Posted By: TBCraigh


We have a few CRE loans that are impaired but still making payments. For loans of this nature is cash flow or collateral preferred?

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Aaron Lenhart

The determining factor is whether the impaired loan is collateral dependent. An institution must measure impairment on impaired collateral-dependent loans based on the fair value of the collateral rather than the present value of expected future cash flows. An impaired loan is collateral dependent if “repayment is expected to be provided solely by the underlying collateral,” which includes repayment from the proceeds from the sale of collateral, cash flow from the continued operation of the collateral, or both.

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