For small farm and small business loans, I have two questions:

If the gross annual revenue was not considered in making the loan decision, we indicate "3" (Revenues Not Known)?

AND

For a loan made to an employee, the revenue may have been considered but, it is not indicated in the loan file (you know......it's SECRET!). For those, do we indicate a "1" because revenues WERE considered or can we indicate a "3" (Revenues not known)?

I use "3" in both of those situations, swiggles. I have yet to be told differently by my examiners.

Is the loan to an employee a business loan or a consumer purpose loan?

From the FRB HMDA/CRA data training in November 2010:

•If file contains revenue information, it should be reported even if no reliance on revenue in underwriting

Employees:

Re gross annual revenue of consumers for employee loans for CRA examination purposes:

From the FAQ:

§ll.42(c)(1)(iv)—2: May an institution list ‘‘0’’ in the income field on consumer loans made to employees when collecting data for CRA purposes as the institution would be permitted to do under HMDA?
A2. Yes.

I should add here that for CRA the discussion re what to report really centers on whose revenue to include when looking at gross annual revenue. The revenue for CRA is used to determine to what size business the loan was made.

If you only made a loan to the one company and no affiliates or parent guaranteed or co-borrowed, you report the revenue of the one borrower.

If you relied on those other companies and gross revenue of all is more than a million then it is viewed as a small business loan to a larger borrower.

It is a different concept than HMDA.

I am only referring to small business/small farm. We do not report consumer loans. So my examples are:

Loan to a business entity...officer claims income was not considered....there is no financial statement or tax return in file....report as 3?

Business loan to an employee. Revenue is "known" and probably "considered" by the loan officer but it's not disclosed in file for "all" to see. For HMDA we indicate "zero" for income because the applicant is an employee....was just wondering if we can do same for a CRA small business loan to an employee.

Thanks for your help!

If you do not have any annual revenue figure in the file report as 3 for small business/small farm.

For a business loan to an employee, there is no option for privacy, but you only report 1, 2 or 3 ($1 mil or under, over a mil or not know). Not much there to be concerned about.

Swiggles - our examiners instructed me to report "whatever number I could prove in the file." If an employee loan file has the financial info blanked, I can't show it. If I can't show it, I can't report it. Same for sb/sf loans that were made using stated income. If the only number is their hand scratched gross income figure on the application, I don't have any provable "revenue" info to report.

Did I just make it worse?

No....not worse. Thanks to you both!

You made it worse for me.

I thought the regulation states:

"The CRA regulations similarly do not require institutions to verify revenue amounts; thus, institutions may rely on the gross annual revenue amount provided by borrowers in the ordinary course of business."

If in the ordinary course of business the borrower tells the lender their gross annual revenues (enters that information in the lending platform) or scratches that information on an application, I thought we could use that figure for revenue collection.

From what you are saying, if there is no documentation in the file to prove the revenues, a bank is to report the borrower's revenues category as 3 - NA? Correct?

We have a dollar threshold where we rely on stated revenue of the borrower. So everyone of those loans we would report a reveune category on 3 - NA?

Set me straight.

revenues vs income.

If all I have is stated income, I don't have gross revenues to report.

Right. You want to know "how much business did they bill out" to customers, not how much did they earn individually.

If you don't know their sales (which is revenue for CRA purposes) you have to report 3.

If somewhere in the file you have a comment on how much the company sells/takes in at a gross level, that is your figure and you report the corresponding code. If you do not know that, you report a 3.

Knowing the sales is important for CRA. If you can possibly ask that question for CRA purposes even if it means nothing for credit approval purposes, do so. It is important for the bank.

Thanks for setting me straight. Income vs. Revenues