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Director's Corner

San Francisco Region Director's College Computer- Based Training
Asset Quality

Rating Asset Quality
Answer to the Rating Asset Quality Component of the Training Module:

Examiners rated asset quality a "3". While the level of classifications may not be high enough to justify a "3" rating on its own, poor underwriting and credit administration practices suggest future losses may be significant. Additionally, the risk profile is heightened by a weak loan policy, increasing and unmonitored loan concentrations, and generally weak risk management practices. If you assigned a "4" rating, then you weren't very far off; however, what you haven't been able to read are management's responses. It is possible that the rising classifications in a very new portfolio were enough to make management agree to curtail future expansion until these weaknesses are corrected. Additionally, the bank has historically been rated a "2" overall, leading us to believe that they may have the ability to correct these deficiencies before the level of adversely classified items threatens the bank's viability.

Now let's move on to the capital module.

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Last Updated 06/29/2005 Supervision@fdic.gov

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