Hilltop Advisors, LLC. Loan Review Services. Presented by: Hilltop Advisors, LLC (an accounting advisory and consulting firm)

Transcription

1 Loan Review Services Presented by: (an accounting advisory and consulting firm)

2 For further information about our proposal or the company, please contact: Geoffrey A. Oliver CPA, CFF, CMB CEO & Managing Partner Main: Joan L. Migliori CFE, CIA Partner Main: Laura M. Lee, CPA reinstatement pending Office Partner Phone: Main: Fax: Spring Hill Rd #460 McLean, VA

3 Loan Review Practice Overview Hilltop Advisors Loan Review practice targets those lenders who either need supplementary resources or new resources to conduct the loan review function. Our professionals are capable of reviewing the following loan/asset types: - commercial loans (real estate, ADC, and C&I), - multifamily loans, - residential mortgages or home equity loans/lines, - consumer loan portfolios, - student loan portfolios, - other loans/leases, - REO. The Loan Review assesses the on-going credit quality and performance of the borrower. Hilltop Advisors team has also been involved in assessing the ALLL adequacy, loss mitigation processes, credit rating processes completed by our client s Loan Review team and assisting with external and internal audit requirements. Since we are an independent function, external auditors can decide to rely on our efforts much like the work of internal auditors. 3

4 Hilltop Advisors Loan Review Team Hilltop Advisors team is comprised of external and internal auditors, fraud auditors, forensic accountants, investigators and data technology consultants. These professionals have achieved specialist recognition as Certified Mortgage Bankers, Certified Fraud Examiners, Certified Internal Auditors, and Certified in Financial Forensics. We have several former Big 4 Audit partners and numerous staff with such experience. We then add to this team, former lending and underwriting professionals to bring the operational perspective to this process. Our Loan Review team has reviewed/assessed hundreds of loan portfolios and thousands of commercial loans for credit quality, valuation, due diligence, lending compliance and other purposes. Our financial professionals understand how to view the borrower s financial condition and apply our proprietary process of assessing the ability to repay, as well as, assessing the ability of the lender to recover from the sale of the collateral. 4

5 What We Do! Hilltop s Loan Review services can be provided on a project or co-sourcing basis and include, all or some, of the following: Financial Assessment of borrower - Desk review - On-site borrower review Identification of specific credit issues/risks - Financial data analysis completeness, accuracy, and timeliness of credit data - Compiling information of what is known and what missing components of data exist - Assessing calculations of risk net realizable value, ALLL, other supporting risk quantification Loss Mitigation Efforts stopping the immediate bleeding and determining long term process/controls changes - Identifying immediate change processes to avoid further fraud perpetration - Verifying fraud related internal controls are in place and functioning - Conducting compliance and operational audits for control breaks - Verifying compliance with laws and regulations ALLL calculations, model validation, and assumption validation Other services 5

6 Financial Assessment of borrower Our Loan Review methodology extends beyond what many loan officers can achieve because most of our team members are CPAs and/or finance specialists who understand how to evaluate a company s performance and determine the financial and operational risks therein. Further, our methodology utilizes as much third party data as is available concerning the company/borrower. We have developed a number of sources through vendor databases and the internet. Finally, we have a proprietary review process that assesses the borrower s complete borrowing picture i.e. assessing the payment and collateral status of loans from other banks. At a minimum, we conduct a desk review of the borrower s financial information, management reports, and third party data. The initial review results in a follow through list of questions that are usually covered with the CEO and/or CFO of the company. The results of the desk review are documented and updated (if Hilltop s co-sourcing services are utilized). Our on-site review includes 2-4 hours of on site interviews with critical senior management (which Hilltop determines) and is completed after the desk review is finished. The results of the desk review and the on site review (where utilized) are then presented to the Bank s Chief Lending Officer or the representative officer handling the loan portfolio credit review. Presentations will focus on those loans that have the highest risk or evolving risk levels. 6

7 Identification of specific credit issues/risks Hilltop Advisors proprietary credit review process adds a few aspects that most bank credit review processes do not include. We focus on the following additional items: - Financial statement disclosures are often key to credit issues that do not show up on the balance sheet or income statement - Third party data sources, press releases, competitor analyses, trade association reputation, etc are all sources of information about the company that will provide additional input - Interviews focused on the overall finances of the company, not just the Bank s own loans - Operational risk discussions that can identify financial risks Our process is focused on being comprehensive, while we are not auditing the data, we are focused on the following: - Financial data analysis completeness, accuracy, and timeliness of financial/operations data - Identifying information missing components and attempting to receive all quickly - Assessing risk calculations to identify how risk can be misunderstood - net realizable value assumptions, - ALLL assumptions or portfolio segregation, - other supporting assumptions or data risk 7

8 Loss Mitigation Efforts While identifying credit exposure and loss potential are important identifying and executing the appropriate loss mitigation steps is critical. Hilltop Advisors professionals have assessed numerous default/loss mitigation teams/processes and understands what is effective and what is not. Our propriety methodology works for residential or commercial loans and identifies needed changes, if applicable, that the lender/loan servicer must make to maximize loss mitigation effectiveness. The following is an overview of the process we use to assess the loss mitigation efforts: - Identifying the credit risk early and often loss mit can only be effective if the risk is identified - Understanding the current financial picture of the borrower update everything - Understanding the current value of the collateral critical analysis of what the potential downside is needs to be completed - Identify opportunities to enhance collateral position - Identify opportunities to use deposits to apply to loans - Ensure that all borrower loans are being assessed not just the one that a payment is missed - Identify immediate change processes to bring loss mit processes to state of the art - Verify all related internal controls are in place and functioning - Ensure that the Loss Mit/Default/Credit Officer are equipped with data, analytic tools and clear decision paths 8

9 Assistance with the ALLL Hilltop Advisors has a number of former CFOs, Controllers and Big 4 Auditors that are very familiar with the ALLL calculations from the audit and regulatory examiner perspectives. Our experience shows that the math is usually not in question but rather the data used (integrity) and/or the assumptions/conclusions about the loans are typically being questioned/challenged. Given that the issues faced by most Banks/Lenders are data and assumptions, Hilltop Advisors has a tested methodology (external auditors and examiners have agreed that this methodology is appropriate) that focuses on the ALLL model validation and validating the support and documentation for critical assumptions (loss frequency and loss severity being typically the most important). Whether assessing residential mortgage or consumer loan portfolios or individual commercial loans we know that data, trends, and borrower behavior are critical to the ALLL calculation. We have a proprietary matrix of critical data, trend calculations, portfolio analytics (slicing/segmenting by key characteristics, performance, etc), and inputs to the loss frequency and severity calculations. Hilltop Advisors understands that loan portfolios are different from bank to bank and the loss characteristics and corresponding ALLL requirements are different as well. Our proprietary credit risk/loss evaluation process approach is based on this fact. 9

10 Other Loan Review Services Our Hilltop Partner team and professionals have conducted many types of engagements beyond the loan review, ALLL assessment etc. A summary of some other loan portfolio related services that we have been engaged for are: actions) - Compliance with the new MHA/HASP modification requirements - Net present value model assessments (NPV models used to evaluate loss mitigation - Data input and integrity assessments - REO assessments of NPV and carrying value adjustments if required - Foreclosure claim reviews to identify whether all related expenses have been claimed - Loan document reviews for quality control, compliance or other needs - Appraisal reviews to identify AICPA acceptable appraisals and overall reliability factors - Fraud assessments and loss calculation If you have project or co-sourcing needs in the loan area check with us to see if we can assist you. 10

11 Key Question Can you do the Loan Review with your current resources credit risk identification, quantification/assessment of the credit exposure and loss mitigation efforts yourself and achieve the following? - An independent assessment of your credit risk and what you are doing to mitigate such risk. - A comprehensive financial review of your borrowers completed by certified/experienced professionals. - A variable cost structure that will vary with the size of the loan portfolio instead of fixed salaries for commercial lenders, residential experts, etc. - A team completing the assessment with the same experience level that Hilltop Advisors can bring. Hilltop Advisors Loan Review team is ready to assist you! 11

12 is here to help your company be successful! We look forward to working with you. 12