Note Exception: Non-Accrual Int Exceeds Active Prin

Peak's Tip of the Week

Note Exception:  “Non-Accrual Int Exceeds Active Prin”

Review the following information to correct the note exception reason “Non-Accrual Int Exceeds Active Prin”.

Cause:  This note exception occurs when the Non-Accrual Interest Paid exceeds the Active Principal.  This means the loan has a negative book balance.  This note exception should not occur when the Auto Recovery Option is turned on and Shadow Loan Accounting has been properly implemented.

Customer Impact Potential:  Low.  Customer impact is low because the customer facing part of the loan is typically correct.  However, this error can have a negative impact on the books with too much of the loan balance offset to the loan loss reserve.

Resolution: The loan will need to have Principal reinstated so the Active Principal will equal the Non-Accrual Interest Paid.  The Auto Recovery Option should be turned on for all classes within the bank, however, this is only one step in the process of automating Shadow Loan Accounting.  If Shadow Loan Accounting is set up and working properly, this exception should not be appearing on the report for any loan.  If you are seeing these on the exception report at your institution, please contact us @ for more information.

Check back next week to see why you should never be manually reinstating principal on loans…