NCUA Releases New 5300 Call Report Form

NCUA has released its new 5300 Call Report Form and accompanying Form Instructions, which will become effective Sept. 30, 2017. This release is especially important for credit unions engaged in commercial lending because the previous version of the call report had not yet been updated to reflect the January 2017 changes to the member business loans (MBL) rule.

One of the most significant changes to the rule is the new distinction between commercial loans and member business loans, and the new Call Report is updated to enable credit unions to report commercial loans and MBLs as separate categories on the form.

CUNA created this chart to help answer questions about the definition of commercial loans and MBLs. The Call Report Instructions contain a very similar list to help clarify the distinction. These instructions also provide examples to assist credit unions in calculating the loan amount they need to report for each category. Below are a few of those examples.

Commercial Loan Definition:

  • A member has $35,000 in commercial purpose loans, and the credit union grants this member an additional $40,000 in a commercial purpose line of credit. The credit union should report both loans as commercial loans as of the date the second loan is granted regardless of whether the line is drawn on.
  • In this example, the same member subsequently paid down the $35,000 commercial purpose loan to $15,000 and has a $34,000 balance on the business line of credit, making the total outstanding balance $49,000. The aggregate outstanding balance plus unfunded commitments less any portion secured by shares in the credit union or other financial institutions is still $55,000. The credit union is required to list both loans as commercial loans.

Reporting Business Loans on line 7:

  • If a member has $35,000 in business purpose loans and the credit union grants this member an additional $40,000 in business purpose loans, the credit union should report the additional $40,000 as a Member Business Loan.
  • If, in the case above, the member subsequently pays down the $35,000 business purpose loan to $15,000 and the $40,000 business loan to $34,000, making the aggregate total business purpose loans $49,000, the credit union is not required to list any of these loans as member business loans since the new aggregate loan total is $49,000 and is now below the $50,000 threshold in §723.8(c) of NCUA’s Rules and Regulations.

In addition to this guidance, the instructions explain that the reporting of commercial loans will be broken down into subcategories such as construction and development loans, loans secured by farmland, secured by multifamily residential property, secured by owner occupied non-farm non-residential property, secured by non-owner occupied non-farm non-residential property, real estate secured commercial loans, loans to finance agricultural production and other loans to farmers commercial and industrial loans, unsecured commercial loans, unsecured revolving lines of credit granted for commercial purposes, and total commercial loans to members.

For member business loans, credit unions will only report the net member business loan balance (NMBLB) and the NMBLB comprised of 1-4 Family Residential Properties. The Call Report Instructions are more than 100 pages long, but you can find the portion pertaining to business and commercial lending on page 71 of the document.

Source: NCUA

Question of the Week

Should credit unions know when an entity is subject to back-up withholding?

Only if the credit union is told that the entity is subject to back-up withholding. There are two ways a credit union can be told. First, the person opening the account on behalf of the entity could tell you when they certify the entity’s TIN. Second, the credit union could receive a “B Notice” from the IRS instructing that back-up withholding will begin.

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Federal Housing Finance Agency (FHFA)

The FHFA released its 2016 Report to Congress, which provides information about the FHFA’s examinations of Fannie Mae and Freddie Mac.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of June 16, 2017. The last update prior to this was June 15, 2017.

Questions? Contact the Compliance Hotline: 1.800.546.4465; compliance@nwcua.org.

Posted in Compliance News, NCUA.