Skip to content
BOL Conferences
Thread Options
#288029 - 12/13/04 03:42 PM Loan Review
Curious Banker Offline
100 Club
Joined: May 2004
Posts: 184
Midwest
I am trying to revamp our internal loan review process. We currently review 50% by aggregate loan dollar of our entire commercial loan portfolio. I think that the percentage is too high. I would appreciate any suggestions and posts on how you handle your loan review. Also, we are OCC regulated and I want to keep them happy as well. Thank you!!!

Return to Top
Audit
#288030 - 12/13/04 04:05 PM Re: Loan Review
Anonymous
Unregistered

I have worked at two community banks and we both do 30 to 40% coverage. We also do some targeted reviews based on risk assessment of the portfolio. I have not had examiners complain, but I have not been at a national bank.

Return to Top
#288031 - 12/13/04 04:32 PM Re: Loan Review
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
OCC generally uses 60% as a rule of thumb for a minimum. Are you calculating as % of dollars or # of loans? Also, you can use some creativity in getting the coverage - a review of your largest relationships, a review of problem loans, a review of newly booked loans affirming the upfront rating, etc.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

Return to Top
#288032 - 12/13/04 05:13 PM Re: Loan Review
Creditcop Offline
Diamond Poster
Creditcop
Joined: Sep 2002
Posts: 1,685
Indiana
We review at least 60% as a minimum. We also make sure the review all of the largest relationships as defined in the loan policy. Also be sure to evaluate the customers that carry more risk, such as land development and construction.

If you are reviewing 50% and the examiners are agreeing with the loan review ratings, then you should be ok. The examiners want to make sure that the bank is reviewing loans correctly to make sure that loan review is functioning properly. Loan review percentages will also depend on the level of credit risk in your loan portfolio. The higher the risk, the more loans that should be reviewed. Also make sure that the examiners understand how creditworthiness and loan grades are evaluated and assigned.

Return to Top
#288033 - 12/13/04 06:38 PM Re: Loan Review
Curious Banker Offline
100 Club
Joined: May 2004
Posts: 184
Midwest
It is by % of loan dollars. Luckily, our portfolio is comprised of A paper. I was hoping to suggest # of loans by loan officer instead of aggregate $$$ but after reading 2 posts that recommend 60% of loans I might not. Your insight is appreciated. Thanks!

Return to Top
#288034 - 12/13/04 10:18 PM Re: Loan Review
Creditcop Offline
Diamond Poster
Creditcop
Joined: Sep 2002
Posts: 1,685
Indiana
Wish I had a portfolio of "A" paper. However, there is job security for loan review in lesser quality loan portfolios.

Return to Top
#288035 - 12/14/04 06:07 PM Re: Loan Review
Anonymous
Unregistered

Although we have a target of 65%, we currently review 63% of the dollar amount of the commercial lending portfolio (Audit takes care of consumer/residential). The 2003 Annual BAI Loan Review Survey reported an average commercial loan coverage rate of 57% for institutions with assets in excess of $1 billion, although a bit higher for small institutions. Reviewers I've spoke to in my area (North Jersey) report coverage percentages of 50% to 70% of the commercial loan portfolio. In addition, we do additional "documentation only" reviews for all business loans over $35,000 and pre-approval reviews for loan committee(unusual but...), so overall review coverage is a bit higher than indicated by the 63%. Hope this helps.

Return to Top
#288036 - 12/15/04 04:23 PM Re: Loan Review
samsara Offline
100 Club
Joined: Mar 2004
Posts: 102
New York
Quote:

In addition, we do additional "documentation only" reviews for all business loans over $35,000 and pre-approval reviews for loan committee(unusual but...), so overall review coverage is a bit higher than indicated by the 63%.




That pre-approval review for loan committee must save a lot of unhappy surprises later - that's a good idea from the Loan Review perspective. Nothing like downgrading a just-approved seven figure loan to cause unpleasantness with the Commercial Loan Department

Return to Top

Moderator:  Andy_Z