Section 13-03-28-01 - Definitions1. "Cash basis" method of income recognition is set forth in generally accepted accounting principles and means while a loan is in nonaccrual status, some or all of the cash interest payments received may be treated as interest income on a cash basis as long as the remaining recorded investment in the loan, after charge-off of identified losses, if any, is deemed to be fully collectible.2. "Charge-off" means a direct reduction (credit) to the carrying amount of a loan carried at amortized cost resulting from uncollectability with a corresponding reduction (debit) of the allowance for loan and lease loss account. Recoveries of loans previously charged off should be recorded when received.3. "Cost recovery" method of income recognition means equal amounts of revenue and expense are recognized as collections are made until all costs have been recovered, postponing any recognition of profit until that time.4. "Credit grading system" means a formal process that identifies and assigns a relative credit score to each commercial loan as set forth under chapter 13-03-06.5. "Deferral" means deferring a contractually due payment on a closed-end loan without affecting the other terms, including maturity, of the loan. The account is shown current upon granting the deferral.6. "Extension" means extending monthly payments on a closed-end loan and rolling back the maturity by the number of months extended. The account is shown current upon granting the extension. If extension fees are assessed, they should be collected at the time of the extension and not added to the balance of the loan.7. "In the process of collection" means collection of the loan is proceeding in due course either: a. Through legal action, including judgment enforcement procedures; orb. In appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future, generally within the next ninety days.8. "Loan classifications" means all loans meeting the definition of substandard, doubtful, or loss in accordance with accepted industry and regulatory guidance and as assigned during examinations.9. "New loan" means the terms of the revised loan are at least as favorable to the credit union, having terms are market-based, and profit driven, as the terms for comparable loans to other customers with similar collection risks who are not refinancing or restructuring a loan with the credit union, and the revisions to the original debt are more than minor.10. "Past due" means a loan is determined to be delinquent in relation to its contractual repayment terms including formal restructures, and must consider the time value of money. Credit unions may use the following method to recognize partial payments on "consumer credit," which includes credit extended to individuals for household, family, and other personal expenditures, including credit cards, and loans to individuals secured by their personal residence, including home equity and home improvement loans. A payment equivalent to ninety percent or more of the contractual payment may be considered a full payment in computing past due status.11. "Re-age" means returning a past due account to current status without collecting the total amount of principal, interest, and fees that are contractually due.12. "Recorded investment in a loan" means the loan balance adjusted for any unamortized premium or discount and unamortized loan fees or costs, less any amount previously charged off, plus recorded accrued interest.13. "Renewal" means underwriting a matured, closed-end loan generally at its outstanding principal amount and on similar terms.14. "Rewrite" means significantly changing the terms of an existing loan, including payment amounts, interest rates, amortization schedules, or its final maturity.15. "Total reserves" means, for the purpose of this section, net worth as defined in 13-03-06 plus the allowance for loan and lease loss account.16. "Troubled debt restructure" loans are as defined in generally accepted accounting principles.17. "Well secured" means the loan is collateralized by:a. A perfected security interest in, or pledges of, real or personal property, including securities with an estimable value, less cost to sell, sufficient to recover the recorded investment in the loan, as well as a reasonable return on that amount; orb By the guarantee of a financially responsible party who has demonstrated support of the credit by making loan payments or injecting cash or otherwise improving the financial position of the business to allow it to make loan payments.18. "Workout loans" include types of workout loans to borrowers in financial difficulties include reagings, extensions, deferrals, renewals, or rewrites. Borrower retention programs, new loans unless used to restructure or pay existing loans, skip-a-pay programs or like loans are not encompassed within this definition.N.D. Admin Code 13-03-28-01
Adopted by Administrative Rules Supplement 371, January 2019, effective 1/1/2019.General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-06-06