I'm looking at a loan that was made to a doctor in his individual name for personal and business investments. The LAR indicates the primary purpose is business. The doctor is part owner in a cardiology group along with two other doctors. The Loan Approval Report (LAR) indicates that the GARs of the cardiology group were considered. They are included in the financial spreads. The source of payment indicates "personal income/bonuses."

Ok. Now that you have all the details, would you have used a code 1 or 3? It appears that the GARs of the business were used in the credit decision; however, my data entry person was thrown off because the LAR indicated that the source of repayment was income, so she used a code 3. In a situation like this should we ignore the source of repayment?

IMO I'd think about excluding this from the LAR. Loans for personal investments shouldn't be included in small business loans. If this borrower is a doctor investing money isn't really his profession. Call report instructions for item 4 read:

Report loans for commercial and industrial purposes to sole proprietorships, partnerships, corporations and other business enterprises, whether secured (other than by real estate) or unsecured, single-payment or installment...Commercial and industrial loans may take the form of direct or purchased loans. Include loans to individuals for commercial, industrial and professional purposes but not for investment or personal expenditure purposes.

I totally agree with you. However, our LAR indicates the funds are to be PRIMARILY used for business purposes and it has been assigned a Call Code 4(a).

Hint: Sometimes the call codes are wrong.

I would look at the file and make sure it was coded correctly. I used to see loans that were coded as business when they were personal investment because they didn't have to do disclosures.