Credit Risk Management

Lending money to reliable customers is the lifeblood of every community bank. Not only are loans a dependable source of revenue for financial institutions, but they also play a crucial role in meeting the needs of local communities. Regardless of the type of lending that a bank engages in, there is always an inherent element of risk involved. This is why it is of utmost importance that community banks have an effective and standardized method of identifying, rating and monitoring the amount of credit risk that it assumes through its lending practices.

The managing partners at Artisan Advisors have decades of experience in all aspects of community banking operations, having previously held positions such as president and board member. We are uniquely qualified to provide valuable insight and expert consulting services to C-Suite level executives in the area of credit risk management.

The Credit Risk Policy

A community bank’s credit risk policy is the foundation of successful and profitable lending practices. The credit risk policy will outline the following fundamental elements.

  • Type of loans to be offered (through Board and regulatory approval
  • Underwriting criteria (collateral minimums, credit score thresholds etc.)
  • Terms of loans, such as time horizon and interest rates
  • The establishment of a risk factor ranking system
  • Other pertinent information

A strong and effective credit risk policy will keep a community bank’s lending portfolio and underwriting process consistent with the organization’s specific objectives. Artisan Advisors has worked closely with banking executive teams to not only ensure that their credit risk policy is compliant with any applicable regulations, but that it is also designed to encourage business growth, while always minimizing financial risk. In addition to reviewing a community bank’s current credit risk policy, we can also advise on how to improve it and make it more effective. Because every bank’s credit and lending goals are different, we take a tailor-fit approach with every client.

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Best Practices Review

The highly experienced partners at Artisan Advisors can evaluate a community bank’s entire lending operation for adherence to best practices. In addition to completing a comprehensive assessment of what regulators are requiring from the bank, we will also evaluate the credit risk management strategy of the bank overall. This will include an objective review of a bank’s adherence to their own credit risk policy, approval criteria, as well as the consistent and accurate use of the credit ranking system currently in place. Having a very knowledgeable, objective party review a community bank’s credit risk management program has proven to be an invaluable resource for many institutions.

Expert Data Analysis

Using a community bank’s own internal loan data, Artisan Advisors can very accurately assess the overall credit risk level a bank is currently holding on its books. By evaluating the types of loans being made, the consistency of the underwriting/approval process based on the credit risk policy and how uniformly the credit rating system is being applied, a true determination of the bank’s credit risk can be seen from both a macro and micro perspective.

The partners at Artisan Advisors have helped our clients fully utilize their available data reporting capabilities to get a clear view of their credit risk management practices. Upon completing this evaluation, we can make suggestions on how to improve a bank’s credit risk factors if needed. Our organization has designed complete credit risk management programs with great success.

Contact us today to learn more about how Artisan Advisors can utilize our decades of knowledge and experience to evaluate and improve your community bank’s credit risk management program. We have helped many institutions become more consistently profitable by implementing best practices with regard to credit risk.

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