presented by Sabrina Robbins and co-presented by Fran Brashares of Marquette Bank Learn how one bank manages their risk by monitoring specific thresholds for their exceptions. We also discussed the processes followed to ensure the management reports are accurate as well as their impact on lender reviews and audits.

1. EFFECTIVE EXCEPTION
TRACKING TO MINIMIZE
RISKFran Brashares
Sabrina Robbins

2. Confidential & Privileged Document
Three key takeaways
• You know what you
don’t have
• Everything is in one
place
• Reduce paper copies

3. Confidential & Privileged Document
Queries are great!
• Custom queries for major
tracking items
• Different users work unique
queries
• Each loan officer has their own
query

4. Confidential & Privileged Document
Marquette Bank’s view on tracking
• Everything is a tracking item
• No issues with auditors
• Marquette Bank is growing their business by
making solid business decisions

5. CHECKLISTS

6. Confidential & Privileged Document
Checklists = Consistency
• Pre-closing checklists
– CIP
– Title commitment
– Initial insurance
• Documentation checklists
– Mortgages
– Assignment of rents
– UCC

7. Confidential & Privileged Document
Appraisal checklists
• Queries to track appraisals:
– Request appraisal
– Quoted appraisal
– Ordered appraisal
– Received appraisal
– Reviewed appraisal
– Payment for appraisal
– Payment for appraisal
review fee

8. APPRAISAL TRACKING

9. Confidential & Privileged Document
Appraisal monitoring
When residence is collateral on
commercial loans:
• Monitor appraisals
• ECOA
– Appraisal within 3 days of
closing

10. Confidential & Privileged Document
Appraisal tracking
• Based on LTV
o  70%: Every 5 Years
o 50% - 60%: Every 7 Years
o < 50%: Not Required
• Annual Appraisal Requirement
o OREO Properties
o Troubled Debt Restructure (TDR) and
a Watch Credit
o Substandard

11. Confidential & Privileged Document
Appraisers
• Use service providers for appraisers:
– Appraisers get a grade/score based on:
• Done on time
• Price
• Errors
• Use acronyms for property types using BDFs
– Single family
– 20 unit apartment
– Mixed use building

12. CREDIT DEPARTMENT
QUERIES

13. Confidential & Privileged Document
Credit risk department queries
• Annual reviews
• Financial statements & covenants
• Risk of loss with site visits
• Formula driven loans / asset-based lending

14. Confidential & Privileged Document
Receivables tracking
• Formula-Driven Lines
– Require BBC, AR, AP
– Use Query for “When Drawn” requirements or
other criteria
– Tie to product to show balance on query
– Allows mass update of ticklers

15. REPORTING: TO TIE OR NOT TO
TIE

16. Confidential & Privileged Document
Tie tracking item to product
• Allows loan balance to be part of reporting
– AR requirements based on balance
– Annual reviews based on balance
• $250K to $500K at officer level
• $500K and up requires analyst input
– Exception exposure based on % of portfolio

17. Confidential & Privileged Document
Percentage of borrowers with exceptions
27.73%
3.85%
26.10%
0.19%
1.30%
4.18%
% of Borrowers with Exceptions
Annual Reviews
Documentation
Financial
Statements
Insurance
Real Estate Taxes
Site Visits

18. RISK RATING REVIEWS

19. Confidential & Privileged Document
Triggers for risk rating review
• Financial tracking exceptions
• Annual review exceptions
• Covenant violations
– Debt Service Coverage
– Net Worth
– LTV

20. LETTERS

21. Confidential & Privileged Document
Letters
• Send financial statement letters in April and
October
– En masse
– Or one-offs by customer

22. Q&A

23. ASK US ABOUT HOW TO USE
QUERIES TO REDUCE RISK
THANK YOU!
Presenter Contact Info
Fbrashares@emarquettebank.com
Sabrina.Robbins@bakerhill.com