(a) Definitions. For purposes of this section:
(1) Accepting official means—
(i) the Reserve Bank in whose District the bank is located; or
(ii) The director
of the Division of Banking Supervision and Regulation in cases in
which the Reserve Bank cannot determine that the bank qualifies.
(2) Agriculturally
related other property means any property, real or personal, that
the bank owned on January 1, 1983, and any additional property that
it acquired prior to January 1, 1992, in connection with a qualified
agricultural loan. For the purposes of paragraph (d) of this section,
the value of such property shall include the amount previously charged
off as a loss.
(3) Participating bank means an agricultural bank (as defined in
12 U.S.C. 1823(j)(4)(A)) that, as of January 1, 1992, had a proposal
for a capital-restoration plan accepted by an accepting official and
received permission from the accepting official, subject to paragraphs
(d) and (e) of this section, to amortize losses in accordance with
paragraphs (b) and (c) of this section.
(4) Qualified agricultural loan means—
(i) loans that finance agricultural production or are secured by
farm land for purposes of Schedule RC-C of the FFIEC Consolidated
Report of Condition or such other comparable schedule;
(ii) loans secured by farm
machinery;
(iii)
other loans that a bank proves to be sufficiently related to agriculture
for classification as an agricultural loan by the Board; and
(iv) the remaining unpaid
balance of any loans described in paragraphs (a)(4)(i), (ii), and
(iii) of this section that have been charged off since January 1,
1984, and that qualify for deferral under this section.
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(b) (1) Provided there is no evidence
that the loss resulted from fraud or criminal abuse on the part of
the bank, the officers, directors, or principal shareholders, a participating
bank may amortize in its Reports of Condition and Income—
(i) any
loss on a qualified agricultural loan that the bank would be required
to reflect in its financial statements for any period between and
including 1984 and 1991; or
(ii) any loss that the bank would be
required to reflect in its financial statements for any period between
and including 1983 and 1991 resulting from a reappraisal or sale of
agriculturally related other property.
(2) Amortization under this section shall
be computed over a period not to exceed seven years on a quarterly
straight-line basis commencing in the first quarter after the loan
was or is charged off so as to be fully amortized not later than December
31, 1998.
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(c) Accounting
for amortization. Any bank that is permitted to amortize losses
in accordance with paragraph (b) of this section may restate its capital
and other relevant accounts and account for future authorized deferrals
and authorization in accordance with the instructions to the FFIEC
Consolidated Reports of Condition and Income. Any resulting increase
in the capital account shall be included in capital pursuant to part
217 of this chapter.
(d) Conditions of participation. In order for a bank to maintain
its status as a participating bank, it shall—
(1) adhere to the approved capital plan
and obtain the prior approval of the accepting official before making
any modifications to the plan;
(2) maintain accounting records for each
asset subject to loss deferral under the program that document the
amount and timing of the deferrals, repayments, and authorizations;
(3) maintain the financial
condition of the bank so that it does not deteriorate to the point where
it is no longer a viable, fundamentally sound institution;
(4) make a reasonable effort,
consistent with safe and sound banking practices, to maintain in its
loan portfolio a percentage of agricultural loans, including agriculturally
related other property, not less than the percentage of such loans
in its loan portfolio on January 1, 1986; and
(5) provide the accepting official, upon
request, with any information the accepting official deems necessary
to monitor the bank’s amortization, its compliance with the conditions
of participation, and its continued eligibility.
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(e) Revocation of eligibility for loss
amortization. The failure to comply with any condition in an
acceptance, with the capital-restoration plan, or with the conditions
stated in paragraph (d) of this section, is grounds for revocation
of acceptance for loss amortization and for an administrative action
against the bank under 12 U.S.C. 1818(b). In addition, acceptance
of a bank for loss amortization shall not foreclose any administrative
action against the bank that the Board may deem appropriate.
(f) Expiration date. The
terms of this section will no longer be in effect as of January 1,
1999.
