A business loan is secured by a person who grows flowers and sells them there. The loan is secured by the property, which includes the greenhouse, residence and business. My question is first - Call report - it seems to be excluded from agricultural production (line 3) as the person is operating a business as well as a farm. That would put it under line 4 - commercial and industrial. BUT, would the residential RE in there change things? It can't be classified as commercial real estate, either, since the category is "nonfarm nonresidential real estate".

My impression is that it is a commercial loan.

Once the call report question is resolved, that will help the CRA reporting category.

Any advice?

Thanks!

To me, it sounds like it is secured by a 1-4 family residence which would make it a 1.c. on the Call Report Schedule RC-C and thus not a CRA loan.

the purpose of the loan was for the business. Typically the residence is taken as an "abundance of caution." 1(C) states "nonfarm"

If you take that residence as collateral, be VERY CAREFUL about the abundance of caution issue. It is the rare circumstance that a lender really takes a borrowers residence on an "Abundance of Caution". This is the most widely abused issue in commercial lending now a days, especially with the smaller (non BofA type) banks.

If you took the home, it's a type 3, (small business loan secured by residential real estate) and is not reportable.

I wouldn't push the "abundance of caution" issue, I'd report as a 3. Furthermore, I'd have a serious look at your portfolio if ABC (my designation of Abundance of Caution loans) deals are out there. In this case you have a borrower with collateral of flowers. What do you think the collateral value of those flowers is when the loan goes belly up? I personally am too good of a lender to sit infront of an examiner and say that the house was just for ABC when my collateral is a bunch of tulips Would you be able to defend that deal as a true ABC deal?

Is the property one parcel? If it is, unless you make them survey off the residence, you're going to get a lien on it whether you wanted to or not. It might not even be feasible to survey off the residence. That's not really "ABC" (I like that term, Dawnie! ) but more like 'incidental collateral' (I just made that up! ) kinda like when you have to take a lien on a building to perfect your lien on equipment in the building. Do you think it's non-CRA reportable if this is the case?

Incidental collateral! Lestie HUSH!!!! god forbid a lender read that and "develop" a new type of loan nightmare for us in 2004!

I'd lean on the side of caution either way and call this a type 3 loan unless that "incidental collateral" were of such little value in relation to the other collateral (ie that equipment you discussed) that it really was incidental. (Say we have a "house" that isn't worth more than $30M but you've taken $10MM in ranch land, which is your real collateral) I'd have to relook at a deal like that before I called it a type 3, and in my case we just don't do enough farm loans to see that type of stuff so it's not worth spending time on, but if I did, I might be more flexible given that type of scenario.

In this case, we've got flowers...and a house. I honestly still couldn't see it as anything either ABC or incidental It's collateral to cover a lazy or smart lenders bumm (cuz if you think the tulips will pay off the debt you done got too much pollen in your brain!) I just wouldn't even consider reporting it