When a guidance line or master note is approved for an amount above $1 million, are we allowed to report the loans that are tied to them as long as they themselves are $1 million and under, or are they considered to be tied to commitments greater than $1 million; thus, not reportable? I know that participations purchased are more clear cut as they are a part of 1 larger commitment, but what about these guidance lines and master notes comprised of multiple loans under one approval. I have heard it both ways. Report or not report? That is the question. Thanks for your help and incite in advance.

You might be talking semantics a little bit here as the terms that you use might mean different things to different people.

But here is my take.

Master Note - it is an actual promissory note which represents and actual legal commitment to lend up to the note amount, as long as certain conditions are met.

Guidance Line - it is in internal credit approval function that establishes a limit to the borrowings of a specific customer under certain conditions without the need for the loan officers involved to seek a new credit approval for individual loan requests up to that limit. However, it is not a formal commitment to lend, and it usually is not communicated to the borrower.

So what is your take as to the reportability of loans tied to each that are </= $1 million themselves on the CRA LR (despite the Guidance Line/Master Note being GT $1 million itself)?

We take the following approach, which I believe is consistent with how other Banks do it. If you have a Note, then the loan amount drives whether it is reportable or not.

If you have a Guidance Line with no Note, but the Guidance Line is $1MM or less, we report the individual loans made under the line, as those have a Promissory Note. If the Guidance Line is over $1MM, we don't report it at all.

I just want to make sure I understand you clearly. We have a Guidance Line with no Note of it's own that is approved, and the overall approved amount is GREATER THAN $1 million. We then start making individual loans referencing/tied to this Guidance Line that DO have their own individual notes that are each LESS THAN $1 million. Are you saying we CAN report each of these smaller individual loans with their own notes, despite them being tied to the Guidance Line whose approved amount is greater than $1 million (no associated note of it's own...just a global approval up to a certain amount for a specific loan/collateral types)?

"If you have a Guidance Line with no Note, but the Guidance Line is $1MM or less, we report the individual loans made under the line, as those have a Promissory Note. If the Guidance Line is over $1MM, we don't report it at all."

"If the Guidance Line is over $1MM, we don't report it at all."

When you say you don't report it at all, do you mean just the Guidance Line or both the Guidance Line AND the associated loans tied to it?

If any loan with a note is $1MM or less, we report it, regardless of Guidance Line size. Our Guidance Lines are internal exposure limit guidance only, so we don't consider them when reporting CRA small business/small farm loans.