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Crowe Loan Review Services Credible, Effective, Risk-Based Analysis

Audit  |  Tax  |  Advisory  |  Risk  |  Performance

As regulatory agencies intensify their scrutiny of financial institutions’ lending and credit risk management practices, effective and credible loan review is an increasingly critical concern. As the only provider of ABA-endorsed credit review services, Crowe Horwath LLP offers independent, objective loan review services for all or part of a bank’s portfolio with an emphasis on using a risk-based approach.

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Crowe Loan Review Services:Credible, Effective, Risk-Based Analysis

Increased Expectations, Greater DemandsIncreased regulatory demands over the past several years have resulted in credit and risk departments being required to do more with limited additional resources. The expectations from all parties for better monitoring procedures and better documentation of procedures, conclusions, and validation have raised the bar for institutions across the country.

In addition to heightened regulatory scrutiny, a low-interest-rate environment and increasingly complex credit products have combined to impose greater expectations on institutions’ lending operations.

In line with these heightened expectations for credit risk management, loan review functions also are being pressured by regulators to raise the bar. Is it time to step back and assess whether your loan review function has adjusted to the changing environment and the products you now offer?

In this environment, Crowe Horwath LLP has developed a widely recognized reputation as a leading provider of credit risk consulting services, particularly in the areas of loan review (cosourced and outsourced) and consultation.

Through our existing client base, our interaction with regulators, and our access to our external audit group, we continue to adjust with the times. Our loan review reporting and work papers are produced using our own proprietary software, which allows us not only to tailor our services to fit each individual client’s needs but also to emphasize consistency and well-documented conclusions, a regulatory expectation.

How Crowe Can HelpAs part of its comprehensive range of risk services, Crowe provides a team of experienced lending and regulatory professionals to perform or support your internal loan review process, including complete outsourcing or working with you in a cosourcing arrangement.

For community and midsized institutions, where it generally is not cost-effective to maintain the necessary in-house expertise to perform the mandated loan review process internally, Crowe offers a complete third-party loan review function, providing objective, credible, in-depth analysis including assessing credit quality, evaluating credit administration processes, assessing risk rating accuracy, and testing credit and collateral documentation.

For larger institutions, where maintaining an internal loan review function is more typical, Crowe serves as a valuable source of specialized expertise in reviewing specific types of credit products or loans to industries that present particular risk profiles, where internal resources may not have experience. Additionally, we work with internal loan review departments across the country to assist them in meeting their annual plans when the scope of the plan increases or the bank does not have the capacity to complete the reviews in a timely manner.

We strive to exceed expectations for all of our clients by not only assessing risk rating accuracy but also going a step further to evaluate the credit administration process, underwriting and approval processes, lending policies, approved policy trends, peer comparison data, and recommended best practices for your bank to consider. We tailor our process and end product to suit your needs.

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Crowe Horwath LLP

Risk-Based ApproachDespite regulators’ frequent recommendations that banks apply a risk-based approach to the loan review function, many institutions struggle to fully embrace this concept. Crowe has extensive experience helping banks develop more mature, fine-tuned risk assessment methods, enabling them to focus their resources more effectively based on the size of the risk, problem credits or industries, and other objective criteria.

In addition to confirming that a bank’s stated risk rating policy is being carried out accurately, Crowe also evaluates how rated loans are being monitored, noting how policies are being implemented and administered.

While the bank always maintains the ultimate responsibility for both policy and implementation, Crowe provides invaluable expertise and insight into the scoping process, working closely with the bank’s management, board, and internal auditors to identify specific areas of concern and attention.

What to ExpectWhile the scope of Crowe involvement naturally varies from one institution to another, the quality of the Crowe team – and the quality of its work – remains constant.

From the outset, Crowe banking professionals maintain clear and open communication with all concerned, providing regular reporting while on-site, including executive summaries that outline any findings and recommendations throughout the duration of the fieldwork. At the conclusion of the review, Crowe conducts a comprehensive exit meeting with senior management to discuss any issues and supplies written findings and best practice recommendations.

Throughout this process, Crowe teams take particular pride in the quality of their work papers and documentation. Customized software incorporates account and borrower information into a secure database for detailed analysis and documentation while also enabling the Crowe team to note and document potential issues regarding administration or monitoring.

The final work papers summarize the review, findings, and conclusions on risk rating, including not only final ratings but detailed information demonstrating how critical ratios were determined. This extensive documentation helps satisfy regulatory expectations and provides valuable information for the bank’s internal use in fine-tuning credit administration policies and procedures.

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Crowe Loan Review Services:Credible, Effective, Risk-Based Analysis

Part of Broad Portfolio of ServicesCrowe loan review services are part of an array of advanced credit consulting services, all of which support the broad Crowe credit lending framework.

In addition to third-party and cosourcing loan review services, Crowe performs a number of specific credit consulting operations including credit due diligence,

stress testing, model validation, policy review and rewrite assistance, process improvement, and targeted reviews of specific credit products or services. Crowe also offers in-depth assessment of financial institutions’ internal loan review function, focusing on internal loan review processes and procedures as well as risk-rating practices and

methods. Our assessments of internal loan review departments often are performed to assist a lending institution’s internal audit department, which may not have resources with the necessary expertise to perform these assessments. Crowe also provides a fully independent assessment of the department to an audit committee, board, or regulators.

Credit Origination

Business Development

Underwriting

Due Diligence

Initial Grade Assessment

Closing

Loan Review

Scoping and Planning

File Rview

Loan Grade Confirmation

Accounting Standards

Quality Control

Analysis and Reporting

Credit Admininstration

Compliance

Ongoing Processing

Exception Tracking

Borrower Performance

Office Performance

Collections and Workouts

Portfolio Management

Portfolio Performance

Portfolio Rebalancing

Profitability Analysis

Origination and Pricing

Portfolio Modeling

Data and Document Management for Retention and Audit Trails

Enterprise Foundation

Effective Internal Controls

Principal Capabilities

Monitoring/Self-Testing

Demonstrated Execution

Independent Audit

Corporate Governance/ERM

Enterprise Risk Assessment

Targeted Risk Assessments

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Crowe Lending Framework (CLeF)

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Crowe Experience and CredibilityFor more than 60 years, Crowe banking professionals have helped financial institutions of all sizes improve processes, underwriting, problem loan identification, and loan monitoring effectiveness. Crowe currently provides credit risk review services to more than 120 financial institutions, including some of the largest banks in the United States as well as credit unions, farm credit associations, and insurance companies.

Crowe lending teams are composed of dedicated banking professionals with years of experience as banking executives and credit officers, as well as executives with direct regulatory experience. Moreover, unlike many loan review providers, Crowe is a full-service accounting and consulting firm, maintaining extensive professional contacts throughout both the financial services industry and the regulatory community.

Crowe risk services are endorsed by the American Bankers Association (ABA) through its affiliate, the Corporation for American Banking. Crowe ABA-endorsed credit review service offerings include:

■ Credit review function outsourcing

■ Commercial real estate concentrations management

■ Credit administration process reviews

■ Allowance for loan and lease loss (ALLL) support and methods

■ Acquisition due diligence

■ Model assessment and validation

The governance, risk, and compliance management solutions from Crowe are endorsed by the American Bankers Association (ABA) through its subsidiary, the Corporation for American Banking. The ABA endorsement of these solutions indicates they deliver high quality and meet performance standards, and offer the potential to improve your bank’s profitability and performance.

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Crowe Loan Review Services:Credible, Effective, Risk-Based Analysis

www.crowehorwath.comWhen printed by Crowe Horwath LLP, this piece is printed on Mohawk Color Copy Premium, which is manufactured entirely with Green-e® certified wind-generated electricity.

Crowe Horwath LLP is an independent member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2014 Crowe Horwath LLP

Contact InformationFor more information, please contact:

Scott Miller, Principal 616.752.4264 scott.miller@crowehorwath.com

Giulio Camerini 630.586.5304 giulio.camerini@crowehorwath.com

Crowe Horwath LLP, The Unique Alternative®

Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of “Building Value with Values,®” Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk, and performance services. With a total of more than 3,000 personnel, Crowe and its subsidiaries have offices coast to coast. The firm is recognized by many organizations as one of the country’s best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.

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