flashcards

(417 cards)