Procedures for Conducting an Effective Commercial Lending Review

The NCUA examines a credit union’s commercial lending program in an effort to fulfill its mission to provide through regulation and supervision, a safe and sound credit union system. Examiners will focus on the effectiveness of the risk management process and the aggregate risk profile of the commercial loan portfolio. In reviewing a credit union’s commercial lending program, exam staff must assess and determine:

• Compliance with NCUA regulations, specifically, parts:
  • 701, Organization and Operation of Federal credit unions
  • 722, Appraisals
  • 723, Member Business Loans; Commercial Lending
  • 741, Requirements for Insurance
• The quality of a credit union’s lending and collection policy and procedures
• The soundness of a credit union’s underwriting standards and credit administration practices
• The effectiveness of a credit union’s risk identification activities, including accuracy of the risk rating process for individual loan relationships and the overall portfolio
• The appropriateness of the ALLL policy (specifically, in accordance with ASC 310)
• The extent management maintains underwriting discipline, exercises prudent risk management practices and implements systems that identify, measure, monitor, and manage the risk in their portfolio (both current and planned levels of risk)

Topics covered in this section include:

• Team Coordination
• Pre-Exam
• Documentation
• Review Steps
• FISCU Review Procedures

Last updated on December 15, 2020