We were recently critizied for our insider loan program because we were charging too low of a rate (WSJ Prime) to our employees and Reg O insiders.

I'm curious, if you are willing to share, what other banks are doing for employees/insiders on loans.

Thanks

We offer no rate, product or service concession to an insider/employee that isn't available to a customer of comparable financial status.

I guess my question would be are all employees, regardless of loan type, given the WSJ Prime under the employee loan program or is Prime only for a certain loan type?

If it is for a certain loan type then the insiders would only be entitled to that rate for that loan type. All other loans would have to be priced at "fair market value".

Insiders are entitled to the same rates that any employee is entitled to under the employee loan program.

Same here.

Given that you have no Reg O violation, based upon your description, this is an unusual criticism. Was it just a comment, that the examiner felt you were to generous in your employee rate?

Was their concern that it was too far below what you charge non-insiders, or that the bank wasn't making any money on these loans?

All employees and insiders are given WSJ Prime at the time of loan origination with a 5 year max maturity on all loans with the exception of real estate with a max repricing (maturity/balloon) of 10 years.

MS Kaybee,

Yes that was the jist of their criticism - too generous and too far below non-insider rate. They offered no recommendation for an adjustment to our policy, so I am trying to find an acceptable practice.

Thanks.

We have no employee loan program. Only waiving of the fees on a single deposit account.

Any other plans out there?

On consumer unsecured, our employee/insider loan rate is 6.25% (currently)fixed. It's that whether you leave tomorrow or in 20 years. When our comittee sets new rates, then that rate might change at that time. (For example: when I was hired, the employee rate was 7.25%, and I watched it drop over the last 2 years.) Of course, the borrower has to meet prudent underwriting standards. I've seen employee credit denials, and that's no fun to be around.

We do very little if any lending AT the prime rate. It's almost always prime + a margin.

Most frequently I will see an employee/insider rate set at regular customer rate -.25% or thereabout.

Always In Training,

Does your bank also set rates for secured employee loans (consumer or real estate)?