As a wholesale bank, we need to report small business loans that we originate, but they are not evaluated under the retail banking test as we are subject only to the community development test. In 2021, it looks like we reported the PPP loans under $1 million as small business loans, which is correct. I am wondering, however, if I can count some of those PPP loans in LMI tracts as community development loans since we will not have the retail lending test. Otherwise, these smaller loans would not be counted at all.

The Q&A's indicate that you could take credit for those PPP loans assuming they are qualified as CD loans. This is based on the answer to the question quoted below regarding the reporting of loan to a non-profit secured by nonfarm, nonresidential real estate. Notice the exception for wholesale or limited purpose institutions that are allowed to claim those loans for CD credit even though retail banks would have them treated as small business loans (of course ISB's would be allowed the exception for examination purposes too).


§ __.12(v) Small business loan
§ __.12(v) – 1: Are loans to nonprofit organizations considered small business loans or are they considered community development loans?
A1. To be considered a small business loan, a loan must meet the definition of “loans to small businesses” in the instructions in the Call Report. In general, a loan to a nonprofit organization, for business or farm purposes, where the loan is secured by loan, or $500,000 or less, if a farm loan, would be reported in the Call Report as a small business or small farm loan. If a loan to a nonprofit organization is reportable as a small business or small farm loan, it cannot also be considered as a community development loan, . Loans to nonprofit organizations that are not small business or small farm loans for Call Report purposes may be considered as community development loans if they meet the regulatory definition of “community development.”

See:
XI. Community Reinvestment Act — Interagency Questions and Answers FDIC Consumer Compliance Examination Manual — July 2016 XI–12.13

Thanks Len - I can't believe that I missed that important exception. This is my first experience as a wholesale bank.