CRA Ratings System

Question 1

True or false:

A bank’s performance needs to fit each aspect of a particular rating profile in order to receive that rating.

Answer 1

False

Exceptionally strong performance with respect to some aspects may compensate for weak performance in others.

Question 2

What is the definition of an outstanding rating?

Answer 2

“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.

Question 3

What is the definition of a satisfactory rating?

Answer 3

“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.

Question 4

What is the definition of a needs to improve rating?

Answer 4

“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.

Question 5

What is the definition of a substantial noncompliance rating?

Answer 5

“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.

Question 6

Outstanding. The FDIC rates a bank’s lending performance “outstanding” if, in general, it demonstrates? (7)

Large bank

Answer 6

° 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.

Question 7

High Satisfactory. The FDIC rates a bank’s lending
performance “high satisfactory” if, in general, it
demonstrates what? (7)

Large Bank

Answer 7

° 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.

Question 8

Low Satisfactory. The FDIC rates a bank’s lending
performance “low satisfactory” if, in general, it
demonstrates what? (7)

Large Bank

Answer 8

° 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.

Question 9

Needs to Improve. The FDIC rates a bank’s lending
performance “needs to improve” if, in general, it
demonstrates what? (7)

Large Bank

Answer 9

° 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.

Question 10

Substantial Noncompliance. The FDIC rates a bank’s
lending performance as being in “substantial
noncompliance” if, in general, it demonstrates what? (7)

Large bank

Answer 10

° 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.

Question 11

Outstanding. The FDIC rates a bank’s investment
performance “outstanding” if, in general, it demonstrates what? (3)

Large Bank

Answer 11

° 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.

Question 12

High Satisfactory.

The FDIC rates a bank’s investment performance “high satisfactory” if, in general, it demonstrates what? (3)

Large Bank

Answer 12

° 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.

Question 13

Low Satisfactory. The FDIC rates a bank’s investment
performance “low satisfactory” if, in general, it
demonstrates what?(3)

Large Bank

Answer 13

° 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.

Question 14

Needs to Improve.

The FDIC rates a bank’s investment performance “needs to improve” if, in general, it demonstrates what? (3)

Large Bank

Answer 14

° 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.

Question 15

Substantial Noncompliance. The FDIC rates a bank’s
investment performance as being in “substantial
noncompliance” if, in general, it demonstrates what? (3)

Large Bank

Answer 15

° 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.

Question 16

Outstanding. The FDIC rates a bank’s service
performance “outstanding” if, in general, the bank
demonstrates what? (4)

Large bank

Answer 16

° 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 moderate income geographies or low- or moderate-income individuals; and

° It is a leader in providing community development services.

Question 17

High Satisfactory. The FDIC rates a bank’s service performance “high satisfactory” if, in general, the bank demonstrates what? (4)

Large Bank

Answer 17

° 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 moderate income geographies and low- and moderate-income individuals; and

° It provides a relatively high level of community development services.

Question 18

Low Satisfactory. The FDIC rates a bank’s service performance “low satisfactory” if, in general, the bank demonstrates what?(4)

Large Bank

Answer 18

° 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 moderate income geographies and low- and moderate-income
individuals; and

° It provides an adequate level of community development services.

Question 19

Needs to Improve. The FDIC rates a bank’s service performance “needs to improve” if, in general, the
bank demonstrates what? (4)

Large Bank

Answer 19

° 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 moderate income geographies or low- or moderate-income individuals; and

° It provides a limited level of community development services.

Question 20

Substantial Noncompliance. The FDIC rates a bank’s
service performance as being in “substantial noncompliance” if, in general, the bank demonstrates what? (4)

Large Bank

Answer 20

° 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 moderate income geographies or low- or moderate-income individuals; and

° It provides few, if any, community development services.

Question 21

Outstanding. The FDIC rates a wholesale or limited purpose bank’s community development performance
“outstanding” if, in general, it demonstrates what? (3)

Answer 21

° 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).

Question 22

Satisfactory. The FDIC rates a wholesale or limited purpose bank’s community development performance
“satisfactory” if, in general, it demonstrates what? (3)

Answer 22

° 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).

Question 23

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 what? (3)

Answer 23

° 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).

Question 24

Substantial Noncompliance. The FDIC rates a wholesale or limited-purpose bank’s community development performance in “substantial noncompliance” if, in general, it demonstrates what? (3)

Answer 24

° 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).

Question 25

Eligibility for a Satisfactory lending test rating. The FDIC rates a small bank’s lending performance “satisfactory” if, in general, the bank demonstrates what? (5)

Answer 25

° 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).

Question 26

What is needed to be eligible for an Outstanding Lending test rating as a small bank?

(lending test)

Answer 26

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

Question 27

What is needed to be eligible for a needs to improve or substantial non compliance rating as a small bank?

(lending test)

Answer 27

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.

Question 28

The FDIC rates a an intermediate small bank’s

community development performance “satisfactory” if the bank demonstrates what?

Answer 28

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).

Question 29

Eligibility for an Outstanding community development
test rating. The FDIC rates an intermediate small bank’s
community development performance “outstanding” if the bank demonstrates what?

Answer 29

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).

Question 30

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 what?

Answer 30

Depending on the degree to

which its performance has failed to meet the standards for a “satisfactory” rating.

Question 31

Eligibility for a Satisfactory overall rating. No intermediate small bank may receive an assigned overall
rating of “satisfactory” unless what?

Answer 31

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.

Question 32

An intermediate small bank may receive an assigned overall rating of outstanding if what conditions are met?

Answer 32

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.”

Question 33

A small bank that is not an intermediate small bank that
meets each of the standards for a ________ rating under the lending test and exceeds some or all of those standards may warrant consideration for an overall rating of _________.

Answer 33

“satisfactory”
“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).

Question 34

A strategic plan bank can achieve a rating of Satisfactory if what?

Answer 34

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

Question 35

A strategic plan bank can achieve a rating of Outstanding if what?

Answer 35

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”.

Question 36

A strategic plan bank can achieve a rating of Needs to Improve or Substantial Noncompliance if what?

Answer 36

If the bank fails to meet substantially its plan goals for a satisfactory rating, the FDIC will rate the bank as either Needs to Improve or Substantial Noncompliance,
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).