One of our directors is president of a university. He has no ownership interest in the university. We made a loan to the university and now we have had to downgrade that loan. Can anyone speak from experience about how this might be viewed by regulators?

From my understanding, if he does not have an ownership interest in the university then I think you are OK.

I have no personal experience with particulars such as these, but this director/university president is in a horrible conflict of interest given that the loan is on your watch list. Is he on your loan committee ? He will need to recuse himself. Is it a public or private university ? I recommend the loan be moved as soon as possible out of the bank.

The Director is not on the loan committee. The university is private and the loan is actually a letter of credit that has not had any draws made against it.