RCON2150: Other Real Estate Owned

Definition

The book value (not to exceed fair value), less accumulated depreciation, if any, of all real estate other than bank premises actually owned by the bank and its consolidated subsidiaries. Includes as other real estate owned: (1) real estate acquired in any manner for debts previously contracted (including, but not limited to, real estate acquired through foreclosure and real estate acquired by deed in lieu of foreclosure), even if the bank has not yet received title to the property (hereafter referred to as 'foreclosed real estate'), (2) real estate collateral underlying a loan when the bank, branch or agency has obtained possession of the collateral, regardless of whether formal foreclosure proceedings have been instituted against the borrower. Such an 'in-substance foreclosure' should be accounted for in accordance with paragraph 34 of FASB Statement No. 15, 'Accounting by Debtors and Creditors for Troubled Debt restructurings,' as amended by FASB Statement No. 114, 'Accounting by Creditors for Impairment of a Loan.' Foreclosed real estate received in full satisfaction of a loan, including 'in-substance foreclosures,' should be recorded at the lesser of (1) the fair value of the property or (2) the recorded amount of the loan (plus the amount of any senior debt to which the property is subject) at the time of foreclosure. The lesser of these two amounts becomes the 'cost' of the foreclosed real estate. The amount by which the recorded amount of the loan exceeds the fair value of the property is a loss which must be charged to the allowance for loan losses at the time of foreclosure. Foreclosed real estate received in partial satisfaction of a loan should be recorded at the fair value of the property at the time of foreclosure and this fair value becomes the 'cost' of the foreclosed real estate. After foreclosure, each foreclosed real estate asset (including each 'in-substance' foreclosed real estate asset) must be carried at the lower of (1) the fair value of the asset minus the estimated costs to sell the asset or (2) the cost of the asset (as defined above). This determination must be made on an asset-by-asset basis. If the fair value of a foreclosed real estate asset minus the estimated costs to sell the asset is less than the asset's cost, the deficiency must be recognized as a valuation allowance against the asset. The valuation allowance should thereafter be increased or decreased (but not below zero) for changes in the asset's fair value or estimated selling costs. (3) real estate acquired and held for investment purposes (other than bank premises), (4) real estate acquisition, development, or construction (ADC) arrangements which are accounted for as investments in real estate in accordance with guidance prepared by the American Institute of Certified Public Accountants (AICPA) in notices to practitioners issued in November 1983, November 1984, and February 1986, (5) property formerly but no longer used for banking, (6) property originally acquired for future expansion but no longer intended to be used for that purpose, (7) foreclosed real estate sold under contract and accounted for under the deposit method of Accounting in Accordance with FASB Statement No. 66, 'Accounting for Sales of Real Estate.' Under this method, the seller does not record notes receivable, but continues to report the real estate and any related existing debt on its balance sheet. The deposit method is used when a sale has not been consummated and is commonly used when the initial investment in the property was inadequate and recovery of the carrying value of the property is not reasonably assured. Once these criteria have been met (and the buyer's initial investments at least 10 percent of the sales value of the real estate sold), the receivable resulting from the sale of the other real estate owned should be reported as a loan in Schedule RC-C (or Schedule C, for the FFIEC 002 report) and any gain on the sale should be recognized in accordance with FASB Statement No. 66, (8) receivables resulting from sales of other real estate owned accounted for under the installment, cost recovery, reduced profit, or percentage of completion method of Accounting in Accordance with FASB Statement No. 66, 'Accounting for Sales of Real Estate,' when the buyer's initial investment (as defined in FASB Statement No. 66) is less than 10 percent of the sales value of the real estate sold. Once this 10 percent initial investment condition has been met, the receivable should be reported as a loan in Schedule RC-C, and (9) for national banks only, real estate sold in a 'covered transaction' for the period the transaction remains 'covered.' A 'covered transaction' is defined as a sale of other real estate owned when: (a) less than 10 percent of the total sales price is in cash, (b) there is financing by the bank of all or a portion of the sales price on terms more favorable than those customarily required by the bank when it is involved only as lender, or (c) the transaction does not transfer from the bank to the purchaser the usual risks and all or most of the rewards of ownership. A transaction ceases to be 'covered' when these conditions no longer exists. Note: A financing at less than prevailing interest rates is not considered to have an interest rate more favorable than that customarily required by the bank provided that the note received is discounted to a market rate of interest in accordance with APB Opinion No. 21, 'Interest on Receivables and Payables,' and is carried on the bank's balance sheet (Schedule RC) at this discounted amount.

Source: Federal Reserve Micro Data Reference Manual (MDRM). The FFIEC call report instructions remain the authority on how to report the item.

Where RCON2150 sits on the call report

Largest reported values, Q2 2026

Total reported by quarter

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