Trying to determine CD loans and have a question. How is it determined whether a loan meets either of these community development tests:

1.activities that promote economic development by financing businesses or farms that meet the size eligibility standards...or have gross revenues of $1 million or less?
Also, does it not matter if it's in a low or mod tract?

2.activities that revitalize or stabilize lmi geographies?
I'm thinking of a business that was bankrupt but the bank made individuals a loan to buy a portion of that business. It saved jobs in the town. The town has two mod. income tracts and four middle tracts.

Your opinions would be appreciated.

I'm not an expert either, but I know that the census tracts do not matter as long as lmi persons are benefiting. It might be a little easier to explain to an examiner that your loan is helping lmi persons if it is in an lmi tract, but it is not necessary. Also, a CDL can be for any amount and to an entity of any revenue size. It just can not be a CRA sm biz/farm loan or a HMDA loan (multi-family units being the exception). I know that doesn't completely answer your question, but I hope it helps some.

Two great answers

My thoughts as well. On item 1, I see this question quite often and it always leads folks to confusion. The particular line you're looking at pertains to activities that the bank provides to entities that provide services/loans, etc., to small businesses (ie the SBA or an SBA subsidiary). What they're saying is that if the bank provides a loan, or perhaps a service (counseling for instance) to an entity that provides services to businesses with revenues below one million, the bank's loan or service would then be eligible for CD consideration for the bank in it's PE. Don't confuse this with actual CD services or lending to LMI geographies. They are two seperate items.

2. If the loan for that business was reportable on the CRA LR, it would not then qualify for CD credit. If it was not reportable to the LR and you could make a case that it had value (saving or adding jobs) to LMI people or geographies, you could then take CD credit for the deal. It would again have nothing to do with the number of LMI tracts but would have everything to do with the value it brings to LMI tracts or people. You can easily have a business in a middle income geography that benefits LMI people and take credit for it if you can establish the value it brings to the LMI people.