Appx B to Part 741 (1-1-20 ED)

Pt. 741, App. B

12 CFR Ch. VII (1–1–20 Edition)

asset range. In order to gather information
and to monitor IRR exposure at larger credit
unions as it relates to the share insurance
fund, NCUA will use this as the criterion for
definition of large credit unions for purposes
of this section of the guidance. Given the increased exposure to the share insurance
fund, NCUA encourages the responsible officials at large credit unions that are complex
or high risk to fully understand all aspects
of interest rate risk, including but not limited to the credit union’s IRR assessment
and potential directional changes in IRR exposures. For example, the credit union
should consider the following:
• A policy which provides for the use of
outside parties to validate the tests and limits commensurate with the risk exposure and
complexity of the credit union;
• IRR measurement systems that report
compliance with policy limits as shown both
by risks to earnings and net economic value
of equity under a variety of defined and reasonable interest rate scenarios;
• The effect of changes in assumptions on
IRR exposure results (e.g. the impact of slower or faster prepayments on earnings and
economic value); and,
• Enhanced levels of separation between
risk taking and risk assessment (e.g. assignment of resources to separate the investments function from IRR measurement, and
IRR monitoring and oversight).

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IX. DEFINITIONS
Basis risk: The risk to earnings and/or
value due to a financial institution’s holdings of multiple instruments, based on different indices that are imperfectly correlated.
Interest rate risk: The risk that changes in
market rates will adversely affect a credit
union’s net economic value and/or earnings.
Interest rate risk generally arises from a
mismatch between the timing of cash flows
from fixed rate instruments, and interest
rate resets of variable rate instruments, on
either side of the balance sheet. Thus, as interest rates change, earnings or net economic value may decline.
Option risk: The risk to earnings and/or
value due to the effect on financial instruments of options associated with these instruments. Options are embedded when they
are contractual within, or directly associated with, the instrument. An example of a
contractual embedded option is a call option
on an agency bond. An example of a behavioral embedded option is the right of a residential mortgage holder to vary prepayments on the mortgage through time, either
by making additional premium payments, or
by paying off the mortgage prior to maturity.
Repricing risk: The repricing of assets or liabilities following market changes can occur

in different amounts and/or at different
times. This risk can cause returns to vary.
Spread risk: The risk to earnings and/or
value resulting from variations through time
of the spread between assets or liabilities to
an underlying index such as the Treasury
curve.
Yield curve risk: The risk to earnings and/or
value due to changes in the level or slope of
underlying yield curves. Financial instruments can be sensitive to different points on
the curve. This can cause returns to vary as
yield curves change.
[77 FR 5162, Feb. 2, 2012, as amended at 77 FR
57990, Sept. 19, 2012. Redesignated at 83 FR
7964, Feb. 23, 2018]

APPENDIX B TO PART 741—INTERPRETIVE
RULING AND POLICY STATEMENT ON
LOAN WORKOUTS, NONACCRUAL POLICY, AND REGULATORY REPORTING OF
TROUBLED
DEBT
RESTRUCTURED
LOANS
This Interpretive Ruling and Policy Statement (IRPS) establishes requirements for
the management of loan workout 1 arrangements, loan nonaccrual, and regulatory reporting of troubled debt restructured loans
(herein after referred to as TDR or TDRs).
This IRPS applies to all federally insured
credit unions.
Under this IRPS, TDR loans are as defined
in generally accepted accounting principles
(GAAP) and the Board does not intend
through this policy to change the Financial
Accounting Standards Board’s (FASB) definition of TDR in any way. In addition to existing agency policy, this IRPS sets NCUA’s
supervisory expectations governing loan
workout policies and practices and loan accruals.
WRITTEN LOAN WORKOUT POLICY AND
MONITORING REQUIREMENTS 2
For purposes of this policy statement,
types of workout loans to borrowers in financial difficulties include re-agings, extensions,
deferrals, renewals, or rewrites. See the
Glossary entry on ‘‘workouts’’ for further descriptions of each term. Borrower retention
programs or new loans are not encompassed
within this policy nor considered by the
Board to be workout loans.
1 Terms defined in the Glossary will be
italicized on their first use in the body of
this guidance.
2 For additional guidance on member business lending extension, deferral, renewal,
and rewrite policies, see Interagency Policy
Statement on Prudent Commercial Real Estate
Loan Workouts (October 30, 2009) transmitted
by Letter to Credit Unions No. 10–CU–07, and
available at http://www.ncua.gov.

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Pt. 741, App. B

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Loan workouts can be used to help borrowers overcome temporary financial difficulties, such as loss of job, medical emergency, or change in family circumstances
like loss of a family member. Loan workout
arrangements should consider and balance
the best interests of both the borrower and
the credit union.
The lack of a sound written policy on
workouts can mask the true performance
and past due status of the loan portfolio. Accordingly, the credit union board and management must adopt and adhere to an explicit written policy and standards that control the use of loan workouts, and establish
controls to ensure the policy is consistently
applied. The loan workout policy and practices should be commensurate with each
credit union’s size and complexity, and must
be in line with the credit union’s broader
risk mitigation strategies. The policy must
define eligibility requirements (i.e., under
what conditions the credit union will consider a loan workout), including establishing
limits on the number of times an individual
loan may be modified.3 The policy must also
ensure credit unions make loan workout decisions based on the borrower’s renewed willingness and ability to repay the loan. If a
credit union engages in restructuring activity on a loan that results in restructuring
the loan more often than once a year or
twice in five years, examiners will have
higher expectations for the documentation of
the borrower’s renewed willingness and ability to repay the loan. NCUA is concerned
about restructuring activity that pushes existing losses into future reporting periods
without improving the loan’s collectability.
One way a credit union can provide convincing
evidence
that
multiple
restructurings improve collectability is to
perform validation of completed multiple
restructurings that substantiate the claim.
Examiners will ask for such validation documentation if the credit union engages in
multiple restructurings of a loan.
In addition, the policy must establish
sound controls to ensure loan workout actions are appropriately structured.4 The pol3 Broad based credit union programs commonly used as a member benefit and implemented in a safe and sound manner limited
to only accounts in good standing, such as
Skip-a-Pay programs, are not intended to
count toward these limits.
4 In developing a written policy, the credit
union board and management may wish to
consider similar parameters as those established in the FFIEC’s ‘‘Uniform Retail Credit
Classification and Account Management Policy’’ (FFIEC Policy). 65 FR 36903 (June 12,
2000). The FFIEC Policy sets forth specific
limitations on the number of times a loan
can be re-aged (for open-end accounts) or ex-

icy must provide that in no event may the
credit union authorize additional advances
to finance unpaid interest and credit union
fees. The credit union may, however, make
advances to cover third-party fees, excluding
credit union commissions, such as forceplaced insurance or property taxes. For loan
workouts granted, the credit union must
document the determination that the borrower is willing and able to repay the loan.
Management must ensure that comprehensive and effective risk management and internal controls are established and maintained so that loan workouts can be adequately controlled and monitored by the
credit union’s board of directors and management, to provide for timely recognition
of losses,5 and to permit review by examiners. The credit union’s risk management
framework must include thresholds based on
aggregate volume of loan workout activity
that trigger enhanced reporting to the board
of directors. This reporting will enable the
credit union’s board of directors to evaluate
the effectiveness of the credit union’s loan
workout program, any implications to the
organization’s financial condition, and to
make any compensating adjustments to the
overall business strategy. This information
will also then be available to examiners upon
request.
To be effective, management information
systems need to track the principal reductions and charge-off history of loans in workout programs by type of program. Any decision to re-age, extend, defer, renew, or rewrite a loan, like any other revision to contractual terms, needs to be supported by the
tended, deferred, renewed or rewritten (for
closed-end accounts). Additionally, NCUA
Letter to Credit Unions (LCU) 09–CU–19,
‘‘Evaluating Residential Real Estate Mortgage Loan Modification Programs,’’ outlines
policy requirements for real estate modifications. Those requirements remain applicable
to real estate loan modifications but could
be adapted in part by the credit union in
their written loan workout policy for other
loans.
5 Refer to NCUA guidance on charge-offs
set forth in LCU 03–CU–01, ‘‘Loan Charge-off
Guidance,’’ dated January 2003. Examiners
will require that a reasonable written
charge-off policy is in place and that it is
consistently applied. Additionally, credit
unions need to adjust historical loss factors
when calculating ALLL needs for pooled
loans to account for any loans with protracted charge-off timeframes (e.g., 12
months or greater). See discussions on the
latter point in the 2006 Interagency ALLL
Policy Statement transmitted by Accounting Bulletin 06–1 (December 2006).

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Pt. 741, App. B

12 CFR Ch. VII (1–1–20 Edition)

credit union’s management information systems. Sound management information systems are able to identify and document any
loan that is re-aged, extended, deferred, renewed, or rewritten, including the frequency
and extent such action has been taken. Documentation normally shows that the credit
union’s personnel communicated with the
borrower, the borrower agreed to pay the
loan in full under any new terms, and the
borrower has the ability to repay the loan
under any new terms.

Nonaccrual Status

Credit unions must ensure appropriate income recognition by placing loans in nonaccrual status when conditions as specified
below exist, reversing or charging-off previously accrued but uncollected interest,
complying with the criteria under GAAP for
Cash or Cost Recovery basis of income recognition, and following the specifications
below regarding restoration of a nonaccrual
loan to accrual status.7 This policy on loan
accrual is consistent with longstanding credit union industry practice as implemented by

Credit unions may not accrue interest 10 on
any loan upon which principal or interest
has been in default for a period of 90 days or
more, unless the loan is both ‘‘well secured’’
and ‘‘in the process of collection.’’ 11 Additionally, loans will be placed in nonaccrual status if maintained on a Cash (or Cost Recovery) basis because of deterioration in the financial condition of the borrower, or for
which payment in full of principal or interest is not expected. For purposes of applying
the ‘‘well secured’’ and ‘‘in process of collection’’ test for nonaccrual status listed above,
the date on which a loan reaches nonaccrual
status is determined by its contractual
terms.
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 (i.e., after charge-off of
identified losses, if any) is deemed to be fully
collectable. The reversal of previously accrued, but uncollected, interest applicable to
any loan placed in nonaccrual status must be
handled in accordance with GAAP.12 Where

6 Subsequent
Call Reports and accompanying instructions will reflect this policy,
including focusing data collection on loans
meeting the definition of TDR under GAAP.
In reporting TDRs on regulatory reports, the
data collections will include all TDRs that
meet the GAAP criteria for TDR reporting,
without the application of materiality
threshold exclusions based on scoping or reporting policy elections of credit union preparers or their auditors. Credit unions
should also refer to the recently revised
standard from the FASB, Accounting Standards Update No. 2011–02 (April 2011) to the
FASB Accounting Standards Codification
entitled, Receivables (Topic 310), ‘‘A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.’’
This clarified the definition of a TDR, which
has the practical effect in the current economic environment to broaden loan workouts that constitute a TDR. This standard is
effective for annual periods ending on or
after December 15, 2012.
7 Placing a loan in nonaccrual status does
not change the loan agreement or the obligations between the borrower and the credit
union. Only the parties can effect a restructuring of the original loan terms or otherwise settle the debt.

8 The federal banking agencies are the
Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller
of the Currency.
9 FFIEC Report of Condition and Income
Forms and User Guides, Updated September
2011, http://www.fdic.gov.
10 Nonaccrual of interest also includes the
amortization of deferred net loan fees or
costs, or the accretion of discount. Nonaccrual of interest on loans past due 90 days
or more is a longstanding agency policy and
credit union practice.
11 A purchased credit impaired loan asset
need not be placed in nonaccrual status as
long as the criteria for accrual of income
under the interest method in GAAP is met.
Also, the accrual of interest on workout
loans is covered in a separate section of this
IRPS later in the policy statement.
12 Acceptable
accounting treatment includes a reversal of all previously accrued,
but uncollected, interest applicable to loans
placed in a nonaccrual status against appropriate income and balance sheet accounts.
For example, one acceptable method of accounting for such uncollected interest on a
loan placed in nonaccrual status is: (1) To reverse all of the unpaid interest by crediting

REGULATORY REPORTING OF WORKOUT LOANS
INCLUDING TDR PAST DUE STATUS
The past due status of all loans will be calculated consistent with loan contract terms,
including amendments made to loan terms
through a formal restructure. Credit unions
will report delinquency on the Call Report
consistent with this policy.6
LOAN NONACCRUAL POLICY

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the NCUA over the last several decades. The
balance of the policy relates to member business loan workouts and is similar to the
FFIEC policies adopted by the federal banking agencies 8 as set forth in the FFIEC Call
Report for banking institutions and its instructions.9

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National Credit Union Administration

Pt. 741, App. B

assets are collectable over an extended period of time and, because of the terms of the
transactions or other conditions, there is no
reasonable basis for estimating the degree of
collectability—when
such
circumstances
exist, and as long as they exist—consistent
with GAAP the Cost Recovery Method of accounting must be used.13 Use of the Cash or
Cost Recovery basis for these loans and the
statement on reversing previous accrued interest is the practical implementation of relevant accounting principles.
Restoration to Accrual Status for All Loans
except Member Business Loan Workouts

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A nonaccrual loan may be restored to accrual status when:
• Its past due status is less than 90 days,
GAAP does not require it to be maintained
on the Cash or Cost Recovery basis, and the
credit union is plausibly assured of repayment of the remaining contractual principal
and interest within a reasonable period;
• When it otherwise becomes both well secured and in the process of collection; or
• The asset is a purchased impaired loan
and it meets the criteria under GAAP for accrual of income under the interest method
specified therein.
In restoring all loans to accrual status, if
any interest payments received while the
loan was in nonaccrual status were applied
to reduce the recorded investment in the
loan the application of these payments to
the loan’s recorded investment must not be
reversed (and interest income must not be
credited). Likewise, accrued but uncollected
interest reversed or charged-off at the point
the loan was placed on nonaccrual status
cannot be restored to accrual; it can only be
the ‘‘accrued interest receivable’’ account on
the balance sheet, (2) to reverse the uncollected interest that has been accrued during
the calendar year-to-date by debiting the appropriate ‘‘interest and fee income on loans’’
account on the income statement, and (3) to
reverse any uncollected interest that had
been accrued during previous calendar years
by debiting the ‘‘allowance for loan and lease
losses’’ account on the balance sheet. The
use of this method presumes that credit
union management’s additions to the allowance through charges to the ‘‘provision for
loan and lease losses’’ on the income statement have been based on an evaluation of
the collectability of the loan and lease portfolios and the ‘‘accrued interest receivable’’
account.
13 When a purchased impaired loan or debt
security that is accounted for in accordance
with ASC Subtopic 310–30, ‘‘ReceivablesLoans and Debt Securities Acquired with Deteriorated Credit Quality,’’ has been placed
on nonaccrual status, the cost recovery
method should be used, when appropriate.

recognized as income if collected in cash or
cash equivalents from the member.
Restoration to Accrual Status on Member
Business Loan Workouts 14
A formally restructured member business
loan workout need not be maintained in nonaccrual status, provided the restructuring
and any charge-off taken on the loan are
supported by a current, well documented
credit evaluation of the borrower’s financial
condition and prospects for repayment under
the revised terms. Otherwise, the restructured loan must remain in nonaccrual status. The evaluation must include consideration of the borrower’s sustained historical
repayment performance for a reasonable period prior to the date on which the loan is returned to accrual status. A sustained period
of repayment performance would be a minimum of six consecutive payments and would
involve timely payments under the restructured loan’s terms of principal and interest
in cash or cash equivalents. In returning the
member business workout loan to accrual
status, sustained historical repayment performance for a reasonable time prior to the
restructuring may be taken into account.
Such a restructuring must improve the collectability of the loan in accordance with a
reasonable repayment schedule and does not
relieve the credit union from the responsibility to promptly charge off all identified
losses.
The graph below provides an example of a
schedule of repayment performance to demonstrate a determination of six consecutive
payments. If the original loan terms required
a monthly payment of $1,500, and the credit
union lowered the borrower’s payment to
$1,000 through formal member business loan
restructure, then based on the first row of
the graph, the ‘‘sustained historical repayment
performance for a reasonable time prior to the
restructuring’’ would encompass five of the
pre-workout consecutive payments that were
at least $1,000 (Months 1 through 5); so, in
total, the six consecutive repayment burden
would be met by the first month post workout (Month 6). In the second row, only one of
the pre-workout payments would count toward the six consecutive repayment requirement (Month 5), because it is the first month
in which the borrower made a payment of at
least $1,000, after failing to pay at least that
amount. The loan, therefore, would remain
on nonaccrual for at least five post-workout
consecutive payments (Months 6 through 10)
provided the borrower continues to make
14 This policy is derived from the ‘‘Interagency Policy Statement on Prudent Commercial Real Estate Loan Workouts’’ NCUA
and the other financial regulators issued on
October 30, 2009.

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Pt. 741, App. B

12 CFR Ch. VII (1–1–20 Edition)

payments consistent with the restructured
terms.
Pre-workout
Month 1

Month 2

$1,500
1,500

$1,200
1,200

Month 3
$1,200
900

Post-workout
Month 4
$1,000
875

Month 5

Month 6

$1,000
1,000

After a formal restructure of a member
business loan, if the restructured loan has
been returned to accrual status, the loan
otherwise remains subject to the nonaccrual
standards of this policy. If any interest payments received while the member business
loan was in nonaccrual status were applied
to reduce the recorded investment in the
loan the application of these payments to
the loan’s recorded investment must not be
reversed (and interest income must not be

$1,000
1,000

Month 7
$1,000
1,000

Month 8
$1,000
1,000

Month 9
$1,000
1,000

Month 10
$1,000
1,000

credited). Likewise, accrued but uncollected
interest reversed or charged-off at the point
the member business workout loan was
placed on nonaccrual status cannot be restored to accrual; it can only be recognized
as income if collected in cash or cash equivalents from the member.
The following tables summarize nonaccrual and restoration to accrual requirements previously discussed:

TABLE 1—NONACCRUAL CRITERIA
Action
Nonaccrual on All Loans

Nonaccrual on Member
Business Loan Workouts.

Condition identified

Additional consideration

90 days or more past due unless loan is both
well secured and in the process of collection;
or
If the loan must be maintained on the Cash or
Cost Recovery basis because there is a deterioration in the financial condition of the borrower, or for which payment in full of principal
or interest is not expected.
Continue on nonaccrual at workout point and
until restore to accrual criteria are met.

See Glossary descriptors for ‘‘well secured’’ and
‘‘in the process of collection.’’
Consult GAAP for Cash or Cost Recovery basis
income recognition guidance. See also Glossary Descriptors.

See Table 2—Restore to Accrual.

TABLE 2—RESTORE TO ACCRUAL
Action

Condition identified

Additional consideration

Restore to Accrual on All
Loans except Member
Business Loan Workouts.

When the loan is past due less than 90 days,
GAAP does not require it to be maintained on
the Cash or Cost Recovery basis, and the
credit union is plausibly assured of repayment
of the remaining contractual principal and interest within a reasonable period.
When it otherwise becomes both ‘‘well secured’’
and ‘‘in the process of collection’’; or
The asset is a purchased impaired loan and it
meets the criteria under GAAP for accrual of
income under the interest method.
Formal restructure with a current, well documented credit evaluation of the borrower’s financial condition and prospects for repayment
under the revised terms.

See Glossary descriptors for ‘‘well secured’’ and
‘‘in the process of collection.’’
Interest payments received while the loan was in
nonaccrual status and applied to reduce the
recorded investment in the loan must not be
reversed and income credited. Likewise, accrued but uncollected interest reversed or
charged-off at the point the loan was placed
on nonaccrual status cannot be restored to accrual.

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Restore to Accrual on
Member Business Loan
Workouts.

The evaluation must include consideration of the
borrower’s sustained historical repayment performance for a minimum of six timely consecutive payments comprised of principal and interest. In returning the loan to accrual status,
sustained historical repayment performance for
a reasonable time prior to the restructuring
may be taken into account.
Interest payments received while the member
business loan was in nonaccrual status and
applied to reduce the recorded investment in
the loan must not be reversed and income
credited. Likewise, accrued but uncollected interest reversed or charged-off at the point the
member business loan was placed on nonaccrual status cannot be restored to accrual.

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Pt. 741, App. B

GLOSSARY 15

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‘‘Cash Basis’’ method of income recognition
is set forth in GAAP 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 (i.e., after charge-off of identified
losses, if any) is deemed to be fully collectible.16
‘‘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 ALLL. Recoveries of loans
previously charged off should be recorded
when received.
‘‘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.17
‘‘Generally accepted accounting principles
(GAAP)’’ means official pronouncements of
the FASB as memorialized in the FASB Accounting Standards Codification® as the
source of authoritative principles and standards recognized to be applied in the preparation of financial statements by federally insured credit unions in the United States with
assets of $10 million or more.
‘‘In the process of collection’’ means collection of the loan is proceeding in due course
either: (1) Through legal action, including
judgment enforcement procedures, or (2) 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, i.e., generally within the next 90 days.
15 Terms defined in the Glossary will be
italicized on their first use in the body of
this guidance.
16 Acceptable accounting practices include:
(1) Allocating contractual interest payments
among interest income, reduction of the recorded investment in the asset, and recovery
of prior charge-offs. If this method is used,
the amount of income that is recognized
would be equal to that which would have
been accrued on the loan’s remaining recorded investment at the contractual rate;
and, (2) accounting for the contractual interest in its entirety either as income, reduction of the recorded investment in the asset,
or recovery of prior charge-offs, depending
on the condition of the asset, consistent with
its accounting policies for other financial reporting purposes.
17 FASB Accounting Standards Codification
(ASC) 605–10–25–4, ‘‘Revenue Recognition,
Cost Recovery.’’

‘‘Member Business Loan’’ is defined consistent with Section 723.1 of NCUA’s Member
Business Loan Rule, 12 CFR 723.1.
‘‘New Loan’’ means the terms of the revised
loan are at least as favorable to the credit
union (i.e., 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.
‘‘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,’’ i.e., 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 90 percent or more of the
contractual payment may be considered a
full payment in computing past due status.
‘‘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.
‘‘Troubled Debt Restructuring’’ is as defined
in GAAP and means a restructuring in which
a credit union, for economic or legal reasons
related to a member borrower’s financial difficulties, grants a concession to the borrower
that it would not otherwise consider.18 The
restructuring of a loan may include, but is
not necessarily limited to: (1) The transfer
from the borrower to the credit union of real
estate, receivables from third parties, other
assets, or an equity interest in the borrower
in full or partial satisfaction of the loan, (2)
a modification of the loan terms, such as a
reduction of the stated interest rate, principal, or accrued interest or an extension of
the maturity date at a stated interest rate
lower than the current market rate for new
debt with similar risk, or (3) a combination
of the above. A loan extended or renewed at
a stated interest rate equal to the current
market interest rate for new debt with similar risk is not to be reported as a restructured troubled loan.
‘‘Well
secured’’
means
the
loan
is
collateralized by: (1) 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, or (2)
18 FASB ASC 310–40, ‘‘Troubled Debt Restructuring by Creditors.’’

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12 CFR Ch. VII (1–1–20 Edition)

by the guarantee of a financially responsible
party.
‘‘Workout Loan’’ means a loan to a borrower in financial difficulty that has been
formally restructured so as to be reasonably
assured of repayment (of principal and interest) and of performance according to its restructured terms. A workout loan typically
involves a re-aging, extension, deferral, renewal, or rewrite of a loan.19 For purposes of
this policy statement, workouts do not include loans made to market rates and terms
such as refinances, borrower retention actions, or new loans.20
[77 FR 31993, May 31, 2012. Redesignated at 83
FR 7964, Feb. 23, 2018]

PART 745—SHARE INSURANCE AND
APPENDIX

Subpart B—Payment of Share Insurance
and Appeals

Subpart A—Clarification and Definition of
Account Insurance Coverage
Sec.
745.0 Scope.
745.1 Definitions.
745.2 General principles applicable in determining insurance of accounts.
745.3 Single ownership accounts.
745.4 Revocable trust accounts.

kpayne on VMOFRWIN702 with $$_JOB

745.5 Accounts held by executors or administrators.
745.6 Accounts held by a corporation, partnership, or unincorporated association.
745.7 Shares accepted in a foreign currency.
745.8 Joint ownership accounts.
745.9–1 Trust accounts.
745.9–2 Retirement and other employee benefit plan accounts.
745.10 Accounts held by government depositors.
745.11 Accounts evidenced by negotiable instruments.
745.12 Account obligations for payment of
items forwarded for collection by depository institution acting as agent.
745.13 Notification
to
members/shareholders.
745.14 Interest on lawyers trust accounts
and other similar escrow accounts.

19 ‘‘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.
‘‘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.
‘‘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.
‘‘Renewal’’ means underwriting a matured,
closed-end loan generally at its outstanding
principal amount and on similar terms.
‘‘Rewrite’’ means significantly changing
the terms of an existing loan, including payment amounts, interest rates, amortization
schedules, or its final maturity.
20 There may be instances where a workout
loan is not a TDR even though the borrower
is experiencing financial hardship. For example, a workout loan would not be a TDR if
the fair value of cash or other assets accepted by a credit union from a borrower in full
satisfaction of its receivable is at least equal
to the credit union’s recorded investment in
the loan, e.g., due to charge-offs.

745.200 General.
745.201 Processing of insurance claims.
745.202 Judicial review.
APPENDIX TO PART 745—EXAMPLES OF INSURANCE COVERAGE AFFORDED ACCOUNTS IN
CREDIT UNIONS INSURED BY THE NATIONAL
CREDIT UNION SHARE INSURANCE FUND
AUTHORITY: 12 U.S.C. 1752(5), 1757, 1765, 1766,
1781, 1782, 1787, 1789; title V, Pub. L. 109–
351;120 Stat. 1966.
SOURCE: 51 FR 37560, Oct. 23, 1986, unless
otherwise noted.
EDITORIAL NOTE: Nomenclature changes to
part 745 appear at 84 FR 1608, Feb. 5, 2019.

Subpart A—Clarification and Definition of Account Insurance
Coverage
§ 745.0 Scope.
The regulation and appendix contained in this part describe the insurance coverage of various types of member accounts. In general, all types of
member share accounts received by the
credit union in its usual course of business, including regular shares, share
certificates, and share draft accounts,
represent equity and are insured. For
the purposes of applying the rules in
this part, it is presumed that the owner
of funds in an account is an insured
credit union member or otherwise eligible to maintain an insured account in
a credit union. These rules do not extend insurance coverage to persons not
entitled to maintain an insured account or to account relationships that

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