Common use of LOAN RISK RATING SYSTEM Clause in Contracts

LOAN RISK RATING SYSTEM. (1) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness.

LOAN RISK RATING SYSTEM. (1) Within sixty one hundred twenty (60120) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) 250,000 (covered relationship), as assigned by responsible loan officers and by internal any independent loan reviewreviewer, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the “Rating Credit Risk Booklet, A-RCR, Risk” booklet of the Comptroller’s’s Handbook. At a minimum, the Board must ensure, on an ongoing basis, that with respect to the assessment of credit risk of any covered relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty ninety (6090) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-well- defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the “Rating Credit Risk Booklet, A-RCR, Risk” booklet of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness.

LOAN RISK RATING SYSTEM. (1) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) 250,000 (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s’s Handbook, and the OCC’s Summary (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s HandbookHandbook and the OCC’s Summary of Key Principles: CRE/Construction & (3) The Board shall ensure that the Bank has processes, the presence of illiquid collateral or existence of a plan for improvement does notpersonnel, and a non-government guarantee generally will not, mitigate control systems to ensure implementation of and adherence to the probability of default or a well-defined weaknessprogram developed pursuant to this Article.

LOAN RISK RATING SYSTEM. (1) Within sixty ninety (6090) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty that equal or exceed seventy-five thousand dollars ($150,00075,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s’s Handbook. At a minimum, the Board must ensure, on an ongoing basis, that with respect to the assessment of credit risk of any covered relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (ed) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (fe) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty ninety (6090) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness.

LOAN RISK RATING SYSTEM. (1) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one two hundred fifty thousand dollars ($150,000200,000) (“covered relationship”), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness. (3) Within sixty (60) days, the Board must establish a credit risk rating management information system that provides, at a minimum, the following information to the Board on a monthly basis: (a) individual detail regarding the identification, type, amount, and assigned rating of all problem loans in excess of fifty thousand dollars ($50,000); (b) individual, or summary, detail regarding this same information for all problem loans less than or equal to fifty thousand dollars ($50,000); (c) ratings equivalent to, or readily convertible to, the common regulatory risk rating definitions of pass, special mention, substandard, doubtful and loss set forth in the Rating Credit Risk booklet of the Comptroller’s Handbook; and (d) summary loan portfolio data highlighting trends in, and condition of, the quality of loans rated pass. (4) The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the system developed pursuant to this Article.

LOAN RISK RATING SYSTEM. (1) Within sixty one hundred twenty (60120) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000100,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the “Rating Credit Risk Booklet, A-RCR, Risk” booklet of the Comptroller’s’s Handbook. At a minimum, the Board must ensure, on an ongoing basis, that with respect to the assessment of credit risk of any covered relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty one hundred twenty (60120) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the “Rating Credit Risk Booklet, A-RCR, Risk” booklet of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness. (3) The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the program developed pursuant to this Article.

LOAN RISK RATING SYSTEM. (1) Within sixty (60) daysBeginning July 31, 2005, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial, commercial real estate, and agricultural credit relationships in excess of one hundred fifty thousand dollars $150,000 ($150,000“covered relationships”) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk BookletRisk, A-RCR, of the Comptroller’s’s Handbook. At a minimum, the Board must ensure that, with respect to the Bank’s assessment of credit risk of any covered relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of lossdefault); (b) if the strength of the borrrower’s primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurredmay occur during the term of the loan; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (fe) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty (60) daysBeginning July 31, 2005, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-well- defined weakness weaknesses that has been risk rated internally is rated no better than Substandard, unless regardless of the debt is secured by marketable securities existence of illiquid collateral, non-government guarantees, and other similar credit risk of loss mitigants. (3) By July 31, 2005, the Board must establish a credit risk rating management information system that provides, at a minimum, the following information to the Board on a monthly basis: (a) individual detail regarding the identification, type, amount, and assigned rating of all problem loans in excess of $50,000 (fifty thousand dollars); (b) individual, or cash. Consistent with summary, detail regarding this same information for all problem loans less than or equal to $50,000 (fifty thousand dollars); (c) ratings equivalent to, or readily convertible to, the guidance common regulatory risk rating definitions of pass, special mention, substandard, doubtful and loss set forth in the Rating Credit Risk BookletRisk, A-RCR, of the Comptroller’s Handbook; and (d) summary loan portfolio data highlighting trends in, and condition of, the presence quality of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weaknessloans rated pass.

LOAN RISK RATING SYSTEM. (1) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) (“covered relationshiprelationships”), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in 12 C.F.R. § 160.160, the Rating Credit Risk Booklet, A-RCR, Booklet of the Comptroller’s’s Handbook, and the OCC’s Summary of Key (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, Booklet of the Comptroller’s HandbookHandbook and the OCC’s Summary of Key Principles: CRE/Construction & Development Lending dated April 9, 2008, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness. (3) The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the program developed pursuant to this Article.

LOAN RISK RATING SYSTEM. (1) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk BookletRisk, A-RCR, of the Comptroller’s’s Handbook and the OCC’s Summary of (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow primary source of repayment is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurredoccurred or may occur during the term of the loan; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that any covered loan relationship with a high probability of payment default or other well-defined weakness weaknesses is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, regardless of the Comptroller’s Handbook, the presence existence of illiquid collateral or existence of a plan for improvement does notcollateral, and a non-government guarantee generally will notguarantees, mitigate the probability and other similar credit risk of default or a loss mitigants. A well-defined weaknessweakness in a loan relationship may include, but is not limited to, slow leasing or sales activity resulting in protracted repayment or default on the loan, changes in concept or plan due to unfavorable market conditions, materially deteriorated market conditions, delinquent taxes, or the inability to obtain necessary zoning or permits. (3) Within thirty (30) days, the Board must revise its credit risk rating management information system to include a summary of loan portfolio data highlighting trends in, and condition of, the quality of loans rated pass. (4) Upon adoption, a copy of the program shall be forwarded to the Assistant Deputy Comptroller for review and determination of no supervisory objection. (5) The Board shall ensure that the Bank has policies, processes, personnel, and control systems to ensure implementation of and adherence to the procedures developed pursuant to this Article.

LOAN RISK RATING SYSTEM. (1) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) 150,000 (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s’s Handbook. At a minimum, the Board must ensure, on an ongoing basis, that with respect to the assessment of credit risk of any covered relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty (60) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is adequately secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s Handbook, the presence of illiquid collateral or existence of a plan for improvement does not, and a non-government guarantee generally will not, mitigate the probability of default or a well-defined weakness. (3) Within ninety (90) days, the Board must establish a credit risk rating management information system that provides, at a minimum, the following information to the Board on a monthly basis: (a) individual detail regarding the identification, type, amount, and assigned rating of all problem loans in excess of $150,000 (one hundred fifty thousand dollars); and (b) ratings equivalent to, or readily convertible to, the common regulatory risk rating definitions of pass, special mention, substandard, doubtful and loss set forth in Rating Credit Risk, A-RCR, of the Comptroller’s Handbook. (4) Upon adoption, a copy of the program shall be forwarded to the Assistant Deputy Comptroller for review and determination of no supervisory objection.

LOAN RISK RATING SYSTEM. (1) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial any credit relationships in excess of one hundred fifty thousand dollars ($150,000) (covered relationship), as assigned by responsible loan officers and by internal any independent loan reviewreviewer, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s’s Handbook and the Federal Financial Institutions Examination Council’s “Uniform Retail Credit Classification and Account Management Policy” dated June 12, 2000, (OCC Bulletin 2000-20). At a minimum, the Board must ensure, on an ongoing basis, that with respect to the assessment of credit risk of any loan relationship: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurred; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (ec) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (fd) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that any covered loan relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities liquid assets or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, of the Comptroller’s Handbook. (3) Within ninety (90) days, the presence Board must establish a management information system that provides, at a minimum, the following information to the Board on a monthly basis: (a) the identification, type, amount, and assigned rating of illiquid collateral each loan or existence of a plan for improvement does notcredit relationship rated Special Mention or worse, and a non-government guarantee generally will notdiscussion of the specific reasons for the assigned risk rating; (b) credit and collateral documentation exceptions; (c) loans and leases not in conformance with the Bank's lending and leasing policies, mitigate and exceptions to the probability Bank’s lending and leasing policies; and (d) the identity of default or a well-defined weaknessthe loan officer who originated each loan reported in accordance with Subparagraphs (a) through (c) of this Paragraph.

LOAN RISK RATING SYSTEM. (1) Within sixty (60) daysBeginning December 31, 2008, and on an ongoing basis thereafter, the Board must ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk BookletRisk, A-A- RCR, of the Comptroller’s’s Handbook. At a minimum, the Board must ensure, on an ongoing basis, that with respect to the Bank’s assessment of credit risk: (a) the primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the strength of the borrower’s cash flow primary source of repayment is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurredoccurred or may occur during the term of the loan; (c) collateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty (60) daysBeginning December 31, 2008, and on an ongoing basis thereafter, the Board must ensure that any covered loan relationship with a high probability of payment default or other well-well- defined weakness weaknesses is rated no better than Substandard, unless regardless of the debt existence of illiquid collateral, non-government guarantees, and other similar credit risk of loss mitigants. A well- defined weakness in a loan relationship may include, but is secured by marketable securities not limited to, slow leasing or cash. Consistent with sales activity resulting in protracted repayment or default on the guidance loan, changes in concept or plan due to unfavorable market conditions, materially deteriorated market conditions, delinquent taxes, or the inability to obtain necessary zoning or permits. (3) By March 31, 2009, the Board must establish a credit risk rating management information system that provides, at a minimum, the following information to the Board on a monthly basis: (a) individual detail regarding the identification, type, amount, and assigned rating of all loans and loan commitments rated Special Mention or worse in excess of five hundred thousand dollars ($500,000); (b) individual, or summary, detail regarding this same information for all problem loans and loan commitments less than or equal to five hundred thousand dollars ($500,000); (c) ratings equivalent to, or readily convertible to, the common regulatory risk rating definitions of pass, special mention, substandard, doubtful and loss set forth in Rating Credit Risk BookletRisk, A-RCR, of the Comptroller’s Handbook; and (d) summary of loan portfolio data highlighting trends in, and condition of, the presence quality of illiquid collateral or existence loans rated pass. (4) Upon adoption, a copy of a plan the program shall be forwarded to the Assistant Deputy Comptroller for improvement does not, review and a non-government guarantee generally will not, mitigate the probability determination of default or a well-defined weaknessno supervisory objection.

LOAN RISK RATING SYSTEM. (1) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must shall ensure that the Bank’s internal risk ratings of commercial credit relationships in excess of one hundred fifty thousand dollars ($150,000100,000) (covered relationship), as assigned by responsible loan officers and by internal loan review, “Covered Relationship”) are timely, accurate, and consistent with the regulatory credit classification criteria set forth in the Rating Credit Risk BookletRisk, A-RCR, of the Comptroller’s’s Handbook and the OCC’s Summary of Key Principles: Construction & (a) the The primary consideration is the strength of the borrower’s primary source of repayment (i.e., the probability of default rather than the risk of loss); (b) if the primary source of repayment is cash flow from the borrower’s operations, the The strength of the borrower’s cash flow primary source of repayment is determined through analysis of the borrower’s historical and projected financial statements, past performance, and future prospects in light of conditions that have occurredoccurred or may occur during the term of the loan; (c) collateralCollateral, non-government guarantees, and other similar credit risk mitigants that affect potential loss in the event of default (rather than the probability of default) are taken into consideration only if the primary source of repayment has weakened and the probability of default has increased; (d) collateral Collateral values should reflect a current assessment of value based on actual market conditions and project status; (e) credit Credit risk ratings are reviewed and updated whenever relevant new information is received, but no less frequently than annually; and (f) the The credit risk rating analysis is documented and available for review by the Board and the OCC upon request. (2) Within sixty thirty (6030) days, and on an ongoing basis thereafter, the Board must ensure that any covered relationship Covered Relationship with a high probability of payment default or other well-defined weakness is rated no better than Substandard, unless the debt is secured by marketable securities or cash. Consistent with the guidance in the Rating Credit Risk Booklet, A-RCR, regardless of the Comptroller’s Handbookexistence illiquid collateral, the presence of illiquid collateral or existence of a plan for improvement does notnon- government guarantees, and a non-government guarantee generally will not, mitigate the probability other similar credit risk of default or a loss mitigants. A well-defined weaknessweakness in a Covered Relationship may include, but is not limited to, slow leasing or sales activity resulting in protracted repayment or default on the loan, changes in concept or plan due to unfavorable market conditions, materially deteriorated market conditions, delinquent taxes, or the inability to obtain necessary zoning or permits. (3) Within thirty (30) days, the Board must revise its credit risk rating management information system to include a summary of loan portfolio data highlighting trends in, and condition of, the quality of loans rated Pass. (4) Upon adoption, a copy of the program shall be forwarded to the Assistant Deputy Comptroller for review and determination of no supervisory objection.