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.  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.  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.

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 (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.