Are Paycheck Protection Program (PPP) loans of $1 million or less reportable as small business loans for Community Reinvestment Act (CRA) purposes? Can the same loans also be considered community development loans (CDLs) for CRA purposes?

Generally, PPP loans of $1 million or less may be reported as small business loans for CRA purposes, but we do not believe the same loans also may be reported as CDLs, subject to the caveats below. However, PPP loans over $1 million may qualify as CDLs for CRA purposes if certain criteria are met.

The FDIC has published guidance stating that “in most cases” PPP loans will receive CRA credit. The federal banking agencies also released a Joint Statement on CRA Consideration for Activities in Response to COVID-19 confirming that “the agencies will favorably consider . . . retail lending activities in a financial institution’s assessment areas that are responsive to the needs of . . . small businesses and small farms affected by COVID-19 and that are consistent with safe and sound banking practices.”

The CRA regulations provide that CDLs are loans that have community development as their primary purpose and, except in the case of a wholesale or limited purpose bank, have “not been reported or collected by the bank or an affiliate for consideration in the bank’s assessment as a . . . small business . . . loan” — unless the loan is for a multifamily dwelling and benefits the bank’s assessment area(s). For CRA purposes, small business loans are loans of $1 million or less that have been reported in specified sections of the Consolidated Report of Condition and Income. Consequently, we believe that PPP loans of $1 million or less generally may not be reported as both small business loans and CDLs.

However, PPP loans greater than $1 million (which are too large to be reported as small business loans) may qualify as CDLs for CRA purposes under “activities that promote economic development” if they create or retain jobs or under “activities that revitalize or stabilize” if they benefit primarily low- and moderate-income areas or distressed middle-income areas.

For resources related to our guidance, please see:

FDIC FAQs on the SBA’s Paycheck Protection Program (April 25, 2020) (“Will loans originated under the PPP receive CRA Credit? In most cases, yes. According to existing examination guidance as well as the March 19, 2020 Joint Statement on CRA Consideration for Activities in Response to the COVID-19, when consistent with safe and sound banking practices and applicable law, loans that benefit small businesses and small farms impacted by COVID-19 serve the long-term interest of those communities and the financial system. Generally, loans to for-profit businesses in amounts of $1 million or less are considered small business loans in CRA evaluations and will be considered as such under the lending test. Additionally, PPP loans to small businesses could receive consideration as innovative or flexible lending practices. Generally, loans to businesses greater than $1 million to small businesses that create or retain jobs would qualify as community development loans under economic development if the loans create or retain jobs or under revitalization/stabilization if they benefit primarily low- and moderate-income areas or distressed middle-income areas.”)

Joint Statement on CRA Consideration for Activities in Response to COVID-19 (March 19, 2020) (“Pursuant to the Community Reinvestment Act (CRA), the agencies will favorably consider retail banking services and retail lending activities in a financial institution’s assessment areas that are responsive to the needs of low- and moderate-income individuals, small businesses, and small farms affected by COVID-19 and that are consistent with safe and sound banking practices.”)

FRB CRA Regulations, 12 CFR 228.12(h) (“Community development loan means a loan that: (1) Has as its primary purpose community development; and (2) Except in the case of a wholesale or limited purpose bank:

(i) Has not been reported or collected by the bank or an affiliate for consideration in the bank’s assessment as a home mortgage, small business, small farm, or consumer loan, unless the loan is for a multifamily dwelling (as defined in § 1003.2(n) of this title); and

(ii) Benefits the bank’s assessment area(s) or a broader statewide or regional area that includes the bank's assessment area(s).”)

FRB CRA Regulations, 12 CFR 228.12(v) (“Small business loan means a loan included in ‘loans to small businesses’ as defined in the instructions for preparation of the Consolidated Report of Condition and Income.”)

Instructions for Preparation of Consolidated Reports of Condition and Income, FFIEC 031 and FFIEC 031 (March 2020) (“For purposes of this schedule, ‘loans to small businesses’ consist of the following:

(1) Loans with original amounts of $1 million or less that have been reported as ‘Loans secured by nonfarm nonresidential properties’ (in domestic offices) in Schedule RC-C, part I, items 1.e.(1) and 1.e. (2), column B, and

(2) Loans with original amounts of $1 million or less that have been reported in Schedule RC-C, part I:

On the FFIEC 041 for banks with less than $300 million in total assets, item 4, column B, “Commercial and industrial loans;”

On the FFIEC 041 for banks with $300 million or more in total assets, item 4.a, ‘Commercial and industrial loans to U.S. addressees;’ and

On the FFIEC 031, item 4.a, column B, “Commercial and industrial loans to U.S. addressees” in domestic offices.”)

Instructions for Preparation of Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $5 Billion, FFIEC 051 (March 2020) (“For purposes of this schedule, ‘loans to small businesses’ consist of the following:

(1) Loans with original amounts of $1 million or less that have been reported as “Loans secured by nonfarm nonresidential properties” in Schedule RC-C, Part I, items 1.e.(1) and 1.e.(2), and

(2) Loans with original amounts of $1 million or less that have been reported in Schedule RC-C, Part I, item 4, “Commercial and industrial loans.”)

FRB CRA Regulations, 12 CFR 228.12(g) (“Community development means:

(1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;

(2) Community services targeted to low- or moderate-income individuals;

(3) Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or

(4) Activities that revitalize or stabilize— (i) Low-or moderate-income geographies; (ii) Designated disaster areas; or (iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on— (A) Rates of poverty, unemployment, and population loss; or (B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals.”)