The effective management of credit risk has never been more critical to the viability of today’s financial institutions.  Abound will complete a comprehensive review of lending, loan operations and credit risk management policies, procedures and controls, systems, organization and staffing, and reporting processes. In connection with this diagnostic, Abound will gain a thorough understanding of the organization’s lending strategies and procedures, as well as its credit risk management processes. During this phase, Abound’s consultants will review the financial institution’s:

• Lending policies, procedures and processes
• Credit risk management organization, systems, monitoring, and reporting processes

A key objective of our work will be to understand current loan origination, analysis, approval and operational processes.  Abound will evaluate the processes for originating various types of loans, including commercial, commercial real estate, construction, SBA and consumer loans, identifying and assessing the efficacy of key credit risk management procedures and controls and reporting systems. Abound will review the institution’s lending and loan accounting policies in view of the inherent level of risk, risk trends, and strategic lending objectives (i.e., growth, quality, markets, products, delivery channels). 

Abound will develop a thorough understanding of the credit risk management processes within the institution, including:

• Loan prospecting and origination processes
• Loan underwriting and approval processes
• Oversight by credit committees
• Functions of Credit Administration, Collections, Loan Review and other related areas
• Loan origination systems and other lending technology, including stress testing, migration analysis, covenant compliance and exception tracking systems and
• Ongoing portfolio quality and risk monitoring and reporting processes

Abound will evaluate credit risk management information systems in use and the sources of information in such systems.  Abound will also evaluate loan collection and workout and credit review (i.e., information systems used, information sources available and information requirements).  This review will enable Abound’s consultants to understand the lending processes and controls and related credit risk management processes. 

In addition to maintaining ALLL policies, financial institutions must also follow appropriate processes for determining the adequacy of the Allowance for Loan and Lease Losses, ensuring that they are compliant with regulatory and accounting guidelines.  In the course of our work, Abound will evaluate:

• Allowance for Loan and Lease Loss policies
• Methods for calculating the ALLL, including identifying sources of appropriate information to support the evaluation and methodologies for preparing, checking and reporting the results of the ALLL evaluation
• Sources and methods used to support the quantitative evaluation of the ALLL, particularly the aggregated pools
• Appropriateness of qualitative data, including local and national economic data and financial institution and industry loss performance and loan default migration data, used to support ALLL calculations
• Methods used to identify those events which “trigger” or are defined as an impairment of a loan and assess the current framework for monitoring these impairment “triggers” and taking appropriate action to determine related loan and collateral values