I am looking at a loan with the purpose of Debt Consolidation. It is secured by 34 acres of improved pasture, but I also saw a house on the land from the appraisal. Would we consider this a farm loan or not reportable?

For CRA, it doesn't matter if there is a residence on the farmland. What matters is the dollar amount (up to and including $500,000) and that it is business purpose debt being refinanced.

Okay, thanks!

KB - we were instructed by FRB to include *anything* that showed up on 1b and = or < $500,000 as small farm, regardless of purpose. I believe the example given was something along the lines of "if a farmer takes out $20,000 to pay for his daughter's wedding and secures it with pecan trees, report it." Do you disagree with this?

Oh my! FRB as in Federal Reserve Bank?

Yes. Could have just been the opinion of our particular set of examiners, though. You never know.

Well, that's true.LOL I will keep digging to make sure though, because I don't want to get it wrong.

Technically, that is true.

The call report instructions for loans secured by farmland state:

Report loans secured by farmland and improvements thereon,
as evidenced by mortgages or other liens. Farmland includes all land known to be used or usable for agricultural purposes,
such as crop and livestock production.

Farmland includes grazing or pasture land, whether tillable or
not and whether wooded or not.

Include loans secured by farmland that are guaranteed by the
Farmers Home Administration (FmHA) or by the Small Business
Administration (SBA) and that are extended, serviced, and
collected by any party other than FmHA or SBA.

Exclude loans for farm property construction and land
development purposes (report in Schedule RC-C, part I,
item 1.a).

So, if the loan falls into that category on the call report, it is reportable.

OK. Our bunch pretty much want us to go by the Call Report code + loan amount first, purpose/borrower type second. We do very little weeding out of the reportable CR sections.

As long as it correctly falls into the call reports sections for small business/small farm, the loan is reportable (subject to dollar amount, of course!)

Yeah, I have to do a little bit of "no, that doesn't go there" but generally speaking anything on 1b, 1e, 3, or 4a that meets the $ limits shows up on our LR.

Resurrecting this thread from many years ago because I'm questioning my current thought process on reporting of small farm loans. We have historically had a very small handful of small farm loans on our CRA LAR (talking no more than five to ten a year) however as the result of mergers, we will begin to see more. The call report definition of 1.b Secured by Farmland includes "all land known to be used OR USABLE for agricultural purpose..." as stated above. To make sure we are reporting all loans appropriately, we review appraisals of loans that are coded vacant land to verify they should not be coded farmland. If the land is not being used for farming purposes but the highest and best use of the land is agricultural we define that as being "or usable" for farmland. In the last few months a couple consumer loans have originated that are secured by land that could be "usable" for farmland but are not currently. There is no revenue because the land is being used for consumer recreational purposes.

The more I think this over, I'm worried maybe this has not been an accurate way to identify some of these loans. However, if we need to make a switch, now is the time, as our volume for small farm loans begins to increase. If a loan is truly a consumer loan secured by land that could be used agriculturally defined by the appraisal, should the loan be reported on the CRA LAR?

Bump

I would not report consumer purpose loans for land as small farm loans. That would not be consistent with the Call Report coding for the loans.

I am confused. The Call Report (I thought) requires you to report all loans secured by farmland. I was not aware that there was also a purpose test?

I am not applying a purpose test.

I am saying that land that is not used for farming is not farmland for the purposes of Call Report classification. The 11/5 post said the land securing the loan was used for consumer recreation purposes. Land that is used for consumer recreation purposes does not seem to be consistent with the definition of farmland for the purposes of either RC-C, part 1, item 1.b because it is not used for "agricultural purposes, such as crop and livestock production," and it is not "grazing or pasture land." Further Comply13 did not say that the loans are guaranteed by the Farmers Home Administration or the Small Business Administration, so they don't fit under that aspect of the instructions for RC-C, part 1, item 1.b.

Based on the description of the collateral and the loan provided, item 1.a(2) or item 1.e of RC-C part 1 seem the best options.

This past thread might be useful
Call Report Question - Real Estate Loans

The poster stated: If the land is not being used for farming purposes but the highest and best use of the land is agricultural we define that as being "or usable" for farmland. In the last few months a couple consumer loans have originated that are secured by land that could be "usable" for farmland but are not currently.

You stated: I would not report consumer purpose loans for land as small farm loans.

The only point I was making was that If the highest and best use of the land is agricultural in the appraisal, what the current owner is doing with it or whether or not you think it is a consumer purpose loan is moot.

Why would the bank's determination that the best and highest use of the land is for farmland outweigh the owner's usage of the land?

Because the instruction say: Report loans secured by farmland and improvements thereon, as evidenced by mortgages or other liens. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland includes grazing or pasture land, whether tillable or not and whether wooded or not.

If the highest use value in an appraisal is agriculture, how could that land not be usable for agricultural purposes? The instructions say to report loans evidenced by mortgages or other liens on such land. It does not say to report loans if the intent of the loan is to use the land as farmland or that the loan has to be for agricultural purposes.

The post doesn't reference any reliance on appraisals, only the bank's internal review of all loans coded as vacant land.

Sorry if it was not clear, but we do rely on appraisals to give us the highest and best use of the land.

Comply13 - I thought you stated it pretty clear to me.

"To make sure we are reporting all loans appropriately, we review appraisals of loans that are coded vacant land to verify they should not be coded farmland. If the land is not being used for farming purposes but the highest and best use of the land is agricultural we define that as being "or usable" for farmland."

Hence my opinion.

What is everyone's opinion on a loan under $500k to " ABC FARM LLC" which is a holding company for farming assets, and the purpose is to buy more equipment. Cash secured. Loan type 2?