Exam 16: Lending Policies and Procedures: Managing Credit Risk

Timothy Gartner,an employee in the Bank of Trust and Faith,has requested for a loan of $200,000 to buy a private cruise.The bank has an unimpaired capital and surplus of $38 million and $75 million in total time and savings deposits.Average revenue for the bank in the last three years is $18.5 million and a net interest income of $5.2 million.What is the maximum amount of loan the bank can grant to Timothy?

Which of the following is a sign of a potential loan problem?

Typically,loan examiners place adversely classified loans into three categories.Loans in which the margin of protection is inadequate due to weaknesses in collateral or in the borrower's repayment abilities are categorized as:

Loans to minors are not legally enforceable contracts in most states.

One of the problems with the newer lending model called _________________ was found to at least partially contribute to the recent crisis in the mortgage market.

The First State Bank is located in Guyman which is in the middle of the wheat country of Oklahoma and as a result many of its loans are agriculture loans.What factor determining the growth and mix of loans does this fact reflect?

Agriculture loans are ones that are made to individuals to finance vacations,purchase durable goods,and other retail goods.

____________________________ are certain actions that a borrower must take during a loan period.Examples include filing periodic financial statements with the bank and purchasing insurance on any collateral pledged.

A loan for Colin Beverly to purchase a new Mazda Miata would fit into which of the following categories of bank loans?

Following the recent global credit crisis,regulators have begun to emphasize the need for loan originators to know their borrowers better and retain some of the risk on loans that they sell.

The letter "C" in the CAMELS rating system for banks in the U.S.refers to the "condition" of a bank.

Royal Bank of New York,a U.S.national bank,has $25 million in capital and surpluses and $42 million in total time and savings deposits.Average revenue for the bank in the last three years is $8.5 million and a net interest income of $2.1 million.What is the maximum volume of real estate loans that the bank can make?

A lender that makes a loan to a minor would be violating which of the 6 Cs of lending?

The First State Bank of Duncan buys railroad cars and rents them to the Santa Fe Railroad Company.What type of loan has this bank made?

A written document in which a lender promises to make credit available to a borrower,over a designated future period,up to a maximum amount in return for a commitment fee is known as a(n):

Under the ___________________________ Act,no individual can be denied credit because of race,sex,religious affiliation,age or receipt of public assistance.

One of the most widely consulted sources of data on business firms is ______________ which was founded in Philadelphia in 1914 to exchange credit information among business lending institutions and to organize conferences and publish educational materials to train loan officers and credit analysts.

The law that requires banks to make 'an affirmative effort' to meet the credit needs of individuals and businesses in their trade territories is called:

At least once in a year,banks in the United States are required to report the composition of their loan portfolio by purpose of loan on a report form known as Schedule A.

Credit extended to banks,insurance companies,finance companies,and other similar institutions is known as _______________.