The importance of an independent loan review
The greatest level of risk to a bank’s balance sheet generally resides in its loan portfolio. An effective loan review function will help your bank manage credit risk by identifying, monitoring, and addressing credit quality issues in an accurate and timely manner. An effective credit management system should work to ensure the accuracy of internal credit classification or grading systems and, thus, the quality of the information used to assess the appropriateness of your bank’s allowance for loan losses or allowance for credit losses. The scope and complexity of your bank’s loan review system should vary based on the size and complexity of your institution. The approach should be adaptable to changes in local and broader markets conditions.
With today’s level of regulatory oversight, there is increased focus on having a quality, independent loan review program. Most community banks find it challenging or cost prohibitive to handle internally.
How We Can Help
Maggart’s approach is tailored to your bank’s size and complexity. We offer:
- Full scope loan reviews
- Limited/targeted scope loan reviews
- Due diligence loan reviews
- Outsourced or co-sourced loan review to supplement or enhance your current loan review department
We build relationships with your credit administration team to develop a practical solution that will help you:
- Assess individual loans and repayment risks
- Identify lapses in loan documentation
- Determine compliance with approved lending policies and procedures
- Evaluate credit and underwriting quality
- Identify opportunities to improve your bank’s lending function
- Validate the accuracy of your bank’s risk ratings
- Find opportunities to improve your bank’s lending function
- Identify and communicate market trends and conditions that could impact your portfolio
Our Loan Review Approach
We will provide you with a report that summarizes your bank’s risk characteristics, documentation exceptions, and includes various graphs and peer group comparisons. The report will allow your management team and Board of Directors to further understand the risk profile of your loan portfolio. We’ll also provide risk rating recommendations about individual loans and loan relationships as well as opportunities to improve your underwriting and credit administration policies and procedures.
- We take a hands-on approach to our loan review to ensure you stay well-informed of regulatory issues and industry trends.
- You will receive useful insights from a relationship-based firm with national firm expertise. Maggart has been providing services to small privately held community banks to publicly traded multi-billion-dollar institutions for over 40 years.
- We will complete your review in a timely and efficient manner to ensure that you maintain your good standing with regulators.
- Our services go beyond providing loan review — our team is a partner with you. We will provide you with recommendations, sample policies, templates, or other materials to help you take improve your credit risk management practices.
- We will provide documentation or equivalent in accordance with AICPA standards to your audit firm to maximize efficiency and minimize staff disruption.
- You will be assigned a partner that is intimately involved in the relationship from day one. We won’t assign unsupervised inexperienced staff to you.