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#2170985 - 03/29/18 08:44 PM CRA Loan Test
Bryan Armendariz Offline
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Joined: Feb 2018
Posts: 3
Abilene, KS
I am trying to understand, how to decide whether to categorize a loan as a community development loan or to leave the loan for the lending test. I have read the July 2016 Q&A's, but it's still not clicking. Does anyone have other newsletters, articles or other learning tool to understand this methodology?

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CRA
#2171164 - 03/30/18 06:13 PM Re: CRA Loan Test Bryan Armendariz
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Are you a Large Bank or an ISB?
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#2174643 - 04/23/18 04:27 PM Re: CRA Loan Test Princess Romeo
Bryan Armendariz Offline
New Poster
Joined: Feb 2018
Posts: 3
Abilene, KS
Crossing over into ISB

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#2174731 - 04/23/18 07:40 PM Re: CRA Loan Test Bryan Armendariz
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
If you are becoming an ISB then you have some flexibility on categorizing your loans. Generally speaking, if the loan is $1MM or less and is secured by non-farm, non-residential property OR not secured by Real Estate but made for a business purpose (ie. Commercial & Industrial loan), then the loan is considered to be a Small Business Loan for CRA.

However, as an ISB, you can look at loans that are "Small Business Loans" and determine if they have a Community Development benefit. As an example - you make a loan for $500,000 to a for-profit medical clinic in a Low/Mod area and more than 50% of their patients are Low/Mod income. If you are a Large Bank, you must report that as a Small Business Loan. But an ISB can categorize that as a Community Development Loan.

Recall that Community Development is a separate text under an ISB CRA Exam, so you need to find as many Community Development loans, investments/donations, and services as you can. However, you also need to keep an eye on your Small Business Lending to make sure you have at least adequate penetration in Low/Mod census tracts and to businesses with revenues of $1MM or less.

If you are new to this, you should seek a qualified consultant to review your entire activity to determine where you should "slot" your loans.

One more thing, an ISB is not required to report their loans on a CRA LR. They can if they want to elect to be examined under the Large Bank test but even if you file, you are not "locked" into either the type of CRA exam or whether a particular loan will be considered Small Business or Community Development. You are only "locked" into it once you present your loans to the examiner. And before that happens, you should have completed a self-assessment that considers all of your lending, investments and services as an ISB. You can provide that self-assessment to your examiner to consider.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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