Addressing Core Challenges

Misaligned Underwriting Rules for a Midsize Bank

1. Situation

A mid-sized credit union was experiencing uneven portfolio performance and stagnant loan growth despite strong market demand. Their underwriting system relied on rigid legacy rules that failed to evolve with changes in borrower behavior, credit data, and the institution’s strategic risk appetite.

2. Key Issues

• High-quality borrowers were being routinely declined due to overly conservative or outdated thresholds
  

• Riskier approvals slipped through due to inconsistent judgment and lack of rule refinement
  

• Limited integration between credit policy, enterprise risk, and product strategy
  

• No formal feedback loop from portfolio performance back into underwriting rules
  

• Examiners raised concerns about the lack of documented justification for rule exceptions
  

3. Resolution

We worked alongside the institution’s credit and enterprise risk teams to redesign the underwriting framework from the ground up. This included integrating performance analytics to identify rule inefficiencies, tailoring decision rules to reflect updated risk tolerances, and embedding a feedback loop between originations and portfolio outcomes. We also introduced structured judgmental overlays and trained frontline staff to apply them consistently. The result was a measurable improvement in credit decision quality, improved borrower approval rates, and a reduction in exceptions—all within a governance model that could stand up to examiner review.

Regulatory Findings for an FDIC Regulated Bank

1. Situation

A community bank undergoing a routine FDIC safety and soundness exam received multiple supervisory recommendations, including MRAs and MRBAs related to credit administration, board oversight, and model governance. The findings created urgency at the executive level but revealed limited internal capacity to design and execute corrective action in a coordinated, regulator-ready way.

2. Key Issues

• Multiple MRAs and one MRBA tied to credit policy deficiencies and model oversight

• Lack of formalized governance structure to track and respond to regulatory findings

• No existing root cause analysis or remediation plan documentation

• Disruption of operational focus due to reallocation of internal resources

• Heightened risk of follow-up enforcement if deadlines were missed

3. Resolution

We formed a dedicated partnership with the bank’s executive, compliance, and risk leaders to manage the remediation effort from start to finish. Our team led a structured root cause analysis, developed tailored corrective action plans for each finding, and created a centralized tracking framework to support board-level and examiner reporting. We integrated new governance protocols, trained internal staff on revised policies, and facilitated direct preparation for FDIC follow-up reviews. The result was full resolution of all findings within the required timeline, restored regulatory confidence, and a stronger internal risk and compliance culture moving forward.

Disjointed Collections & Recovery Strategies

1. Situation

A mid-sized bank was experiencing rising delinquencies and inconsistent recovery performance across its consumer and small business portfolios. Collections efforts were siloed by business line, lacked standardized workflows, and relied heavily on manual tracking with no centralized reporting or segmentation.

2. Key Issues

• No unified collections strategy across asset classes or product types

• Inconsistent borrower contact methods and follow-up timing

• No segmentation of borrowers by risk, behavior, or resolution likelihood

• Limited insight into team performance or campaign effectiveness

• Poor integration between collections activity and enterprise risk oversight

3. Resolution

We collaborated with the bank’s collections, credit, and risk teams to design a fully integrated, end-to-end collections strategy. This included portfolio segmentation models, tailored borrower outreach strategies, and updated workflows aligned with both recovery goals and compliance requirements. We implemented dashboards to monitor performance across teams and portfolios and developed governance practices to maintain accountability and adapt strategies over time. As a result, the bank saw improved recovery rates, streamlined operations, and a consistent borrower experience—backed by real-time data and aligned with enterprise-wide risk management.

Ambiguous Loan Pricing and Portfolio Strategy

1. Situation

A growing credit union was struggling to balance loan growth targets with margin compression and rising capital requirements. Loan pricing decisions were inconsistent—based largely on competitor rates and internal judgment—with little insight into risk-adjusted returns or portfolio performance under stress scenarios.

2. Key Issues

• Pricing decisions were disconnected from risk appetite and capital planning

• Lack of profitability analytics or return-on-capital modeling

• No centralized framework for setting, adjusting, or monitoring loan pricing

• Underpricing of riskier segments and over-reliance on market-based benchmarks

• Inability to defend pricing strategy to regulators or internal stakeholders

3. Resolution

We partnered with the institution’s executive and finance teams to build an integrated loan pricing and portfolio management framework. This included developing risk-based pricing models tailored to each product, aligning price floors with capital costs, and embedding stress testing to evaluate pricing under adverse conditions. We also introduced governance and reporting tools to track pricing decisions and portfolio trends over time. The new framework enabled the credit union to make more strategic, data-informed pricing decisions—improving yield, protecting capital, and ensuring compliance with both internal risk policy and regulatory expectations.

Ineffective or Outdated Risk Models

1. Situation

A regional bank relied on a third-party credit risk model embedded in its loan origination system. The model had not been independently validated in several years, and internal teams lacked clarity on its underlying assumptions, inputs, and limitations. As regulatory pressure around model risk governance increased, the institution faced growing concerns about transparency and compliance.

2. Key Issues

• No recent independent validation of the credit risk model
  

• Limited documentation on model development, inputs, and performance metrics
  

• Vendor-supplied model lacked alignment with the bank’s evolving risk appetite
  

• Examiners flagged weaknesses in model governance and oversight
  

• Internal stakeholders could not explain or challenge the model’s output
  

3. Resolution

We partnered with the bank’s risk and credit leadership to deliver a tailored model risk governance engagement. This included a full-scope validation of the vendor model, analysis of performance trends against portfolio outcomes, and a gap assessment against OCC and FDIC model governance expectations. We helped integrate documentation, monitoring procedures, and control testing into the bank’s model governance framework. In parallel, we worked with business line leaders to refine model use cases and implement appropriate override protocols. The outcome was a transparent, defensible, and institutionally owned model that passed examiner scrutiny and better informed credit decisions.

FDIC Finding – Deficient Loan Review Process

1. Situation

During a routine safety and soundness exam, a state-chartered bank received an FDIC finding citing deficiencies in its credit policy governing the loan review process. Specifically, the examiners noted the absence of a statistically valid sampling methodology and the lack of a documented, repeatable process for scoping, executing, and reporting loan reviews. The bank faced a supervisory recommendation and tight remediation timeline.

2. Key Issues

• Loan review sample sizes were arbitrarily selected, lacking statistical justification
  

• No written methodology for risk-based selection, frequency, or portfolio rotation
  

• Findings were inconsistently reported, with limited traceability or executive oversight
  

• No linkage between loan review results and credit policy adjustments or training
  

• Examiners questioned the governance and credibility of the bank’s credit review framework
  

3. Resolution

We engaged with the bank’s credit administration and risk teams to overhaul the loan review policy and program. Our team developed a statistically sound sampling methodology tailored to the bank’s portfolio risk profile and integrated that methodology into a formal loan review framework. We created a standardized process for review execution, issue tracking, and board-level reporting. Training was delivered to credit reviewers and management to ensure consistency, defensibility, and transparency. Finally, we embedded governance controls and feedback loops to ensure loan review findings influenced underwriting guidelines, training, and portfolio strategy. This holistic remediation not only resolved the FDIC findings but also elevated the bank’s credit oversight standards across the board.