S.C. Code Regs. § § 15-13

Current through Register Vol. 48, No. 11, November 22, 2024

Section 15-13 - State Bank Forest Tract Loans

Every State chartered bank may make real estate loans secured by first liens upon forest tracts which are properly managed in all respects. Such loans shall be in the form of an obligation or obligations secured by mortgage or other such instrument; and any State chartered bank may purchase any obligation so secured when the entire amount of such obligation is sold to the bank. The amount of any such loan shall not exceed 40 per centum of the appraised value of the economically marketable timber offered as security and the loan shall be made upon such terms and conditions as to assure that at no time shall the loan balance exceed 40 per centum of the original appraised value of the economically marketable timber then remaining. No such loan shall be made for a longer term than two years; except that any such loan may be made for a term not longer than ten years if the loan is secured by an amortized mortgage or other such instrument under the terms of which the installment payments are sufficient to amortize the principal of the loan within a period of not more than ten years and at a rate of at least 10 per centum per annum.

No State chartered bank shall make forest-tract loans in an aggregate sum in excess of 50 per centum of its capital stock paid in and unimpaired plus 50 per centum of its unimpaired surplus fund.

Provided further, that the total amount of any such loan to any one person shall not exceed 10% of the capital and surplus of any such bank, except that by approval, in writing, by two-thirds of the Directors of the bank, the amount may be extended to 15% of the bank's capital and surplus.

In addition to the above, the general conditions of loans on forest tracts are as follows:

1. The obligation evidencing the loan must be secured by a mortgage or other such instrument which is a first lien upon a forest tract which is properly managed in all respects.

2. The bank may purchase such obligation only if the entire amount is sold to the bank.

3. The loan must not exceed 40% of the appraised value of the economically marketable timber offered as security, which means 40% of the value at the time the loan is made and not the value which it is estimated the timber will have at the time it is to be cut or at the maturity date of the loan. The loan balance may at no time exceed 40% of the original appraised value of the economically marketable timber then remaining, which means that as the timber is cut at least a portion of the proceeds must be used toward payment of the loan if the maximum permissible loan were made at the outset.

4. Forest tract loans may run for only two years, except that they may run for ten years if provision is made for amortization of at least 10% per annum.

5. The aggregate amount of forest-tract loans which a bank may have outstanding may not exceed 50% of the bank's capital and surplus.

To further clarify the meaning of "properly managed," there is issued the following ruling:

Proper forest management in all respects is the application of suitable and economically sound forestry principles relating to protection, utilization and reproduction of forest tracts, and the following are indicative of such management:

A. Organized protection against forest fires is provided by the State Forest Service or other protective public or private fire protection agencies. Such protection should include provision for prompt detection and suppression of forest fires, and where considered necessary by local foresters presuppression measures such as construction of fire-breaks and fire roads.

B. In cases where hazards from attack by insects or disease are unusually high, protection is provided by an effective public or private organization, or existing roads and logging conditions are such as to make salvage of killed timber feasible.

C. Any cutting conducted during the period of the loan is of such nature as to insure reproduction and continued growth of timber tracts. Where a borrower following the advice of a qualified person in timber marking for example, this would ordinarily indicate acceptable cutting practice.

S.C. Code Regs. § 15-13