We are a large bank and I thought a community development loan must not only satisfy one of the activities (affordable housing, services targeted to LMI, economic development, etc.), but must ALSO be $1 million or more. Is that correct? We have originated a $250,000 loan to Habitat for operating expenses and I'm hoping it will qualify.

Thanks!

I have never heard that a CD loan must be a $1MM or more.

My understanding of the rule is if a loan can be classified as a small business loan, it must be. That leaves those loans > $1MM and any loans not to businesses.

Multifamily loans are also counted as CDLs, even though they would most likely be on your HMDA-LAR.

Loans to nonprofits not secured by mining payments, or oil production do not have a dollar limit on them if they have a valid CD Purpose. If the loan is also not secured by mining payments, or oil production and does not have a valid CD purpose it would not be reported.

Loans to non profits secured by mining payments or oil production less than or equal to 1MM must be reported as small business loans, and as community development loans if greater than 1MM with a valid CD Purpose.

If it is secured by nonresidental nonfarm real estate it must be greater than 1MM if it is a permanent loan to a non profit entity with a valid CD purpose. If it is less than 1MM it would be reported as a small business loan even if it has a valid CD purpose. Alternatively, if it is a construction loan secured by nonresidential nonfarm real estate it would not have a dollar limit for CD if it has a valid CD purpose. Alternatively, if it is a construction loan without a valid CD purpose to a nonprofit it would not be reported at all.

The whole rigmarole on Community Development lending started (IMO) when a short-cut was taken to provide a definition of "small business loan" and someone got the bright idea of piggy-backing on the Call Report definition of "Small Business loan". ("Oh hey, we can just use this handy-dandy definition right here!") and the powers that be didn't consider that Call Report definitions serve a different purpose than CRA.

So you have to review the Call Report instructions, the short-hand of which is:
- IF the loan is properly classified as either 01E (loan secured by non-farm, non-residential property) OR 04A (Commercial & Industrial loan)
- AND the loan is $1Million or less,
if you are a Large Bank then you must report that loan as Small Business and you cannot double count it as Community Development.

Also- if you make Ag or farm loans, then any loan correctly reported as 01b or 03 and the amount is $500,000 or less, you must report as a small farm loan and cannot double count it as Community Development.

ANY other non-consumer loan (except for 1-4 family RE reported on HMDA) is fair game to report as Community Development IF the loan meets the criteria for Community Development.

In the instructions for Call Report Code 04A, there is a whole host of items that either must be included or excluded when it comes to nonprofit organizations, but the most common scenario, an unsecured loan to a non-profit, if that loan has a Community Development purpose then it can be reported as a Community Development loan regardless of the loan amount.

CRA officers need to establish a good line of communication with the person/department responsible for assigning the Call Report codes on loans. It also helps to be familiar with the Call Report instructions:
https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_201806_i.pdf

Also, keep the loan data collection grid handy ( CRA Loan Data Collection Grid).

This post has been so helpful. It's frustrating when loans that have a CD purpose are being originated, but since they are less than $1 million, they must be included in the data. We have a few others similar to the Habitat loan.

Thanks!!!

So - show of hands, how many have run across a loan to a non-profit entity where the loan is secured by oil or mining production payments?

And I agree that it IS frustrating when you have a loan that is as "CRA" as CRA gets, but because of a technicality, you have to report it as small business. Sometimes you can get a sympathetic examiner who will still give you credit in your exam for making that loan, but other times you get a bureaucratic examiner who basically says "too bad." Consider a loan made to a non-profit that is running a day care for low- and moderate income families. The loan is for $950,000 and is secured by the day care facility that is located in a middle-income census tract because that's the side of the street the facility is on. The non-profit receives annual revenue of $3 Million that helps them carry out their mission of serving the poor. The other side of the street is a moderate-income tract, and many low- and moderate-income tracts are located close by.

But in your lending analysis, all you get is a small business loan to a large business located in a middle income census tract.

I recently switched from an employer who is the largest CRA lender in the states, and was apart of their CRA Risk team, and there they report small business loans with a CD Purpose as CD loans. Then at my newest employer they only collect business with less than 1MM in rev/dollar amount as small business.

As such, from what I have gathered, according to A Guide to CRA Data Collection and Reporting (pg 11, Link, FFIEC, 2016) on page 11 it states:


but interestingly in the Interagency Q&As on page 29 it states


But here is the death nail for us that are not small or intermediate institutions:


So, else where in the Q&As it states that if a small business loan does have a CD purpose it should be collected in the "Other Loan Data" field, or "Information on Small Business Loans, and Lines of Credit" that isn't reported, but held to provide to examiners during your actual CRA Exam. This information is considered Qualitative, and provides missing context to loans that otherwise should be demonstrated for having a response to community credit needs.



So essentially, if you want to get the full bang for your buck--you would still qualify Small Business Loans for CD, but keep that in a separate file to supplement your request letter when it comes evaluation time.