Been a few years since I've been a large bank CRA reporter so I'm a little bit rusty. Your input would be much appreciated on this one - what to report for gross annual revenues and physical address?

Loan to an individual to purchase cattle for his ranch.

He has an LLC for a restaurant with revenues well over $1 mil, and he has another LLC for property rentals.

On his individual tax return, he has a Sch.E for oil and gas royalties as well as a house rental. He has a schedule F for the ranch (farm income/revenues WAY under $1 mil). No address for the ranch on the Sch F, and officer says he's not sure where it's located.

Thanks for your input!

If the bank is relying on the affiliated companies (perhaps got guarantees or had them co-borrow), you would add up the annual sales/receipts. If it just is looking to the cattle operation, just look at the gross income from that.

From the FAQ:


§ll.42(a)(4)—1: When indicating
whether a small business borrower had
gross annual revenues of $1 million or
less, upon what revenues should an
institution rely?
A1. Generally, an institution should
rely on the revenues that it considered
in making its credit decision. For
example, in the case of affiliated
businesses, such as a parent corporation
and its subsidiary, if the institution
considered the revenues of the entity’s
parent or a subsidiary corporation of the
parent as well, then the institution
would aggregate the revenues of both
corporations to determine whether the
revenues are $1 million or less.

Alternatively, if the institution
considered the revenues of only the
entity to which the loan is actually
extended, the institution should rely
solely upon whether gross annual
revenues are above or below $1 million
for that entity. However, if the
institution considered and relied on
revenues or income of a cosigner or
guarantor that is not an affiliate of the
borrower, such as a sole proprietor, the
institution should not adjust the
borrower’s revenues for reporting
purposes.

Generally, in cases like this, the commercial or ag loan is to the individual and this particular officer is basing the credit decision on that individual's strength (primary source of repayment is simply listed as "income"; hard to really separate his individual strength from the strength of these companies). That would mean I'd have to report the GAR as NA. But, since I have this other financial information, it doesn't seem right to report as NA.

Did they calculate debt service? If yes, from what gross income did they get the net for debt service. If all, then report all.

I would try to get a process change to make CRA reporting accurate and simpler so you don't have to agonize over each loan. It is important to the bank to have a good consistent process.

Thanks, Kathleen! I know exactly what you are saying, and in an ideal world, that would be great! Unfortunately, we have a lot of deals like this from our main commercial lenders - customers have banked here FOREVER, wealthy individuals with a lot of different business dealings, they do loans for these customers all the time. So, we have a lot we will be "agonizing over" because we will never get a calculated debt service, details on what was considered for the lending decisions, details on the loan, etc.

We will get no more than what I go on this one: "Commercial loan to John Doe to purchase cattle. Primary source of repayment is income." Period. No amount of begging is going to change this.

When you dig in imaging, you find out that he has these various LLCs. You can look at the last tax return and see the income, then the revenues on the schedules. You can see (sometimes) the business financials, etc. So, I am left to make the determination myself.

FlamingoGal - I could have written this myself. One word frustrating.

I guess I was "lucky"...never had regulators that would let that fly!