Indiana Code Title 28. Financial Institutions § 28-7-1-24

Sec. 24. (a) All entrance charges shall, after payment of the organization expenses, be known as reserve income, and shall be added to the regular reserve of the credit union.  At the close of the dividend period, there shall be set apart to the regular reserve ten percent (10%) of gross income until the regular reserve shall equal seven and one-half percent (7 1/2 %) of the total of outstanding loans, then five percent (5%) of gross income until the regular reserve shall equal ten percent (10%) of the total of outstanding loans.  Whenever the regular reserve falls below ten percent (10%) or seven and one-half percent (7 1/2 %) of the total of outstanding loans, it shall be replenished by regular contributions to maintain the reserve goals of seven and one-half percent (7 1/2 %) or ten percent (10%).  The regular reserve shall be held to meet contingencies and shall not be distributed to the members except upon dissolution of the credit union.

(b) A credit union may have an undivided profits account.  The undivided profits account may be transferred to the regular reserve.

(c) The department may, by rule, revise the formula prescribed by this section.  A revised formula must be prudent and must reasonably be expected to protect the credit unions.

(d) Financial statements of credit unions must provide for full and fair disclosure of all assets, liabilities, and members' equity, including such allowance for credit loss accounts necessary to present fairly the financial position, and all income and expenses necessary to present fairly the results of operation for the period concerned.

(e) The maintenance of the allowance for credit losses or other losses does not exempt a credit union from the requirement set forth in subsection (a).  The totals of the regular reserve and the allowance for credit losses account shall be combined for determining the percentage of gross income to be transferred to the regular reserve.

(f) Loan and investment losses of a credit union must be charged against the corresponding loan or investment category of the allowance for credit losses.  Adjustments to the allowance for credit losses shall be made before the distribution of any dividend so that the allowance for credit loss represents the value of loans and investments and anticipated losses resulting from:

(g) Adjustments to the allowance for credit losses must be recorded in the appropriate allowance for credit loss subcategory corresponding to the asset type being reserved against.