First)We have made a $40,000 LOC to a farmer to fund the expense of harvesting the crops. He employs 2 moderate income people. The farm in located in a NON-MSA moderate tract.
Second) $250,000 LOC to a Co-op for equipment, supplies, seeds to plant, chemicals, etc.. to supply the farms in the area. They employ 3 moderate income individuals. The Co-op is located in a middle income tract.
The purpose of these loans were to keep farm production going forward. Would they be better as CD loans or just Small Farm loans????
Thank you

You can't pull out a qualifying small business/small farm loan and call it CD instead of a reportable loan.

If both of these loans were to for profit businesses they both should be on your LR as small farm loans, in which case they aren't CD loans due to double counting.

If the loan to the co-op is to a non-profit (many are) then it has a chance. I wouldn't lean on the moderate-income employees unless they have a mandate to hire within certain income levels. 3 people is a bit of a short fall for "job creation". If however you can show that the farms served by the co-op (membership rooster) are predominately LTM you could shoot it as a service to those folks. Again, ONLY if this is a non-profit entity.

No you can not exclude a loan from reporting on the CRA LR or the HMDA LAR just because you want to call it CD. It's either one or the other (reportable based on the CRA/HMDA reporting rules) or CD lending. The only type of loan that can be double counted (both CD and on the HMDA LAR or CRA LR) is a loan for multi-family housing. Those are allowed to be double counted.

A loan to a for profit business that are above $1,000,000 in size, or are not reportable (for instance a construction loan or raw land purchase loan) could have CD potential. It's not the "for profit" or "non profit" status that makes the criteria for CD reporting but rather it's the benefit of the loan to the community AND if the loan was reported on either the HMDA LAR or CRA LR.

http://www.dallasfed.org/ca/pubs/craloan.pdf

This is a brief helper for you to review that might answer some questions.

http://www.ffiec.gov/cra/guide.htm
I would strongly suggest some time reading this Most of your questions will be answered here.

And of course you can always visit here for more insite

http://www.bankersonline.com/tools/tools_compliance.html#cdforms
one more place to visit. You might consider downloading this form (Community Development Loan Tracking Form) which I contributed to BOL under an old name If the deal is qualified it needs to pass the test (answer appropriately) to all of the questions on these documents.

If your loans are slated to be reported as small business or small farm loans, you just can't make the determination to report them as CD loans to get more credit. If the loans qualify as small business or small farm based on the call report definitions, you must report them as such, and then cannot report them as CD loans also (unless it is for multi-family housing). I definitely understand the frustration in trying to qualify loans as CDs, but you can't manipulate the reporting process. Good luck!

I am sorry if I wasn't clearer as well Starfish pretty much covered it but I'll try once again as well for practice.

Step 1: Determine if a loan is reportable on the CRA LR/HMDA LAR.

If it is NOT reportable:

Step 2: It is possible to take it as a Community Development Loan

You have NO option which it is. First you look at the loan and determine if it is reportable as in Step 1. If it is, you stop there. You can not do anything further!

If it is not qualified after reviewing Step 1 you can THEN look at the loan and see if you can take CD credit for the deal but ONLY if the loan is NOT reportable on either report. You can never withhold reporting of the loan on the LAR/LR and take CD credit.

The only loan that can be both reportable and CD qualified is Multi-Family Housing. Nothing else!

In the regulation there is mention that one can also submit a listing of their loans which were reportable (like your two loans) as "extra credit" for an examiner to review if necessary. This is not a list of loans you removed from the LAR/LR, but rather a seperate statement showing the examiner that you are doing your part in the community, but the deals were reportable so you couldn't add the total to your CD lending total. There is no need to waste your time on this if you have adequate lending in other areas as well as CD lending in some form.

If you're looking to review the bank's portfolio, consider looking first at loans over $1 million in size (not reportable) and all loans to non-profits which weren't reported. Also look at all multi-family deals. Use my write up sheet to qualify these deals before you waste time reviewing the deals that are "extra credit".

To soften the blow of not being able to take credit on a loan you feel has Community Development Merit, you might try keeping a list of the Small Business/Small Farm reported loans that have that extra little benefit.

You can always show this to the examiner and include the benefit these loans have on the community. The examiner may or may not consider this when evaluating your performance. But a lot goes into how you evaluated this credit in terms of the needs in your community. If you are tetering between two performance levels in your lending test, this additional bit of information may help.

CAVEAT:
It is a lot of additional work for you to do this, and it may not provide any benefit at all. If you only have a couple of loans that fit into this scenario, it may not be worth it.

SAVING GRACE:
But if you find you have a large number of these loans, then you may want to take this a step further and see if you can develop an innovative and flexible lending program to further promote this type of lending. If you can then show how this effort further increased your credit activity in this area, you should be rewarded under the "innovative and flexible" lending program criteria of the CRA Lending Test.