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Regulations and Examinations

Risk Management Training Program - Loan Analysis School

Last Updated: February 3, 2023

Program Overview

Loan Analysis School introduces participants to the loan review process.  Through a combination of computer-based instruction and participation in a related skills-practice workshop, participants learn how to review and classify individual loans.  Specifically, participants learn how to analyze financial statements, calculate and interpret cash flow, and assess the appropriateness of loan structure, pricing, and documentation.  Participants analyze a series of loans, prepare for and conduct loan discussions, make loan classification decisions, and compose loan write-ups.

Skills Taught

By the end of this course, students will have been taught how to:

  • Review a loan file for creditworthiness
  • Analyze financial statements
  • Document any weaknesses or issues on a loan line sheet
  • Prepare for, and conduct, a loan discussion
  • Determine appropriate loan classifications
  • Prepare a loan write-up using the 6P format
  • Identify apparent violations of lending laws, rules, and regulations

Duration and Format

This course contains:

  • 20 hours of Pre-Course Work  - Computer-based Instruction (CBI)
  • 2 week facilitated classroom discussion/lectures and small group activities

Level and Credits

Basic
Continuing Education Unit (CEU): 7.0
Continuing Professional Education Unit (CPE): 83.5

Target Audience

This course is open to appropriate staff of the FDIC and partner government regulatory agencies.  This course is not open to the public or staff of private banks.

FDIC participants should attend in accordance with the parameters outlined in the Examiner Training and Development Policy.  Prior to attendance, participants must demonstrate competent performance in balance sheet analysis; investment portfolio analysis; earnings analysis; internal routines and control analysis; Call Report analysis; and Uniform Bank Performance Report analysis.  This also includes unassisted preparation of Report-quality comments for Capital, Earnings, Liquidity, and Sensitivity to Market Risk. Participants must have a firm working knowledge of Microsoft Word and Excel and be able to work effectively in a team environment.

NOTE:  The minimum interval between the Asset Liability Management School and the Loan Analysis School is four months.

Prerequisites and Prior Work Experience

Under the guidance of an experienced examiner, students must have participated in the following loan-related activities:

  • Reviewed the documentation contained in a typical commercial loan file
  • Observed a loan discussion
  • Read several loan write-ups included within a Report of Examination and discussed the write-ups with an experienced examiner (minimum of two)
  • Prepared practice (or actual) write-ups (minimum of two)
  • Read the Loan section of the Risk Management Manual of Examination Policies

Pre-Course Assignment

The items below constitute the pre-course assignment. The pre-course assignment is due in general two weeks/11 business days prior to the start of the session.  The exact date the work is due for any given session is specified in the pre-course information sent approximately two months prior to the start date.  Prior to attending the workshop, participants are required to complete and submit the following pre-course assignments:

  • Complete the Loan Analysis School Pre-Course computer-based instruction modules
  • Complete the Participant Profile

Post Course Recommendation and Feedback

The participants should review and discuss loans at several upcoming examinations, as well as be given the opportunity to prepare loan write-ups to reinforce skills learned at this school. A written assessment of the participant's performance is submitted to each participant's field supervisor or training contact approximately 30 days after the conclusion of the school.

Key Topics Covered

  • Introduction to Loan Analysis
    • Participants are provided an introduction to the loan analysis process, including the 6Ps of loan analysis, which provides a framework for evaluating credit risk.
    • 6P’s:
      • People – Participants learn how to identify and document information to form a borrower profile.
      • Purpose – Participants learn how to identify the loan purpose and assess the appropriateness of the loan structure, pricing, and documentation.
      • Payment – Participants learn how to identify and analyze sources of repayment.  Includes cash flow statement creation and analysis.
      • Protection – Participants learn how to identify and evaluate collateral and guarantees.
      • Problems – Participants learn how to identify problems or red flags and evaluate if loan discussion is necessary.
      • Prospects – Participants learn how to gather and document additional information and management’s intentions via loan discussion using effective communication skills.
  • Reassessment
    • Participants learn how to assess all information they have gathered through their 6P review and make a classification decision.
  • Loan Write-up
    • Participants are provided an overview of effective loan write-up guidelines for both full and summary write-ups.
  • Discuss Only Loan Reviews
    • Participants learn about the purpose and scope of discuss-only loan reviews and how to select and make classification decisions for discuss only loans.
  • Loan Fraud Prevention and Detection
    • Participants learn about fraud prevention and detection as it relates to a bank’s lending operation.
  • Allowance for Loan and Lease Losses  (ALLL), Troubled Debt Restructuring (TDR), and Other Real Estate (ORE)
    • Participants learn about the nature and purpose of the ALLL, the ALLL methodology evaluation process, the various measurement methods used for impaired loans, TDR accounting, and the basic concepts of the Current Expected Credit Losses methodology.  In addition, they learn about ORE, including the evaluation and classification of ORE; the three stages of the ORE life cycle; and policies and procedures to acquire, hold and dispose of ORE.
  • Legal and Regulatory Framework
    • Participants review the laws, rules, and regulations that govern lending and practice identifying potential violations.
  • Commercial Real Estate Loans
    • Participants learn about the elements of a sound commercial real estate lending program.  They review a commercial real estate loan case study using the 6P framework and prepare a full-scope write-up.
  • Loan Analysis Simulations
    • Participants analyze, discuss, classify, and prepare write-ups.  Through case studies, participants practice conducting a systematic analysis of a variety of loan types and complexities using the 6P framework.  They gain experience communicating classification decisions, including the factual foundation, to a bank’s senior management via role-plays and write-ups.
  • Loan Participations
    • Participants learn about loan participation identification and review, including how to determine whether a participation qualifies as a sale and the accounting implications.
  • “The Worst Loan”
    • Participants learn how to identify red flags and loan administration weaknesses. Participants review case studies to identify red flags and demonstrate the relationship between problems and administrative weaknesses.
  • Retail Credit Classification
    • Participants review the application of the interagency Uniform Retail Credit Classification and Account Management Statement of Policy and practice assigning classifications in accordance with the Statement of Policy.

More Information

CPE Credit logoFor information regarding administrative policies such as complaints and refunds, please contact Corporate University, Attn: NASBA Representative Ava Livas, Room A-3025, 3501 North Fairfax Drive, Arlington, VA 22226 (703) 562-2463.

The Federal Deposit Insurance Corporation is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: NASBARegistry.org

IACET logoThe Federal Deposit Insurance Corporation (FDIC) is accredited by the International Association for Continuing Education and Training (IACET) (www.iacet.org). The FDIC complies with the ANSI/IACET Standard, which is recognized internationally as a standard of excellence in instructional practices. As a result of this accreditation, the FDIC is accredited to issue the IACET CEU.

For more information concerning course content and administration, please contact Halle Dickey or Janice Crawford.