We have a Letter of Credit that is CRA reportable. Should it be reported when the LOC is finalized or when the Letter is actually drawn?

Letters of credit are optional reporting items. There are also many different types of LOC's to consider when reporting. If, when the letter is drawn, it's converted into term debt, it's (or the term debt) is reportable at that time as a regular loan. If however this is something like a cash secured LOC then it wouldn't be reportable as a type 1, but it could be included in your optional data.

If you report one, you report all of them. I report at the committment level, otherwise I'd be leaving out many of the LOC's that are never funded.

Thanks Dawnie!

Letters of Credit don't qualify as Fed CRA type 1 loans as Dawnie indicates. Information pertaining to letters of credit can be collected and used in a performance evaluation at the request of the bank. Don't confuse this with lines of credit that are reportable (assuming they meet small business definition).

Letters of Credit are "obligations of the bank" and are not a "Loan" transaction. An L/c can be "backed" by a loan which may be reportable, and some L/C's are backed by cash deposits and would not be reportable at all. If paymemt of the L/C is via a draw against AN ESTABLISHED (originated) "Line of Credit" you would report the LOC per all reporting qualifications as you normally would.

If you have no line of credit or originated loan established to pay the draw, then you do not have a reportable transaction.

Sorry I forgot to Log In Don Narup posted this

Thank you all for your responses. Based on your input I was able to determine that the L/C in question here is "backed" by a loan and in this case is reportable. Again, many thanks!

Report the Loan and not the LC. The loan has to have been orginated. If it has not been originated you have nothing to report.

Sometimes loan officers issue a L/C and with the "intention" of making a loan when the LC is drawn on. (Which is not a real good move) Especially if the borrower won't or is not able to come in and sign the note. If that happens the bank is on the hook for the full amount of the LC, and has to persue the customer for the money.

The fact that a loan offcer is going to make a loan sometime in the future to cover the LC does not make it reportable. Make sure they have actually done so.