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Federal Reserve System § 208.22

purchasing, selling, underwriting, andholding investment securities andstocks as are national banks under 12U.S.C. 24, ¶7th. To determine whetheran obligation qualifies as an invest-ment security for the purposes of 12U.S.C. 24, ¶7th, and to calculate thelimits with respect to the purchase of such obligations, a state member bankmay look to part 1 of the rules of theComptroller of the Currency (12 CFRpart 1) and interpretations thereunder.A state member bank may consult theBoard for a determination with respect

to the application of 12 U.S.C. 24, ¶7th,with respect to issues not addressed in12 CFR part 1. The provisions of 12 CFRpart 1 do not provide authority for astate member bank to purchase securi-ties of a type or amount that the bankis not authorized to purchase under ap-plicable state law.

§ 208.22 Community development andpublic welfare investments.

(a) Definitions. For purposes of thissection:

(1) Low- or moderate-income area means:

(i) One or more census tracts in aMetropolitan Statistical Area where

the median family income adjusted forfamily size in each census tract is lessthan 80 percent of the median familyincome adjusted for family size of theMetropolitan Statistical Area; or

(ii) If not in a Metropolitan Statis-tical Area, one or more census tractsor block-numbered areas where the me-dian family income adjusted for familysize in each census tract or block-num-bered area is less than 80 percent of themedian family income adjusted forfamily size of the State.

(2) Low- and moderate-income persons has the same meaning as low- and mod-erate-income persons as defined in 42U.S.C. 5302(a)(20)(A).

(3) Small business means a businessthat meets the size-eligibility stand-ards of 13 CFR 121.802(a)(2).

(b) Investments not requiring prior

Board approval. Notwithstanding theprovisions of section 5136 of the Re-vised Statutes (12 U.S.C. 24, ¶7th) madeapplicable to member banks by para-graph 20 of section 9 of the Federal Re-serve Act (12 U.S.C. 335), a memberbank may make an investment, with-

out prior Board approval, if the fol-lowing conditions are met:

(1) The investment is in a corpora-tion, limited partnership, or other enti-ty, and:

(i) The Board has determined that aninvestment in that entity or class of entities is a public welfare investmentunder paragraph 23 of section 9 of theFederal Reserve Act (12 U.S.C. 338a), ora community development investmentunder Regulation Y (12 CFR225.25(b)(6)); or

(ii) The Comptroller of the Currency

has determined, by order or regulation,that an investment in that entity by anational bank is a public welfare in-vestment under section 5136 of the Re-vised Statutes (12 U.S.C. 24 (Eleventh));or

(iii) The entity is a community de-velopment financial institution as de-fined in section 103(5) of the Commu-nity Development Banking and Finan-cial Institutions Act of 1994 (12 U.S.C.4702(5)); or

(iv) The entity, directly or indirectly,engages solely in or makes loans solelyfor the purposes of one or more of thefollowing community development ac-tivities:

(A) Investing in, developing, rehabili-tating, managing, selling, or rentingresidential property if a majority of the units will be occupied by low- andmoderate-income persons, or if theproperty is a ‘‘qualified low-incomebuilding’’ as defined in section 42(c)(2)of the Internal Revenue Code (26 U.S.C.42(c)(2));

(B) Investing in, developing, rehabili-tating, managing, selling, or rentingnonresidential real property or otherassets located in a low- or moderate-in-come area and targeted towards low-and moderate-income persons;

(C) Investing in one or more smallbusinesses located in a low- or mod-

erate-income area to stimulate eco-nomic development;

(D) Investing in, developing, or other-wise assisting job training or place-ment facilities or programs that willbe targeted towards low- and moderate-income persons;

(E) Investing in an entity located ina low- or moderate-income area if theentity creates long-term employmentopportunities, a majority of which

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12 CFR Ch. II (1–1–03 Edition)§ 208.23

(based on full-time equivalent posi-tions) will be held by low- and mod-erate-income persons; and

(F) Providing technical assistance,credit counseling, research, and pro-gram development assistance to low-and moderate-income persons, smallbusinesses, or nonprofit corporationsto help achieve community develop-ment;

(2) The investment is permitted bystate law;

(3) The investment will not exposethe member bank to liability beyond

the amount of the investment;(4) The aggregate of all such invest-

ments of the member bank does not ex-ceed the sum of five percent of its cap-ital stock and surplus;

(5) The member bank is well capital-ized or adequately capitalized under§§ 208.43(b) (1) and (2);

(6) The member bank received a com-posite CAMELS rating of ‘‘1’’ or ‘‘2’’under the Uniform Financial Institu-tions Rating System as of its most re-cent examination and an overall ratingof ‘‘1’’ or ‘‘2’’ as of its most recent con-sumer compliance examination; and

(7) The member bank is not subjectto any written agreement, cease-and-

desist order, capital directive, prompt-corrective-action directive, or memo-randum of understanding issued by theBoard or a Federal Reserve Bank.

(c) Notice to Federal Reserve Bank. Notmore than 30 days after making an in-vestment under paragraph (b) of thissection, the member bank shall adviseits Federal Reserve Bank of the invest-ment, including the amount of the in-vestment and the identity of the entityin which the investment is made.

(d) Investments requiring Board ap-

 proval. (1) With prior Board approval, amember bank may make public welfareinvestments under paragraph 23 of sec-tion 9 of the Federal Reserve Act (12

U.S.C. 338a), other than those specifiedin paragraph (b) of this section.

(2) Requests for Board approval underthis paragraph (d) shall include, at aminimum:

(i) The amount of the proposed in-vestment;

(ii) A description of the entity inwhich the investment is to be made;

(iii) An explanation of why the in-vestment is a public welfare invest-

ment under paragraph 23 of section 9 of the Federal Reserve Act (12 U.S.C.338a);

(iv) A description of the memberbank’s potential liability under theproposed investment;

(v) The amount of the member bank’saggregate outstanding public welfareinvestments under paragraph 23 of sec-tion 9 of the Federal Reserve Act;

(vi) The amount of the memberbank’s capital stock and surplus; and

(vii) If the bank investment is not el-igible under paragraph (b) of this sec-

tion, explain the reason or reasons whyit is ineligible.

(3) The Board shall act on a requestunder this paragraph (d) within 60 cal-endar days of receipt of a request thatmeets the requirements of paragraph(d)(2) of this section, unless the Boardnotifies the requesting member bankthat a longer time period will be re-quired.

(e) Divestiture of investments. A mem-ber bank shall divest itself of an in-vestment made under paragraph (b) or(d) of this section to the extent thatthe investment exceeds the scope of, orceases to meet, the requirements of paragraphs (b)(1) through (b)(4) or para-

graph (d) of this section. The divesti-ture shall be made in the manner speci-fied in 12 CFR 225.140, Regulation Y, forinterests acquired by a lending sub-sidiary of a bank holding company orthe bank holding company itself in sat-isfaction of a debt previously con-tracted.

§ 208.23 Agricultural loan loss amorti-zation.

(a) Definitions. For purposes of thissection:

(1) Accepting official means:(i) The Reserve Bank in whose dis-

trict the bank is located; or(ii) The Director of the Division of 

Banking Supervision and Regulation incases in which the Reserve Bank can-not determine that the bank qualifies.

(2) Agriculturally related other property means any property, real or personal,that the bank owned on January 1,1983, and any additional property thatit acquired prior to January 1, 1992, inconnection with a qualified agricul-tural loan. For the purposes of para-graph (d) of this section, the value of 

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