T. Gschwender & Associates Risk Based Loan Review

T. Gschwender & Associates has been providing loan review services to financial institutions for nearly 30 years. TGA has implemented a risk-based approach to conducting loan review. Our methodology ensures our risk ratings are consistent and transparent, resulting in:

  • Increased confidence by examiners that the financial institutionís commercial loan portfolio is properly risk rated.
  • More accurate Allowance for Loan & Lease Loss calculation.
  • Better portfolio management by employees and the board of directors.

TGA's three-tiered risk based approach includes:

  • Completion of a credit risk assessment to determine the proper portfolio penetration level.
  • Ensures our focus is on financial institutions high-risk loans.
  • A proprietary loan review system is used to assign proper risk ratings.

During full scope loan reviews, TGA starts by completing a credit risk assessment to determine the current level and direction of credit risk. It then separates each loan in the portfolio into high, moderate and low risk buckets. Loans are classified based on their unique characteristics, which are outlined in the table below. These characteristics can be modified from bank to bank based on their risk tolerances. By completing this step, TGA is able to focus its attention on those loans that will have the highest impact on earnings and capital.

The goal is to cover 100 percent of the high, 50 percent of the moderate and 10 percent of the low-risk loans in the portfolio. Coverage may exceed moderate and low guidelines in order to achieve the appropriate penetration level. In addition, TGA may exclude low dollar amount criticized and classified loans since these loans have already been identified as having potential or well-defined weaknesses.

T. Gschwender & Associates Inc.