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#2277921 - 11/15/22 03:00 PM CRA LR - Report revenue not used in decision?
Help! Compliance Offline
100 Club
Joined: Oct 2012
Posts: 155
San Antonio, TX
If an institution collects current YE financial documents due to a larger lending relationship, but they don't rely upon them in making a credit decision for a loan we are reporting on the CRA LR, can we report the Borrower's revenue for that loan based on the current YE financial documents we possess, or MUST it be what was utilized in the specific loan's credit decision, which none were considered in this case (renewal of internal brokerage-secured loan)?

Furthermore, does your answer also apply to any Community Development Loans we may report as well?

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#2277931 - 11/15/22 06:06 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
burke116 Offline
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Joined: Jun 2014
Posts: 574
Petersburg, VA
We report the revenue in those situations. It's harder to argue that you had it and it played no role whatsoever in your decision to grant credit, rather than just reporting what you have.

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#2277980 - 11/16/22 06:38 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 2,007
Idaho
Ditto.
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#2278258 - 11/28/22 06:49 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
Lori01 Offline
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Joined: Jan 2007
Posts: 186
VT
If you have access to revenue information you should report it, regardless of it being used or not in deciding on the loan. When looking at your distribution of small business loans compared to aggregate, anything with a "3" for revenue unknown gets dropped out the calculations and can have a negative effect on your performance.

Revenue information is never used when looking at qualified CD Loans.

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#2282882 - 03/31/23 12:37 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
Luv2run Offline
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Joined: Jan 2015
Posts: 661
Would the same go for income from Guarantors on a loan?
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#2282884 - 03/31/23 01:15 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
rlcarey Online
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rlcarey
Joined: Jul 2001
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Galveston, TX
Income from Guarantors has nothing to do with revenues generated by the business.
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#2282932 - 03/31/23 07:22 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
Luv2run Offline
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Joined: Jan 2015
Posts: 661
Perfect!!! Thanks very much RL!
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#2298886 - 07/01/24 03:12 PM Re: CRA LR - Report revenue not used in decision? rlcarey
Help! Compliance Offline
100 Club
Joined: Oct 2012
Posts: 155
San Antonio, TX
What about corporate guarantors whose revenue was considered in the cash flow calculation, and it appears this was necessary for approval. It also would change it from a Revenue Code 1 to a 2.

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#2298891 - 07/01/24 04:34 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 84,530
Galveston, TX
I am not sure why the revenues of guarantors have anything to do with the business applicant.
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#2298917 - 07/02/24 12:49 PM Re: CRA LR - Report revenue not used in decision? Help! Compliance
Inherent_Risk Offline
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Joined: Jan 2017
Posts: 633
Depends on who the guarantors are. If they are entity affiliates and you used them in underwriting, then I would include them. For example, if your borrower is a newly formed LLC with no or little revenue in the previous year, and your guarantor is a parent company with millions in revenue, then you would include the guarantor.

From the data reporting guide:
Generally, an institution should rely on the revenues that it considered in making its credit decision when indicating whether a small business or small farm borrower had gross annual revenues of $1 million or less. For example, in the case of affiliated businesses, such as a parent corporation and its subsidiary, if the institution considered the revenues of the entity’s parent or a subsidiary corporation of the parent as well, then the institution would aggregate the revenues of both corporations to determine whether the revenues are $1 million or less. Alternatively, if the institution considered the revenues of only the entity to which the loan is actually extended, the institution should rely solely upon whether gross annual revenues are above or below $1 million for that entity.
However, if the institution considered and relied on revenues or income of a cosigner or guarantor that is not an affiliate of the borrower, such as a sole proprietor, it should not adjust the borrower’s revenues for reporting purposes.

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