Credit Evaluation School - May 2023

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• A review of the previous ROE lists appraisal violations on multiple credits and during the current loan review, newly originated loans have similar violations. • During pre-planning of the loan scope, examiners discover several loans over the state’s legal lending limit. Management dismisses concern by saying the loans are to “good customers.”

Lack of a Structured Lending Format

• Bank makes all of its commercial real estate loans with fixed interest rates and for fully amortizing 30-year periods. • Monthly interest and annual principal payment on loan when borrower’s income is monthly.

Poor Oversight of Lending

Numerous Federal and State Violations Pertaining to Lending

• Several lenders made loans which exceed their loan authority. • Concentrations in Commercial Real Estate were found to exceed internal policy, but management was unaware.

MATCH THE RED FLAGS TO THE EXAMPLES PROVIDED

• A review of the previous ROE lists appraisal violations on multiple credits and during the current loan review, newly originated loans have similar violations. • During pre-planning of the loan scope, examiners discover several loans over the state’s legal lending limit. Management dismisses concern by saying the loans are to “good customers.”

Lack of a Structured Lending Format

• Bank makes all of its commercial real estate loans with fixed interest rates and for fully amortizing 30-year periods. • Monthly interest and annual principal payment on loan when borrower’s income is monthly.

Poor Oversight of Lending

Numerous Federal and State Violations Pertaining to Lending

• Several lenders made loans which exceed their loan authority. • Concentrations in Commercial Real Estate were found to exceed internal policy, but management was unaware.