I know this may seem like a silly question. We have a branch that is using change in terms when adding new money on the Ag lines of credit. These are not consumer real estate (so not disclosable). I'm trying to present to them the reasons why it's cleaner to do a new note. Does anyone have any thoughts? Any other regulation out there? Thanks!

Why would they be doing a change in terms for an advance on an Ag LOC? How does the loan agreement call for advances to be evidenced on the LOC? Are they to be evidenced by individual notes, modifications agreements (change in terms), GL Tickets to the master note, etc.? Are these modification agreements approved by legal and consistent with any applicable state laws?

I don't believe they have been approved by legal. I'll check with our state laws. Essentially, they are re-writing the notes to increase the note amount via a change in terms form instead of a regular note. I'll have to take a look at the note verbage.

Dan, it sounds like an overall increase, rather than draws within the original parameters.

I see nothing wrong with using a modification agreement in those instances.

Exactly. They are increasing the line due to factors in regards to Ag pricing. However, they may have 2-3 increases in any given year. You still see no problem with that?

If this is what is happening then there is nothing wrong in using modification agreements.