Section 600.1

Renegotiated loans are defined as lending relationships in which the borrower has experienced financial difficulties which necessitated restructuring principal and/or interest payment requirements significantly from terms the bank would be willing to accept in a new lending situation. Examples include: an obligation contracted with a 3 percent interest rate at a time when the prevailing interest rates for similar borrowers was 9 percent, and a short-term working capital advance restructured to a 3-year note with token monthly payments.

The page is not intended to be a catch-all for all loans for which the original repayment terms were not met. Carryover crop loans, short-term advances restructured on a reasonable term basis and instalment loans with isolated extensions are specifically excluded. Examiners should use their judgment to determine those loans which should be included in this category. The intent of the page is to accurately reflect the delinquent status of the loan portfolio. The separate caption "Renegotiated" is intended to provide additional insight into the true delinquent status by including loans which would otherwise be excluded as they are legally and contractually current. A particular loan should not be included in both categories. A renegotiated loan should be shown as past due if the loan has reverted to a delinquent status. Listing of Credit to Insiders and Their Interest This page will be used for the detailed information relating to the Extension of Credit to Insiders and Their Interest page in the comment section.

Assets Subject to Criticism

This page is the same as page 7 in the old report, except that the past-due column has been eliminated and "Assets" rather than "Loans" is used in the heading. Delinquent status should be embodied in the write-up. The page can be used for assets other than loans. It will support and provide detail for the related page in the comment section and will be used when larger loans, leases, etc., are criticized.

Miscellaneous Criticized Assets

The page supplements the previous page. Assets Subject to Criticism, and its inclusion in the report is optional. The examiner uses this page to detail smaller criticized assets (those below 1 percent of total capital), including loans, investments, other real estate owned, cash items, overdrafts, accrued inter

est and miscellaneous assets. If management disagrees with the criticism of an asset, the examiner should use the Assets Subject to Criticism page with appropriate write-up, regardless of size. The page is constructed for the examiner to explain the reason for criticism by marking the appropriate column. Amounts shown are in dollars. When assets are aggregated, for example, instalment loans classified according to the uniform policy, use the notation "List Furnished Management." Each category of asset should be separately totalled and carried forward to the "Summary of Assets Subject to Criticism" page. Other Real Estate Owned Subject to Classification The page should be used only for other real estate owned subject to classification. Working papers should contain information on all significant parcels of other real estate. General comments regarding amounts, liquidation efforts and policies should be contained in the comment section under Other Matters.

Loans Not Supported by Satisfactory Credit
Information and Collateral Exceptions

These pages should be used to detail exceptions. When exceptions are material, in the aggregate, comments should be made under Loan Portfolio Management as well as in the letter to the board of directors. Other Schedules or Exhibits

The examiner may include in this section any schedules or exhibits developed during the examination, including pro-forma working papers. Schedules and exhibits should be used when a point made in the comment section could be subject to differing interpretations or could be illustrated more easily by utilizing those devices.

Acknowledgment Page

This page will be attached, in the regional office, to the copy of the report of examination forwarded to the bank. It indicates that each director or member of a properly designated committee has personally reviewed the contents. The examiner should ascertain during subsequent examinations that all directors or committee members have signed the report.

The signature of committee members will suffice only if the committee includes outside directors and a resolution has been passed by the full board delegating the review to such committee. The examiner should

Comptroller's Handbook for National Bank Examiners August 1982

Section 600.1

determine that the committee adequately reports significant matters contained in the report to the full board.

> Confidential Section

The confidential section should set forth matters requiring the prompt attention of senior OCC personnel, such as:

Suspected violations of law uncovered during the examination reported or to be reported to the appropriate OCC officials or other regulatory and enforcement agencies.

Critical comments relating to senior bank officers which may require official remedial action by the OCC, such as the threat of cease and desist order or officer removal.

Other critical comments regarding major problems noted during the examination which require remedial actions, but on which the bank has failed or refused to take appropriate corrective action.

This section also should contain additional data deemed necessary to the operation of the OCC, such as financial information of related organizations, schedules prepared by the bank, and subjective comments which cannot be supported by fact in the comment section. The examiner should include a description of the bank's ownership under the caption "Other Information Deemed Beneficial to OCC." The description should contain a listing of large shareholders (5 percent or more of capital stock, except in large banks where it may be desirable to lower the percentage), the number of shares outstanding, a calculation of the bank's adjusted book value per share, the current market price, recent trade activities and comments about the financial responsibility of any controlling group. If the bank is in poor condition or threatened with a capital impairment, the examiner should estimate the ability of large shareholders, directors or possible outside sources to purchase additional capital stock or otherwise aid the institution.

information requested by the Washington office will be included in this section. Regional administrators also may request information germane to a particular region and this data could be transmitted in this section. The appendix to this chapter of the handbook contains a checklist of attachments and miscellaneous information requested by the Comptroller.

The last page in the confidential section is a listing of directors and officers. The captions are selfexplanatory. All directors, excluding honorary directors, should be included. A listing of officers is left to the examiner's discretion; however, all executive officers as defined in 12 CFR 11.2(o) should be listed. Years in present positon applies to functional area of responsibility and not to the specific title.

Reports of Supervisory Visitation

Supervisory visitations are visits by examiners to banks for any reason other than a general or specialized examination. They may vary from a simple inquiry on a single subject requiring a minimum amount of time to a detailed investigation requiring substantial time. As such, OCC does not prepare formal reports for all supervisory visitations.

However, one situation occurs frequently enough to require both a formal report and uniform procedural guidelines. OCC may visit a bank with serious problems frequently to monitor its progress in correcting those problems. The most common situation is when the problems include substantial criticized assets and inadequate liquidity. In that case, the examiner files a formal report. The report includes: The Statistical Data Sheet

Section 600.1

The Comment on Criticized Assets page should contain all assets criticized at the previous examination or visitation. The page is structured in schedule format. The columns include name and comments, amount previously criticized and amount criticized at this visitation. Comments on previously criticized assets should be brief and cover only significant changes. The examiner should also list newly criticized assets and briefly comment on the reasons for criticism.

The confidential page should contain the same type of information as in a report of examination. For all other supervisory visitations, the regional administrator or the appropriate OCC department head will decide whether a formal report is written. If a formal report is not used, the examiner will communicate with OCC via memorandum. A copy of all formal reports of visitation will be provided to the bank. Examiner memoranda will not.

Comptroller's Handbook for National Bank Examiners August 1982