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Appeal of Shared National Credit (First Quarter 2022)


A participant bank appealed the pass risk rating assigned to a revolving credit during the first quarter Shared National Credit (SNC) examination.


The appeal asserted that a special mention rating is more appropriate. The appeal contended that although the borrower’s financial performance and the industry outlook had significantly improved, certain metrics, including revenue per available room (RevPAR) and earnings before interest, taxes, depreciation, and amortization (EBITDA) remained well below 2019 levels, and a full recovery may not occur until late 2022 or early 2023. The appeal further asserted that business and group travel had not returned to levels prior to COVID-19 and covenant relief was recently extended.

Supervisory Standards

The interagency appeals panel conducted a comprehensive review of the information submitted by the bank and relied on the supervisory standards outlined below:

  • Comptroller’s Handbook, “Commercial Loans” (Narrative—March 1990, Procedures—March 1998)
  • Comptroller’s Handbook, “Rating Credit Risk” (April 2001, updated June 2017 for nonaccrual status)
  • OCC Bulletin 2020-35, “Troubled Debt Restructurings: Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by COVID-19 (Revised)”
  • OCC Bulletin 2020-64, “Examinations: Interagency Examiner Guidance for Assessing Safety and Soundness While Considering the Effect of COVID-19 on Institutions”
  • OCC Bulletin 2020-72, “Credit Administration: Joint Statement on Additional Loan Accommodations Related to COVID-19”


An interagency appeals panel of three senior credit examiners concurred with the SNC review team’s originally assigned pass rating based on the borrower’s satisfactory primary source of repayment and liquidity. Operating performance, while still lower than 2019, improved to a satisfactory level for the year-end 2021. Negative cash flow experienced during 2020 turned positive in 2021. While the COVID-19 related shutdowns had a negative impact on operating performance, the borrower currently demonstrates continuing capacity to satisfactorily repay debt. The obligor reported a satisfactory year-end 2021 fixed charge coverage ratio. Year-end 2021 data reflected sufficient cash liquidity and revolving credit availability to support operations.