Can someone give me a easy explanation of how to keep information on community development loans for an intermediate small banks? Do we have to specifically slot these different on our system and Call Report as to not "count" them with the lending part of the evaluation? From the definitions:

(h) Community development loan means a loan that:
(1) Has as its primary purpose community development; an
(2) Except in the case of a wholesale or limited purpose bank:
(i) Has not been reported or collected by the bank or an affiliate for consideration in the bank's assessment as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203 of this title.

If we are not reporting data, what is considered "collected" for consideration in the assessment of small business, small farm, etc?

You can have them coded specially so that you can pick them out by purpose code or something. That might make it easier to distinguish them from other SB or SF coded loans.

I personally look thru each loan booked on our system for CRA SB, SF and CD loans by hand so I'm just offering a suggestion here.

Just because you are not reporting don't mean you should not be collecting or conducting a self assessments of your CRA Small Business/Farm and Fair Lending data.

To quote the regulators "A bank will be expected to know their story and be able to tell it."

You have to pass both CRA and the Community Development tests. The last thing you want is to be surprised by what regulators may find on the CRA side of the exam.

There are some good software packages that are not expensive and that allow you to collect and monitor your CD activity as well as your loans (mandatory loans such as small bus and small farm and optional loans such as consumer loans and small business-other) for performance analysis. That would be the easiest and most efficient way to control your CRA performance.
Keep in mind that it is important to not only identify CD activity, but to classify what type of CD activity (affordable housing, community services, economic development, etc.) and to be able to substantiate the qualifications with appropriate documentation in order to withstand examiner scrutiny.

Thanks for all your help. I'm a little unclear as to if we can consider particular loans as community development, or if they are simply just considered in the lending test. For example if we financed a new start-up business in a small community that created several new wage-earning jobs (low-mod based on hourly rates). To me this is economic development by creating jobs, using a vacant building, etc. but, can this be considered a community development loan or is this just a business loan considered in the lending test? Our bank is made up of a large number of small community banks, so our opportunities for community development activities are very limited. I'm trying to make everything possible count. I know the primary purpose should be "community development" and have read the definitions...I just need a little clarification and some creativity maybe.

The priority rule requires that any loan reportable as a small business or small farm loan must be reported as such and cannot be reported as a CD loan. Many banks lose credit for bona fide CD loans because of this. However, you can collect information about such loans that have CD qualifications and present them to examiners for consideration and partial credit for community development. The proposed Q&A will give ISB's the opportunity to determine if they prefer CD credit or small business loan credit for loans that would be considered reportable small business loans but which have CD qualifications. The ISB will be given the choice of which recognition they would prefer if the change is approved.

We fall into the category of intermediate small bank for CRA purposes but the former Compliance Officer elected to be examined as a large bank. Any feed back on why he would choose this option?

were you a large bank before and then ISB after the change?

Yes, we qualify as an ISB after the change but opted for the Large Bank exam.

Some banks that were already in Large Bank mode just kept doing the same...
LenS would be a good one to respond on that one...

The main difference in an ISB and a large bank is the make up of the exam. The ISB consists of two test. Lending and Community Development. The large bank exam consists of three. Lending Investments and Service. The ISB CD test incorporates the investment and service test and adds community development loans. To pass and ISB exam you must pass both test.

For an ISB you no longer have to submit SB Loan data. But the examiners will ask to review the data when they come in. Like Rizzo stated if you are all ready collecting and reporting why stop now. Since the examiners will ask for the data, you should collect it and analize it.