I know someone will have an answer to these easy questions!

Is there a requirement as to when a loan has to be charged off? How about when it must go into non-acrual?

Maybe the FFIEC Uniform Retail Credit Classification and Account Management Policy is what you're looking for. (?) It was detailed in OCC Bulletin 2000-20, dated June 22, 2000.

Wyogirl

Also consider the accounting standards - FASB 114? governs impaired loans.

A lot of when loans must be charged off and/or placed on non-accural are governed by accounting standards in addition any regulatory requirements.

Your public accounting firm should also be able to help you.

Thanks for the suggestions, it seems everything there is subjective. They say we are required to write it off if we know we aren't going to see any cash. What's reasonable? Our policy has a "guideline" of 120 to 180 days past due for chargeoff but it seems there are several out there past that. We are a community bank regulated by FDIC. Just want to make sure I'm not missing any definitive benchmarks.

There is some subjectivity as you could have a delinquent loan still paying and not yet a "loss", as in a Ch. 13 fully secured.

It has been years since I worked with classification requirements and even that was OCC, not FDIC.

Short of direct guidance cited here, and because this policy has such an impact on safety and soundness issues, ALLL, etc., you should discuss the objectives with your regulators and ensure they agree with your methodology.

Anytime the collection of a loan is in doubt, you can place it on non accrual. You do not have to wait for the account to become a certain number of days delinquent before you can do this. It becomes a question of when the bank wants to stop kidding itself that its going to collect the money.

Generally if an account is 90 days past due and there is no clear resolution or payment plan in place the loan should be considered "Doubtful" This is when you need to give consideration to non-accrual, if that hasn't been done already, and to take an honest look at what the odds for ultimate collection are. If not good or if it looks like a long term collection effort is required charge it off.

Charge off does not mean collection stops. You need to have an aggressive effort in place to work charge off loans. Peoples circumstances change. Jobs are found, incomes become normal again and 99% of the people will make good on an old obligation if they are asked. It always amazed me that once a loan is charged off, many bankers never attempt any type of recovery.

All recoveries go directly to the bottom line as income

The call report instructions state that a loan must be placed in non-accrual if it is 90 days past due unless it is both well-secured and in the process of collection. We have had examiners translate "in the process of collection" to mean that litigation is in process.

Are these loans secured that are 180 days past due? If so, you should be trying to recover the collateral. If they are unsecured, your loan policy should address the time frame for charging them off.

Hope this helps.