How does your institution handle a loan is put into non-accrual status after the 90/120 days, and the person is still making payments on the note?

(ex-140 days p.d. and 2 payments made, is it still p.d. with a lower prin. bal. or is it now 81 days?)

If the payments made are enough to satisfy one or more principal payments and the note is reinstated to "accrual", does your system automatically adjust the days past due? Do you have to reverse the principal pymts and then manually re-key them in? Do you wipe the slate clean for past due days once the note is reinstated?

We have had an issue with our methods and the auditors would like us to make some minor changes. Thanks.
JJJ

This is really a case by case judgement call. It depends if you think that you are going to be able to collect all the principal and interest. If the answer is no, then you should consider applying the payments to principal to try and reduce your exposure.

Isn't the real question whether the loan should remain in non-accrual status or be returned to accrual?

According to the Call Report instructions, a loan that has been placed in non-accrual is not to be returned to accrual status until a six-month history of current payment has been established and you believe that you can reasonably expect to collect the balance of principal and interest outstanding.

a lot depends on how your individual loan accounting system works -- the requirement usually is that the book balance on the GL has to be reduced before you book income.

E.G: ITI has a feature where you can post payments so that the note always shows the contract balance whereas the GL reflects the book balance. If the loan comes off non-accrual, then there is maintenance that can be done on the individual note level to increase the book value and book the income

other LAS applications may have similar features -- it is just a question of finding a guru who can tell you how to work it. If worse comes to worse, you can track the payments in EXCEL