Bank Analysis School

Internal Use Only

Loan Classification Decision #2 (Smith Farming)

Basic Facts: • Smith Farming, LLC has an equipment loan that is severely past due. • The operation has been unsuccessful, and a farm sale is being held next month. • The last financial statement indicates the equipment securing the loan is worth $300,000; however, it is unknown how much the auction will bring. • The loan balance is $300,000.

How would you classify this loan?

Internal Use Only

Basic Facts: • Babe Ruth has an unsecured $5,000 loan for personal expenses. • He is unable and unwilling to make any more payments on the debt. • The loan is currently 240 days past due. Loan Classification Decision #3 (Babe Ruth)

How would you classify this loan?