As used in this part and as an administrative interpretation of terms contained in the Arkansas credit union act, the following definitions shall apply:

1. (1) “Arkansas credit union act” means Acts 1971, No. 132, as amended;

2. (2)

   1. (A) “Contractual delinquency” means any amount due and owing to a credit union by a borrower which is unpaid.
   2. (B) This constitutes a contractual delinquency regardless of the amount involved or the length of time unpaid.
   3. (C) A loan or contract becomes a contractual delinquency on the day following the date on which the borrower is required, and fails, to make a payment.
   4. (D) If a contract specifies both a due and delinquent date, the failure to make the required payment on the due date places the loan in a delinquent status.
   5. (E) When the contract gives the credit union the right to increase the total contractual payment in order to provide for future tax or insurance requirements, the failure of the credit union to exercise this right does not result in a contractual delinquency, even though the amount which the borrower is required to pay is obviously insufficient to meet future tax or insurance requirements.
   6. (F) When the contract requires that the borrower pay to someone other than the credit union all taxes, assessments, insurance premiums, etc., when they become due, the failure of the borrower to pay for such items does not create a contractual delinquency.

   7. (G)

      1. (i) The purchase of a loan does not affect the previous delinquent status of such loan.
      2. (ii) Any delinquency existing prior to purchase is included in any subsequent computation of delinquency by the purchaser.
      3. (iii) An exception to this rule is made in the case of a loan on which there exists a guaranty by the National Credit Union Administration.
   8. (H) Any loan which is modified or refinanced while delinquent will continue to be classified as contractually delinquent unless after such modification or refinancing, the borrower has made all payments required for the next eight-month period following the modification or refinancing;

3. (3) “Insolvency” means a credit union which is deemed insolvent or bankrupt because:

   1. (A) It cannot meet its obligations as they come due in the normal course of business; or
   2. (B) Considering the credit union's assets and liabilities, that the assets, if made immediately available, net recoverable assets, would not be sufficient to discharge the credit union's obligations to its creditors and members;

4. (4)

   1. (A) “Modification” means an additional advance of funds to or for the benefit of a borrower by an institution for any purpose or the changing of any of the terms of the contract.
   2. (B) When a new borrower assumes an existing debt of a loan and the old borrower is not relieved from liability, the loan is not considered to have been modified.
   3. (C) If the old borrower is released from all liability in connection with the assumption of liability by a new borrower, the loan is considered to have been modified;

5. (5) “Risk assets” means, for the purpose of establishing the reserves required by Section 26 of the Arkansas credit union act, all assets except those following shall be considered risk assets:

   1. (A) Cash on hand;
   2. (B) Deposits and/or shares in federally insured banks, savings and loan associations, and credit unions to the limits of the federal insurance;
   3. (C) Deposits and/or shares in federally insured banks, savings and loan associations, and credit unions in excess of the federal insured limit if the institution and depositing credit union have entered into a written agreement which allows the depositing credit union to withdraw said funds immediately upon written notice;
   4. (D) Assets which are insured by, fully guaranteed as to principal and interest by, or due from the United States Government, its agencies, the Federal National Mortgage Association, or the Government National Mortgage Association;
   5. (E) Loans to students insured under the provisions of Title IV, Part B of the Higher Education Act of 1965, 20 U.S.C. § 1071 et seq., or similar state insurance programs;
   6. (F) Loans insured under Title I of the National Housing Act, 12 U.S.C. § 1703, by the Federal Housing Administration;
   7. (G) Common trust investments which deal in investments authorized under subdivision (5)(C) of this section;
   8. (H) Prepaid expenses;
   9. (I) Accrued interest on non-risk investments;
   10. (J) Furniture and equipment;
   11. (K) Land and buildings;
   12. (L) Loans which are purchased from liquidating credit unions guaranteed by the National Credit Union Administration; and
   13. (M) Loans fully secured by a pledge of shares in the lending credit union, equal to and maintained to at least the amount of the loan outstanding; and
6. (6) “Unimpaired capital and surplus” means any shares, unrestricted reserves, undivided earnings, and undistributed income less the principal balance due on any loan two (2) or more months delinquent.