Commercial Loan Annual Credit Review Best Practices

Over the course of 2023, the prime rate of interest increased by 5.25%, an unprecedented increase in borrowing costs over a relatively short period of time. Consumer loan delinquency has risen significantly and revolving consumer debt is at an all-time high. Commercial real estate delinquency (excluding farm loans) increased by over 25% in the period between third quarter 2022 and second quarter 2023. Regardless of the direction of interest rates or current delinquency trends, a sound, meaningful approach to periodic loan review is a crucial component of loan portfolio management.

For most community financial institutions, resources are limited in terms of FTEs to conduct annual loan review. This session will address a targeted approach to loan review based on risk inherent in the institution’s portfolio. You will learn best practices for proactively managing the loan portfolio through the early identification of problem loans, as well as essential steps in measuring, controlling, and mitigating credit quality risk prior to loan delinquency and eventual default.