NAICS Guidance

Does anyone know of a good resource for guidance on how to code commercial customers with an NAICS code. We have some differing opinions based on the loan purpose vs the type of entity the borrower is. I am looking for something other than:

http://www.naics.com/search.htm

NAICS codes relate to the business itself, not the purpose of the loan. It is used to classify businesses.

If you have a manufacturing company with a construction loan, the NAICS code is for the type of manufacturing company, nothing to do with the fact it is doing some construction.

"What is NAICS and how is it used?

The North American Industry Classification System (NAICS, pronounced Nakes) was developed as the standard for use by Federal statistical agencies in classifying business establishments for the collection, analysis, and publication of statistical data related to the business economy of the U.S. NAICS was developed under the auspices of the Office of Management and Budget (OMB), and adopted in 1997 to replace the old Standard Industrial Classification (SIC) system. It was also developed in cooperation with the statistical agencies of Canada and Mexico to establish a 3-country standard that allows for a high level of comparability in business statistics among the three countries. NAICS is the first economic classification system to be constructed based on a single economic concept. Click here to learn more about the background, the development and the difference between NAICS and the SIC."

The FAQ on the page you linked to gives advice on coding a business.


http://www.naics.com/faq.htm#q4

I'm surprised there is disagreement or confusion. Your bank should put a procedure in place because if management is using those codes for concentrations of credit you will have a problem. The codes are rather straightforward.

I've been spending quite a bit of time with NAICS Codes lately so thought I'd throw in my two cents worth.

We code loans with NAICS Codes, but for our own purposes we "drilled" down further into the way we code these loans, primarily directed at CRE loans and those that are owner/investor rather than owner-occupied. We have alot of loans in the NAICS Code "Real Estate, Rental and Leasing" Category. Rather than just use the R/E, Rental & Leasing category we reviewed the loan to determine repayment source. We deemed it helped us more to have that loan with an NAICS code of Food Service rather than a basic R/E, R, L code if the building was soley leased as a pizza parlour. Those that were apartment complexes or totally mixed-use strip centers stay at R/E, R, L code.

We also don't loose track that these are R/E, R, L as we can determine that from the Owner/Investor occupancy code on the loan.

Along with the loan type, call report code and collateral code.

That is a good method to track your exposure to certain industries. I have used internal codes in the same way to break out owner occupied, not owner occupied, type of tenant - for the same reason.

We project to be a CRE bank by the end of 2011. We have an exam in Feb 2011 by the OCC and want to be able to stratify the portfolio six ways to Sunday.

We started creating reports for management and the Board and realized the R/E, Rental and Leasing category was a large piece of the pie with no additional identifying information. We felt it would behoove* us to know what was in that category. Drilling down in the NAICS Code made the most sense and makes our management information reports more informative.

I also didn't want to add another code to maintain in our loan system.

*how 'bout that word! Extra credit for using it, huh?

One other use for NAICS codes that requires industry accuracy - use of RMA statement studies. If you participate, you must categorize accurately. As a user of the data, you just need to manually know your customer's correct code (at the primary level), not a drilled down level.