Credit Evaluation School Instructor eBook - Oct 2023

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• Several loans on the bank’s internal watchlist lacked annual reviews, even though updated financials were in the credit file. • Construction loans are made without any inspection requirement. • Bank has multiple pieces of OREO, and some properties have not been visited in over 12 months. • Several loans were approved with DSCR below bank’s loan policy, no exception approvals were noted. • Several loans were missing environmental due diligence required by bank’s loan policy. • Repayment analyses of individuals do not include a deduction for personal living expenses. • Non ‐ recurring capital gains were included in the global cash flow analysis. • Repayment analysis of a strip mall included no allocation for vacancy or reserves.

Non ‐ Compliance With Loan Policies and Procedures

Inadequate Credit Analysis

Failure to Detect Existing and Emerging Loan Problems

6

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• Several loans on the bank’s internal watchlist lacked annual reviews, even though updated financials were in the credit file. • Construction loans are made without any inspection requirement. • Bank has multiple pieces of OREO, and some properties have not been visited in over 12 months. • Several loans were approved with DSCR below bank’s loan policy, no exception approvals were noted. • Several loans were missing environmental due diligence required by bank’s loan policy. • Repayment analyses of individuals do not include a deduction for personal living expenses. • Non ‐ recurring capital gains were included in the global cash flow analysis. • Repayment analysis of a strip mall included no allocation for vacancy or reserves.

Non ‐ Compliance With Loan Policies and Procedures

Inadequate Credit Analysis

Failure to Detect Existing and Emerging Loan Problems

7