Credit Evaluation School, Sacramento, CA

Red Flags

Ineffective or Lax Credit Underwriting on New or Existing Loans

Borrower is Frequently Overdrawn or Experiencing Cash Flow Difficulties

Evergreen Loans

Insider Transactions

Over-Lending To Individuals And Industries

• Lessons learned from the financial crisis showed that institutions that did not monitor concentrations and did not have limits in place suffered the most losses.

Inexperienced Loan Officers

• Ag loans, asset based lending and complex CRE loans require a certain skill set. • Loan officers who do not have the experience to properly manage their portfolio are at risk to make mistakes that could cause losses. • The AQ lead should obtain bios on new lenders. • A sample of an inexperienced lenders portfolio should be reviewed.

• Could be a red flag under several scenarios. • Institutions with understaffed lending may not have the time to adequately serve the needs of the existing borrowing customers and possibly agreeing to unprudent terms in order to retain customers. • Inadequate staffing of lending support functions could lead to inadequate credit underwriting or processing errors which could lead to losses.

Inadequate Staffing