I am wondering how other community banks with an internal auditor handle the reporting of audits and loan reviews. The bank I came from was larger than the bank I work for now and had an audit committee and and loan review committee. We reviewed new consumer and mortgage loans on a quarterly basis and commercial loans were reviwed on annual/bi-annual basis based on the total dollar amount of the relationship.

Here I am reviewing the newconsumer and mortgage loans on a quarterly basis just as before, but commercial loans reviews are outsourced and I do not cooridnate those reviews. The internal audits (GL recons, wires, reg E, NACHA, etc) are submitted to the audit committee comprised of all external directores (3 people). The loan reviews are curretnly being discussed at the loan committee which includes 2 of the 3 external directors on the audit commitee and I am not present for the discussion.

How are other banks handling a loan review function that is performed in house? I don't have a problem with the loan reviwes being discussed at the loan committee. In fact, that is a good thing. However, the external directors are not given any of the reports in advance to review. Thanks for your input!

Our loan review function is completely outsourced. The reports are provided to our holding company Audit Committee in advance of their meetings and then the bank-level loan committees (also comprised of outside directors) also receive the reports. Some directors may overlap the two committees.

Thanks!

Our bank submits all loan review reports to the audit committee. We have one loan review officer - the key thing is that whoever is doing your loan reviews should be reporting independently those reviews. They should not be reporting to lenders. Our loan review officer administratively reports to a lender (not my preference), but all her reports are the ultimate authority of the audit committee. Hope that helps. Audit used to do the loan reviews (until this year) and we still submitted them all to audit committee. A loan committee would be fine as long as there is not a lender that can vote/approve on that committee and it's comprised of people independent from lending function (board members ideal).

Oh, and if you are doing the reviews, you should definitely be there!!!

Auditjg... thanks! You have very good points that I looked over.