The loan portfolio is the most significant group of assets on the balance sheet of almost every financial institution; loans usually represent the majority of the institution’s earning assets, and pose the greatest amount of risk.
Until recently, many banks, particularly regional and community banks, cited their superior knowledge of borrowers as sufficient to preclude the need for an objective loan review. Much of that feeling of security has vanished in recent years. Over 500 financial institutions have failed in the U.S. since 2001 (and over 3,000 since 1980), most because of loan problems.
Many bankers recognize the need for loan review and have implemented internal programs. Others have retained outside firms. PBS is one of the most experienced and established financial consulting companies in the nation today. Each member of our loan review staff has, on average, in excess of 25 years of financial institution credit examination or lending experience in all economic and lending environments. We don’t just give you a generic cover letter and binder of work papers and walk out the door. We give you a written portfolio analysis with thoughtful recommendations to improve credit quality and administration.
PBS can conduct loan reviews either on-site, or if the client has the technological capability, offsite through a secure remote network connection. PBS conducts significant upfront preparation for this service that enables us to efficiently conduct the review without disruption to the institution.
Below are the services that may be included in a loan review scope:
- Overall evaluation of portfolio quality
- Evaluation of compliance with the institution’s written policies
- Analysis of financial statements
- Evaluation of collateral
- Verification of the perfection of security interests
- Review of procedures regarding major lending-related laws and regulations
- Training of internal loan review personnel
- Establishment of a loan rating system
- Validation of methodology for maintaining an adequate ALLL.
- Review of loan administration and underwriting standards
- Evaluation of lending personnel
- Review of adequacy of loan policy
- Evaluation of documentation standards, systems and tracking mechanisms