1. (1) The lending test evaluates a banking institution's record of helping to meet the credit needs of its assessment area(s) through its lending activities by considering a banking institution's home mortgage, small business, minority- and women-owned business, small farm, and community development lending. If consumer lending constitutes a substantial majority of a banking institution's business, the department will evaluate the banking institution's consumer lending in one or more of the following categories: motor vehicle, credit card, home equity, other secured, and other unsecured loans. In addition, at a banking institution's option, the department will evaluate one or more categories of consumer lending, if the banking institution has collected and maintained the data required by Regulation BB of the Board of Governors of the Federal Reserve System (12 CFR^*part 228) for each category that the banking institution elects to have the department evaluate.
2. (2) The department considers originations and purchases of loans. The department may also consider any other loan data the banking institution may choose to provide, including data on loans outstanding, commitments and letters of credit.

3. (3) The department may consider loans originated or purchased by consortia in which the banking institution participates or by third parties in which the banking institution has invested.

   (b) Performance criteria.

   The department evaluates a banking institution's lending performance pursuant to criteria which may include the following:

4. (1) Lending activity. The number and amount of the banking institution's home mortgage, small business, minority- and women-owned business, small farm, and consumer loans, if applicable, in the banking institution's assessment area(s).

5. (2) Geographic distribution. The geographic distribution of the banking institution's home mortgage, small business, minority- and women-owned business, small farm, and consumer loans, if applicable, based on the loan location, including:

   1. (i) the proportion of the banking institution's lending in the banking institution's assessment area(s);
   2. (ii) the dispersion of lending in the banking institution's assessment area(s); and
   3. (iii) the number and amount of loans in low-, moderate-, middle-, and upper-income geographies in the banking institution's assessment area(s).

6. (3) Borrower characteristics. The distribution, particularly in the banking institution's assessment area(s), of the banking institution's home mortgage, small business, minority- and women-owned business, small farm, and consumer loans, if applicable, based on borrower characteristics, including the number and amount of:

   1. (i) home mortgage loans to low-, moderate-, middle-, and upper-income individuals;
   2. (ii) small business and small farm loans to businesses and farms with gross annual revenues of $1 million or less;
   3. (iii) small business and small farm loans by loan amount at origination;
   4. (iv) loans to minority- and women-owned businesses;
   5. (v) consumer loans, if applicable, to low-, moderate-, middle-, and upper-income individuals; and
   6. (vi) the banking institution'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.
7. (4) Community development lending. The banking institution's community development lending, including the number and amount of community development loans, and their complexity and innovativeness.

8. (5) Innovative or flexible lending practices. The banking institution'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, or minority- or women-owned businesses.

   (c) Affiliate lending.

   Affiliate lending will be considered as follows:

9. (1) At a banking institution's option, the department will consider loans by an affiliate of the banking institution, if the banking institution provides data on the affiliate's loans to the department. The data provided should contain the information specified in section 228.42 of Regulation BB of the Board of Governors of the Federal Reserve System (12 CFR^*part 228).

10. (2) The department considers affiliate lending subject to the following constraints:

    1. (i) no affiliate may claim a loan origination or loan purchase if another institution claims the same loan origination or purchase; and
    2. (ii) if a banking institution elects to have the department consider loans within a particular lending category made by one or more of the banking institution's affiliates in a particular assessment area, the banking institution shall elect to have the department consider all the loans within that lending category in that particular assessment area made by all of the banking institution's affiliates.

11. (3) The department does not consider affiliate lending in assessing a banking institution's performance under subparagraph (b)(2)(i) of this section.

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

    Community development loans originated or purchased by a consortium in which the banking institution participates or by a third party in which the banking institution has invested:

12. (1) will be considered, at the banking institution's option, if the banking institution reports to the department the data specified in section 228.42 of Regulation BB of the Board of Governors of the Federal Reserve System (12 CFR* part 228) pertaining to these loans; and

13. (2) may be allocated among participants or investors, as they choose, for purposes of the lending test, except that no participant or investor:

    1. (i) may claim a loan origination or loan purchase if another participant or investor claims the same loan origination or purchase; or
    2. (ii) 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.

(a) Scope of test.

The scope of the lending test is as follows: