PUBLIC DISCLOSURE
May 1, 2023
COMMUNITY REINVESTMENT ACT
PERFORMANCE EVALUATION
Optum Bank, Inc.
Certificate Number: 57408
12921 S. Vista Station Blvd
Draper, Utah 84020
Federal Deposit Insurance Corporation
Division of Depositor and Consumer Protection
San Francisco Regional Office
25 Jessie Street at Ecker Square, Suite 2300
San Francisco, California 94105
This document is an evaluation of this institution’s record of meeting the credit needs of its entire
community, including low- and moderate-income neighborhoods, consistent with safe and sound
operation of the institution. This evaluation is not, nor should it be construed as, an assessment of
the financial condition of this institution. The rating assigned to this institution does not represent
an analysis, conclusion, or opinion of the federal financial supervisory agency concerning the
safety and soundness of this financial institution.
TABLE OF CONTENTS
INSTITUTION RATING ................................................................................................................1
DESCRIPTION OF INSTITUTION ...............................................................................................2
DESCRIPTION OF ASSESSMENT AREA ...................................................................................2
SCOPE OF EVALUATION ............................................................................................................5
CONCLUSIONS ON PERFORMANCE CRITERIA .....................................................................5
DISCRIMINATORY OR OTHER ILLEGAL CREDIT PRACTICES REVIEW .........................8
GLOSSARY ....................................................................................................................................9
1
INSTITUTION RATING
INSTITUTION’S CRA RATING: This institution is rated Outstanding.
An institution in this group has an outstanding record of helping to meet the credit needs of its
assessment area (AA), including low- and moderate-income (LMI) neighborhoods, in a manner
consistent with its resources and capabilities.
Optum Bank, Inc. (OB) operated under a Federal Deposit Insurance Corporation (FDIC)-approved
Community Reinvestment Act (CRA) Strategic Plan (Plan) during the evaluation period. The Plan
defines three measurable performance criteria to address the institution’s responsibilities under the
CRA consistent with its business strategy, capacity, and operational focus. The following factors
support the overall CRA rating.
•
Combined new community development (CD) lending and new qualified investments
exceeded the bank’s established minimum goals for an “Outstanding” performance in the
Plan years.
•
Combined cumulative CD lending and qualified investments exceeded the bank’s
minimum established goals for an “Outstanding” performance in 2020 and 2022 and
exceeded the minimum goals for a “Satisfactory” performance in 2021.
•
CD service hours exceeded the bank's established minimum goals for an “Outstanding”
performance in 2022, but did not meet the goals for a “Satisfactory” performance in 2020
and 2021.
2
DESCRIPTION OF INSTITUTION
OB was established in 2003 and is a state-chartered, industrial bank headquartered in Draper, Utah.
The bank is a wholly-owned subsidiary of Optum Health Financial Services, Inc. (OHFS), which is
ultimately a wholly-owned subsidiary of UnitedHealth Group, Inc. The bank operates from a
single, non-retail office. During the review period, OB moved its main office from Salt Lake City,
Utah to Draper, Utah, and the new location remains within the bank’s designated AA.
The FDIC rated the bank “Outstanding” at the previous CRA Performance Evaluation, dated March
2, 2020, following Interagency Strategic Plan Examination procedures. On April 10, 2018, OB
received approval to be designated a wholesale bank. This designation was granted because OB is
not in the business of extending home mortgage, small business, small farm, or consumer loans to
retail customers. OB offers various healthcare benefits, and banking products and services related
to medical expenses, including acting as a custodian of health savings accounts.
As of the December 31, 2022, Consolidated Reports of Condition and Income (Call Report), assets
totaled $15.7 billion, deposits totaled $13.4 billion, and loans totaled $4.0 billion. The following
table summarizes the bank’s loan portfolio distribution.
Loan Portfolio Distribution as of 12/31/2022
Loan Category
$(000s)
%
Construction, Land Development, and Other Land Loans
68,758
1.7
Secured by Farmland
0
0.0
Secured by 1-4 Family Residential Properties
0
0.0
Secured by Multifamily (5 or more) Residential Properties
1,112,842
28.1
Secured by Nonfarm Nonresidential Properties
1,857,129
46.8
Total Real Estate Loans
3,038,729
76.6
Commercial and Industrial Loans
380,425
9.6
Agricultural Production and Other Loans to Farmers
0
0.0
Consumer Loans
250,401
6.3
Obligations of State and Political Subdivisions in the U.S.
15,509
0.4
Other Loans
281,795
7.1
Lease Financing Receivable (net of unearned income)
0
0.0
Less: Unearned Income
0
0.0
Total Loans
3,966,859
100.0
Source: Reports of Condition and Income.
Examiners did not identify any financial, legal, or other impediments that affect the bank’s ability to
meet the AA’s credit and CD needs.
DESCRIPTION OF ASSESSMENT AREA
The CRA requires each financial institution to define one or more AAs in which its CRA performance
will be evaluated. OB has defined its AA as all of Salt Lake County, which is part of the Salt Lake City,
3
Utah Metropolitan Statistical Area (MSA) #41620. The AA meets regulatory requirements and does not
reflect any illegal discrimination or arbitrary exclusion of any LMI areas. The AA has not changed
since the previous evaluation.
To establish the bank’s performance context, examiners relied on bank records, public financial
information, demographic data from the U.S. Bureau of Labor Statistics, 2020 U.S. Census, business
demographics, and other public sources, as well as information obtained from a community contact.
Economic and Demographic Data
The AA consists of 251 census tracts (CTs). The CTs reflect the following income designations: 5 low-
income, 56 moderate-income, 115 middle-income, 71 upper-income, and 4 CTs where income
information is not available. The following table illustrates select demographic, housing, and business
information of the AA.
Demographic Information of the Assessment Area
Demographic Characteristics
Low
% of #
Moderate
% of #
Middle
% of #
Upper
% of #
NA*
% of #
Geographies (Census Tracts)
2.0
22.3
45.8
28.3
1.6
Population by Geography
2.0
22.4
46.4
28.6
0.6
Housing Units by Geography
1.8
24.2
46.3
27.7
0.1
Owner-Occupied Units by Geography
0.7
17.9
47.6
33.9
0.0
Occupied Rental Units by Geography
4.0
36.4
44.6
14.7
0.2
Vacant Units by Geography
3.4
29.1
39.8
27.7
0.0
Businesses by Geography
2.1
16.3
44.7
35.9
0.9
Farms by Geography
1.6
18.0
44.4
35.6
0.4
Family Distribution by Income Level
17.8
19.1
23.4
39.7
0.0
Household Distribution by Income
Level
21.1
17.3
20.4
41.2
0.0
Median Family Income MSA -
#41620 Salt Lake City, UT MSA
$90,360
Median Housing Value
$347,355
Median Gross Rent
$1,178
Families Below Poverty Level
5.6%
Source: 2020 U.S. Census and 2022 D&B Data
Due to rounding, totals may not equal 100.0 percent
(*) The NA category consists of geographies that have not been assigned an income classification.
The economy in the AA has recovered since the recession caused by the COVID-19 pandemic.
According to the Bureau of Labor Statistics, the unemployment rate in Salt Lake County has
decreased year-over-year since 2020. As demonstrated in the following table, the unemployment
rates in Salt Lake County are generally consistent with the State of Utah and below the national
average over the review period.
4
Unemployment Rates
2020
2021
2022
Area
%
%
%
Salt Lake County
5.2
2.8
2.3
State of Utah
4.8
2.7
2.3
National Average
8.1
5.3
3.6
Source: Bureau of Labor Statistics
Examiners obtained the following information from Moody’s Analytics as of January 2023 for Salt
Lake County. According to Moody’s, Salt Lake County is a center for the financial services and
technology industries, and the area maintains a highly skilled workforce. Despite a recent
slowdown in growth, the economy will outpace the state, region, and nation in the near term. The
technology and financial services industries will continue to be primary drivers of the local
economy, but investment will decline due to high interest rates and economic uncertainty. Major
strengths of the area include an elevated concentration of high-wage jobs and stable employment
from local universities. Weaknesses include a relatively low office space availability and low
housing affordability. The area’s top employers are the University of Utah, Intermountain
Healthcare Inc., and Walmart Inc.
Competition
The AA is a highly competitive market for financial services that includes a large number of
national and industrial banks. According to the June 30, 2022 FDIC Deposit Market Share report,
46 financial institutions operate 202 branches and manage $804.0 billion in deposits throughout
OB’s AA. OB ranked 10
th
with a 1.6 percent market share. The top three banks in the area are
Morgan Stanley Bank, Ally Bank, and UBS Bank USA, accounting for 52.5 percent of the market
share.
Community Contact(s)
Examiners reviewed a recent community contact with an economic development organization that
serves the AA. According to the contact, the economy in Salt Lake County is strong, but rising
costs of living are straining individuals and families. Specifically, affordable housing is a primary
need in the area. Higher prices have limited the ability of individuals to purchase a home, while
increasing rent is also contributing to the shortage of affordable housing.
Credit and Community Development Needs and Opportunities
Considering the information from the community contact, bank management, and demographic and
economic data, examiners determined that affordable housing and economic development for LMI
individuals represent the primary credit needs of the AA.
5
SCOPE OF EVALUATION
General Information
This performance evaluation covers the period from the previous evaluation date of March 2, 2020,
to the current evaluation date of May 1, 2023. Examiners used the Interagency Procedures for
Institutions with Strategic Plans to evaluate OB’s CRA performance. OB operated under one five-
year FDIC-approved CRA Plan during the evaluation period. The Plan is in effect from January
2019 through December 2023.
Activities Reviewed
Examiner reviewed OB’s records and documentation of CD loans, qualified investments, and CD
services. The plan sets forth measurable goals in the following areas:
• New CD loans and qualified investments compared to year-end average assets.
• Cumulative CD loans and qualified investments compared to year-end average assets.
• CD services compared to full-time employees located in Utah.
This CRA evaluation compares the bank’s performance in 2020, 2021, and 2022 to the Plan’s
measurable goals. Examiners considered CD service activities performed by OHFS employees
located in Utah as affiliated activities during this evaluation. No other affiliate activities were
considered during the evaluation. Examiners also considered the economic conditions, credit and
CD opportunities, and the bank’s financial capacity and constraints.
CONCLUSIONS ON PERFORMANCE CRITERIA
OB’s CRA performance under the Plan reflects outstanding performance in helping to meet the
needs of its designated AA in a manner consistent with its resources and capabilities. The following
information details the measurable goals delineated in the Plan compared to the bank’s actual
performance.
New Community Development Loans and New Qualified Investments
The first performance criterion is the total amount of new CD loans and new qualified investments,
grants, and donations. The Plan established a measurable goal for OB’s new CD lending and new
qualified investment performance for each year of the review period. The bank exceeded the
minimum goals established by the Plan for an “Outstanding” performance in 2020, 2021, and 2022.
The goals analyze the total combined dollar amount of new CD loans and new qualified
investments expressed as a percentage of each year-end average annual assets. The Plan states
year-end average assets will be calculated by averaging the four quarterly average asset figures
from Schedule RC-K, line 9, of the bank's Call Report for each year.
The following table summarizes the goals established by the Plan and the bank’s actual
performance for 2020, 2021, and 2022.
6
New CD Lending and Investment Performance
Bank Established Goals
Bank Performance
Plan
Year
Satisfactory
(%)
Outstanding
(%)
New CD Lending
and Investments
($000)
Average Total
Assets
($000)
Actual
Performance
(%)
2020
0.40
0.60
86,584
12,465,540
0.69
2021
0.40
0.60
126,804
15,071,311
0.84
2022
0.40
0.60
216,812
16,763,924
1.29
Source: OB data and Plan
The following are notable examples of the bank’s new CD lending and investments during the
review period:
• Invested in a $30.0 million bond issued by an organization that helps raise funds to assist in
the creation of affordable housing for low-income households in Utah. The organization
offers programs for LMI first-time homebuyers and other LMI mortgage loan programs.
• Originated a $13.8 million loan to provide housing for individuals experiencing
homelessness. The loan was originated through a strategic relationship with an organization
that provides LMI individuals with medical, social, and employment services.
• Provided $345,059 in donations and grants to 11 organizations in Utah. These organizations
include a local food bank and groups that provide healthcare, emergency services and
affordable housing to LMI individuals.
Cumulative Community Development Loans and Qualified Investments
The second performance criterion is the total cumulative amount of CD loans and qualified
investments. The bank exceeded the minimum goals established by Plan for an “Outstanding”
performance during 2020 and 2022. OB exceeded the minimum goals for a “Satisfactory”
performance in 2021. The Plan established a measurable goal for OB’s cumulative CD lending and
qualified investment performance for each year of the review period. The goals analyze the total
combined dollar amount of new CD loans and qualified investments plus prior period investments
still outstanding expressed as a percentage of each year-end average annual assets.
The following table summarizes the goals established by the Plan and the bank’s actual
performance for 2020, 2021, and 2022.
7
Cumulative CD Lending and Investment Performance
Bank Established Goals
Bank Performance
Plan
Year
Satisfactory
(%)
Outstanding
(%)
CD Lending and
Investments
(000s)
Average Total
Assets
(000s)
Actual
Performance
(%)
2020
0.90
1.15
144,669
12,465,540
1.16
2021
1.00
1.30
178,523
15,071,311
1.18
2022
1.10
1.45
283,212
16,763,924
1.69
Source: OB data and Plan
Community Development Services
The third performance criterion is the total amount of qualified CD service hours per full-time bank
employee. OB exceeded the minimum goals established under the Plan for an “Outstanding”
performance for 2022. OB did not meet the minimum goals for a “Satisfactory” rating in 2020 and
2021, as service hours were impacted by the COVID-19 pandemic. Due to the pandemic and the
subsequent stay-at-home orders, employees had limited opportunities to provide service hours. The
Plan states that the annual service hour requirement is calculated by taking the total number of
qualified service hours and dividing it by the average number of Utah-based full-time employees
over the four quarters of the prior year.
The following table summarizes the goals established by the Plan and the bank’s actual
performance for 2020, 2021, and 2022.
CD Service Hours
Bank Established Goals
Bank Performance
Plan
Year
Satisfactory
Outstanding
Number of
Employees in Utah
Qualified Service
Hours
Actual
Performance
2020
4.25
5.50
207
135
0.7
2021
4.25
6.00
212
221.25
1.0
2022
4.50
6.00
194
1,389.75
7.2
Source: OB data and Plan
The following are notable examples of the bank’s CD services during the review period:
• A bank officer volunteered on the Board of an organization aimed at providing housing
services to individuals experiencing homelessness. Services offered include housing
assistance, education assistance, and employment services.
• Bank employees volunteered for an organization dedicated to providing affordable housing
to LMI populations. Additionally, the organization provides financial assistance and
housing referral services.
8
• Bank employees volunteered for an organization providing financial literacy education to
schools with majority LMI students. The organization provides experiential, hands-on
training to help students develop competitive skills, increase knowledge, and prepare for
future work opportunities.
DISCRIMINATORY OR OTHER ILLEGAL CREDIT PRACTICES REVIEW
No evidence of discriminatory or other illegal credit practices inconsistent with helping to meet
community credit needs was identified.
9
GLOSSARY
Aggregate Lending: The number of loans originated and purchased by all reporting lenders in
specified income categories as a percentage of the aggregate number of loans originated and
purchased by all reporting lenders in the metropolitan area/assessment area.
American Community Survey (ACS): A nationwide United States Census survey that
produces demographic, social, housing, and economic estimates in the form of five year
estimates based on population thresholds.
Area Median Income: The median family income for the MSA, if a person or geography is
located in an MSA; or the statewide nonmetropolitan median family income, if a person or
geography is located outside an MSA.
Assessment Area: A geographic area delineated by the bank under the requirements of the
Community Reinvestment Act.
Census Tract: A small, relatively permanent statistical subdivision of a county or equivalent
entity. The primary purpose of census tracts is to provide a stable set of geographic units for the
presentation of statistical data. Census tracts generally have a population size between 1,200 and
8,000 people, with an optimum size of 4,000 people. Census tract boundaries generally follow
visible and identifiable features, but they may follow nonvisible legal boundaries in some
instances. State and county boundaries always are census tract boundaries.
Combined Statistical Area (CSA): A combination of several adjacent metropolitan statistical
areas or micropolitan statistical areas or a mix of the two, which are linked by economic ties.
Community Development: For loans, investments, and services to qualify as community
development activities, their primary purpose must:
(1) Support affordable housing for low- and moderate-income individuals;
(2) Target community services toward low- and moderate-income individuals;
(3) Promote economic development by financing small businesses or farms; or
(4) Provide activities that revitalize or stabilize low- and moderate-income geographies,
designated disaster areas, or distressed or underserved nonmetropolitan middle-income
geographies.
Community Development Corporation (CDC): A CDC allows banks and holding companies
to make equity type of investments in community development projects. Bank CDCs can
develop innovative debt instruments or provide near-equity investments tailored to the
development needs of the community. Bank CDCs are also tailored to their financial and
marketing needs. A CDC may purchase, own, rehabilitate, construct, manage, and sell real
property. Also, it may make equity or debt investments in development projects and in local
businesses. The CDC activities are expected to directly benefit low- and moderate-income
groups, and the investment dollars should not represent an undue risk on the banking
organization.
10
Community Development Financial Institutions (CDFIs): CDFIs are private intermediaries
(either for profit or nonprofit) with community development as their primary mission. A CDFI
facilitates the flow of lending and investment capital into distressed communities and to
individuals who have been unable to take advantage of the services offered by traditional
financial institutions. Some basic types of CDFIs include community development banks,
community development loan funds, community development credit unions, micro enterprise
funds, and community development venture capital funds.
A certified CDFI must meet eligibility requirements. These requirements include the following:
• Having a primary mission of promoting community development;
• Serving an investment area or target population;
• Providing development services;
• Maintaining accountability to residents of its investment area or targeted population
through representation on its governing board of directors, or by other means;
• Not constituting an agency or instrumentality of the United States, of any state or
political subdivision of a state.
Community Development Loan: A loan that:
(1) Has as its primary purpose community development; and
(2) Except in the case of a wholesale or limited purpose bank:
(i) Has not been reported or collected by the bank or an affiliate for consideration in the
bank’s assessment area as a home mortgage, small business, small farm, or consumer
loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203
of this title); and
(ii) Benefits the bank’s assessment area(s) or a broader statewide or regional area
including the bank’s assessment area(s).
Community Development Service: A service that:
(1) Has as its primary purpose community development;
(2) Is related to the provision of financial services; and
(3) Has not been considered in the evaluation of the bank’s retail banking services under §
345.24(d).
Consumer Loan(s): A loan(s) to one or more individuals for household, family, or other
personal expenditures. A consumer loan does not include a home mortgage, small business, or
small farm loan. This definition includes the following categories: motor vehicle loans, credit
card loans, home equity loans, other secured consumer loans, and other unsecured consumer
loans.
Core Based Statistical Area (CBSA): The county or counties or equivalent entities associated
with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus
adjacent counties having a high degree of social and economic integration with the core as
measured through commuting ties with the counties associated with the core. Metropolitan and
Micropolitan Statistical Areas are the two categories of CBSAs.
11
Distressed Middle-Income Nonmetropolitan Geographies: A nonmetropolitan middle-
income geography will be designated as distressed if it is in a county that meets one or more of
the following triggers:
(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 5-year period
preceding the most recent census.
Family: Includes a householder and one or more other persons living in the same household
who are related to the householder by birth, marriage, or adoption. The number of family
households always equals the number of families; however, a family household may also include
non-relatives living with the family. Families are classified by type as either a married-couple
family or other family. Other family is further classified into “male householder” (a family with
a male householder and no wife present) or “female householder” (a family with a female
householder and no husband present).
FFIEC-Estimated Income Data: The Federal Financial Institutions Examination Council
(FFIEC) issues annual estimates which update median family income from the metropolitan and
nonmetropolitan areas. The FFIEC uses American Community Survey data and factors in
information from other sources to arrive at an annual estimate that more closely reflects current
economic conditions.
Full-Scope Review: A full-scope review is accomplished when examiners complete all
applicable interagency examination procedures for an assessment area. Performance under
applicable tests is analyzed considering performance context, quantitative factors (e.g.,
geographic distribution, borrower profile, and total number and dollar amount of investments),
and qualitative factors (e.g., innovativeness, complexity, and responsiveness).
Geography: A census tract delineated by the United States Bureau of the Census in the most
recent decennial census.
Home Mortgage Disclosure Act (HMDA): The statute that requires certain mortgage lenders
that do business or have banking offices in a metropolitan statistical area to file annual summary
reports of their mortgage lending activity. The reports include such data as the race, gender, and
the income of applicants; the amount of loan requested; and the disposition of the application
(approved, denied, and withdrawn).
Home Mortgage Loans: Includes closed-end mortgage loans or open-end line of credits as
defined in the HMDA regulation that are not an excluded transaction per the HMDA regulation.
Housing Unit: Includes a house, an apartment, a mobile home, a group of rooms, or a single
room that is occupied as separate living quarters.
Limited-Scope Review: A limited scope review is accomplished when examiners do not
complete all applicable interagency examination procedures for an assessment area.
12
Performance under applicable tests is often analyzed using only quantitative factors (e.g.,
geographic distribution, borrower profile, total number and dollar amount of investments, and
branch distribution).
Low-Income: Individual income that is less than 50 percent of the area median income, or a
median family income that is less than 50 percent in the case of a geography.
Low Income Housing Tax Credit: The Low-Income Housing Tax Credit Program is a housing
program contained within the Internal Revenue Code of 1986, as amended. It is administered by
the U.S. Department of the Treasury and the Internal Revenue Service. The U.S. Treasury
Department distributes low-income housing tax credits to housing credit agencies through the
Internal Revenue Service. The housing agencies allocate tax credits on a competitive basis.
Developers who acquire, rehabilitate, or construct low-income rental housing may keep their tax
credits. Or, they may sell them to corporations or investor groups, who, as owners of these
properties, will be able to reduce their own federal tax payments. The credit can be claimed
annually for ten consecutive years. For a project to be eligible, the developer must set aside a
specific percentage of units for occupancy by low-income residents. The set-aside requirement
remains throughout the compliance period, usually 30 years.
Market Share: The number of loans originated and purchased by the institution as a percentage
of the aggregate number of loans originated and purchased by all reporting lenders in the
metropolitan area/assessment area.
Median Income: The median income divides the income distribution into two equal parts, one
having incomes above the median and other having incomes below the median.
Metropolitan Division (MD): A county or group of counties within a CBSA that contain(s) an
urbanized area with a population of at least 2.5 million. A MD is one or more main/secondary
counties representing an employment center or centers, plus adjacent counties associated with
the main/secondary county or counties through commuting ties.
Metropolitan Statistical Area (MSA): CBSA associated with at least one urbanized area
having a population of at least 50,000. The MSA comprises the central county or counties or
equivalent entities containing the core, plus adjacent outlying counties having a high degree of
social and economic integration with the central county or counties as measured through
commuting.
Micropolitan Statistical Area: CBSA associated with at least one urbanized area having a
population of at least 10,000, but less than 50,000.
Middle-Income: Individual income that is at least 80 percent and less than 120 percent of the
area median income, or a median family income that is at least 80 and less than 120 percent in
the case of a geography.
13
Moderate-Income: Individual income that is at least 50 percent and less than 80 percent of the
area median income, or a median family income that is at least 50 and less than 80 percent in the
case of a geography.
Multi-family: Refers to a residential structure that contains five or more units.
Nonmetropolitan Area (also known as non-MSA): All areas outside of metropolitan areas.
The definition of nonmetropolitan area is not consistent with the definition of rural areas. Urban
and rural classifications cut across the other hierarchies. For example, there is generally urban
and rural territory within metropolitan and nonmetropolitan areas.
Owner-Occupied Units: Includes units occupied by the owner or co-owner, even if the unit has
not been fully paid for or is mortgaged.
Qualified Investment: A lawful investment, deposit, membership share, or grant that has as its
primary purpose community development.
Rated Area: A rated area is a state or multistate metropolitan area. For an institution with
domestic branches in only one state, the institution’s CRA rating would be the state rating. If an
institution maintains domestic branches in more than one state, the institution will receive a
rating for each state in which those branches are located. If an institution maintains domestic
branches in two or more states within a multistate metropolitan area, the institution will receive a
rating for the multistate metropolitan area.
Rural Area: Territories, populations, and housing units that are not classified as urban.
Small Business Investment Company (SBIC): SBICs are privately-owned investment
companies which are licensed and regulated by the Small Business Administration
(SBA). SBICs provide long-term loans and/or venture capital to small firms. Because money
for venture or risk investments is difficult for small firms to obtain, SBA provides assistance to
SBICs to stimulate and supplement the flow of private equity and long-term loan funds to small
companies. Venture capitalists participate in the SBIC program to supplement their own private
capital with funds borrowed at favorable rates through SBA’s guarantee of SBIC debentures.
These SBIC debentures are then sold to private investors. An SBIC’s success is linked to the
growth and profitability of the companies that it finances. Therefore, some SBICs primarily
assist businesses with significant growth potential, such as new firms in innovative
industries. SBICs finance small firms by providing straight loans and/or equity-type
investments. This kind of financing gives them partial ownership of those businesses and the
possibility of sharing in the companies’ profits as they grow and prosper.
Small Business Loan: A loan included in “loans to small businesses” as defined in the
Consolidated Report of Condition and Income (Call Report). These loans have original amounts
of $1 million or less and are either secured by nonfarm nonresidential properties or are classified
as commercial and industrial loans.
14
Small Farm Loan: A loan included in “loans to small farms” as defined in the instructions for
preparation of the Consolidated Report of Condition and Income (Call Report). These loans
have original amounts of $500,000 or less and are either secured by farmland, including farm
residential and other improvements, or are classified as loans to finance agricultural production
and other loans to farmers.
Underserved Middle-Income Nonmetropolitan Geographies: A nonmetropolitan middle-
income geography will be designated as underserved if it meets criteria for population size,
density, and dispersion indicating 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.
Upper-Income: Individual income that is 120 percent or more of the area median income, or a
median family income that is 120 percent or more in the case of a geography.
Urban Area: All territories, populations, and housing units in urbanized areas and in places of
2,500 or more persons outside urbanized areas. More specifically, “urban” consists of territory,
persons, and housing units in places of 2,500 or more persons incorporated as cities, villages,
boroughs (except in Alaska and New York), and towns (except in the New England states, New
York, and Wisconsin).
“Urban” excludes the rural portions of “extended cities”; census designated place of 2,500 or
more persons; and other territory, incorporated or unincorporated, including in urbanized areas.