Bank requested revenue projections for a start-up. Current Year-End Gross Annual Revenues are $0, which permitted bank to report a loan on CRA LAR with Rev Code 1. Then, bank renewed the loan in year two (different CRA LAR reporting year), but in year two the bank doesn't obtain updated financials. Can the bank report year two renewal as 1 Rev. Code 1 (if bank was willing to base its loan decision on prior Rev. information already in file)?

I know the CRA FAQ guidance says that you don't need to collect, but if you don't collect, report as Rev Code 3. I am trying to split the NO, you don't need to collect, from the if you do not collect, then report as 3. I am trying to argue that you don't need to collect (period). Then, since I have known revenues and I base my decision on the old information, then I can report renewal loan to start-up as Rev Code 1 in year two.

As an example, bank has 2013 year-end numbers in hand and it is now time for a renewal in mid-2015 and bank makes another loan, but bank did not collect any new financials and uses old information to make the credit decision. Note: small dollar loan - limited safety and soundness risk - no concentrations.

You should record the revenue code as "3" because the latest fiscal year is now well complete and you chose to make your credit decision without requesting the latest fiscal year numbers. In my opinion, once the fiscal year is complete and gross annual revenues are (or should be) available for the latest fiscal year, if you don't ask for those numbers you have chosen not to rely on them for your credit decision. You can't say I know what they are from 2 years (or longer) ago and I know back then they were $X and therefore I will base the revenue code on what I knew back then (which is now outdated information). How will you explain to an examiner that you made a credit decision on out-of-date numbers? The answer is obvious, you did not rely on the old numbers to make the current credit decision. You decided that the current financial information is not relevant to your current credit decision. About the only latitude you have regarding this is perhaps a few months after the latest fiscal year has ended and the gross annual revenues are not yet available. But once a reasonable period of time has lapsed you can no longer credibly maintain that you made your credit decision on stale financial information.

I have spoken with examiners who have said they will accept two year old data but no older. I certainly would never recommend trying, as you have no way to predict an examiners view.

I also always recommend gathering and updating revenue data. While "3" is an acceptable code, the lack of revenue data can negatively impact an examination because it is impossible to categorize these loans into less than or greater than $1 million in revenue. Such loans can be discounted entirely.