I know that many banks did not collect the GAR information for many PPP borrowers. The regulators have made it clear they won't penalize banks for failing to collect the GAR. But you could be penalizing yourself by not doing so because PPP loans are a great opportunity to earn CD credit under the "economic development" definition. However, aside from fulfilling the "purpose" of job preservation, the size test requires the borrower to either have a GAR <=$1 million or the borrower must fall within the size standards in the SBA regulations Part 121. But if you haven't collected the GAR you may be out of luck. Today I just spoke with a bank that had extended hundreds of PPP loans, including many larger than $1 million, but they didn't report any of the loans as CD loans. Effectively, they denied themselves credit for more than $40 million of CD loans! - and this was a relatively small bank.

If you extended PPP loans >$1 million you should get CD credit, but you need to get the documentation to prove the borrower meets the size test. What is also bad is if you haven't reported the loans as CD loans your reported and understated CD lending will be reflected in the 2020 A&D market data when the FFIEC releases that data later this year. Aside from the regulators, the community activists scrutinize that data. So the activists will assume you are doing far less CD lending than you really are. Finally, you will look very bad in comparison to the banks that have reported their qualified PPP loans as CD loans. You lose, lose and lose again!!!!

We encourage our clients to refile their 2020 CRA data if you did not report the large PPP loans as community development loans. Typically, you have until the beginning of April to submit refiled data and have it reflected in the annual A&D public data. If you don't include all eligible PPP loans no one will give you credit for them. And BTW you also get credit for F&I responsive to community needs - bonus points in a CRA exam. So all these loans, even the smaller ones that must be reported as small business loans, are an opportunity lost if you haven't recognized them and collected the documentation pertaining to the borrower's size.

Finally, don't forget for all you ISB's that even if you must report the smaller PPP loans ($1 million or less) as small business loans you can get credit for CD during an examination if you have voluntarily reported your loan data and thereby qualified to exercise your elective to have qualified small business loans as CD loans for exam purposes.

Very good information Len. We originated over 1,500 last year and made every lender collect the revenue, even after the loan had already originated. There were of course some we could not obtain, but the attempt was made. We were still a ISB at the time.

To add to the CD credit discussion, all PPP loans in a low or moderate income census tract should receive credit under revitalize or stabilize, as per the CRA COVID FAQs.

Question 16: Are PPP loans over $1 million that are also in low- or moderate-income geographies or in distressed or underserved nonmetropolitan middle-income geographies automatically considered to be community development activities? (new FAQ added March 8, 2021)
Response 16: Yes, a PPP loan greater than $1 million in one of these geographies will be considered an eligible community development activity. Pursuant to the Interagency Questions and Answers Regarding Community Reinvestment,8 activities that revitalize or stabilize a low- or moderate-income geography or a distressed or underserved nonmetropolitan middle-income geography help to attract new, or retain existing, jobs, businesses, or residents. The PPP was enacted and signed into law in order to support smaller businesses and retain jobs.

Compl101TX - you are correct and that makes the PPP's even more potentially valuable as Community Development activity because they could possibly qualify under 2 CD definitions, economic development and revitalization/stabilization. It's a golden opportunity for CRA credit that no bank should pass.

BTW, we have posted on our website the SBA Size Standards book. If anyone wants a copy they can retrieve it free from the GeoDatavision website.

Another thing, we have the ability to run a bank's file with the PPP loans that includes the NAICS codes (they are required in the SBA application) against the SBA Part 121 size standards and append that information to a bank's PPP file to facilitate confirmation that a borrower meets the "size test".

For any bank that wants a copy of the SBA Size Standards Part 121 just visit our website to retrieve the document at Free SBA Size Standards Book Part 121

My latest post spoke about needing to pass the size test for the revitalization stabilization qualification, but after thinking about it I realized I erred. The revitalization/stabilization option is good because it doesn't require a size test like the economic development definition, although if you can qualify under both CD definitions it enhances the value of the PPP loan for CD purposes.