Nonrefundable loan origination fees
Deferred and amortized over the life of the loan as an adjustment to the loan's yield. When the loan is not closed, nonrefundable fees are credited to the current period earnings.
Points
allow the bank to recoup costs incurred during the origination process while increasing the yield to maturity on the loan if it's prepaid
direct costs
deferred and recognized as an adjustment to the loan's yield using the effective interest method to provide a constant yield to maturity
direct costs (unsuccessful origination)
costs must be expensed in the period in which the costs were incurred or deferred in the period in which the origination is determined to be unsuccessful
incremental direct costs
costs to originate a loan that result directly from and are essential to the lending transaction and would not have been incurred by the lender had that lending transaction not occurred (i.e. outside loan broker fees, outside appraisals, etc.)
certain direct loan origination costs
incurred by the lender during underwriting
indirect loan costs
not associated w a specific transaction; should be expensed as incurred. (i.e. advertising, servicing, etc.)
Record $100k loan w $3k fees
Debit to loan: 100,000Credit to official checks: 97,000Credit to deferred origination fee: 3,000
Record $1k in loan origination costs
Debit to deferred loan origination costs: 1,000Credit to demand deposits: 1,000
Interest revenue
beginning of period carrying balance x effective interest rateAccount is closed out to RE through the income summary account @ YE
accrued interest receivable
beginning of period loan balance x stated interest rate
amortization of net deferred origination fee
interest revenue - accrued interest receivable
Record quarterly interest accrual
Debit to interest receivable: xDebit to net deferred origination fee: yCredit to interest revenue: x + y
Recording loan pmt w a check
Debit cash items in process of collection: 16,275Credit to loan: 6275Credit to accrued interest receivable: 10,000
Record loan payoff
Debit cash items in process of collection: 103,098Debit net deferred origination fee: 1,474Credit to loan: 93,725Credit to accrued interest receivable: 9,373Credit to interest revenue: 1,474*Any remaining unamortized net deferred origination fee is taken immediately into income
Record commitment fee
Debit to demand deposits: 4,000Credit to deferred loan commitment fee: 4,000
Record standby LOC origination costs
Debit to deferred standby LOC origination costs: 1,000Credit to demand deposits: 1,000
Record draw on standby LOC funded thru loan
Debit to loan: 100,000Credit to due from correspondent bank: 100,000
Record late pmt fee receivable
Debit late pmt fee receivable: 100Credit fee income on loans: 100
Record receipt of loan pmt and late pmt fee
Debit cash items in process of collection: 4,398Credit to loan: 1,014Credit to accrued interest receivable: 3,284Credit to late pmt fee receivable: 100
Nonaccrual criteria
1. asset is maintained on a cash basis bc of deterioration in the financial condition of the borrower2. pmt in full or P or I isn't expected3. P or I has been in default for >90 days unless asset is both well secured and in process of collection
Well-secured
1. collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full, or2. the guarantee of a financially responsible party
process of collection
1. Collection of the asset is proceeding in due course either through legal action, including judgement enforcement procedures, or2. 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
Accounting for uncollected interest in non accrual
1. Reversing all unpaid interest by crediting "accrued interest receivable"2. Reverse uncollected interest by debiting appropriate "interest and fee income on loans" account3. Reverse any uncollected interest accrued during previous calendar years by debiting "ALLL
Reverse interest accrued on non accrual loan
Debit to interest income on loans: 13,221Credit to net deferred loan origination fee: 204Credit to accrued interest receivable: 13,017
Reverse loan late payment fee receivable
Debit to fee income on loans: 300Credit to late payment fee receivable: 300
Reverse december interest income accrual
Debit to ALLL: 3,318Credit net deferred loan origination fee: 51Credit accrued interest receivable: 3,267
Restoring loan to accrual criteria
1. None of the loan's principal and interest is due and unpaid, and the bank expects repayment of the remaining contractual principal and interest; or2. the loan becomes well secured and is in the process of collection
Record monthly loan pmt w escrow
Debit to demand deposits: 883Credit to escrow deposits: 283Credit to loans: 100Credit to accrued int. receivable: 500
Record first installment of RE taxes
Debit to escrow deposits: 1,200Credit to official checks: 1,200
Record depreciation on HFS loans
Debit to loss on HFS loans (expense): 50,000Credit to valuation allowance - HFS loans (contra asset): 50,000
Capitalization criteria
1. ownership test: the lease transfers ownership of the property to the lessee by the end of the lease term2. bargain purchase option test: the lease contains a bargain purchase option3. economic life test: the lease term is equal to 75% of more of the estimated economic life of the leased property4.recovery of investment test: the PV of the minimum lease payments equals or exceeds 90% of the FV of the leased property at the inceptionMust meet following:5. collectability test: collectibility of the minimum lease payments is reasonably predictable6. uncertainty test: no important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease
Record purchase of equipment and origination of lease
Debit to lease receivable: 121,559Credit to unearned income: 21,559Credit due from correspondent bank: 100,000
Record first lease payment:
Debit to cash items in process of collection: 26,456Credit to lease receivable: 26,456
Record lease interest income
Debit to unearned income: 8,825Credit to interest income-lease: 8,825
To accrue to estimated loan and lease losses
Debit to PLLL: 300,000Credit to ALLL: 300,000
Partial charge-off
Debit to ALLL: 10,000Credit to loans: 10,000
Record sale proceeds received and recovery on charged-off loan
Debit due from correspondent bank: 195,000Credit loans: 190,000Credit ALLL: 5,000
Record sale proceeds received and additional loss on loan
Debit due from correspondent bank: 180,000Debit ALLL: 10,000Credit loans: 190,000