LOAN REVIEW

Independent loan review is the cornerstone of every community bank’s approach to managing risk and the quality of their credit portfolio. And though every bank wants to avoid surprises with troubled loans, each bank’s scope is unique. This is why we believe the best results are achieved through an adaptable process that still ensures regulatory compliance. Synergy’s specialists tailor the loan review process and outputs your bank needs, thereby also enabling you to prepare for future regulatory and external audit reviews and identify reserve needs.

Our method

Serving all size banks, we evaluate asset quality, internal controls, and administrative procedures that are fundamental to effective risk and regulatory management. Our process takes into account the critical role that risk ratings and portfolio assessment play in management's assessment of reserve adequacy. We also help bank management understand the overall quality of their loan portfolio and quality control activities. Our loan review specialists review a sampling of loans, as determined by review parameters provided by your bank, to assess the suitability of the institution’s assigned loan grade. Borrower loans are examined for credit quality, documentation exceptions, compliance with the bank’s lending policy, and compliance with banking laws and regulations.

Synergy Bank Consulting also evaluates the bank’s underwriting standards and procedures during these reviews, and determines impairment magnitude for the Allowance for Loan and Lease Losses (ALLL) for problematic loans. We properly identify any significant credit quality issues that may warrant management’s attention or interfere with our process for conducting the loan review.

Synergy’s loan review audits typically analyze the bank’s asset portfolios that are most susceptible to risk: commercial, commercial real estate, investment real estate, and construction loan portfolios. The scope of the loan review may be expanded to include the assessment of consumer, indirect and residential mortgage loans as well, depending upon the requirements of your institution.

We review all pertinent credit file information, financial data, financial forecasts, and collateral documentation and provide individual loan summaries for each borrower based on the information specifications requested by the bank. These summaries highlight borrower and collateral information, the loan review date, which loans were reviewed and their corresponding grade assignments, the reason for each grade assignment, repayment capacity, the amount of loan impairment and how it was calculated, documentation exceptions, financial spreads, and a listing of strengths, weaknesses, credit analysis and underwriting deficiencies. Compliance with salient elements of the loan policy and credit agreements is also included.

Issues and suggestions resulting from the loan review audit will be discussed in a timely manner with management, particularly in cases where recommended loan ratings differ significantly from the bank lending officer’s loan ratings. We will also provide an analysis of loan loss reserve adequacy, so that a target for the loan loss reserve may be developed and compared to the client's actual reserve position. This feedback will be provided from the perspective of best practices, as well as compliance with the latest regulatory guidance.

At the conclusion of the loan review audit process, we issue each client a comprehensive loan review audit report supported by a detailed discussion of our findings regarding your institution’s overall loan portfolio quality, lending policies and procedures, quality control systems, and lending personnel. This in-depth report contains our recommendations for improving the oversight of your bank’s individual borrowers and/or the bank’s overall loan portfolio.

In addition to an annual external loan review audit, Synergy Bank Consulting recommends that your bank utilize subsequent periodic reviews as well, preferably quarterly, or more frequently if deterioration in the portfolio is noted. This optimizes adequacy of your bank’s risk management practices, and allows senior management and bank staff to monitor the extent of their response to special issues and/or changes in asset quality levels over time. Subsequent loan audit reviews also serve to provide bank management with accurate, up-to-date credit quality information for financial and regulatory reporting purposes, and evaluate the appropriateness of the allowance for loan and lease loss on a timely basis.