(a) Retail Lending Test.
(1) In general. Pursuant to section 228.21, the Retail Lending Test evaluates a
bank’s record of helping to meet the credit needs of its entire
community through the bank’s origination and purchase of home
mortgage loans, multifamily loans, small business loans, and small
farm loans.
(2) Automobile loans. The Retail Lending Test
evaluates a bank’s record of helping to meet the credit needs
of its entire community through the bank’s origination and purchase
of automobile loans if the bank is a majority automobile lender. A
bank that is not a majority automobile lender may opt to have automobile
loans evaluated under this section.
(b) Methodology overview.
(1) Retail Lending
Volume Screen. The Board evaluates whether a bank meets or surpasses
the Retail Lending Volume Threshold in each facility-based assessment
area pursuant to the Retail Lending Volume Screen as provided in paragraph
(c) of this section.
(2) Retail lending distribution analysis. Except as provided in paragraph (b)(5) of this section, the Board
evaluates the geographic and borrower distributions of each of a bank’s
major product lines in each Retail Lending Test Area, as provided
in paragraphs (d) and (e) of this section.
(3) Retail Lending
Test recommended conclusions. Except as provided in paragraph
(b)(5) of this section, the Board develops a Retail Lending Test recommended
conclusion pursuant to paragraph (f) of this section for each Retail
Lending Test Area.
(4) Retail Lending Test conclusions. Except
as provided in paragraph (b)(5) of this section, the Board’s
determination of a bank’s Retail Lending Test conclusion for
a Retail Lending Test Area is informed by the bank’s Retail
Lending Test recommended conclusion for the Retail Lending Test Area,
performance context factors provided in section 228.21(d), and the
additional factors provided in paragraph (g) of this section.
(5) Exceptions.
(i) No major product line. If
a bank has no major product line in a facility-based assessment area,
the Board assigns the bank a Retail Lending Test conclusion for that
facility-based assessment area based upon its performance on the Retail
Lending Volume Screen pursuant to paragraph (c) of this section, performance
context factors provided in section 228.21(d), and the additional
factors provided in paragraph (g) of this section.
(ii) Banks that lack an acceptable
basis for not meeting the Retail Lending Volume Threshold. The
Board assigns a Retail Lending Test conclusion for a facility-based
assessment area in which a bank lacks an acceptable basis for not
meeting the Retail Lending Volume Threshold as provided in paragraph
(c)(3)(iii) of this section.
(c) Retail Lending Volume Screen.
(1) Retail Lending Volume Threshold. A bank meets or surpasses the
Retail Lending Volume Threshold in a facility-based assessment area
if the bank has a Bank Volume Metric of 30 percent or greater of the
Market Volume Benchmark for that facility-based assessment area. The
Board calculates the Bank Volume Metric and the Market Volume Benchmark
pursuant to section I of appendix A to this part.
(2) Banks that
meet or surpass the Retail Lending Volume Threshold in a facility-based
assessment area. If a bank meets or surpasses the Retail Lending
Volume Threshold in a facility-based assessment area pursuant to paragraph
(c)(1) of this section, the Board develops a Retail Lending Test recommended
conclusion for the facility-based assessment area pursuant to paragraphs
(d) through (f) of this section.
(3) Banks that
do not meet the Retail Lending Volume Threshold in a facility-based
assessment area.
(i) Acceptable basis factors. If a bank does not meet the Retail Lending Volume Threshold in a
facility-based assessment area pursuant to paragraph (c)(1) of this
section, the Board determines whether the bank has an acceptable basis
for not meeting the Retail Lending Volume Threshold in the facility-based
assessment area by considering:
(A) The bank’s dollar volume
of non-automobile consumer loans;
(B) The bank’s institutional capacity
and constraints, including the financial condition of the bank;
(C) The presence or lack
of other lenders in the facility-based assessment area;
(D) Safety and soundness limitations;
(E) The bank’s business
strategy; and
(F) Any other
factors that limit the bank’s ability to lend in the facility-based
assessment area.
(ii) Banks that have an acceptable
basis for not meeting the Retail Lending Volume Threshold in a facility-based
assessment area. If, after reviewing the factors described in
paragraph (c)(3)(i) of this section, the Board determines that a bank
has an acceptable basis for not meeting the Retail Lending Volume
Threshold in a facility-based assessment area, the Board develops
a Retail Lending Test recommended conclusion for the facility-based
assessment area in the same manner as for a bank that meets or surpasses
the Retail Lending Volume Threshold under paragraph (c)(2) of this
section.
(iii) Banks that lack an acceptable basis for not meeting the Retail Lending
Volume Threshold in a facility-based assessment area.
(A) Large banks. If, after reviewing the factors in paragraph (c)(3)(i) of this section,
the Board determines that a large bank lacks an acceptable basis for
not meeting the Retail Lending Volume Threshold in a facility-based
assessment area, the Board assigns the bank a Retail Lending Test
conclusion of “Needs to Improve” or “Substantial
Noncompliance” for that facility-based assessment area. In determining
whether “Needs to Improve” or “Substantial Noncompliance”
is the appropriate conclusion, the Board considers:
(1) The bank’s retail lending
volume and the extent by which it did not meet the Retail Lending
Volume Threshold;
(2) The bank’s distribution analysis pursuant to paragraphs
(d) through (f) of this section;
(3) Performance context factors provided
in section 228.21(d); and
(4) Additional factors provided in paragraph (g) of this section.
(B) Intermediate
or small banks. If, after reviewing the factors in paragraph (c)(3)(i)
of this section, the Board determines that an intermediate bank, or
a small bank that opts to be evaluated under the Retail Lending Test,
lacks an acceptable basis for not meeting the Retail Lending Volume
Threshold in a facility-based assessment area, the Board develops
a Retail Lending Test recommended conclusion for the facility-based
assessment area pursuant to paragraphs (d) through (f) of this section.
The Board’s determination of a bank’s Retail Lending Test
conclusion for the facility-based assessment area is informed by:
(1) The bank’s Retail Lending
Test recommended conclusion for the facility-based assessment area;
(2) The bank’s
retail lending volume and the extent by which it did not meet the
Retail Lending Volume Threshold;
(3) Performance context factors provided
in section 228.21(d); and
(4) Additional factors provided in paragraph (g) of this section.
(d) Scope of Retail Lending Test distribution
analysis.
(1) Product lines
evaluated in a Retail Lending Test Area. In each applicable Retail
Lending Test Area, the Board evaluates originated and purchased loans
in each of the following product lines that is a major product line,
as described in paragraph (d)(2) of this section:
(i) Closed-end
home mortgage loans in a bank’s facility-based assessment areas
and, as applicable, retail lending assessment areas and outside retail
lending area;
(ii)
Small business loans in a bank’s facility-based assessment areas
and, as applicable, retail lending assessment areas and outside retail
lending area;
(iii)
Small farm loans in a bank’s facility-based assessment areas
and, as applicable, outside retail lending area; and
(iv) Automobile loans in a bank’s
facility-based assessment areas and, as applicable, outside retail
lending area.
(2) Major product
line standards.
(i) Major product line standard for
facility-based assessment areas and outside retail lending areas. In a facility-based assessment area or outside retail lending area,
a product line is a major product line if the bank’s loans in
that product line comprise 15 percent or more of the bank’s
loans across all of the bank’s product lines in the facility-based
assessment area or outside retail lending area, as determined pursuant
to paragraph II.b.1 of appendix A to this part.
(ii) Major product line standards
for retail lending assessment areas. In a retail lending assessment
area:
(A) Closed-end home mortgage loans are a major
product line in any calendar year in the evaluation period in which
the bank delineates a retail lending assessment area based on its
closed-end home mortgage loans as determined by the standard in section
228.17(c)(1); and
(B) Small
business loans are a major product line in any calendar year in the
evaluation period in which the bank delineates a retail lending assessment
area based on its small business loans as determined by the standard
in section 228.17(c)(2).
(e) Retail Lending Test
distribution analysis. The Board evaluates a bank’s Retail
Lending Test performance in each of its Retail Lending Test Areas
by considering the geographic and borrower distributions of a bank’s
loans in its major product lines.
(1) Distribution
analysis in general.
(i) Distribution analysis for closed-end
home mortgage loans, small business loans, and small farm loans. For closed-end home mortgage loans, small business loans, and small
farm loans, respectively, the Board compares a bank’s geographic
and borrower distributions to performance ranges based on the applicable
market and community benchmarks, as provided in paragraph (f) of this
section and section V of appendix A to this part.
(ii) Distribution analysis for automobile
loans. For automobile loans, the Board compares a bank’s
geographic and borrower distributions to the applicable community
benchmarks, as provided in paragraph (f) of this section and section
VI of appendix A to this part.
(2) Categories
of lending evaluated.
(i) Geographic distributions. For each major product line in each Retail Lending Test Area, the
Board evaluates the geographic distributions separately for the following
categories of census tracts:
(A) Low-income census tracts;
and
(B) Moderate-income
census tracts.
(ii) Borrower distributions. For
each major product line in each Retail Lending Test Area, the Board
evaluates the borrower distributions separately for, as applicable,
the following categories of borrowers:
(A) Low-income borrowers;
(B) Moderate-income borrowers;
(C) Businesses with gross
annual revenues of $250,000 or less;
(D) Businesses with gross annual revenues
greater than $250,000 but less than or equal to $1 million;
(E) Farms with gross annual revenues
of $250,000 or less; and
(F) Farms with gross annual revenues greater than $250,000 but less
than or equal to $1 million.
(3) Geographic distribution measures. To evaluate the geographic
distributions in a Retail Lending Test Area, the Board considers the
following measures:
(i) Geographic Bank Metric. For
each major product line, a Geographic Bank Metric, calculated pursuant
to paragraph III.a of appendix A to this part;
(ii) Geographic Market Benchmark. For each major product line except automobile loans, a Geographic
Market Benchmark, calculated pursuant to paragraph III.b of appendix
A to this part for facility-based assessment areas and retail lending
assessment areas, and paragraph III.d of appendix A to this part for
outside retail lending areas; and
(iii) Geographic Community Benchmark. For each major product line, a Geographic Community Benchmark, calculated
pursuant to paragraph III.c of appendix A to this part for facility-based
assessment areas and retail lending assessment areas, and paragraph
III.e of appendix A to this part for outside retail lending areas.
(4) Borrower distribution measures. To evaluate
the borrower distributions in a Retail Lending Test Area, the Board
considers the following measures:
(i) Borrower Bank Metric. For each major product line, a Borrower Bank Metric, calculated
pursuant to paragraph IV.a of appendix A to this part;
(ii) Borrower Market
Benchmark. For each major product line except automobile loans,
a Borrower Market Benchmark, calculated pursuant to paragraph IV.b
of appendix A to this part for facility-based assessment areas and
retail lending assessment areas, and paragraph IV.d of appendix A
to this part for outside retail lending areas; and
(iii) Borrower Community Benchmark. For each major product line, a Borrower Community Benchmark, calculated
pursuant to paragraph IV.c of appendix A to this part for facility-based
assessment areas and retail lending assessment areas, and paragraph
IV.e of appendix A to this part for outside retail lending areas.
(f) Retail Lending Test recommended conclusions.
(1) In general. Except as described in paragraphs (b)(5)(i) and (c)(3)(iii)(A) of
this section, the Board develops a Retail Lending Test recommended
conclusion for each of a bank’s Retail Lending Test Areas based
on the distribution analysis described in paragraph (e) of this section
and using performance ranges, supporting conclusions, and product
line scores as provided in sections V through VII of appendix A to
this part. For each major product line, the Board develops a separate
supporting conclusion for each category of census tracts and each
category of borrowers described in paragraphs V.a and VI.a of appendix
A to this part.
(2) Geographic distribution supporting conclusions.
(i) Geographic distribution supporting
conclusions for closed-end home mortgage loans, small business loans,
and small farm loans. To develop supporting conclusions for geographic
distributions of closed-end home mortgage loans, small business loans,
and small farm loans, the Board evaluates the bank’s performance
by comparing the Geographic Bank Metric to performance ranges, based
on the Geographic Market Benchmark, the Geographic Community Benchmark,
and multipliers, as described in paragraphs V.b and V.c of appendix
A to this part.
(ii) Geographic distribution supporting conclusions for automobile loans. To develop supporting conclusions for geographic distributions for
automobile loans, the Board evaluates the bank’s performance
by comparing the Geographic Bank Metric to the Geographic Community
Benchmark, as described in paragraph VI.b of appendix A to this part.
(3) Borrower distribution supporting conclusions.
(i) Borrower distribution supporting
conclusions for closed-end home mortgage loans, small business loans,
and small farm loans. To develop supporting conclusions for borrower
distributions of closed-end home mortgage loans, small business loans,
and small farm loans, the Board evaluates the bank’s performance
by comparing the Borrower Bank Metric to performance ranges, based
on the Borrower Market Benchmark, Borrower Community Benchmark, and
multipliers, as described in paragraphs V.d and V.e of appendix A
to this part.
(ii) Borrower distribution supporting conclusions for automobile loans. To develop supporting conclusions for borrower distributions for
automobile loans, the Board evaluates the bank’s performance
by comparing the Borrower Bank Metric to the Borrower Community Benchmark,
as described in paragraph VI.c of appendix A to this part.
(4) Development of Retail Lending Test recommended
conclusions.
(i) Assignment of performance scores. For each supporting conclusion developed pursuant to paragraphs
(f)(2) and (3) of this section, the Board assigns a corresponding
performance score as described in sections V and VI of appendix A
to this part.
(ii) Combination of performance scores. As described in section VII
of appendix A to this part, for each Retail Lending Test Area, the
Board:
(A) Combines the performance scores for each
supporting conclusion for each major product line into a product line
score; and
(B) Calculates
a weighted average of product line scores across all major product
lines.
(iii) Retail Lending Test recommended conclusions. For each
Retail Lending Test Area, the Board develops the Retail Lending Test
recommended conclusion that corresponds to the weighted average of
product line scores developed pursuant to paragraph (f)(4)(ii)(B)
of this section, as described in section VII of appendix A to this
part.
(g) Additional factors considered when evaluating
retail lending performance. The factors in paragraphs (g)(1)
through (7) of this section, as appropriate, inform the Board’s
determination of a bank’s Retail Lending Test conclusion for
a Retail Lending Test Area:
(1) Information indicating that a bank
purchased closed-end home mortgage loans, small business loans, small
farm loans, or automobile loans for the sole or primary purpose of
inappropriately enhancing its retail lending performance, including,
but not limited to, information indicating subsequent resale of such
loans or any indication that such loans have been considered in multiple
depository institutions’ CRA evaluations, in which case the
Board does not consider such loans in the bank’s performance
evaluation;
(2) The
dispersion of a bank’s closed-end home mortgage lending, small
business lending, small farm lending, or automobile lending within
a facility-based assessment area to determine whether there are gaps
in lending that are not explained by performance context;
(3) The number of lenders
whose home mortgage loans, multifamily loans, small business loans,
and small farm loans and deposits data are used to establish the applicable
Retail Lending Volume Threshold, geographic distribution market benchmarks,
and borrower distribution market benchmarks;
(4) Missing or faulty data that would be
necessary to calculate the relevant metrics and benchmarks or any
other factors that prevent the Board from calculating a Retail Lending
Test recommended conclusion. If unable to calculate a Retail Lending
Test recommended conclusion, the Board assigns a Retail Lending Test
conclusion based on consideration of the relevant available data;
(5) Whether the Retail
Lending Test recommended conclusion does not accurately reflect the
bank’s performance in a Retail Lending Test Area in which one
or more of the bank’s major product lines consists of fewer
than 30 loans;
(6) A
bank’s closed-end home mortgage lending, small business lending,
small farm lending, or automobile lending in distressed or underserved
nonmetropolitan middle-income census tracts where a bank’s nonmetropolitan
facility-based assessment area or nonmetropolitan retail lending assessment
area includes very few or no low- and moderate-income census tracts;
and
(7) Information
indicating that the credit needs of the facility-based assessment
area or retail lending assessment area are not being met by lenders
in the aggregate, such that the relevant benchmarks do not adequately
reflect community credit needs.
(h) Retail Lending Test performance
conclusions and ratings.
(1) Conclusions.
(i) In general. Pursuant to section
228.28, section VIII of appendix A to this part, and appendix C to
this part, the Board assigns conclusions for a bank’s Retail
Lending Test performance in each Retail Lending Test Area, state,
and multistate MSA, as applicable, and for the institution.
(ii) Retail Lending Test
Area conclusions. The Board assigns a Retail Lending Test conclusion
for each Retail Lending Test Area based on the Retail Lending Test
recommended conclusion, performance context factors provided in section
228.21(d), and the additional factors provided in paragraph (g) of
this section, except as provided in paragraphs (h)(1)(ii)(A) and (B)
of this section:
(A) Facility-based assessment areas with
no major product line. The Board assigns a Retail Lending Test
conclusion for a facility-based assessment area in which a bank has
no major product line based on the bank’s performance on the
Retail Lending Volume Screen pursuant to paragraph (c) of this section,
performance context information provided in section 228.21(d), and
the additional factors provided in paragraph (g) of this section.
(B) Facility-based assessment
areas in which a bank lacks an acceptable basis for not meeting the
Retail Lending Volume Threshold. The Board assigns a Retail Lending
Test conclusion for a facility-based assessment area in which a bank
lacks an acceptable basis for not meeting the Retail Lending Volume
Threshold as provided in paragraph (c)(3)(iii) of this section.
(2) Ratings. Pursuant to section 228.28
and appendix D to this part, the Board incorporates a bank’s
Retail Lending Test conclusions into its state or multistate MSA ratings,
as applicable, and its institution rating.
