Credit Evaluation School Instructor eBook - Oct 2023

Internal Use Only

UNACCEPTABLE OR HIGH-RISK LOANS Other Considerations • Loans where management has no expertise • Loans that require special handling or controls • Abnormal amount of loans involving out of territory borrowers • Loans involving brokered deposits or link financing

• As a reminder, bank should not be making loans that require specialized expertise, handling, or controls. • It should be a red flag if there are a lot of out of territory loans – how many banks did these customers pass to do business at this bank? Generally, if a bank starts taking some marginal borrowers, they all seem to find their way to this bank. • Brokered deposit/linked financing – interest rate risk concerns with potential term mismatches.