Page 2 of 2 1 2
Thread Options
#2237882 - 06/10/20 09:33 PM Re: Paycheck Protection Program and CRA tedster
Nicole H. Offline
New Poster
Joined: Jul 2016
Posts: 7
We are a Large reporting bank regulated by the Fed.The majority of the PPP loans we originated were under $1M. We plan to report revenue for these loans as NA. It is my understanding from reading the COVID FAQs that these will be reported as small business as they will likely all fall into the "Commercial & Industrial" (not secured by residential real estate) Call Report coding. The COVID FAQs state these will be small business regardless of the revenues reported; however, bank examiners will give some extra consideration for the increase in small business loans with NA revenues for these types of loans. With this being said, I'm still unclear on the PPP loans over $1M being reported as community development. Has it been determined if these will "automatically" qualify under economic development based on the "purpose" of these loans (employee retention) and that they have been approved by the SBA so these loans must have met the "size" requirement also (based on number of employees/NAICS code)?

Thank you.

Return to Top
CRA
#2237889 - 06/11/20 03:58 AM Re: Paycheck Protection Program and CRA tedster
Inspector Offline
Gold Star
Joined: Apr 2016
Posts: 250
PPP loans over $1MILLION could be given credit as CD loans under either economic development or revitalization stabilization and can also be given credit as innovative and flexible loans. This is stated in the interagency Q&As.

My understanding is that they would not be automatic as CD loans as they would need to meet the parameters for either CD hook noted above. So for economic development you would already have the size test covered, you would just need to evidence that the jobs are for LMI. Revitalization I would guess it would be near automatic if the loan was in a low, modest, or distressed/underserved tract.

That said, the interagency Q&As do kind of make it sound automatic so I dont know how it will be applied in practice.
_________________________
Opinions expressed are my own and do not reflect legal advice or the opinions of my employer.

Return to Top
#2237928 - 06/11/20 03:32 PM Re: Paycheck Protection Program and CRA Inspector
Lori01 Offline
100 Club
Joined: Jan 2007
Posts: 133
VT
I have been on two different trade association calls with the OCC recently and in both cases they were asked specifically about the burden of additional documentation for qualifying PPP loans over $1 million as CD loans. Both times they seemed a little confused by our question and clearly didn't have an answer. They said they would review it and get back to us. I hope that means there will be additional guidance provided.

Return to Top
#2238392 - 06/19/20 06:58 PM Re: Paycheck Protection Program and CRA tedster
CRA Fan Offline
New Poster
Joined: Apr 2016
Posts: 23
I just wanted to round back to something asked about in the original post. Are you all reporting PPP loans of $1MM or less on the CRA LAR and removing them if they are forgiven prior to year end? Am struggling with how to report these and manage the process. Thanks!

Return to Top
#2238540 - 06/24/20 03:37 AM Re: Paycheck Protection Program and CRA CRA Fan
Lori01 Offline
100 Club
Joined: Jan 2007
Posts: 133
VT
My plan is to report them regardless of if they end up being forgiven. When we made the loan we commit to a two year term. If any other loan paid off in less than the term we would still report those, so why not report these?

Return to Top
#2243907 - 10/10/20 09:29 PM Re: Paycheck Protection Program and CRA tedster
Love Cruising Offline
Member
Joined: Dec 2019
Posts: 67
Great POST for all to read, bank employees have worked very hard to meet the needs of the small businesses in such difficult times. At our bank we had to get employees form other department to help gather all the date needed for those employees funding the loans. Hope everyone gets the credit well deserved..

Return to Top
#2243967 - 10/13/20 05:17 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
I can see there is much confusion about the PPP loans. So here are some points:
1 - for the most part "community development" activity remains the same as normal, however an exception has been made for CD qualification insofar as activity that finances or supports healthcare in middle- and upper-income tracts (all tracts have been designated as disaster areas eligible for Type A and Type B relief which ordinarily doesn't qualify for the revitalization stabilization definition or for credit for activities in distressed or underserved tracts, but will be considered as disaster areas for this type of activity only. In other words the PPP activity is not affected by this unless it is related to healthcare)
2 - PPP may qualify for CD recognition under the Economic Development definition if the activity meets the primary purpose requirement which contains a size factor and a purpose factor (permanent job creation, preservation or improvement for LMI persons) and if the loan is >$1 million. It is is <= $1 million it must be reported as a small business loan. Banks undergoing a CRA exam under the ISB standards may elect to treat such loans as CD loans rather than small business loans for examination purposes
3- the concept of innovative, flexible and complex and responsive to community needs continues to apply for extra credit and this certainly pertains to PPP loans whether they are CD qualified or ordinary small business loans.
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2246189 - 12/04/20 06:40 PM Re: Paycheck Protection Program and CRA Len S
trout22 Offline
Gold Star
Joined: Nov 2004
Posts: 313
We are NOT an SBA lender, but are under a holding company which has an SBA lender - so we spent countless hours working with our borrowers to collect the information and assist with the application and approval process through our sister bank. Unfortunately that doesn't generate any CRA credit (other than "positive consideration" for our efforts).

We participate loans back and forth with this sister bank. So I was thinking, this might be a good opportunity for us to buy these PPP loans to our customers back. Participation loans are eligible for CRA credit as I recall (they're in our assessment area, we have revenue information on them already as existing loan customers, etc.). Looking to improve our small business lending here before EOY to get credit for some of the vast PPP work we did. Our numbers are down as borrowers targeted the funds thru SBA programs, most aren't looking to expand, lenders spent time helping these existing customers vs. bringing in new relationships, etc. We're a small bank (ISB) so purchasing even 15-20 would make a big difference. There are also some in there we could pick up as CDL.

Anyone know if we can purchase these SBA loans if we're not an SBA lender? Any additional considerations - please feel free to comment and shoot holes in my logic as necessary. Seems like a win/win - we get our customer's PPP loans on our books and in doing so will take loans that are outside the assessment area for the other bank off of their books.

Return to Top
#2248971 - 02/09/21 11:57 PM Re: Paycheck Protection Program and CRA tedster
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,113
Len S. - Can you please provide the source for this information? I want to make sure I have documentation when the regulators come to review my CD loans for 2020.

1 - for the most part "community development" activity remains the same as normal, however an exception has been made for CD qualification insofar as activity that finances or supports healthcare in middle- and upper-income tracts (all tracts have been designated as disaster areas eligible for Type A and Type B relief which ordinarily doesn't qualify for the revitalization stabilization definition or for credit for activities in distressed or underserved tracts, but will be considered as disaster areas for this type of activity only. In other words the PPP activity is not affected by this unless it is related to healthcare)

Return to Top
#2249031 - 02/10/21 07:24 PM Re: Paycheck Protection Program and CRA tedster
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,113
Would a PPP loan over $1 million to an organization that supports healthcare (i.e. pathology lab, imaging center) automatically qualify as revitalize/stabilize? These facilities serve all income levels, but the loan definitely helped retain jobs during the pandemic.

Return to Top
#2249040 - 02/10/21 08:02 PM Re: Paycheck Protection Program and CRA tedster
Inspector Offline
Gold Star
Joined: Apr 2016
Posts: 250
Is it in a low, mod, or distressed or underserved middle tract? If yes then I think its good. If not does it primarily serve those areas that are? If not, I would consider under economic development. Unless I am missing something special about a medical center.
_________________________
Opinions expressed are my own and do not reflect legal advice or the opinions of my employer.

Return to Top
#2249067 - 02/10/21 11:45 PM Re: Paycheck Protection Program and CRA tedster
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,113
If I can find documentation that middle and upper tracts were considered "distressed" because of COVID, I believe they would qualify....

Return to Top
#2249069 - 02/11/21 01:34 AM Re: Paycheck Protection Program and CRA tedster
Inspector Offline
Gold Star
Joined: Apr 2016
Posts: 250

I would move to economic development, are the jobs retained low or moderate income jobs? If not, then what about community service? Do they do Covid testing, treatment, anything like that? Or free up space so other places could?
_________________________
Opinions expressed are my own and do not reflect legal advice or the opinions of my employer.

Return to Top
#2249096 - 02/11/21 04:22 PM Re: Paycheck Protection Program and CRA tedster
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,113
Great thoughts, Inspector. The pathology lab was the primary COVID testing site in the county. Thanks!

Return to Top
#2249247 - 02/16/21 04:50 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
BTW, I don't know if I mentioned this above. All PPP loans do have a job preservation qualification which is important for getting credit under the economic development definition in CRA. But there is a second part to qualifying - the "size test". Only businesses that have GAR <=$1 million or meet the size standards in the SBA regulations, Part 121 qualify under the definition. So if you make a PPP loan to Walmart it won't qualify. The SBA size standards are somewhat liberal and allow companies with as many as 1,500 employees to qualify if they are in the right NAICS category.

I would suggest that even if a business is too big by the size test I would capture the information anyways and give it to examiners for consideration on how your bank helped the community.
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2249284 - 02/17/21 01:18 PM Re: Paycheck Protection Program and CRA tedster
Michael Offline
New Poster
Joined: Jan 2016
Posts: 6
Honestly, you should put it forth as such. Worst case scenario, the examiners decide it doesn't count. Frankly, this goes for loans that you would think are slam dunks too. You never know exactly how examiners are going to decide on community development loans. Just too subjective.

Return to Top
#2249290 - 02/17/21 03:58 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
One other aspect of this PPP issue is that aside from the "economic development" definition (which has a purpose and size tests) PPP loans extended in LMI tracts or distressed and underserved tracts may qualify under the revitalization/stabilization definition. The advantage of that angle is the "size test" doesn't apply. So a PPP loan to a large business would potentially qualify as CD under the revitalization/stabilization definition. "The devil is in the details" certainly applies here.
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2249437 - 02/19/21 03:43 PM Re: Paycheck Protection Program and CRA Len S
Tennismom Offline
Platinum Poster
Tennismom
Joined: Jan 2004
Posts: 762
So....are you reporting(submitting) PPP to non-profits with a community development purpose with your usual Community Development Loans OR are you segregating these loans and providing the list to the examiners for "special mention" at exam time?

Return to Top
#2249442 - 02/19/21 03:52 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
If you are speaking about "submitting" your loans for your annual CRA filing, loans to non-profits if they qualify for CD recognition would be reported as CD loans (unless they are secured by commercial real estate in which case if they are <= $1 million they are reported as small bus loans).
If you are speaking of "submitting" your PPP loans to examiners for examination purposes then I would suggest you isolate the PPP loans to non-profits that have a community development purpose (providing community services primarily to LMI persons for example) because they would qualify for recognition under potentially 3 CD purposes, (1) community services, (2) economic development and (3) revitalization/stabilization (if they are in a low- or moderate-income tract or a distressed or underserved area. Furthermore, they would qualify for flexible and innovative programs responsive to community needs.
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2249446 - 02/19/21 04:05 PM Re: Paycheck Protection Program and CRA Len S
Tennismom Offline
Platinum Poster
Tennismom
Joined: Jan 2004
Posts: 762
We currently are tracking our "normal" CDL and our "PPP" Loans (those to non-profits with a CDL Purpose) separately. For the 2020 submission, are you reporting both the "normal" CDLs AND the "PPP" Loans (those to non-profits with a CDL Purpose) in your CDL totals? When I say submit, you have to report at the minimum the # and dollars of CDLs, correct?

What about the "PPP Loans" greater than 1 million that are not reported on the CRA LAR. Are those being added to the CDL total as well....claiming that they helping to retain jobs?

Return to Top
#2249451 - 02/19/21 04:31 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
For reporting purposes, you would submit any loan that qualifies as CD. This would include PPP loans to non-profits even if they may not qualify for CD recognition (in cases when they don't provide services "primarily" to LMI persons for example) because the PPP loan itself would qualify under the economic development definition (assuming the non-profit passes the "size" test because for econ development you must have a qualified purpose which would be permanent job protection and the borrower cannot exceed $1 MM GAR or the SBA size standards under Part 121).

When you submit your annual report you would include all the PPP loans as CD except those that are <=$1 million. For those that are <= $1 million if they were to a non-profit and are not secured by non-farm, non-residential property they also could be reported as CD loans. Any PPP loans over a million dollars would be qualified as CD if they pass the purpose test (permanent job preservation) and size test (as explained above).
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2250779 - 03/17/21 11:13 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
I don't know if I have made this clear, but every PPP loan should qualify for economic development because they meet the purpose test of job preservation. However, there is a second part to the qualification - the so-called "size" test. This pertains to the borrower's size as measured by its GAR or by the SBA Part 121 size standards. Many banks that have extended PPP loans have not collected the GAR. That could jeopardize the loans' qualifications as community development under the economic development definition (although it will not affect the revitalization/stabilization qualifications) because those banks won't have the information needed to pass the size test. So I strongly recommend that you go back and get the GAR information so you can establish the CD qualifications of your PPP loans.
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
#2250849 - 03/18/21 06:36 PM Re: Paycheck Protection Program and CRA tedster
Pale Rider Offline
10K Club
Pale Rider
Joined: Aug 2002
Posts: 34,317
under the Lone Star
Here is the link to the SBA size test:

https://www.sba.gov/size-standards
_________________________
Societies that do not find work in and of itself "pleasing to God and requisite to Man," tend to be highly corrupt.


Return to Top
#2250933 - 03/19/21 09:22 PM Re: Paycheck Protection Program and CRA tedster
Len S Online
Diamond Poster
Joined: Oct 2004
Posts: 1,835
Connecticut
For either size standard, you will need to know the GAR and/or the number of employees working for the PPP borrower which you can then compare to the straight forward $1 million GAR or the SBA Size standards
_________________________
CRA Exam Preparation, CRA Performance Evaluations, Key Performance Benchmarks, & maps

Return to Top
Page 2 of 2 1 2