Credit Evaluation School Instructor eBook - Oct 2023

Internal Use Only

Loan Selection Coverage • Loan volume or particular area of the loan trial • History can dictate how much to review • Confidence in management also lends to coverage Resources • Number of employees assigned to examination • Length of time allowed on site/scheduling

• Coverage is usually referenced as a percentage of the dollar volume of either all loans or of a specific type of loan. • Many states have their own standards. In Iowa, we have a minimum of 20% of the entire portfolio; however, on average, we end up looking at 30 ‐ 40% once the typical review items are included (will be covered in coming slides). • If management does not have a strong track record of self ‐ identifying loan problems and issues, we would generally review more of the portfolio. Or, if bank has suddenly increased a segment of the portfolio, i.e. hotel loans, we would likely take a sample of this new segment.