An effective loan review system should include:

  • Assessment of the adequacy of adherence to internal credit policies and loan administration procedures
  • An objective and timely assessment of the overall quality of the loan portfolio for senior management and the board to manage risk
  • Accurate and timely credit quality information for financial and regulatory reporting purposes, and an evaluation of the adequacy of the allowance for loan and lease loss
  • Prompt identification of loans with potential credit weaknesses
  • Identification of relevant trends that affect the collectability of the portfolio and the segmentation of portions of the portfolio that are problematic

Our loan review experts can assess your portfolio and enhance your processes.

Credit Quality

We conduct an independent credit quality review of the commercial loan portfolio to assist management with identifying and quantifying the risk level of the portfolio and assessing the institution’s controls and processes for identifying, monitoring, and addressing credit quality.

As part of the response to the recent economic downturn, the regulatory agencies have become more explicit in their requirements for the assessment of overall loan quality at certain lending institutions. Our review methodology includes determining whether loans were closed as approved, verifying and validating the assigned loan risk rating, and determining compliance with the lending institution’s loan policies and procedures including loan covenants and collateral requirements, and product-specific regulatory requirements. Based on our consultants’ experience and industry knowledge, we are able to offer recommendations and best practice improvements to enhance the institution’s policies and procedures and mitigate credit risk.

We have designed loan review engagements to directly address the requirements of regulators.

  • Identification and Quantification of Risk
  • Assessment of Controls
  • Loan Covenant Compliance
  • Collateral Review

Due Diligence Reviews

Preparing for an acquisition engenders exciting and uncertain feelings. We can assist in alleviating some of the uncertainty through an independent, objective due diligence review of the loan portfolio considered for acquisition. These reviews often require a high degree of urgency, quick turnaround, and absolute confidentiality. Our experienced loan review team realizes the criticality of accurately assessing the underlying credit quality and the components that determine whether the identified credit risk is acceptable to the acquiring institution. A due diligence review is customizable to the client’s specific areas of concern or interest. At a minimum, we assess the reliability of the target institution’s risk rating system, whether proper policies and procedures were followed for loan approvals, and the availability and adequacy of all loan related documentation.

  • Mergers & Acquisitions
  • Portfolio Purchase
  • Correspondent Requirements

Policy & Procedure Review

The adequacy of the lending institution’s credit policies and procedures and its adherence to them are integral components for managing the risk appetite and loan quality standards in a commercial loan portfolio. The recent recession and the resultant loan losses experienced by lending institutions, have increased regulatory scrutiny on both loan underwriting and appropriate and sufficient loan documentation. We will review the lending institution’s underwriting, loan risk rating system, ongoing portfolio maintenance, management reporting, and other related credit policies and procedures. Our best practice recommendations are based on our extensive knowledge and experience in credit administration and regulatory expectations.

  • Credit Policy
  • Underwriting Guidelines
  • Allowance for Loan and Lease Loss (ALLL)

Representative Engagements

  • Commercial Loan Portfolio Annual Review – performed a comprehensive assessment of the overall credit risk
  • Due Diligence Review – performed an independent assessment for the acquiring bank
  • Post-Purchase Portfolio Review – reviewed credit risks and documentation of assets acquired from a failed bank
  • Policy and Procedures Review – made recommendations to further enhance controls and processes which responded to regulator concerns
  • Loan and Credit Risk Process Review – reviewed policies and procedures and made recommendations to strengthen procedures

View Engagements