Pub. 2 2021 Issue 6

13 ISSUE 6 | 2021 Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. are involved, especially when inappropriate staffing is also a concern. Some loan review workflow automation software, on the other hand, can pull a sample of loans and the required data, then automatically respread the loans’ financials without additional data entry or searching other systems. Automating the loan review process and other data-intensive functions have become higher priorities for many financial institutions and organizations over the past few years. A recent example is the U.S. Small Business Administration, which is automating low-end functions of loan reviews for 7(a) loans to cut loan reviewers’ evaluation time by as much as a third so they can focus on high-value work. Abrigo’s survey found that more than half of respondents either have automated or plan to automate loan review processes. Respondents with fully or partially automated loan review processes represented 35% of those surveyed, and another 19% reported they have plans to automate loan review processes. Thirty-seven percent said their financial institutions have manual loan review processes and have no plans to automate. How lenders select loans or relationships for review Financial institutions vary in their methods for selecting samples of loans or credits to review, and sometimes the sampling criteria can differ by portfolio. Therefore, participants in Abrigo’s survey were able to choose multiple answers when asked how they determine which loans or relationships to review. Most respondents (85%) said they base the review sample on a certain size threshold. The next most common methods were choosing a statistical or random sample (37% of respondents) and basing the sample set on an asset-quality indicator (37% of respondents). Respondents said they also selected loans or relationships for review: • By examining new rather than existing borrowers (30% of respondents) • Based on the industry of the loan (26%) • Based on the collateral type (23%) • Based on the geographic location or market (14%) When it comes to organizing the loan review function, Abrigo’s survey found that a majority of financial institutions performed at least some of the loan review process in-house. Only 8% of respondents outsource all loan review work, and 26% primarily outsource the function, while 31% perform loan review in- house, and another 33% primarily conduct loan review using in-house resources. Abrigo’s survey was conducted from Sept. 2-24. Among the 115 respondents, 77% were from banks, 21% from credit unions, and 3% from other organizations. The asset-size breakdown among participants was: • Below $500 million: 28% • $500 million to $3 billion: 51% • $3 billion to $10 billion: 14% • More than $10 billion: 7%  Among 115 people from banks, credit unions, and other organizations surveyed about the loan review function, 37% named getting the necessary data as the top challenge. What is your financial institution’s biggest challenge when it comes to loan review? How does your institution approach loan review right now from a technology standpoint?