Credit Evaluation School Dec 2022

Internal Use Only

First Paragraph: • Translate the numerical rating to a qualitative statement of AQ (i.e. Asset quality is strong). • Adversely classified items ratio, comparisons to prior periods or exams as appropriate. • Narrate the major findings (underwriting weaknesses). • Composition of classified/criticized assets (loans, securities, OREO, etc.) and the respective classifications (Substandard, Doubtful, etc.) • Internal classification/Watch List numbers, if necessary (ex: “few downgrades from management’s internal ratings”) • Level and trend of nonaccrual and past dues, if necessary.

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Internal Use Only

Second Paragraph (Risk Rating Accuracy/Risk Identification Practices):

• Level and amount of examiner downgrades • Adequacy of internal loan grading system • Adequacy of independent loan review

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