We are a large bank, but we have a lot of small business and ag loans. In order to help us substantiate what we report and speed up the reporting process, we have implemented a CRA Input sheet. We ask the lender to identify the Gross Revenues, indicate what type of document was used to obtain this information and provide a copy of this documentation. The commercial lenders want us to change the box to a check box of Under $1M, Over $1M, or not relied upon. Can we just rely on the box the lender checks on the input form? Do we need additional documenatation in the loan file?

We have discussed allowing financial information up to two years old. Does anyone else have a set guideline like this?

If you have a farmer who the lender knows and knows based on the size of the operation the annual gross revenue is less than one million, can we report this as a 1? Is the input sheet enough documentation?

If you have a customer you have made loans to for 10 years but you do not have current revenue information, can you really code it a 3?

Does everyone else really get financial statements, tax returns, income statements and p&l statements every year form all their customers?

Any help or clarification would be greatly appreciated.

Several items to discuss here. Its important to have the gross annual revenue code for Small Business/ Small Farm accurately reported. Examiners do not allow more than a 5% error factor in any one cra reported data field. How you do it internally is up to you.

Examiners may question how you can report a Revenue code if there is nothing in file to substantiate it.

IMO its not a good idea to rely on loan officers to provide data you are reporting, without someone in the compliance department doing some periodic checking.

A lender guessing on a revenue to report because they think the size of the operation can determine that is again IMO not a good idea. Any business that has revenue close to the 1 mil figure leaves only a 50/50 chance of them being right.

Not having financial statements in a file could be a safety and soundness issue with examiners. It is not unusual for them to classify a loan due to stale financial data in file.

Yes, most banks get current financial statements when they make loans regardless of how long the customer has been doing business with the bank, or how many other loans they have had.

I have had this issue in the past also. I would talk with your examiner. Have you had a data integrity review? What did they say about the way you collect your data then?

You will get some criticism on these threads for not collecting financial information. I can't argue that it is best to get it, but I do understand that in some institutions loans are made to borrowers without financials being a factor.
When our examiners came in and did a data integrity review a few years back. They suggested a check box form for those loans that we did not collect financial information for. Our loan policy still dictates when we have to get financials for certain loans, and for those loans not requiring financials, we require the revenue form. However the form is to be completed by the borrower not the loan officer. It is simple something like....I certify that <name of business> has gross annual revenues that are: Check boxes for greater than or less than $1million. Date and Signature.

Making loans without the financial information is a Safety and Soundness issue that only your bank management can decide on. However, your examiners can, and most likely will, criticize you on something like that.

Having said that, I would NOT rely on your LOs for the income figures. I would HIGHLY recommend that you go ahead and let them use check boxes but that you continue to have them attached whatever source they used. As Jennifer mentioned, the source CAN be a statement from the borrower stating their Gross Annual Income, if that is all your management deems is necessary.

I need to bump this up because I am definitely in the middle of it on this topic right now. We're a bank that has a process for originating some of our loans that does not involve collecting financials on loans within certain parameters. On others we require only a balance sheet, but no revenue information. Can we rely on a borrower statement of more or less than a million for CRA purposes, when actually no amount is considered in the loan decision?

Second question: when you do require lenders to supply some of the information for data input, do you require them to supply a revenue figure that can be verified...or just the indicator code and you have to figure out what revenues are used to support it? I've asked for a number since I find it challenging at times to identify business affiliates that are involved in a loan decision. (I just don't have time for a treasure hunt.) That's getting a big negative reaction. Is anyone willing to share their "best practice" procedures for data collection and verification?

I have tried a few different methods over the years and found the best method for us was to have the LO actually enter the dollar figure on our HMDA review sheet AND attach WHATEVER they used to derive that figure.

They do bulk about this but the error rate was just too high and I don't have time to pull all of the credit files and mine the data myself.

I don't care WHAT source they use, that is a Safety and Soundness issue and quite frankly, someone else's problem, just as long as I can verify the source and the number.

By having them actually use the number instead of just a code also helps when there is more than one entity involved and I need to look at that as well.

How is a new entity listed? < $1 million or unknown