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ALLL for the Non-Accountant

ALLL for the Non-Accountant. ALLL for the Non-Accountant. ALLL for the Non-Accountant. ALLL for the Non-Accountant. The 7 Habits of Highly Effective Loan Committees. Presentation by: Ancin Cooley, CIA, CISA Lindgren, Callihan , VanOsdol , & Co. Ltd. What is a Loan Committee?.

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ALLL for the Non-Accountant

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  1. ALLL for the Non-Accountant ALLL for the Non-Accountant ALLL for the Non-Accountant ALLL for the Non-Accountant The 7 Habits ofHighly Effective LoanCommittees Presentation by: Ancin Cooley, CIA, CISA Lindgren, Callihan, VanOsdol, & Co. Ltd.

  2. What is a Loan Committee? The purpose of a Loan Committee is to oversee the credit and lending strategies and objectives of the Bank. This includes: • Overseeing credit risk management • Reviewing internal credit policies • Establishing portfolio limits • Reviewing the quality and performance of the loan portfolio

  3. Total Bank Failures in 2009 Rise To 69 Common characteristics among failed institutions • Credit Risk • Commercial real estate concentrations • Weak credit administration practices • Poor risk selection

  4. Effective Loan Committees • Understand and define its purpose • Create a diversemembership mix • Communicate effectively • Take minutes that matter • Obtain the right information • Ask the right questions... • Maintain a safe and sound Credit Culture

  5. Understand and Define its Purpose The Loan Committee charter outlines the committee’s : • Roles • Scope of responsibilities • Composition • Authority

  6. Create a Diverse Membership Mix Ideally, a Loan Committee should be comprised of individuals with different skills and approaches to solving problems.

  7. Loan Committee Member Matrix Increasingemphasis on relationships

  8. Take Minutes that Matter • Ensure accurate minutes are kept to provide a high-level summary of meeting discussions • Include relative insight on the topics and subtopics • Capture specific approvals and follow-up actions for accountability

  9. Communicate Effectively Loan Committee meetings should serve as a forum for lively debate and airing thoughts on issues brought to the committee for its consideration. Committee members must be open to and encourage diversity of ideas and candid discussions in order to thoroughly consider all aspects of the agenda topics. Thus, tolerance and a willingness to listen are important traits for Loan Committee members.

  10. “Loan Discussion”

  11. Obtain the Right Information The primary considerations of the Loan Committee in reviewing loan requests are: • Ability to repay (cash flow) • Balance sheet condition • Collateral • Management • Trends and prospects for the future

  12. Ask the Right Questions... As a Loan Committee member, what types of question should you ask the loan officer about the: • Ability to repay (cash flow) • Balance sheet condition • Collateral • Management • Trends and prospects for the future

  13. Maintain a Safe & Sound Credit Culture Financial institutions with strong credit cultures learn from past mistakes and replicate success WHAT’S ON THE HORIZON FOR 2010?

  14. Questions?

  15. Ancin Cooley, CIA, CISA Senior Bank Consultant Lindgren, Callihan, VanOsdol, & Co. Ltd. 4949 Harrison Avenue Rockford, IL 61125 (224) 475-7551 acooley@lcvcpa.com

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