Agricultural Lending

Procedures

General Procedures

These procedures should be used in conjunction with the “Loan Portfolio Management” booklet and the Classification of Credit section of The Comptroller’s Handbook for National Bank Examiners. It is important for the examiner conducting the agricultural lending examination to work closely with the LPM examiner to identify mutual areas of concern and maximize examination efficiencies. Most of the information required to perform these procedures will be available from the LPM examiner.

After completing the general procedures, select from among the following examination procedures the necessary steps to meet examination objectives. Seldom will it be necessary to perform all of the steps during an examination.

Objective: Determine the scope of the examination for agricultural lending.

1.

Review the following to identify any previous problems. Determine the status of planned corrective action.

  • Previous ROE.

  • Bank management’s response to previous examination findings.

  • Previous examination working papers.

  • Bank correspondence concerning agricultural lending.

  • Audit reports, and working papers if necessary.

  • Supervisory strategy and overall summary comments.

  • EIC’s scope memorandum.

2.

Obtain from the EIC the results of analyses of the UBPR, BERT, and other OCC reports. Identify any concerns, trends, or changes involving agricultural lending since the last examination. Examiners should be alert to growth rates, changes in portfolio composition, loan yields, and other factors which may affect credit risk.

3.

Obtain and review any other internal reports management uses to supervise agricultural lending activities. Examples include:

  • Loan trial balance, past dues, and non-accruals for agricultural portfolio.

  • Risk rating stratification report.

  • Copy of the most recent problem loan status report on adversely graded agricultural loans.

  • Loan review report with management’s response.

  • Organizational chart of the agricultural lending department.

  • Resumes of agricultural lending department management and senior staff for any staff added since the last exam.

4.

Discuss the following topics with management to determine the impact on the agricultural portfolio:

  • How management supervises the agricultural loan portfolio (individually, committee, division, etc.).

  • Concentrations within the agricultural loan portfolio (e.g., specific crops, type of livestock, orchards, agribusinesses, etc.).

  • Any significant changes in policies, procedures, personnel, and control systems affecting agricultural lending.

  • Any internal or external factors that could affect the agricultural loan portfolio.

  • Strategic plans, new initiatives, and other new initiatives.

5.

Based on the performance of the previous steps, combined with discussions with the EIC and other appropriate supervisors, determine the examination scope and how much testing is necessary. Set examination objectives.

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