Charge-Off

The bank will charge-off all loans whose collectivity is sufficiently questionable that we can no longer justify showing these loans on the books as assets. Our charge-off timeframes correspond with the Uniform Retail Credit Classification and Account Management Policy issued by the Federal Financial Institutions Examination Council. 

The following charge-off timeframes are used for consumer purpose loans, regardless of the system under which the loan has been booked: 

1. Closed-end retail loans past due 120 cumulative days and open-end retail loans past due 180 cumulative days from the contractual due date should be evaluated for charge-off (or charged down). 
   • Amounts deemed uncollectible should be charged-off when identified, but not later than the end of the month in which the 120 or 180-day time period elapses.
   •  Amounts will be deemed uncollectible by comparison to the value of the underlying collateral as well as any clearly identified sources of collection and with the exception that collection is highly probable. 
2. Unless the institution can clearly demonstrate and document that repayment on accounts in the bankruptcy is likely to occur, unsecured accounts in bankruptcy should be charged-off within 60 days of receipt of notification of filing from the bankruptcy court. 
   • If the timeframes outlined above are met prior to 60 days of receipt of bankruptcy, the loan will be charged-off earlier. 
   • The charge-off should be taken by the end of the month in which the applicable time period elapses. 
3. Fraudulent loans should be charged-off within 90 days of discovery or within the time frames specified in this classification policy, whichever is shorter. 
   • The charge-off should be taken by the end of the month in which the applicable time period elapses. 
4. Loans of deceased persons should be charged-off when the loss is determined or within the time frames adopted in this policy, whichever is shorter. The charge-off should be taken by the end of the month in which the applicable time period elapses. 

All loan charge-offs are to be made by the Collections Department. If the Collections Department has not been working on the account that needs to be charged off, the officer needs to initiate the charge-off with the Charge-Off Request form unless otherwise approved by bank officers within Credit Administration. This form, along with the loan file, is to be sent to the Collections Department no later than 5 days prior to month end. 

Loans are charged-off by crediting the appropriate loan category and debiting the loan loss reserve. For consumer purpose installment loans, accrued interest can be charged against the loan loss reserve because of the immaterial amounts. For all other loan types, accrued interest will be reversed against interest income prior to charging off the principal balance. Late charges and all unearned insurance will be reversed as well.

Re-Aging

There are times when we need to work with our clients to get through a temporary financial crisis caused by loss of job, medical emergencies, or change in family circumstances. When this occurs, we can re-age, extend, renew or rewrite certain loans. Accounts should never be re-aged, extended, or rewritten to mask a past due or permanent problem. 

The following are eligibility requirements for re-aging, extending, renewing, or rewriting loans: 

1. The borrower should show a renewed willingness and ability to repay the loan.
2. The account should exist for at least 9 months before allowing a re-aging, extension, renewal, referral, or rewrite. 
3. The borrower should make at least 3 minimum consecutive monthly payments or the equivalent lump sum payment before an account is re-aged. 
   • Funds may not be advanced by the institution for this purpose. 
4. No loan should be re-aged, extended, deferred, renewed, or rewritten more than once within any 12 month period - that is, at least 12 months must have elapsed since a prior re-aging. 
   • In addition, no loan should be re-aged, extended, deferred, renewed, or rewritten more than 3 times within the life of the loan. 
5. For open-end credit, an over limit account may be re-aged at its outstanding balance (including the over limit balance, interest, and fees).