Section 345.220 Lending Test

Section

345.220  Lending Test

a)         Scope of test.

1)         The lending test evaluates a bank's record of

helping to meet the credit needs of its assessment area through its lending

activities by considering a bank's home mortgage, small business, small farm,

and community development lending. If consumer lending constitutes a

substantial majority of a bank's business, the Secretary will evaluate the bank's

consumer lending in one or more of the following categories: motor vehicle,

credit card, other secured, and other unsecured loans. In addition, at a bank's

option, the Secretary will evaluate one or more categories of consumer lending,

if the bank has collected and maintained, as required in Section 345.410(c)(1),

the data for each category that the bank elects to have the Secretary evaluate.

2)         The Secretary considers originations and initial

purchases of loans.  The Secretary will also consider any other loan data the

bank may choose to provide, including data on loans outstanding, commitments

and letters of credit.

3)         A bank may ask the Secretary to consider loans

originated or purchased by consortia in which the bank participates or by third

parties in which the bank has invested only if the loans meet the definition of

community development loans and only in accordance with subsection (d). The Secretary

will not consider these loans under any criterion of the lending test except

the community development lending criterion.

b)         Performance criteria.  The Secretary evaluates

a bank's lending performance considering the assessment factors in Section

345.200 and pursuant to the following criteria:

1)         Lending activity.  The number and amount of

the bank's home mortgage, small business, small farm, and consumer loans, if

applicable, in the bank's assessment area;

2)         Geographic distribution

rion.

b)         Performance criteria.  The Secretary evaluates

a bank's lending performance considering the assessment factors in Section

345.200 and pursuant to the following criteria:

1)         Lending activity.  The number and amount of

the bank's home mortgage, small business, small farm, and consumer loans, if

applicable, in the bank's assessment area;

2)         Geographic distribution.  The geographic

distribution of the bank's home mortgage, small business, small farm, and

consumer loans, if applicable, based on the loan location, including:

A)        The proportion of the bank's lending in the bank's

assessment area;

B)        The dispersion of lending in the bank's

assessment area; and

C)        The number and amount of loans in low-,

moderate-, middle-, and upper-income geographies in the bank's assessment area.

3)         Borrower characteristics.  The distribution,

particularly in the bank's assessment area, of the bank's home mortgage, small

business, small farm, and consumer loans, if applicable, based on borrower

characteristics, including the number and amount of:

A)        Home mortgage loans to low-, moderate-,

middle-, and upper-income individuals;

B)        Small business and small farm loans to

businesses and farms with gross annual revenues of $1 million or less;

C)        Small business and small farm loans by loan

amount at origination; and

D)        Consumer loans, if applicable, to low-,

moderate-, middle-, and upper-income individuals.

4)         Community development lending.  The bank's

community development lending, including the number and amount of community

development loans, and their complexity and innovativeness; and

5)         Innovative or flexible lending practices.  The

bank's 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

development lending.  The bank's

community development lending, including the number and amount of community

development loans, and their complexity and innovativeness; and

5)         Innovative or flexible lending practices.  The

bank's 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.  Innovative or flexible lending practices may include efforts

working with delinquent customers to facilitate a resolution of the

delinquency, in which case the bank shall maintain written loss

mitigation/workout policies and procedures.

In

assessing performance pursuant to this Part, the Secretary shall consider

whether a bank offers special credit programs.  The bank must be able to show

that the program will fall under any of the following:

A)        Any credit assistance program expressly

authorized by federal or state law for the benefit of an economically

disadvantaged class of persons;

B)        Any credit assistance program offered by a

not-for-profit organization for the benefit of its members or an economically

disadvantaged class of persons; or

C)        Any special credit program offered by a

for-profit organization, or in which the organization participates to meet

special social needs, if it meets certain standards prescribed in 12 CFR

1002.8(a)(3)(i).

c)         Affiliate lending.

1)         At a bank's option, the Secretary will

consider loans by an affiliate of the bank, if the bank provides data on the

affiliate's loans pursuant to Section 345.410

credit program offered by a

for-profit organization, or in which the organization participates to meet

special social needs, if it meets certain standards prescribed in 12 CFR

1002.8(a)(3)(i).

c)         Affiliate lending.

1)         At a bank's option, the Secretary will

consider loans by an affiliate of the bank, if the bank provides data on the

affiliate's loans pursuant to Section 345.410.

2)         The Secretary considers affiliate lending

subject to the following constraints:

A)        No affiliate may claim a loan origination or

loan purchase if another institution claims the same loan origination or

purchase and in this regard the bank shall monitor and keep records of whether

such claims exist; and

B)        If a bank elects to have the Secretary consider

loans within a particular lending category made by one or more of the bank's

affiliates in a particular assessment area, the bank shall elect to have the Secretary

consider, in accordance with subsection (c)(1), all the loans within that

lending category in that particular assessment area made by all of the bank's

affiliates.

3)         The Secretary does not consider affiliate

lending in assessing a bank's performance under subsection (b)(2)(A).

d)         Lending by a consortium or a third party. Community

development loans originated or purchased by a consortium in which the bank

participates or by a third party in which the bank has invested:

1)         Will be considered, at the bank's option, if

the bank reports the data pertaining to these loans under Section 345.410(b)(2);

and

2)         May be allocated among participants or

investors, as they choose, for purposes of the lending test, except that no

participant or investor:

A)        May claim a loan origination or loan purchase

if another participant or investor claims the same loan origination or purchase

and in this regard the bank shall monitor and keep

records of whether such claims exist

; or

B)        May claim loans accounting for more than its

percentage share

ors, as they choose, for purposes of the lending test, except that no

participant or investor:

A)        May claim a loan origination or loan purchase

if another participant or investor claims the same loan origination or purchase

and in this regard the bank shall monitor and keep

records of whether such claims exist

; or

B)        May claim loans accounting for more than its

percentage share (based on the level of its participation or investment) of the

total loans originated by the consortium or third party.

e)         Lending performance rating. The Secretary

rates a bank's lending performance as provided in Section 345.APPENDIX A.