Credit Evaluation School - May 2023

Internal Use Only

What does it mean when a loan is placed on nonaccrual? • Loan becomes a nonearning asset • Loan must be reported as nonaccrual • Accrued interest is charged off • Future payments are applied to principal • Customer is typically NOT notified • Bank maintains two accounting records for the account

Internal Use Only

Loan should be reported as nonaccrual if… Loan is maintained on a cash basis because of deterioration in the financial condition of the borrower. OR When payment in full of principal or interest is not expected. OR When principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection.