Carryover does not necessarily have to be classified in the “substandard” category, and there may be circumstances in which it is not classified at all. The OCC defines “carryover debt” as “any amount of short-term operating debt left unpaid because of the borrower’s inability to generate sufficient income to repay the debt. . . .” Based on the OCC’s Comptroller Manual, carryover debt “by its nature . . . suggests a well-defined credit weakness; . . . [but] examiners should not automatically classify carryover debt and should carefully examine all relevant data to ensure an accurate rating.” The OCC goes on to discuss the factors that should be considered when examiners classify carryover debt.

For resources related to our guidance, please see:

• OCC Comptroller’s Manual, Agricultural Lending, printed page 62 (“Carryover debt: Any amount of short-term operating debt left unpaid because of the borrower’s inability to generate sufficient income to repay the debt. The unpaid amount is typically restructured into a longer-term loan.”)

• OCC Comptroller’s Manual, Agricultural Lending, printed page 25 (“By its nature, carryover debt suggests a well-defined credit weakness; it is important, however, for the bank to understand which part of an operating line is true carryover debt. Examiners should not automatically classify carryover debt and should carefully examine all relevant data to ensure an accurate rating. Some factors may lead a farmer not to pay off operating lines while not resulting in carryover debt. For example, a farmer who has a strong crop year may delay crop sales or prepay expenses to reduce income tax liability. While a balance may be left on the operating line at renewal, this would not be an indication of carryover debt. Examiners should consider the following factors when analyzing carryover debt: . . . .”)