General Credit Knowledge
What repays a loan?
CASH
What is the definition of a small business loan?
Aggregate Exposures under $500,000
What is the Max Advance Rate on A/R?
80%
How many years of financial statements are required for businesses?
Minimum of 2 years but prefer 3-5 years
How is DSCR calculated?
EBITDA/NOI divided by Debt Service
What are the 5 C's of Credit
Character, Capacity, Capital, Collateral, and Conditions
What is the maximum LTV for Improved Commercial Property?
85%
Name 3 products in the CRE ITB that are either Caution or Undesirable types
Unanchored Retail, Retail Outlet Center, Shadow Rated, Big Box, Concentrated and non-credit tenants, Franchisee, Small unit operators (MF), MF Type C, Mobile Homes, Senior Living, Self Storage, Hotels, Office A, B & C, Resi land, spec land, SF Builders, Condos
When are Phase I required?
Loans and assets of $1,000,000 and above
What is passthrough income and how do we account for it in the spreads?
Income from businesses are passthrough to the owners (owners are taxed for this income on their PTR).
We do not include passthrough income when spreading tax returns. We need to obtain the K-1s to determine what cash was contributed or distributed to the owners.
What is a CAP Rate and how is it utilized?
It is the rate of return on RE investment property based on the expected income that the property will generate.
NOI / Cap Rate = Appraisal Value
Who can approve a 100 day maturity extension?
CCO or CLO
How should the UCC be filed for an AG loan per ITB?
Priority UCC filing for each crop year and GBA
When are Audits required?
Aggregate Exposure over $7MM
How are living expenses calculated in SW?
20% of AGI with a minimum of $20,000 and maximum of $100,000
What does it mean for a loan to be on nonaccrual? And, when do we usually switch loans to nonaccrual?
The Bank stops accruing interest income on the loan. Loans are moved into nonaccrual when there is a well defined weakness and it becomes PROBABLE that the loan will not be repaid from the primary repayment source (P&I payments re over 90 days past due).
What is the definition of the bank's market area?
States in which the Bank maintains a presence through a deposit gathering branch and areas in contiguous states that are within 50 miles from a location. An MSA may extend this range and that is acceptable.
In the C&I ITB - what is the Max Senior Debt to EBITDA ratio allow?
3.0x
When must a hard credit report be utilized?
-new borrowing relationship or expansion of relationship
-if renewal and soft pull score is under 660.
What are the stress test scenarios that we generally use?
• Scenario #1: Interest rates increase by 300 basis points;
• Scenario #2: A decrease in Cash Flow (i.e., EBITDA, NOI) by 20%;
• Scenario #3: A simultaneous stress test increasing the interest rate by 300 basis points and decreasing Cash Flow by 20%.
What is the definition of a concentration per regulators?
sum of obligations that exceed 25% of bank's tier 1 capital plus ACL
What is the minimum Global DSCR for a 40 RG (large loan)?
1.20x
When are covenant expected per the C&I ITB?
When 1 of the following are met:
-Single transaction over $5MM or Agg Exp over $10MM
-Loan terms greater than 5 years
- BBLOC
-Significant reliance on guarantor
2 Part Question:
1) What amortization should be used to calculate DSCR if a short amortization is requested?
2) For CRE older than 40 years, DSCR would be calculated on what amortization?
1) 25 years
2) 15 years
How is the Cash Conversion Cycle Days calculated and what does it mean?
A/R Days + Inventory Days - A/P Days
indicates how many days it takes for the company to convert their inventory and A/R into Cash.