Credit Evaluation School eBook

Special Mention Rating Special Mention

A asset listed for Special Mention has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Special Mention Rating: Key Characteristics • Special Mention are loans of questionable quality, but involving insufficient risk to warrant Classification • Weak underwriting, administration, and/or imprudent lending practices (improper loan structure, inadequate loan agreements or covenants, incomplete or inadequate documentation to adequately monitor the loan) • Borrowers with adverse operating trends (declining revenues or margins) • Borrowers with ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity) • Collateral concerns • *(Special Mention assets may or may not have characteristics that management action would remedy)