HVCRE Exposure Classifier — Spring Creek Advisory

1 Loan Basics

Loan Structure

Property / Project Type

Borrower or affiliate will owner-occupy more than 50% of the completed property

2 ADC Determination

All three criteria must be present for a loan to be an HVCRE ADC exposure. If any one is absent, the loan is not subject to HVCRE treatment — document accordingly.

1 — Secured by real property: the credit facility is secured by a mortgage, deed of trust, or other lien on land or improved real estate 2 — Primarily finances ADC: the primary purpose is to acquire, develop, or construct real property into income-producing property — not incidental to another primary business purpose 3 — Future-dependent repayment: repayment is primarily dependent on future income from the property, sales proceeds, or refinancing — not on the borrower's existing operations or personal income

3 Exemption Analysis

If the loan is an ADC facility, a single qualifying exemption is sufficient to remove it from HVCRE treatment. Exemptions are evaluated in the order shown — the first one fully satisfied controls the result.

Exemption A — 1-4 Family Residential Construction

Facility finances the construction of 1-4 family residential structures (or individual condominium / cooperative units to be sold), and does not solely finance land development activities without also constructing residential structures

Exemption B — Community Development

The primary purpose of the project qualifies as community development under CRA regulations (e.g., affordable housing, economic development for LMI communities, area revitalization). Note: TIF-financed projects may qualify here if community development is the primary purpose — but TIF grants do not count toward the 15% capital test in Section 4.

Exemption C — Agricultural Land

Facility finances the acquisition, development, or construction of agricultural land (farmland) as defined in Call Report / FR Y-9C instructions — land used primarily for agricultural purposes

Exemption D — Permanent Financing of Existing Income-Producing Property

Facility finances the acquisition or refinance of an existing, completed income-producing property secured by a mortgage on that property, where existing cash flow covers debt service and expenses per the bank's permanent loan underwriting criteria

Exemption E — Project Substantially Complete & Producing Income

The financed project is substantially complete and has begun generating income in a manner satisfying the bank's permanent financing underwriting standards

4 15% Contributed Capital Test — Exemption F

If no exemption above applies, the borrower may qualify by contributing at least 15% of the appraised "as completed" value before the first bank advance. Each item is validated below against the rule's requirements.

Multi-phase projects: If this loan takes out prior debt and/or finances a subsequent phase, use the full project "as completed" appraised value (all phases combined) in Step 1 below. Borrower equity contributed in prior phases may count toward the 15% threshold — select "Prior phase equity" from the contribution type list and confirm that the funds have remained continuously in the project and were not loan proceeds. Document the prior-phase equity with reconciled cost records from the earlier loan file.

What Counts — Rule Summary

✓ Eligible: Cash for land/site acquisition; out-of-pocket pre-development costs (engineering, permits, surveys, architecture, brokerage); arm's-length developer fees; and the full appraised value of borrower-contributed land net of existing liens (appreciated value is permitted).
✗ Ineligible: Any loan proceeds (secondary lender, mezzanine, related-party); third-party grants (TIF grants, CDBG, HOME, municipal grants); pledged collateral not actually transferred; and purchaser deposits on condominium units.
Timing & Retention: Capital must be contributed before the first bank advance and must remain in the project until permanent financing is obtained, the project is sold, or the loan is paid in full.

Step 1 — Appraised "As Completed" Value

As-Completed Appraised Value

$

Use the prospective "as completed" value — not "as is," "as stabilized," or "as-if-vacant."

15% Required Threshold

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Step 2 — Capital Contributions

Add each funding source individually. Select the type — the tool validates compliance and flags ineligible items automatically. Only confirmed-eligible amounts count toward the 15% threshold.

Step 4 — Required Confirmations

Capital was (or will be) contributed before the first bank advance (other than nominal amounts to secure the lender's lien), and each contribution is documented in the credit file with supporting evidence (settlement statements, invoices, receipts, appraisals) Loan documents require all contributed and internally generated capital to remain in the project for the life of the loan — borrower cannot withdraw prior to obtaining permanent financing, selling the project, or paying the loan in full

Analysis & Rationale