We are an ISB. We have a $1 million loan for the purchase of a convenience store. The property is in an upper income tract. I am thinking we can still get CRA given the number of low wage hourly workers.

Is my thinking correct?

Unless is an SBA 504, I think you're going to have a rought time making a case for this..... but it never hurts to make a case.


Also, if the loan is CRA reportable as a small business loan you must report it as such.

Thanks CRA/HMDA Guy - since we are ISB we are not required to report so I was thinking if I can document then might get CDL credit.

I am new to ISB from Large bank but think we can get CDL credit for small business loans??? Is that incorrect???

Beegee,
I went from a large bank to a small bank to an ISB so I can appreciate the transition you're going through.

Whether or not you are required to report has no bearing on how CDLs and small business loans are treated. If a loan falls under the definition of small business, small farm, consumer,or HMDA, it generally can't be counted as a CDL. Multi-family loans are an exception to this.

ISBs have an option to pull some loans from the small business loans and count them as community development, assuming a CD purpose. This is discussed in the q and a.

One more thing -
Our lenders will tell me about any small business loans that can't be reported as a CDL but would otherwise meet the CD definition. I put these loans in my "Can't report it, but this is a CDL" file. I give this information to the examiners for consideration. While they won't include it as a CDL, they have taken them into consideration. Sometimes they help to tell our CRA story.

Thank you Kathleen! I guess I missed that in the Q&As. I pull them aside, but I never reported them as CDLs.
I will check out that Q&A and bring it to my CRA Committee.

I don't see how that convenience store in an upper income tract has a CD purpose.

Thanks Pale Rider - I was looking at the angle of creating/retaining jobs for low income workers....

If gross annual revenues of the convenience store are less than $1 million and you can prove that the jobs are below AMI, wouldn't that count as economic development?

Also, in regards to pulling some loans from the small business sample to use as CDL's - be careful not to pull too many or you may have troubles with your geographic distribution test.

How in the world would you ever document that. Would that not then apply to any loan to a minimum wage employer?

Thanks Bulls Eye - we are ISB so we don't report small business loans.

Given we don't report small business loans would the examiners look at what we classify as CDL in relation to our geographic distribution test? - meaning would they pull those out?

again - I'm new to the ISB world....

Yes - even though you do not report small business loans as an ISB, they will still pull a sample for the geographic distribution part of the test. They will not use loans that you have chosen to use as CDL's in that sample as you cannot "double dip". So if you have no loans in LMI tracts left in the small business sample because you have pulled them all to use as CDL's, you will have a tougher time performing well in the geographic distribution test.

We have been credit in which the majority of the workers are low-to-moderate income wage earners. Fast food restaurants, C-stores, etc...

I have seen many loans like this receive CRA 'credit' for jobs creation.

You do need info about the jobs and salaries. Also, where is the candidate pool coming from? Where are the low/mod workers living? Is it easy to get to this location, is there perhaps public transportation?