Loan review services are a critical function for the Board of Directors in its oversight of the financial institution. The Board should realize that loan review is not just about validating risk ratings and identifying exceptions. It also involves an expert assessment of the entire credit risk management process, including policy, underwriting, approval processes and credit administration. The loan portfolio is usually the most significant group of earning assets on the balance sheet and poses the greatest amount of risk. Almost 500 financial institutions have failed since 2008; most because of loan problems. An independent loan review by qualified individuals is paramount in identifying and controlling credit risk.
Our loan review staff has, on average, in excess of 30 years of financial institution credit examination or lending experience.
Loan reviews may include the following services:
- Overall Evaluation of Portfolio Quality
- Evaluation of, Adequacy of, and Compliance with, the Institution’s Written Policies
- Review of Credit Administration, Underwriting and Approval Processes
- Analysis of Financial Statements
- Evaluation of Collateral
- Verification of the Perfection of Security Interests
- Review of Compliance with Lending-Related Safety and Soundness Laws and Regulations
- Training of Internal Loan Review Personnel
- Establishment of a Loan Rating System
- Validation of the Methodology for Establishing an Adequate Allowance for Loan and Lease Loss Account
- Evaluation of Documentation Standards, Tracking Mechanisms, and Reporting Functions
- Identification of Concentrations of Credit
- Special or “Targeted” Loan Review Services
- Forensic Audits and Special Investigations
PBS requires its loan review services engagement letters to be accepted at the Board or Board Committee level and that our findings be presented to the same by PBS or an independent internal officer of the institution.