CD Loans

Just need to make sure I have this right:
In order to be considered a community dev. loan the entity has to have revenues of $1 million or less OR IS IT

The loan has to be $1 million or less. Or is it a combo of the two, business with $1 million or less in revenues and the loan amount is $1 million or less.

I am looking through various manuals and I'm getting confused on the parameters. (I'm not even looking at the creative spins banks are coming up with...)

See this prior thread - Revenues do not come into play for CD lending.

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1458056#Post1458056

Agreed

OK, I read through that thread and the thread within the thread. Confused like the rest of the world. This CRA hat was hoisted onto my already multi-hatted head. I don't like it. I am trying to get the lenders to take some responsibility in identifying possible loans for credit, using a nifty form included in a recent BOL webinar. (My predesessor left the bank. Worked in lending and so it was a piece of cake for him). They are throwing this question back at me, that is, what are the parameters of a loan to be considered for CRA (and not considered). I thought there were some dollar amount paramenters. We are an ISB reporting bank, so .....

No dollar parameters. Although, they will give more weight to loans above 1MM.

Loan amount and revenues may come into play.

A community development loan must 1) have community development as its primary purpose, 2) benefit the bank's assessment area, and 3) not already be reported on the bank's CRA or HMDA LARs.

Some people say that a community development loan has to be over $1 million, otherwise it's on the CRA LAR. That's not true because there are a number of scenarios in which a loan can be excluded from the LAR that may qualify for CD if the purpose test is also met (i.e., business loans over $1 million, farm loans over $500 thousand, multi-family housing, construction loans, some loans to non-profits...). ISBs don't have to worry about the CRA LAR conflict. Large banks have to exclude certain loans that may have otherwise qualified because the loan amount lands them on the CRA LAR.

Regarding the revenues, these do come into play if you are trying to get credit for the loan by stating that you are promoting economic development by financing businesses that meet certain size standards. Size does matter!

Definition from Reg BB...

(g) Community development means:

(1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;

(2) Community services targeted to low- or moderate-income individuals;

(3) Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs ( 13 CFR 121.301) or have gross annual revenues of $1 million or less; or

(4) Activities that revitalize or stabilize —
(i) Low-or moderate-income geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved nonmetropolitan middle-income geographies...

Sorry, tennismom and Boatn Shasta, I disagree. Did you read that entire thread?

Trees, since you are an ISB, and I'm assuming you opt for the ISB exam, you don't have to worry about the $1 million loan amount. You just need to focus on the purpose test being fulfilled and that it's benefitting your assessment area.

Guess I should have said "Revenues only come into play if it is for economic development by financing businesses that meet certain size standards. Otherwise they do not come into play for loans with a Community Development Purpose of:

1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;

(2) Community services targeted to low- or moderate-income individuals; or

(3) Activities that revitalize or stabilize —
(i) Low-or moderate-income geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved nonmetropolitan middle-income geographies”

Does that sound reasonable?

That is more accurate.

OK, things are getting clearer now.I am going to tell my lenders to focus on the points indicated above.

As a last (for the moment) question covering suitable loans, I believe we can include an existing loan that was renewed for the same amount, an existing loan where additional amounts have been added (so I include the first $250,000 as well as the $100,000 additional added this year and any new loans that fit the purpose test......right??

You win Kelsey D, good call.