Community Reinvestment Act Regulations, 44256-44270 [05-15227]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY
• Comptroller of the Currency

[Federal Register Volume 70, Number 147 (Tuesday, August 2, 2005)]
[Rules and Regulations]
[Pages 44256-44270]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-15227]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket No. 05-11]
RIN 1557-AB98

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Regulation BB; Docket No. R-1225]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AC89


Community Reinvestment Act Regulations

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); and Federal 
Deposit Insurance Corporation (FDIC).

ACTION: Joint final rule.

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SUMMARY: The OCC, Board, and FDIC (collectively, ``federal banking 
agencies'' or ``the agencies'') are issuing this joint final rule that 
revises certain provisions of our rules implementing the Community 
Reinvestment Act (CRA). The agencies are taking this action after 
carefully considering public comments received in response to the joint 
notice of proposed rulemaking published on March 11, 2005 (the ``March 
proposal''). The joint final rule addresses regulatory burden imposed 
on small banks with an asset size between $250 million and $1 billion 
by exempting them from CRA loan data collection and reporting 
obligations. It also exempts such banks from the large bank lending, 
investment, and service tests, and makes them eligible for evaluation 
under the small bank lending test and a flexible new community 
development test. Holding company affiliation is no longer a factor in 
determining which CRA evaluation standards apply to a bank. In 
addition, the joint final rule revises the term ``community 
development'' to include activities to revitalize and stabilize 
distressed or underserved rural areas

[[Page 44257]]

and designated disaster areas. Finally, it adopts without change the 
amendments to the regulations to address the impact on a bank's CRA 
rating of evidence of discrimination or other credit practices that 
violate an applicable law, rule, or regulation.

EFFECTIVE DATE: This joint final rule is effective September 1, 2005.

FOR FURTHER INFORMATION CONTACT: OCC: Michael Bylsma, Director, or 
Margaret Hesse, Special Counsel, Community and Consumer Law Division, 
(202) 874-5750; Karen Tucker, National Bank Examiner, Compliance 
Division, (202) 874-4428; or Patrick T. Tierney, Senior Attorney, 
Legislative and Regulatory Activities (202) 874-5090, Office of the 
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Anjanette M. Kichline, Oversight Senior Review Examiner, 
(202) 785-6054; Catherine M.J. Gates, Oversight Team Leader, (202) 452-
3946; Kathleen C. Ryan, Counsel, (202) 452-3667; or Dan S. Sokolov, 
Senior Attorney, (202) 452-2412, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, 20th Street 
and Constitution Avenue, NW., Washington, DC 20551.
    FDIC: Richard M. Schwartz, Counsel, Legal Division, (202) 898-7424; 
Susan van den Toorn, Counsel, Legal Division, (202) 898-8707; or Robert 
W. Mooney, Chief, CRA and Fair Lending Policy Section, Division of 
Supervision and Consumer Protection, (202) 898-3911; Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

Background

    The CRA requires the federal banking and thrift agencies to assess 
the record of each insured depository institution of meeting the credit 
needs of its entire community, including low- and moderate-income 
neighborhoods, consistent with the safe and sound operation of the 
institution, and to take that record into account when the agency 
evaluates an application by the institution for a deposit facility.\1\
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    \1\ 12 U.S.C. 2903.
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Rulemaking History

    In 1995, when the OCC, the Board, the FDIC, and the Office of 
Thrift Supervision (OTS) (collectively, ``federal banking and thrift 
agencies'' or ``the four agencies'') adopted major amendments to 
regulations implementing the Community Reinvestment Act, they committed 
to reviewing the amended regulations in 2002 for their effectiveness in 
placing performance over process, promoting consistency in evaluations, 
and eliminating unnecessary burden. (60 FR 22156, 22177 (May 4, 1995)). 
The federal banking and thrift agencies indicated that they would 
determine whether and, if so, how the regulations should be amended to 
better evaluate financial institutions' performance under the CRA, 
consistent with the Act's authority, mandate, and intent.
    The four agencies' review was initiated in July 2001 with 
publication in the Federal Register of an advance notice of proposed 
rulemaking requesting comment on whether the regulations were effective 
in meeting the stated goals of the 1995 rulemaking and whether any 
changes should be made to the rules (66 FR 37602 (July 19, 2001)). The 
approximately 400 comments reflected a consensus that certain 
fundamental elements of the regulations are sound, but demonstrated a 
disagreement over the need and reasons for change.
    In February 2004, the four agencies published a notice of proposed 
rulemaking (69 FR 5729 (Feb. 6, 2004)). Among other things, the 
proposal would have increased the small bank asset size threshold to 
$500 million, without regard to holding company affiliation. Commenters 
were deeply split on this proposal, with financial institutions and 
their trade associations urging additional burden relief for more 
institutions and community organizations opposed to allowing any 
additional financial institutions to be evaluated as ``small'' 
institutions. On July 16, 2004, the OCC and the Board announced that 
they would not proceed with their respective February 2004 proposals. 
The OCC did not formally withdraw the proposal, but did not adopt it. 
The Board formally withdrew its proposal.
    On August 18, 2004, the OTS published a final rule that expanded 
the category of ``small savings associations'' under the OTS'' CRA 
regulations to those with under $1 billion in assets, regardless of 
holding company affiliation (69 FR 51155 (Aug. 18, 2004)). Following 
its publication of a notice of proposed rulemaking in November 2004, 
the OTS also adopted a final rule that allows a thrift that is 
evaluated as a large retail institution to determine the weight that 
will be assigned to lending, investments, and services in its CRA 
evaluation. (70 FR 10023 (Mar. 2, 2005)).
    On August 20, 2004, the FDIC issued a proposal on the CRA 
evaluation of banks defined as ``small'' (69 FR 51611 (Aug. 20, 2004)). 
The FDIC proposal would have expanded the category of ``small banks'' 
to those under $1 billion, regardless of any holding-company size or 
affiliation. For small banks with assets between $250 million and $1 
billion, the FDIC proposal would have added to the five performance 
criteria of the current streamlined small bank test a new sixth 
criterion taking into account a bank's record of community development 
lending, investments, or services, but also asked for comment on 
whether those community development activities should be evaluated in a 
separate test. The FDIC received over 11,000 comments in response to 
its proposal. Banks and their trade associations supported a change in 
the small bank dollar threshold, primarily as a way to reduce 
administrative burden, but expressed mixed views on whether community 
development activities should be evaluated as a sixth criterion in the 
small bank evaluation or as a separate test. Community organizations 
almost universally opposed any increase in the small bank threshold. 
However, these commenters generally supported the proposal to require 
such banks to be evaluated under a separately rated community 
development test in addition to the small bank lending test, if the 
small bank threshold were to be increased.\2\
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    \2\ For a more detailed history of CRA rulemaking activities by 
the banking agencies since 2001, please refer to the supplementary 
information published in the Federal Register with the joint notice 
of proposed rulemaking (70 FR 12148, 12149 (Mar. 11, 2005)).
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The Proposed Rule

    The OCC, the Board, and the FDIC jointly issued the proposed 
amendments to their CRA regulations, which were published in the 
Federal Register on March 11, 2005. The proposal was developed after 
thorough consideration of all the comments that the agencies had 
received in response to their previous proposals. The March proposal 
responded to community banks concerned about regulatory burden by 
extending eligibility for streamlined lending evaluations and the 
exemption from data reporting to banks under $1 billion, without regard 
to holding company assets. The new proposal also provided an adjustment 
of this threshold for inflation, based on changes to the Consumer Price 
Index.
    The proposal addressed the concerns of community organizations that 
had urged the federal banking and thrift agencies to continue to 
evaluate community development participation by providing that the 
community

[[Page 44258]]

development records of banks between $250 million and $1 billion, 
termed ``intermediate small banks,'' would be separately evaluated and 
rated, but provided a new, more streamlined basis than the current rule 
for doing so. Under the proposal, an intermediate small bank would not 
be eligible for an overall rating of ``satisfactory'' unless it 
received ratings of ``satisfactory'' on both the lending and community 
development tests.
    The proposal also responded to suggestions from both community 
banks and community organizations that the current definition of 
``community development'' was too narrow by proposing to expand the 
definition of community development activities to include certain 
activities in underserved rural areas and designated disaster areas. 
Finally, the proposal provided that evidence of discrimination, or 
evidence of credit practices that violate an applicable law, rule, or 
regulation, could adversely affect an agency's evaluation of a bank's 
CRA performance and included an illustrative list of such practices.
    Together, the agencies received over 10,000 public comments, 
including identical comments sent to each agency, from consumer and 
community organizations, banks and bank trade associations, academics, 
Federal and State Government representatives, and individuals. In 
general, commenters recognized that the proposal had the potential to 
strike an appropriate balance between the need to provide meaningful 
regulatory relief to small banks and the need to preserve and encourage 
meaningful community development activities by those banks.

The Final Rule

Increase in Size Threshold for Small Banks From $250 Million to $1 
Billion

Comments on Proposed Rule

    The agencies proposed to reduce undue regulatory burden by 
extending eligibility for streamlined lending evaluations and the 
exemption from data reporting to banks under $1 billion without regard 
to holding company affiliation. In addition, the agencies proposed to 
define small banks with assets between $250 million and $1 billion as 
``intermediate small banks.'' The proposal also would annually adjust 
the asset size for small and intermediate small banks based on changes 
to the Consumer Price Index.
    Most community organizations opposed the proposal to raise the 
small bank threshold to $1 billion while most banks supported the 
increase. Community organizations expressed a concern that an increase 
in the threshold would cause banks to reduce their investments and 
services in low- and moderate-income areas. Although they preferred 
that the agencies not increase the threshold, a number of community 
organization commenters noted that the proposed evaluation of 
intermediate small banks under a community development test and the 
streamlined lending test was a notable improvement over the previous 
proposals to raise the small bank threshold.
    Community organizations also expressed concern that an increase in 
the small bank threshold would reduce public data on small business, 
small farm, and community development loans. Community organizations 
objected to this result on the basis that communities would lack the 
means to evaluate the small business and small farm lending of 
intermediate small banks. A few community organizations offered 
specific examples of how they or others have used information about 
such lending, including, for example, a series of studies examining 
impediments to capital formation by business owners in low- and 
moderate-income areas. Some community organizations asserted that 
intermediate small banks make more small business, small farm and 
community development loans, as a percentage of bank assets, than 
larger banks. Thus, they believe that the loss of the intermediate 
small bank lending data will significantly affect the relevance of the 
remaining data, particularly in markets that include numbers of 
intermediate small banks. Some commenters also noted that the proposal 
would affect the Home Mortgage Disclosure Act (HMDA) requirements to 
report certain loans outside of a Metropolitan Statistical Area (MSA) 
for intermediate small banks.
    The vast majority of bank and bank trade association commenters 
noted that increasing the small bank threshold would provide 
substantial and needed regulatory burden reduction because intermediate 
small banks would be relieved of the obligation to collect and report 
information about small business, small farm, and community development 
loans. They also noted that, given the inclusion of the community 
development test for intermediate small banks, elimination of the data 
collection and reporting requirements was the principal regulatory 
relief component of the proposed amendments. However, a few banks 
stated that this relief would not be realized fully if banks continue 
to collect information about community development loans, investments, 
and services, and provide it to examiners for use in evaluating the 
bank's performance under the proposed community development test.
    A number of banks and their trade associations commented that the 
small bank size threshold should be raised to $1 billion without 
creating a tier of intermediate small banks that would be subject to 
the proposed community development test. A few bank commenters 
suggested defining an intermediate small bank subject to the new 
community development test as a bank with assets between $500 million 
and $1 billion, and to permit institutions with less than $500 million 
in assets to be evaluated solely under the streamlined small bank 
lending test.
    Some community organization commenters criticized the proposal to 
adjust the asset threshold annually for small and intermediate small 
banks based on changes to the Consumer Price Index (CPI) because it 
could increase the number of banks that are exempt from the large bank 
evaluation standards and further decrease the availability of small 
business, small farm, and community development loan data. Most banks 
that commented on the issue supported tying the small and intermediate 
small bank thresholds to changes in the CPI.

Provisions of Final Rule

    The joint final rule retains the proposed asset size threshold for 
small banks of less than $1 billion and the annual adjustment to the 
threshold based on changes to the Consumer Price Index. The text of the 
``small bank'' definition describing the ``intermediate small bank'' 
category has been revised for clarity. The federal banking agencies 
believe that raising the asset size threshold provides important 
regulatory relief for community banks. As discussed below, the final 
rule also will preserve and encourage meaningful CRA activities by 
intermediate small banks by means of a new community development test.
    As a result of the rule change, data on the distribution of small 
business loans and small farm loans extended by intermediate small 
banks will no longer be publicly available. In revising the rule, the 
agencies have considered the adequacy of substitute sources of 
information. Call Report data, although lacking the loan-location and 
business-size information in the CRA data, provide the public with 
annual outstanding amounts of small business and small farm loans. 
Moreover, an intermediate small bank's CRA performance evaluation 
includes, as appropriate, a description of its small

[[Page 44259]]

business and small farm lending performance, as well as a description 
of any community development loans the bank has made. These sources 
will give the public information on intermediate small banks' records 
of extending small business, small farm, and community development 
loans. On balance, the agencies believe the costs of the mandatory data 
collection and reporting by intermediate small banks, including the 
fixed costs that weigh more heavily on smaller banks, outweigh the 
benefits.
    Further, under the CRA and HMDA regulations, large banks generally 
must collect and report information about the location of property 
securing home loans located outside of MSAs and metropolitan divisions 
in which the institution has a home or branch office, or outside any 
MSA (12 CFR 203.4(e)). But for small banks, collecting and reporting 
this location information is optional. Thus, under this joint final 
rule, intermediate small banks will no longer be required to collect 
and report information on the location of mortgage loans outside MSAs 
and metropolitan divisions in which the banks have home or branch 
offices.
    Summary information about where such mortgage loans were made, and 
detailed information about the applicants or borrowers, will 
nevertheless continue to be available. Mortgage loan location 
information is summarized in the CRA performance evaluation as part of 
the evaluation of the geographic distribution of a bank's loans, as 
appropriate. Moreover, some newly designated intermediate small banks 
may opt to report loan location information as some small banks have 
done in the past. Furthermore, intermediate small banks covered by HMDA 
will continue to report borrower or applicant race, ethnicity, gender, 
and income even when property location need not be reported. The 
agencies believe that the additional value of requiring intermediate 
small banks to report loan location information on all of their 
mortgage loans does not justify the cost of reporting such 
information.\3\ Although an intermediate small bank will no longer be 
required to collect and report data on small business or small farm 
loans or on the location of certain nonmetropolitan mortgage loans, the 
agencies will continue to evaluate such lending under the streamlined 
lending test if it constitutes a major product line of the bank.
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    \3\ Even were the proposal not adopted, intermediate small banks 
would continue to be exempt from reporting loan location information 
on mortgage loans made in counties with populations of less than 
30,000.
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Community Development Test for Intermediate Small Banks

Comments on Proposed Rule

    The March proposal would have added a new community development 
test that would be separately rated in CRA examinations for 
intermediate small banks. The new community development test would 
evaluate an intermediate small bank's community development loans, 
qualified investments, and community development services, resulting in 
a single rating for community development performance. Overall CRA 
ratings for intermediate small banks would be based on ratings for this 
community development test and the streamlined small bank lending test.
    Most community organization commenters generally favored the 
retention of the large bank lending, investment, and service tests for 
evaluation of all banks with assets of $250 million or more. On the 
other hand, many of these commenters noted that the proposed 
intermediate small bank examination standards--the streamlined small 
bank lending test plus the proposed community development test--were 
significantly preferable to permitting additional banks to be evaluated 
under only the streamlined small bank lending test. In this regard, 
community organizations strongly supported the provision in the 
proposed rule to require an intermediate small bank to receive a 
``satisfactory'' rating on both the community development and the small 
bank lending tests in order to receive an overall ``satisfactory'' 
rating.
    Many bank commenters opposed the creation of separate new standards 
for intermediate small banks. For example, many community bankers 
commented that all banks under $1 billion should be examined solely 
under the streamlined lending test. Some bank and bank trade 
associations urged the agencies to adopt final rules that assign 
greater weight to retail lending than to community development in the 
overall evaluation of an intermediate small bank's CRA performance. A 
few commenters stated that, under the proposal, community development 
would receive greater weight in an intermediate small bank's overall 
rating than it does under the large bank lending, investment, and 
service tests that currently apply to such banks. They urged the 
agencies to clarify that intermediate small banks, at their option, 
could continue to choose to be evaluated under the large bank lending, 
investment, and service tests.
    Regarding the activities evaluated under the proposed community 
development test, most community organizations stated that an 
institution should be required to engage in all three activities--
community development loans, qualified investments, and community 
development services--in order to earn a ``satisfactory'' rating on the 
community development test. Although community organizations believed 
that an institution's rating on the community development test should 
take account of bank capacity and community opportunities for community 
development, they asserted that the primary consideration should be the 
institution's responsiveness to community needs. Moreover, many 
community organizations requested that the community development test 
also evaluate an intermediate small bank's provision of community 
development services through branches located in low- and moderate-
income areas.
    Many banks and bank trade associations commented favorably on the 
flexibility that the community development test offered. Some large 
banks requested that the proposed community development test be made 
available to banks with assets of $1 billion or more as a substitute 
for the existing investment and service tests.

Provisions of Final Rule

    The final rule adopts the proposed community development test for 
intermediate small banks without change. The number and amount of 
community development loans, the number and amount of qualified 
investments, and the provision of community development services, by an 
intermediate small bank, and the bank's responsiveness through such 
activities to community development lending, investment, and services 
needs, will be evaluated in the context of the bank's capacities, 
business strategy, the needs of the relevant community, and the number 
and types of opportunities for community development activities. The 
agencies believe that, given these performance context factors, the 
community development test will provide a better framework for 
assessing community development performance by intermediate small banks 
than the separate lending, investment, and service tests. As noted in 
the preamble to the proposed rule, the community development test will 
be applied flexibly to permit a bank to apply its resources 
strategically to the types of community development activities (loans, 
investments, and services) that are most responsive to helping to meet 
community needs, even when those activities are not necessarily 
innovative, complex, or new. (``Innovativeness'' and

[[Page 44260]]

``complexity,'' factors examiners consider when evaluating a large bank 
under the lending, investment, and service tests, are not factors in 
the intermediate small banks' community development test.) The agencies 
will incorporate these considerations as appropriate into examination 
guidance and procedures to ensure flexible application of the 
standards.
    In providing this flexibility for intermediate small banks, the 
federal banking agencies do not intend to suggest that a bank may 
simply ignore one or more categories of community development or 
arbitrarily decrease the level of such activities. Nor does the joint 
final rule prescribe any required threshold level or allocation of 
community development loans, qualified investments, and community 
development services for these banks. Instead, the OCC, the FDIC, and 
the Board expect that a bank will appropriately assess the needs in its 
community, engage in different types of community development 
activities based on those needs and the bank's capacities, and that it 
will take reasonable steps to apply its community development resources 
strategically to meet those needs.\4\ As the agencies indicated on 
adoption of the 1995 regulation, the agencies will expect a bank to 
make an assessment using information normally used to develop a 
business plan or identify potential markets and customers.\5\ Examiners 
will consider the bank's assessment of community needs along with 
information from community, government, civic, and other sources to 
gain a working knowledge of community needs.\6\ The flexibility 
inherent in the community development test will allow intermediate 
small banks to focus on meeting the substance of community needs 
through these means, without undue regulatory consequences from the 
form of the response.
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    \4\ As discussed in the supplementary information published with 
the proposed rule, the agencies anticipate that examiners will 
exercise their discretion, using performance context, to assign 
appropriate weight in a bank's current period rating to prior-period 
outstanding investments that reflect a substantial financial 
commitment or outlay by the bank designed to have a multi-year 
impact, in addition to investments made during the current 
examination cycle.
    \5\ 60 FR 22156, 22163 (May 4, 1995).
    \6\ Id.
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    Under the joint final rule, retail banking services provided by 
intermediate small banks will no longer be evaluated in a separate 
service test. Instead, the extent to which such banks provide community 
development services to low- and moderate-income people will be taken 
into account in the community development test. Thus, the federal 
banking agencies will consider not only the types of services provided 
to benefit low- and moderate-income people, such as low-cost bank 
checking accounts and low-cost remittance services, but also the 
provision and availability of services to low- and moderate-income 
people, including through branches and other facilities located in low- 
and moderate-income areas.
    The federal banking agencies believe that providing flexibility to 
intermediate small banks in how they apply their community development 
resources to respond to community needs through the strategic use of 
loans, investments, and services will reduce burden on these banks 
while making the evaluation of their community development records more 
effective.\7\
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    \7\ A few commenters requested that the community development 
test be available to banks with assets of more than $1 billion, for 
the sake of increasing flexibility for those banks, too. The 
agencies have not made this change. However, a large bank seeking 
more flexibility than it finds in the present three-part test can 
consider a strategic plan. See 12 CFR 25.27, 228.27, & 345.27.
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    The agencies are making a non-substantive change to the proposed 
criteria for a ``satisfactory'' rating on the community development 
test (in Appendix A, Ratings, paragraph (d)(2)(i)) to conform those 
criteria to the other ratings criteria. Under the proposal, a 
``satisfactory'' rating would have required an intermediate small bank 
to demonstrate ``adequate responsiveness to the community development 
needs of its assessment area(s) or a broader statewide or regional area 
that includes the bank's assessment area(s) through community 
development loans, qualified investments, and community development 
services.'' In the final rule, the agencies deleted the phrase ``or a 
broader statewide or regional area that includes the bank's assessment 
area(s)'' from the criteria for a ``satisfactory'' rating on the 
community development test in order to conform the manner in which the 
term ``assessment area'' is used in other parts of Appendix A. 
Examiners will, however, continue to evaluate a bank's community 
development activities in the broader statewide or regional area that 
includes its assessment area(s) according to existing interagency 
guidance.\8\
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    \8\ See Interagency Questions and Answers Regarding Community 
Reinvestment (``Q&A''), 66 FR 36620 et seq. (July 12, 2001) 
(Q&A--.12(i)-5 and -6).
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    The agencies are not revising the provision in the existing 
regulations that permits any small bank, including an intermediate 
small bank, to choose to be evaluated under the large bank lending, 
investment, and service tests at its option. Any small bank that opts 
to be evaluated under the lending, investment, and service tests will 
be required to collect and report small business, small farm, and 
community development loan data.\9\
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    \9\ See 12 CFR 25.21(a)(3), 228.21(a)(3), & 345.21(a)(3).
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Community Development Definition

Comments on Proposed Rule

    The regulations' present definition of ``community development'' 
covers four categories of activity. Three categories (affordable 
housing, community services, and economic development) are defined in 
terms of the activity's targeting of specific persons (low- or 
moderate-income people in the first two categories, small farms or 
businesses in the third). A fourth category (revitalization or 
stabilization activities) is defined in terms of the activity's 
targeting of specific areas, namely, low-or moderate-income census 
tracts.
    The OCC, the FDIC, and the Board proposed to amend two of the 
categories--activities that revitalize or stabilize an area, and 
affordable housing. Under one proposed amendment, a bank's support for 
activities that revitalize or stabilize an area would receive 
consideration not only in low- or moderate-income census tracts 
(referred to as ``geographies'' in the regulations), but also in 
``underserved rural areas.'' \10\ The proposal would thus expand the 
number and kinds of rural areas in which bank activities that 
revitalize or stabilize communities are eligible for community 
development consideration (referred to herein as ``eligible rural 
tracts''). The proposal responded to the scarcity of eligible rural 
tracts, which appeared to limit the effectiveness of the regulations in 
encouraging rural community development.\11\ The proposed amendment 
would also give consideration to bank activities that

[[Page 44261]]

revitalize or stabilize designated disaster areas.
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    \10\ Staff interpretations of activities that ``revitalize or 
stabilize'' an area can be found in Q&A--.12(h)(4)-1 and .12(i)-4.
    \11\ The scarcity is both absolute and relative. Only 15 percent 
of nonmetropolitan tracts are now classified as ``low- or moderate-
income,'' and 59 percent of nonmetropolitan counties lack a single 
low- or moderate-income tract. In comparison, 31 percent of 
metropolitan tracts are classified as ``low- or moderate-income'' 
and only 18 percent of metropolitan counties lack a single low- or 
moderate-income tract. See Robert B. Avery, Glenn B. Canner, et al., 
``Community Banks and Rural Development: Research Relating to 
Proposals to Revise the Regulations That Implement the Community 
Reinvestment Act,'' Federal Reserve Bulletin, Spring 2005, Table 14, 
pp. 224-225.
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    The agencies sought comment on three general alternatives for 
increasing the number and kinds of rural tracts in which bank 
activities are eligible for community development consideration. The 
first alternative was to expand the definition of ``low- or moderate-
income'' tracts in rural areas. Two specific options were raised: 
increasing the threshold for a low- or moderate-income tract from a 
median income of 80 percent of the state nonmetropolitan median income 
to 90 percent, or changing the baseline against which a nonmetropolitan 
tract's median income is compared to the median income of the entire 
state (not just its nonmetropolitan parts). The second alternative was 
to retain the present definition of a tract's income status, but 
identify a set of rural tracts that, while not low- or moderate-income, 
were nonetheless shown by other relevant indicators to be 
``underserved'' or otherwise in need of bank support to revitalize or 
stabilize. Specific indicators on which the agencies sought comment 
were rates of poverty, unemployment, and population loss used as 
``distress'' indicators by the Community Development Financial 
Institutions (CDFI) Fund, United States Department of the Treasury. The 
third alternative was to consider as eligible any rural area that had 
been designated by a Federal, State, tribal, or local government as in 
need of revitalization or stabilization.
    Under another proposed amendment, bank support for affordable 
housing would receive consideration in ``underserved rural areas'' or 
designated disaster areas even if the housing benefited individuals not 
defined as ``low- or moderate-income.'' \12\ The agencies indicated 
that the proposal's premise was that affordable housing--in addition to 
other activities that revitalize and stabilize underserved rural 
areas--may meet a critical need of individuals in certain underserved 
rural areas, even if those individuals may not meet the technical 
requirements of the definition of ``low- or moderate-income'' in the 
regulation.
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    \12\ Staff interpretations of ``affordable housing'' can be 
found in Q&A --.12(h)(1)-1.
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    Banks and community organizations alike generally supported 
expanding the definition of ``community development'' to make bank 
activities eligible for community development consideration in a larger 
number of rural areas. Banks argued that having few or no eligible 
tracts in their assessment areas meant they felt pressure to make 
community development investments outside of their assessment areas 
merely for the sake of their CRA evaluations.
    Bank commenters suggested that ``rural'' be defined using existing 
government definitions. Some commenters suggested using the Office of 
Management and Budget's concept of nonmetropolitan areas (areas outside 
Metropolitan Statistical Areas, or MSAs), though a few requested 
flexibility to treat certain parts of MSAs as rural, too. Others 
suggested the Census Bureau's definition of ``rural.'' Some suggested 
using several criteria, including population density.
    Banks asked that any rule distinguishing ``underserved'' rural 
areas be simple. Some expressed concern that using the CDFI Fund 
distress criteria would be complicated and cause uncertainty, but some 
indicated the criteria were appropriate. Many banks suggested that an 
area be eligible regardless of its income if targeted by a government 
agency for redevelopment. Community banks expressed a strong preference 
that a bank's support for meeting community needs such as education, 
infrastructure, and healthcare be considered as ``community 
development'' in rural communities of all kinds, not just 
``underserved'' or low- or moderate-income communities.
    Community organizations disagreed that all rural areas should be 
eligible, but agreed that more rural areas should be eligible than are 
now. Many requested that the agencies consider both expanding the 
standard for classifying rural tracts as ``low- or moderate-income'' 
and adopting criteria such as the distress criteria of the CDFI Fund to 
identify additional eligible tracts.\13\ At the same time, community 
organizations generally sought to keep the proportion of eligible rural 
tracts in rough parity with the proportion of eligible urban tracts.
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    \13\ On the whole, community organizations did not express a 
strong preference between raising the threshold income for a 
moderate-income tract to 90% of nonmetropolitan state median income 
and changing the baseline against which a tract's income is measured 
to the state median income. They generally opposed, however, a 
threshold of 100% of nonmetropolitan state median income. Some 
organizations that favored using the CDFI Fund distress criteria 
suggested that additional criteria also be considered.
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    Like bank commenters, community organizations offered a variety of 
suggestions for defining ``rural.'' For example, some suggested 
including any area with a population of less than 10,000, while others 
suggested using several criteria, including population, household 
income, the area's economic base, and distance from a metropolitan 
area. Some cautioned against treating exurbs of large MSAs as 
``rural.''
    As noted above, banks and community organizations alike generally 
supported expanding the ``community development'' definition to include 
activities that benefit underserved rural areas. Few comments 
distinguished between the proposal to amend the ``revitalize or 
stabilize'' category and the proposal to amend the ``affordable 
housing'' category but, among those that did comment specifically on a 
category, more commented specifically in favor of expanding the 
``revitalize or stabilize'' category.
    Banks favored revising the definition of ``community development'' 
to include activities in a designated disaster area. They noted that 
such areas are easily identified and have special redevelopment needs. 
Some, but not all, community organizations opposed the revision. 
Organizations that opposed, and those that did not oppose, the revision 
shared the view that the regulation should not give consideration to 
bank responses to disasters that do not meet the needs of affected low- 
or moderate-income people.

Provisions of Final Rule

    The agencies are revising the definition of ``community 
development'' to increase the number and kinds of rural tracts in which 
bank activities are eligible for community development consideration. 
In doing so, the agencies are revising the ``revitalize or stabilize'' 
category of the definition of ``community development'' to provide that 
activities that revitalize or stabilize areas designated by the 
agencies as ``distressed or underserved nonmetropolitan middle-income 
geographies'' will qualify as community development activities.
    The final rule uses the term ``nonmetropolitan,'' which means an 
area outside of an MSA, to refer to rural areas. The final rule also 
describes qualifying rural geographies as ``distressed or 
underserved,'' while the proposal used only the term ``underserved.'' 
The agencies believe that the phrase ``distressed or underserved'' 
better describes the eligible geographies that will be designated using 
the factors discussed more fully below.
    Eligible rural tracts will continue to include tracts currently 
defined as ``low-income'' or as ``moderate-income,'' and the agencies 
have not revised the definitions of those terms. Eligible rural tracts 
will also include middle-income, nonmetropolitan tracts designated by 
the agencies as distressed or

[[Page 44262]]

underserved based on either or both of two sets of criteria: criteria 
indicating a community is in distress (rates of poverty, unemployment, 
and population loss), and criteria indicating a community may have 
difficulty meeting essential community needs (population size, density, 
and dispersion).
    The agencies believe that using these criteria to identify eligible 
areas has advantages over simply expanding the definition of ``low- or 
moderate-income'' tracts for rural areas. The distress criteria permit 
a more careful targeting of the middle-income tracts that are most in 
need of revitalization or stabilization. Simply changing the definition 
of ``moderate-income'' to include some presently middle-income tracts 
would (a) fail to cover many rural middle-income tracts in distress and 
(b) cover many tracts not necessarily in distress, or in less distress 
than other rural tracts that would not be covered. In addition, some 
rural communities, albeit middle-income and not necessarily in 
distress, have such small and thinly distributed populations that they 
have difficulty financing the fixed costs of essential community needs 
such as essential infrastructure and community facilities; moreover, 
residents may have to travel long distances to reach certain 
facilities, such as hospitals. The challenges facing such communities 
are reflected in several comments suggesting the agencies use factors 
such as population size, density, and distance from a population center 
to identify eligible areas. Simply changing the definition of 
``moderate-income'' to include some presently middle-income tracts 
would not effectively identify those communities either. Finally, 
changing the definition of ``low- or moderate-income tract'' for one 
purpose (evaluating community development activities) but not for other 
purposes (evaluating retail lending and service activities) could 
create confusion and the appearance of inconsistency.
    To facilitate planning, the agencies will publish a list of 
eligible rural tracts that are distressed or underserved on the Web 
site of the Federal Financial Institutions Examination Council.\14\ 
Year-to-year changes in the tracts designated based on the distress 
criteria are expected to be minimal; to account for such changes the 
agencies will specify a uniform lag period--of at least one year--for 
removal from the list of any tract designated based on those criteria. 
The lag will help promote investments that take an extended period to 
arrange. A qualifying loan, investment, or service in the area will 
count so long as the bank made, or entered into a binding commitment to 
make, the loan or investment or provided, or entered into a binding 
commitment to provide, the service while the area was designated or 
during the lag period.
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    \14\ The Web site address is: https://www.ffiec.gov.
---------------------------------------------------------------------------

    The ``distressed or underserved'' designations will be based on 
objective criteria. A middle-income, nonmetropolitan tract will be 
designated if it is in a county that meets one or more of the following 
triggers that the CDFI Fund employs as ``distress criteria'': (1) An 
unemployment rate of at least 1.5 times the national average, (2) a 
poverty rate of 20 percent or more, or (3) a population loss of 10 
percent or more between the previous and most recent decennial census 
or a net migration loss of 5 percent or more over the five-year period 
preceding the most recent census.\15\ Activities qualify for 
``revitalize or stabilize'' community development consideration in 
these tracts, like in low- or moderate-income tracts, based on the 
regulation and applicable interagency guidance.
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    \15\ 12 CFR 1805.201(b)(3). The CDFI Fund uses other criteria, 
as well, including an income trigger different from the definition 
of ``low- or moderate-income'' under the CRA regulations. The other 
criteria, however, will not be used in the CRA regulation's 
definition of ``community development.''
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    A middle-income, nonmetropolitan tract will also be designated if 
it meets criteria for population size, density, and dispersion that 
indicate the area's population is sufficiently small, thin, and distant 
from a population center that the tract is likely to have difficulty 
financing the fixed costs of meeting essential community needs. The 
agencies will use as the basis for the designations the ``urban 
influence codes'' maintained by the Economic Research Service of the 
United States Department of Agriculture.\16\ In areas so designated, 
bank financing for construction, expansion, improvement, maintenance, 
or operation of essential infrastructure or facilities for health 
services, education, public safety, public services, industrial parks, 
or affordable housing generally will be considered to meet essential 
community needs, so long as the infrastructure or facility serves low- 
and moderate-income individuals. Other bank activities in such areas 
generally will not qualify for revitalization or stabilization 
consideration, unless the area meets the distress criteria. In these 
cases, the agencies will continue to decide on a case-by-case basis 
whether a particular activity qualifies for such consideration based on 
the regulation and applicable interagency guidance.
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    \16\ The codes can be found at https://www.ers.usda.gov/ Briefing/Rurality/urbaninf/. The agencies are considering 
designating middle-income tracts in the counties coded ``7,'' 
``10,'' ``11,'' or ``12.'' The counties coded ``11'' or ``12'' have 
population densities under five people per square mile, are not 
adjacent to either a metropolitan or micropolitan area, and do not 
have a town with a population greater than 10,000. The counties 
coded ``7'' or ``10'' have population densities between five and 
seven people per square mile and do not have a town with a 
population greater than 2,500, though they border a micropolitan or 
small metropolitan area. These counties are concentrated in the 
Great Plains, but appear elsewhere, too. A map at the Web site shows 
where these counties are located.
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    The agencies are also revising the definition of ``community 
development'' to make bank activities to revitalize or stabilize 
designated disaster areas eligible for CRA consideration. Disaster 
areas may be designated by Federal or State Governments. Such 
designations include, for example, Major Disaster Declarations 
administered by the Federal Emergency Management Agency. A designation 
will expire for purposes of CRA when it expires according to the 
applicable law under which it was declared. As the agencies indicated 
with the proposal, examiners will give significant weight to the extent 
to which a bank's revitalization activities in a disaster area benefit 
low- or moderate-income individuals.
    The final rule does not incorporate the specific proposal to amend 
the ``affordable housing'' category of the community development 
definition. The proposal would have included affordable housing that 
benefits individuals who reside in underserved rural areas or 
designated disaster areas, even if the individuals are not technically 
``low- or moderate-income.'' The agencies believe it is appropriate to 
maintain the focus of the separate ``affordable housing'' category on 
characteristics of the residents of the housing, and not to expand this 
category to consider characteristics of the residents' communities 
without regard to the residents' income-level characteristics.\17\ 
Thus, under the regulation, a bank activity that has a primary purpose 
of providing housing affordable to low- or moderate-income individuals 
continues to qualify as ``community development'' regardless of the 
location of the housing.\18\ In

[[Page 44263]]

addition, such an activity may receive additional weight in the 
evaluation if the examiner determines that the activity helps to 
revitalize or stabilize a low- or moderate-income census tract, a 
distressed or underserved rural area, or a designated disaster area. 
However, as described previously, a bank activity that provides 
affordable housing, but not necessarily for low- or moderate-income 
individuals, may qualify as an activity that revitalizes or stabilizes 
an eligible nonmetropolitan area. For example, a bank activity that 
provides housing for middle- or upper-income individuals in an eligible 
rural area qualifies as ``community development'' when part of a bona 
fide plan to revitalize or stabilize the community by attracting a 
major new employer that will offer significant long-term employment 
opportunities to low- and moderate-income members of the community.
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    \17\ In contrast to the lack of census tracts in rural areas 
that meet the regulation's definition of ``low- or moderate-income'' 
geography, there is not a comparable lack of individuals residing in 
rural areas who meet the regulation's definition of ``low- or 
moderate-income'' individuals. Under the regulation's definition of 
a ``low- or moderate-income'' individuals, the average 
nonmetropolitan middle-income tract has a low- and moderate-income 
population of 38 percent.
    \18\ For guidance on application of the ``primary purpose'' 
standard, see Q&A --.12(i)-7.
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Effect of Certain Credit Practices on CRA Evaluations

Comments on Proposed Rule

    The OCC, the FDIC, and the Board proposed to revise the regulations 
to address the impact on a bank's CRA rating of evidence of 
discrimination or other illegal credit practices. The agencies proposed 
that evidence of discrimination, or evidence of credit practices that 
violate an applicable law, rule, or regulation, would adversely affect 
an agency's evaluation of a bank's CRA performance. The agencies also 
proposed to revise the regulations to include an illustrative list of 
such practices. This list includes evidence of discrimination against 
applicants on a prohibited basis in violation of, for example, the 
Equal Credit Opportunity (15 U.S.C. 1691 et seq.) or Fair Housing Acts 
(42 U.S.C. 3601 et seq.); evidence of illegal referral practices in 
violation of section 8 of the Real Estate Settlement Procedures Act (12 
U.S.C. 2607); evidence of violations of the Truth in Lending Act (15 
U.S.C. 1601 et seq.) concerning a consumer's right to rescind a credit 
transaction secured by a principal residence; evidence of violations of 
the Home Ownership and Equity Protection Act (15 U.S.C. 1639); and 
evidence of unfair or deceptive credit practices in violation of 
section 5 of the Federal Trade Commission Act (15 U.S.C. 45(a)(1)).\19\
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    \19\ Evidence of credit practices that violate other laws, rules 
or regulations, including a federal banking agency regulation or a 
State law, if applicable, also may adversely affect a bank's CRA 
evaluation.
---------------------------------------------------------------------------

    Further, the March proposal clarified that a bank's evaluation 
could be adversely affected by such practices regardless of whether the 
practices involve loans in the bank's assessment area(s) or in any 
other location or geography. In addition, as proposed, a bank's CRA 
evaluation also could be adversely affected by evidence of such 
practices by any affiliate in connection with loans in the bank's 
assessment area(s), if any loans of that affiliate have been considered 
in the bank's CRA evaluation.
    Most community organizations strongly supported the proposal. Many 
of these commenters recommended that the provision should be expanded 
to include evidence of discriminatory or other illegal credit practices 
by any affiliate of a bank, whether or not such affiliate's loans were 
included in the bank's CRA evaluation. Some bank and bank trade 
association commenters opposed the standard as unnecessary because 
other legal remedies are available to address discriminatory or other 
illegal credit practices. Many of these commenters also opposed 
extending the ``illegal credit practices'' standard to loans by an 
affiliate that are considered in a bank's lending performance. 
Furthermore, a few large banks were concerned that their CRA 
performance will be adversely affected by ``technical'' violations of 
law.

Provisions of Final Rule

    The joint final rule adopts without change the proposed amendments 
to the agencies' regulations that address the impact on a bank's CRA 
rating of evidence of discrimination or other illegal credit practices. 
The final rule states that evidence of discrimination, or evidence of 
credit practices that violate an applicable law, rule, or regulation, 
adversely affects an agency's evaluation of a bank's CRA performance. 
The rule includes an illustrative, but not comprehensive, list of such 
practices. It also provides that a bank's evaluation is adversely 
affected by such practices by the bank regardless of whether the 
practices involve loans in the bank's assessment area(s) or in any 
other location or geography. The rule also provides that a bank's CRA 
evaluation is also adversely affected by evidence of discrimination or 
other illegal credit practices by any affiliate in connection with 
loans inside the bank's assessment area(s), if any loans of that 
affiliate have been considered in the bank's CRA evaluation. The 
adverse effect on the bank's CRA rating of illegal credit practices by 
an affiliate is limited to affiliate loans within the bank's assessment 
area(s) because, under the regulations, a bank may not elect to include 
as part of its CRA evaluation affiliate loans outside the bank's 
assessment area(s).
    The agencies believe that providing in the CRA regulations examples 
of violations that give rise to adverse CRA consequences, rather than 
having such examples solely in interagency guidance on the 
regulations,\20\ will improve the usefulness of the regulations and 
provide critical information in primary compliance source material. 
Further, because affiliate loans may be included by a bank in it's 
lending evaluation for favorable consideration, evidence of 
discrimination or other illegal credit practices in an affiliate's 
loans in an assessment area of the bank can adversely affect the bank's 
CRA rating, if loans by that affiliate have been considered in the 
bank's CRA evaluation. The agencies believe that the same CRA standards 
generally should apply to loans included in the bank's CRA lending 
record that are made by an affiliate in the bank's assessment area and 
those that are made by the bank in any geography.
---------------------------------------------------------------------------

    \20\ See Q&A--.28(c)-1.
---------------------------------------------------------------------------

Interagency Guidance

    The agencies intend to issue interagency CRA guidance for comment 
in the near future. The guidance will address new provisions adopted in 
this joint final rule and related issues (for example, the appropriate 
lag period for removal of a census tract from the list of designated 
distressed or underserved nonmetropolitan middle-income geographies). 
The guidance will also conform existing interagency questions and 
answers to the regulatory revisions, where needed.

Effective Date

    The joint final rule becomes effective September 1, 2005. The 
agencies will issue interim interagency examination procedures for the 
community development test applicable to intermediate small banks in 
advance of the effective date of the regulation.
    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (CDRI), Pub. L. 103-325, authorizes a banking 
agency to issue a rule that contains additional reporting, disclosure, 
or other requirements to be effective before the first day of the 
calendar quarter that begins on or after the date on which the 
regulations are published in final form if the agency finds good cause 
for an earlier effective date. 12 U.S.C. 4802(b)(1). This joint final 
rule takes effect September 1, 2005. As discussed earlier in this 
``Supplementary Information,'' the changes adopted by

[[Page 44264]]

this joint final rule reduce regulatory burden by extending eligibility 
for streamlined lending evaluations and the exemption from data 
reporting to banks under $1 billion without regard to holding company 
affiliation. Because this joint final rule eliminates data collection 
and reporting burden for banks with assets between $250 million and $1 
billion, and banks with assets below $250 million that are affiliated 
with a holding company with bank and thrift assets of $1 billion or 
above, and will provide greater flexibility in the CRA evaluations of 
such institutions, the agencies find good cause for the September 1, 
2005, effective date.

Regulatory Flexibility Act

    OCC and FDIC: Under section 605(b) of the Regulatory Flexibility 
Act (RFA), 5 U.S.C. 605(b), the regulatory flexibility analysis 
otherwise required under section 604 of the RFA is not required if an 
agency certifies, along with a statement providing the factual basis 
for such certification, that the rule will not have a significant 
economic impact on a substantial number of small entities. The OCC and 
the FDIC have reviewed the impact of this joint final rule on small 
banks and certify that the joint final rule will not have a significant 
economic impact on a substantial number of small entities.
    The Small Business Administration (SBA) has defined ``small 
entities'' for banking purposes as a bank or savings institution with 
less than $150 million in assets. See 13 CFR 121.201. This joint final 
rule primarily affects banks with assets of at least $250 million and 
under $1 billion. The amendments decrease the regulatory burden for 
banks within that asset range by relieving them of certain reporting 
and recordkeeping requirements applicable to larger institutions.
    The elimination of the $1 billion holding company threshold as a 
factor in determining whether banks will be subject to the streamlined 
CRA examination or the more in-depth CRA examination applicable to 
larger institutions will affect a limited number of small banks, which 
are affiliated with holding companies with assets over $1 billion. The 
FDIC estimates that only 110 of approximately 5,300 FDIC-regulated 
banks had assets of under $150 million and were affiliated with a 
holding company with over $1 billion in assets. The OCC estimates that 
only 36 of approximately 2,000 OCC-regulated banks met these criteria. 
Because so few small banks will be affected by the revisions to Parts 
25 and 345, a regulatory flexibility analysis is not required. 
Furthermore, the OCC and the FDIC did not receive any comments 
regarding the March proposal's economic impact on small banks with 
assets of under $150 million.
    Board: The Board has prepared a final regulatory flexibility 
analysis as required by the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.).
    1. Statement of the need for and objectives of the final rule. As 
described in the SUPPLEMENTARY INFORMATION section, the Board, together 
with the Office of the Comptroller of the Currency and the Federal 
Deposit Insurance Corporation, seeks to improve the effectiveness of 
the CRA regulations in placing performance over process, promoting 
consistency in evaluations, and eliminating unnecessary burden. The 
final rule is intended to reduce unnecessary burden while maintaining 
or improving CRA's effectiveness in evaluating performance.
    2. Summary of issues raised by comments in response to the initial 
regulatory flexibility analysis. The Board received several comments on 
matters raised in its initial regulatory flexibility analysis. As 
described more fully in the SUPPLEMENTARY INFORMATION section, a number 
of commenters supported expansion of the number and kinds of rural 
census tracts eligible for community development consideration. Several 
banks expressed concern that definitions of eligible rural census 
tracts would impose burden on them to document an activity's 
qualification, and urged the use of simple, objective definitions, 
including if possible the use of definitions from existing federal 
programs. In response, the final rule defines ``distressed or 
underserved'' rural areas with reference to objective criteria set 
forth by the Department of the Treasury (CDFI Fund) and the Department 
of Agriculture, and it defines ``rural'' with reference to objective 
criteria set forth by the Office of Management and Budget. The agencies 
also have agreed that the Federal Financial Institutions Examination 
Council will publish and update an annual list of eligible rural census 
tracts, and will allow for a lag time before a tract loses its 
designation.
    As is also described in the SUPPLEMENTARY INFORMATION section, the 
agencies received a number of comments on provisions regarding the 
effect of evidence of illegal credit practices on CRA evaluations. 
Several commenters asserted that the proposal amounted to superimposing 
consumer credit laws onto CRA examinations and ratings. The Board notes 
that these provisions of the final rule would not subject any banks of 
any size to consumer credit laws to which they are not already subject; 
and hence, would not place new compliance, reporting, or recordkeeping 
requirements on small institutions.
    3. Description of small entities affected by the final rule. The 
final rule applies to all state-chartered banks that are members of the 
Federal Reserve System; there are approximately 922 such banks. The RFA 
requires the Board to consider the effect of the final rule on small 
entities, which are defined for RFA purposes as all banks with assets 
of less than $150 million. There are 419 state member banks with assets 
of less than $150 million. All but about 12 state member banks with 
assets of less than $150 million are already subject to a streamlined 
CRA evaluation that is not affected by this final rule. The rule 
eliminates data reporting requirements for these 12 state member banks 
by eliminating holding-company affiliation as a disqualification for 
treatment as a ``small bank'' under the CRA regulations.
    4. Reporting, recordkeeping, and other compliance requirements. The 
final rule does not impose any new reporting or recordkeeping 
requirements, as defined in section 603 of the RFA. As noted, the rule 
eliminates holding-company affiliation as a disqualification for 
treatment as a ``small bank'' under the CRA regulations. Accordingly, 
the rule eliminates data reporting requirements for about 12 state 
member banks with assets of less than $150 million. As noted above, all 
other state member banks with assets of less than $150 million are 
already exempt from this reporting requirement.
    As is described in section 2 of this regulatory flexibility 
analysis, th