Two questions:

1.A multiple advance line of credit was made to a business for $2 million in early 2004. Later in 2004 it was paid down and refinanced into a single advance loan for $400,000. Should I now report this as a small business loan for $400,000?

2.A $1 million loan was made to a business in year 2003 and was reported as community development. In 2004 it was refinanced for $600,000. Should I now report this loan as small business since it is less than $1 million or ok to report as community development?

Thanks

You may have better luck posting your questions in the CRA forum. Sorry I can't answer them.

The CRA Guidelines indicate that multiple loans to the same borrower should be reported in the aggregate unless the collection of data in the aggregate would be unduly burdensome. Therefore, these loans would not be reportable because they exceeded $1 million in the aggregate (obviously your system can collect aggregate data). See "A Guide To CRA Data Collection and Reporting" page 55. I would also check with your chief financial officer and find out how they are going to classify the loan for Call Report (or TFR) purposes. Be consistent between the two of you.

Wait a minute. Can I have some more input on this? I agree with swiggles based on CRA Reporting Guide page 12 and Q&A 42(a)-5.

Len, I am not sure how your answer addresses the question. He never mentioned multiple loans. It appears he has two separate loans with different situations. I think Swiggles has the answer.

In situation #1 he indicated that the bank extended a $2 million line of credit to a borrower. Clearly that would not be reportable. Then the line was paid off and replaced with a $400k loan. As I understood the question, he was asking if the $400k was a reportable small business loan. As we all know, Small Business loans are defined in the instrutions to the Call Report. The Call Report instructions state that in a situation where multiple loans are made to the same borrower in the same reporting period, the bank should aggregate the loans if it is not "unduly burdensome" to determine the amount to report. The instructions give an example of a situation where two separate loans were made to the same borrower, each less than $1 million, but combined exceeded $1 million (see page 39 of Instructions). The instructions say this is not a reportable small business loan situation if the institution can aggregate the loans without undue burden. If the loans can't be aggregated without undue burden, then each loan would be reported separately as a small business loan. So my understanding of the situation here is that the bank can aggregate the loans without undue burden and the combined loans would disqualify the loans as reportable. I intended no comment on the second question.

I would be interested in knowing if ANYONE "aggregates." If we aggregated each of our customers' loans for the year and then did not report aggregations over one million, our CRA loan register would be non-existent.

We automatically download our small business loans to the register. Loans which are renewals of former loans within the same year are flagged so that they are not downloaded. Single loans over $1 million are deleted before reporting.

why would you aggregate loans? That defeats the purpose of reporting for CRA and contradicts call report instructions. Swiggles and KC are consistent in the answer to Roger's original question. The 400M loan is now one loan that meets small business definition. The other post about call report instructions and aggregating loans just adds more confusion since that wasn't the original question asked. We would report that loan as small business

The Interagency Q & A dicusses aggregation:
§ __.42(a)(2) – 2: How should an institution collect data about multiple loan originations to the same business?
A2. If an institution makes multiple originations to the same business, the loans should be collected and reported as separate originations rather than combined and reported as they are on the Call Report or TFR, which reflect loans outstanding, rather than originations. However, if institutions make multiple originations to the same business solely to inflate artificially the number or volume of loans evaluated for CRA lending performance, the agencies may combine these loans for purposes of evaluation under the CRA.

Thank you for posting that. I read that today but didn't have time to get back here to post it. I stick with my original opinion that you report the $400M.

Squiggles answered the question correctly. Report the $400M and then also report the second deal if it qualified for reporting on the LR in year two. You can't hold it back as a CD deal just because it was originally. Once it qualified on a size basis, you lost it on the CD listing.

But, as mentioned, if you're terribly desperate you can compile a list of loans on the LR that would have had CD value, but were reportable and share them with your examiner. Don't waste time on this if you have enough CD loans...it's too much work for too little value.