Keeping in mind this general picture of your bank and community, the examiners use specific standards, amended in 1995, for reviewing your bank's CRA performance. While examiners' judgment is still an important part of the process, the standards are intended to be as objective as possible to help make evaluations of banks across the country more consistent.
The examiners apply these standards to rate your bank's overall record of helping to meet the credit needs of the specific area your bank has defined as its assessment area. Depending on whether your bank or thrift is large or small, the standards used to review it (described in the sections below) are somewhat different.
A bank may choose to develop its own strategic plan to be evaluated by rather than use the defined standards. Such a plan must be open to public comment and must be approved by the bank's federal regulatory agency before it can go into effect.
Wholesale banks, which do not make loans to retail customers, and limited purpose banks, which offer only a few products (such as credit cards or auto loans), also receive CRA ratings. These ratings, though, are based on different standards since the banks' activities are more limited.
Standards for Large Banks
Large banks—those with total assets of $250 million or more or that are affiliates of holding companies with assets of $1 billion or more—are evaluated in three areas: lending, investment, and service.
Lending. When evaluating a bank's lending activities and the borrowers it reaches, examiners analyze loans for home mortgages, small businesses, small farms, and community development (as well as consumer loans, in some cases). They look at information about
- the total number and total dollar amount of loans;
- the geographic distribution of loans—that is, the proportion of the bank's total loans made within its assessment area; how these loans are distributed among low-, moderate-, middle-, and upper income locations;
- the characteristics of borrowers—how loans are distributed to people at various income levels and to small businesses and small farms;
- the bank's activity in community development—how many and what dollar amount of loans benefit low- and moderate-income people or geographic areas? how many and what size loans promote small business or small farm development? how complex or creative are these loans?
- whether the bank uses flexible lending practices to address the credit needs of low- or moderate-income individuals or neighborhoods.
Investment. When evaluating a bank's investments, examiners look not only at a bank's assessment area but also at a broader statewide or regional area surrounding it. Examiners want to know
- how much money the bank has invested,
- how innovative or complex the investments are,
- how well the investments respond to credit and community development needs, and
- whether the investments are a different type from those provided by most other investors.
Service. When evaluating retail and community development services, examiners focus on how well these services help meet the credit needs of the institution's community. In the area of retail banking, examiners look at
- how branches are distributed throughout the community;
- the bank's history of opening and closing branches, particularly those serving low- or moderate-income people or geographic areas;
- what alternative systems (such as ATMs or telephone, computer, or by-mail banking services) the bank provides for delivering services to low- and moderate-income areas and individuals; and
- whether the range of services provided meets the needs of various neighborhoods at all income levels.
Examiners also consider how responsive and creative a bank is in providing or helping other organizations provide financial services that address special credit needs in the community or region—for example, more affordable housing or more available credit.
Standards for Small Banks
Small banks—those with total assets of less than $250 million, either independent or an affiliate of a holding company with total assets of less than $1 billion—are evaluated by more streamlined standards than those used for larger banks. At a small bank, examiners look at
- the share of the bank's deposits used to make loans,
- the percentage of loans made within the bank's assessment area,
- its record of lending to borrowers of different income levels as well as businesses and farms of different sizes,
- the geographic distribution of its loans, and
- its record of taking action in response to written complaints about its performance in helping meet the community's credit needs.