The Writing of Business Memo to Revise

	Interoffice Memorandum Constancy National Bank
Date:	March 8, 1997
To:	All Commercial Banking Division Heads, Bank Presidents, Officers, Associates and Credit Analysts
From:	Mike Roberts/William Reichert
Division:	Relationship Credit
Extension:	7-2435
Regarding:	90 DAY PAST DUE LOANS
	In order to comply with the requirements of FASB 114 (Accounting for Impaired Loans) CNB must amend the way it accounts for 90 day past due loans. Specifically, the following two changes are necessary: Lenders submitting memos to Credit Administration stating that 90 day past due loans are "well-secured and in the process of collection" must complete the attached form, which also includes the representation that there will not be any significant delay in the receipt of principal or interest. Loans that are not "well-secured and in the process of collection" must be considered impaired and be downgraded to a risk rating of 7 or 8, immediately upon becoming 90 days past due. In order to comply with this requirement the Credit Advisors will automatically downgrade these credits to risk class 7, if a completed form is not received prior to the loan becoming 90 days past due. Since the requirement of FASB 114 could greatly effect the level of CNB's non-performing loans, and ultimately the reserves and profitability of the band, it is imperative that lenders monitor their past due loans, and correct any errors prior to the 90 day delinquency point. If a loan is "well-secured and in the process of collection" and will become 90 days past due the lender should complete the attached form and forward it to their Credit Advisor during the month in which the loan will become 90 days past due. All loans will be restored to their original risk rating if they are brought completely current and the officer notifies the Credit Advisor of this event. If you have any questions regarding these new procedures please contact your Credit Advisor. Attachment

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