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For CRA loan reporting purposes, if we have farm borrower who also has revenues from a side business, how should we treat the revenue from the side business for purposes of determining whether the borrower qualifies as a small farm or a small business? – IBA Compliance Connection

IBA Compliance Connection

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For CRA loan reporting purposes, if we have farm borrower who also has revenues from a side business, how should we treat the revenue from the side business for purposes of determining whether the borrower qualifies as a small farm or a small business?

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When determining whether the borrower qualifies as a small business or a small farm, the CRA rules state that you should consider only “the revenues that the bank considered in making its credit decision.” For example, if the borrower has a business and a farm, if the bank considered the borrower’s income from both businesses when the loan was made, then the income should be aggregated.

For resources related to our guidance, please see below:

  • FDIC CRA regulations — 12 CFR 345.42(b)(1)(iv) (the number and amount of small business and small farm loans to businesses and farms with gross annual revenues of $1 million or less, using the revenues that the bank considered in making its credit decision)
  • FFIEC 2013 CRA Guide, p. 14 (“Generally, an institution should rely on the revenues that it considered in making its credit decision when indicating whether a small business or small farm borrower had gross annual revenues of $1 million or less. For example, in the case of affiliated businesses, such as a parent corporation and its subsidiary, if the institution considered the revenues of the entity’s parent or a subsidiary corporation of the parent as well, then the institution would aggregate the revenues of both corporations to determine whether the revenues are $1 million or less.”)