We have existing demand notes, no maturity, that we would like to change to a five year maturity. This will be done with a modification to the existing note. No other changes.

I do not think this event meets the definition of a renewal for CRA reporting, because the existing note is not being extended. If anything, you are shortening the maturity.

I have read several posts from a few years ago that state that this "change" in maturity qualifies as a CRA renewal. I would like to know if any of the original people who offered that interpretation (Len? Kathleen?) still feel the same way or if anyone has heard an examiner address this issue. We are an FDIC regulated bank.

Well, that is an interesting question. Were these loans reported at the "original" origination date and then not reported from thence forward because of being pure demand loans?

I think the fact that you are now actually extending a five year maturity would cause me to report. You were previously making an annual decision whether to renew (which did not count for CRA due to demand nature of the note) but you are now committing to a 5 year loan. You can now only call for material adverse change, fraud, etc. Correct? Previously you could demand for any reason at all. I think this change should be reported as an extension.

Added: An annual review of a demand note involves a decision whether or not to demand payment or allow the note to continue.

These loans were recently acquired with the purchase of another bank (not an FDIC asset acquision). It is my understanding that these are old fashioned evergreen loans and we have the option to activate the demand at any time. We plan to contact the smaller note-holders and offer them other product options, including changing the note (usually an unsecured LOC) to a 5 year maturity.

Currently these notes are "reviewed", not renewed, annually and it is not reported for small business CRA reportting.

That is correct, true demand loans that are reviewed annually to determine whether to call them or allow to continue are not reportable.

Replacing with a new note, or changing to a 5 year (or other) maturity takes them out of that category and I would report that.

No new note. Just a modification to add a maturity date.

So you work with banks that treat this modification as a renewal and it is not a problem with examiners? I am just concerned that we will be criticized because this is not an "extension" of the maturity.

There is no set guidance on this topic. I am saying that I would report this because you are removing a demand and placing a set in stone date that did not exist before.

You can always ask you regulator how they want you to handle.

Thank you.

Demand notes can also be presented during an exam in the "other category". This still leaves the bank with skewed public data but gets the data in front of an examiner.

What if the loan was originated with a hard maturity in 2014 and was modified in 2015 with the loan payable in full and on demand - maturity date 2049. Is this reportable?

Thank you!