About now, your institution is winding up strategic budget planning sessions for the next fiscal year. With PPP and new guidance coming in waves, this year has been a trying experience for all of us. Now at last, we have SOP 50 10 6, effective 10/1/2020 and SBA’s guidance regarding COVID-19.
So now more than ever, it’s time to plan for next year’s Loan Review. You have all the tools. With the new SOP including COVID-19 analysis for new loans, we strongly recommend that you include in your Annual Review a thorough review of the loans approved at year end for compliance with the new requirements.
Why are loan reviews important? Loan Reviews are critical to the overall strength of your organization. It’s important for your board of directors and executive management to know the quality of your loan portfolio. At the same time, you’ll want to shore up any deficiencies so you and your team aren’t playing catch up at year end.
Yet in working with clients across the country, we’ve sometimes seen Loan Reviews left simmering on the back burner. Everything’s going well, and loan reviews head for your “pending” files while other priorities command your attention. Until it’s almost too late. You have stacks of pending reviews and little time to meet your yearend goals and complete your reviews and the last thing you want is to have examiners come in and find a concern that should have been addressed during your Annual Loan review.
And with OIG’s increased monitoring of SBA’s repurchases of guarantees, it’s important to proactively address any issues SBA identifies as the top reasons for repair/denial of the guaranty and any concerns identified in OIG’s report findings. Especially this year, you can’t leave the pot on the stove until it boils over.
Dig into those “pending” files. Plug any leaks. Do it now: dig out those loans, plug any leaks – and conduct your reviews. An annual review of your portfolio will give you added peace of mind. Among other benefits, you’ll be better able to:
- maintain handle on your policies procedures to ensure they comply with the latest SBA requirements;
- identify weaknesses in your processes and procedures that may require additional training;
- gain time to correct deficiencies instead of finding out at repurchase that you have deficiencies that can lead to repair or denial of the guarantee.
It’s a Big Job. All SBA loans and commercial term loans secured by real estate require an annual review to make sure all necessary information is obtained and reviewed to provide timely identification of problem assets and to establish adequate Allowance for Loan and Lease Losses. Required information includes updated financials, personal and business tax returns, rents rolls, collateral evaluations, insurance and site visits.
As always, our JRB Team is here to perform your loan reviews. We’ll conduct a thorough loan portfolio review, check your tickler reports to ensure accuracy, and in some cases perform site visits. So don’t let those loans pile up until it all spills over! Contact JRB.