Call Report - Small Farm Code 3

Posted By: CalifDreamin

Call Report - Small Farm Code 3 - 04/13/17 09:02 PM

We are having much discussion over the Call Report Code 3 for Loans to finance agricultural production and other loans to farmers. So, I'm curious as to how others report these. The way the instructions read, in summary, you code the loan as a 3 for:

1. All agricultural purpose loans, whether made to farm 7 ranch owner or non-farmer.

2. ALL other loans made to farmers. (it doesn't exclude consumer loans from this from what we can tell - if you know the borrower is a farmer, you report even consumer loans as a call code 3). - This is the one that is in much discussion.

Because of this from the instructions:
Quote:
Loans to farmers for household, family, and other personal expenditures (including credit cards) that are not readily identifiable as being made to farmers need not be broken out of Schedule RC-C, part I, item 6, for inclusion in this item.


it would seem that if you know the borrower is a farmer, you code it as a 3 regardless. It doesn't say that you only code it as a 3 if he's a full time farmer, or if the majority of his income comes from farming, or if repayment is from farming, etc. There's just not a ton of detail (other than if the loan is for the business unrelated to farming, then you code it as a 4a).

Thoughts?

From the Call Report Instructions:


Quote:
3 Loans to finance agricultural production and other loans to farmers. On the FFIEC 041, report in column B and, on the FFIEC 031, report in columns A and B, as appropriate, loans for the purpose of financing agricultural production. Include such loans whether secured (other than those that meet the definition of a “loan secured by real estate”) or unsecured and whether made to farm and ranch owners and operators (including tenants) or to nonfarmers. All other loans to farmers, other than those excluded below, should also be reported in this item.

Include as loans to finance agricultural production and other loans to farmers:

(1) Loans and advances made for the purpose of financing agricultural production, including the growing and storing of crops, the marketing or carrying of agricultural products by the growers thereof, and the breeding, raising, fattening, or marketing of livestock.

(2) Loans and advances made for the purpose of financing fisheries and forestries, including loans to commercial fishermen.

(3) Agricultural notes and other notes of farmers that the bank has discounted for, or purchased from, merchants and dealers, either with or without recourse to the seller.

(4) Loans to farmers that are guaranteed by the Farmers Home Administration (FmHA) or by the Small Business Administration (SBA) and that are extended, serviced, and collected by a party other than the FmHA or SBA. Include SBA “Guaranteed Interest Certificates,” which represent a beneficial interest in the entire SBA-guaranteed portion of an individual loan, provided the loan is for the financing of agricultural production or other lending to farmers. (Exclude SBA “Guaranteed Loan Pool Certificates,” which represent an undivided interest in a pool of SBA-guaranteed portions of loans. SBA “Guaranteed Loan Pool Certificates” should be reported as securities in Schedule RC-B, item 2.a, or, if held for trading, in Schedule RC, item 5.)

(5) Loans and advances to farmers for purchases of farm machinery, equipment, and implements.

(6) Loans and advances to farmers for all other purposes associated with the maintenance or operations of the farm, including purchases of private passenger automobiles and other retail consumer goods and provisions for the living expenses of farmers or ranchers and their families.

Loans to farmers for household, family, and other personal expenditures (including credit cards) that are not readily identifiable as being made to farmers need not be broken out of Schedule RC-C, part I, item 6, for inclusion in this item.

Exclude from loans to finance agricultural production and other loans to farmers:

(7) Loans that meet the definition of a “loan secured by real estate” (report in Schedule RC-C, part I, item 1).

(8) Loans to farmers for commercial and industrial purposes, e.g., when a farmer is operating a business enterprise as well as a farm (report in Schedule RC-C, part I, item 4).

(9) Loans to farmers for the purpose of purchasing or carrying securities (report in Schedule RC-C, part I, item 9.b).

(10) Loans to farmers secured by oil or mining production payments (report in Schedule RC-C, part I, item 4).
Posted By: rlcarey

Re: Call Report - Small Farm Code 3 - 04/13/17 09:19 PM

I don't see anything wrong with your analysis.
Posted By: CalifDreamin

Re: Call Report - Small Farm Code 3 - 04/13/17 09:23 PM

Thank you, Randy! I think it's just difficult for staff to code a consumer loan as anything else since "that's how we've always done it." It should always be accurate to the instructions, but these things really come to light once you are a CRA reporter and start training staff on correct call report coding.
Posted By: rlcarey

Re: Call Report - Small Farm Code 3 - 04/13/17 09:49 PM

I don't think you are alone with this problem. Staff is trained how to code loans in a generic fashion. It is usually the accountants that care about the call report instructions. I have seen the lack of communication between the two create significant call reporting issues in a number of organizations over the years.
Posted By: CalifDreamin

Re: Call Report - Small Farm Code 3 - 04/19/17 07:18 PM

I'm serious when I ask this, but I've looked in the call report instructions and call report definitions and don't see anything to guide me to explain to staff, but how would you define "farmer" for call report coding purposes? (I've been asked several times now.)

I found the USDA definition for farm and family farm farm, but not farmer - and really, that's still not the call report definition, so I'm just not sure we can go by that. Not to mention, it's pretty complicated and much more detail than our staff probably gets from most of our small farmers (e.g. customer may get a W2 from a totally separate business, but deals in cows or grows grapes on the side).