APRIL THROUGH SEPTEMBER 2000

HIGHLIGHTS

l During the six months ending September 30, 2000, examiners reported increases in the risks associated with

underwriting practices and more frequent occurrences of risky underwriting practices compared with the six

months ending March 31, 2000. 

l Five percent of FDIC-supervised banks were reported to have high risk associated with current underwriting

practices for new lending compared with 3 percent during the previous six months. In addition, 5 percent were

reported as having high risk in their overall loan portfolios, also up from 3 percent previously.

l Compared with the six months ending March 31, 2000, examiners also reported more frequent occurrences of

risky underwriting practices in three of the seven major loan categories covered in the questionnaire: construction, commercial (nonresidential) real estate, and home equity lending.

l The frequency of risky underwriting practices in the major loan category of agriculture decreased slightly compared with the previous period. Results for consumer and credit card loans, however, were mixed.

INTRODUCTION

At the end of each FDIC-supervised bank examination,

the examiner in charge responds to a questionnaire on the

banks underwriting practices. This Report on Underwriting Practices covers the responses submitted during

the six months beginning April 1, 2000, and ending

September 30, 2000. The number of responses received

during this six months was 1,124which represents

approximately 20 percent of the number and 28 percent of

the assets of all FDIC-supervised banks. The results reported here refer to weighted responses and are estimates of the

underwriting practices of all FDIC-supervised banks. An

explanation of the use of weights appears in Purpose and

Design of the Report. All weighted responses appear in the

table at the end of this Report.

GENERAL UNDERWRITING TRENDS

During the six months ending September 30, 2000,

examiners indicated that 12 percent of FDIC-supervised

banks showed a material change in underwriting practices

since the previous examination, the largest percentage since

September 30, 1998. The percentage of banks that had

loosened their underwriting practices since the previous

examination was larger than the percentage that had tightened them (7 percent and 5 percent). 

In general, greater levels of risk were seen among banks

that were reported to have loosened their underwriting

practices than among banks reported to have tightened

them. Likewise, banks that loosened their underwriting practices since the previous examination also showed more frequent occurrences of risky underwriting practices than the

group that tightened underwriting practices. 

The main reasons for the loosening of underwriting practices, as indicated by examiners, were competition and/or a

drive to meet growth goals; the reasons for the tightening were

a need to respond to regulatory observations and/or a change

in management.

Examiners also reported that the potential risk associated

with institutions current underwriting practices increased

during the six months ending September 30, 2000, compared

with the six months ending March 31, 2000. For example, the

proportion of banks with high risk associated with institutions current underwriting practices increased from 3 percent to 5 percent.

The proportion of banks with an absolute level of high

potential credit risk in their loan portfolios also rosefrom

3 percent to 5 percent. 

The most noteworthy changes for FDIC-supervised

banks during the six months ending September 30, 2000,

compared with the six months ending March 31, 2000,

were increases in the proportions of banks in the following

categories: those with high risk associated with loan

growth and/or with significant changes in lending activities,

Division of Research and Statistics

Virginia Olin (202) 898-8711

Internet address: World Wide Web, www.fdic.gov.

Division of Supervision

Robert W. Walsh (202) 898-6911 

12

9

11

10

12

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

2

4

6

8

10

12

14

Proportion

Six months ending . . .

Proportion of FDIC-Supervised Banks That Materially

Changed Underwriting Practices since the Previous

Examination

Report on Underwriting Practices Report on Underwriting Practices Report on Underwriting Practices

Federal Deposit Insurance Corporation Donna Tanoue, Chairman
those with high risk associated with loan administration,

and those whose written lending policies differed from

actual practices either frequently enough to warrant

notice (hereafter, frequently) or commonly or as standard procedure (hereafter, commonly). The occurrences

of all types of risky underwriting practices were considerably higher among banks with high risk in current underwriting practices than among banks with medium or

low risk in current underwriting practices. 

Of the 1,124 banks examined, 197 used a credit scoring

model for credit decisions; the model was used most frequently (105 banks) for consumer installment lending.

INDIVIDUAL LOAN CATEGORIES

During the six months ending September 30, 2000, of

the 1,124 banks examined, 952 were active in business

lending, 877 in consumer lending (excluding credit cards),

and 772 in commercial (nonresidential) real estate lending.

Twenty banks were not active in any of the major loan categories covered. 

Examiners are also asked to report additional loan categories (those not listed in the chart) in which the institution

may be active.1 Only 246 banks examined had activity in

additional loan categories, with the largest number (124)

having dealer paper loans. Only 21 banks examined had

activity in home equity lending with high loan-to-value

ratios.

Compared with the six months ending March 31, 2000,

examiners also reported more frequent occurrences of risky

underwriting practices in three of the seven major loan categories covered in the questionnaire: construction, commercial (nonresidential) real estate, and home equity

3

4

3

5

3/31/99 9/30/99 3/31/00 9/30/00

0

1

2

3

4

5

6

Proportion

Six months ending . . .

Report on Underwriting Practices 2 September 2000

4 4

2

5

3/31/99 9/30/99 3/31/00 9/30/00

0

1

2

3

4

5

6

Proportion

Six months ending . . .

Proportion of FDIC-Supervised Banks with “High” Risk

Associated with Loan Growth and/or Changes in

Lending Activities since the Previous Examination

Proportion of FDIC-Supervised Banks with “High”

Credit Risk in Their Overall Loan Portfolios

Six months ending . . .

5 5

3

6

3/31/99 9/30/99 3/31/00 9/30/00

0

1

2

3

4

5

6

7

Proportion

Proportion of FDIC-Supervised Banks with “High” Risk

Associated with Loan Administration

1 The section Purpose and Design of the Report lists additional loan

categories.

Six months ending . . .

29

20

23 22

26

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

5

10

15

20

25

30

35

Proportion

Loans Made in Which the Institution’s Written Policies

Differ from Actual Practices

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)

3

4

3

5

3/31/99 9/30/99 3/31/00 9/30/00

0

1

2

3

4

5

6

Proportion

Six months ending . . .

Proportion of FDIC-Supervised Banks with “High” Risk

Associated with Current Underwriting Practices
lending. The frequency of risky underwriting practices in

the major loan category of agriculture decreased slightly

during the six months ending September 30, 2000, compared to the six months ending March 31, 2000.

The occurrences of risky underwriting practices in each

of the major loan categories were considerably higher

among banks with high risk in current underwriting practices than among banks with medium or low risk in

current underwriting practices.

Business Loans

The frequency of specific risky underwriting practices in

business lending remained about the same during the six

months ending September 30, 2000, as it was during the six

months ending March 31, 2000, except that the proportion

of FDIC-supervised banks that either frequently or commonly made business loans to borrowers who lacked documented financial strength to support such lending

increased from 20 percent to 22 percent.

Among banks making business loans, the proportion that

either frequently or commonly failed to monitor the

collateral pledged on asset-based loans remained about the

same (21 percent, compared with 20 percent previously),

and the proportion that either frequently or commonly

made business loans without a clear and reasonably predictable repayment source was unchanged15 percent.

Consumer Loans (Excluding Credit Card

Lending)

For FDIC-supervised banks active in consumer lending

(excluding credit card loans), the frequency of specific

risky underwriting practices remained about the same during the six months ending September 30, 2000, compared

with the previous six months. Fourteen percent either frequently or commonly made secured consumer loans

without adequate collateral protection (unchanged from

previously).

Eighteen percent either frequently or commonly

made loans to borrowers who lack a demonstrable ability to

repay (up from 17 percent previously). 

Commercial (Nonresidential) Real Estate

Loans

For commercial (nonresidential) real estate lending, the

frequency of specific risky underwriting practices was

higher compared with the previous six months. Of the

FDIC-supervised banks actively making such loans, 11 percent either frequently or commonly made loans without using realistic appraisal values relative to the current

21

19 20 20

22

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

5

10

15

20

25

Proportion

Six months ending . . .

September 2000 3 Report on Underwriting Practices

Business Loans

Loans Made to Borrowers Who Lacked Documented Financial

Strength to Support Such Lending

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)

877

772

617

535

185

20

1124

Business

Consumer

Nonresidential

Construction

Agricultural

Home Equity

Credit Card

None of the Above

TOTAL LOANS

0 500 1000

952

455

Number of Banks Actively Making Loans, by Type

Responses Received 4/1/00–9/30/00

Six months ending . . .

17

14

15

14 14

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

5

10

15

20

Proportion

Consumer Loans

Loans Made without Adequate Collateral Protection

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)

11

8

10

9

11

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

2

4

6

8

10

12

Proportion

Six months ending . . .

Commercial (Nonresidential) Real Estate

Loans Made Failing to Use Realistic Appraisal Values

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)
economic environment and/or to the performance observed

on similar credits (up from 9 percent previously).

Eighteen percent either frequently or commonly

made short-term commercial real estate loans with minimal

amortization terms and large balloon payments at maturity, up from 17 percent. And 12 percent either frequently

or commonly made commercial real estate loans without

consideration of repayment sources other than the project

being funded (up from 11 percent). The proportion of

banks that either frequently or commonly made interestonly, extended-amortization, or negative-amortization permanent commercial real state remained the same7 percent.

Construction Loans 

The frequency of specific risky underwriting practices in

construction lending also increased slightly compared with

the previous six months. The proportion of FDIC-supervised banks making speculative construction loans (that is,

projects unaccompanied by refinancing commitments)

either frequently or commonly rose from 25 percent to

26 percent. 

And the proportion that either frequently or commonly failed to use realistic appraisal values relative to the

current economic environment and/or to the performance

observed on similar credits rose from 11 percent to 12 percent. For FDIC-supervised banks either frequently or

commonly making construction loans for the following

underwriting practices, the increase in the frequency of

risky practices was slight: (1) making construction loans

without consideration of repayment sources other than the

project being funded13 percent, compared with 12 percent previously; (2) failing to take appropriate steps to verify the quality of alternative repayment sources when such

sources are required13 percent, compared with 12 percent previously; (3) funding, or deferring, interest payments

during the commercial construction loan term15 percent,

compared with 14 percent previously; and (4) funding 100

percent of the cost of construction and land, with no cash

equity on the part of the borrower/developer12 percent,

compared with 11 percent previously.

Home Equity Loans

Of FDIC-supervised banks active in home equity lending, a slightly larger proportion were making home equity

loans that pushed mortgage indebtedness above 90 percent

of collateral value. Specifically, 13 percent were making

such loans either frequently or commonly, compared

with 12 percent previously.

Three percent of banks either frequently or commonly qualified borrowers for home equity credit on the basis

of initially discounted loan (teaser) rates (up from 1 percent

previously).

Credit Card Loans

Few FDIC-supervised banks were making new credit

card loans. Two percent of banks active in new credit card

lending had high risk in current underwriting practices

for new credit card loans (up from 1 percent previously).

Two percent also had high risk associated with the banks

credit card portfolio (also up from 1 percent previously). 

Agricultural Loans

For FDIC-supervised banks active in agricultural lending, for the second consecutive six-month period examiners

reported a decrease in the proportion having a moderate

or a sharp increase in the banks level of carryover debt.

These smaller proportions may reflect legislation designed

to assist farmers in both 1998 and 1999.

In general, examiners noted slight decreases in the frequency of risky practices for agricultural lending at FDICsupervised banks that were actively making agricultural

loans. For example, 13 percent either frequently or

commonly made agricultural loans on the basis of land

values that cannot be supported by farm operations (down

from 14 percent previously). Forty-four percent either frequently or commonly had portfolios tied to crops affected by the Federal Agricultural Improvement and Reform

Act of 19962 (down slightly from 45 percent previously).

Report on Underwriting Practices 4 September 2000

Six months ending . . .

37

25 24 25 26

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

10

20

30

40

Proportion

13

9

11

12

13

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

5

10

15

20

Proportion

Six months ending . . .

Home Equity Loans

Loans Made with Greater than 90% Collateral Value

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)

Construction Loans

Loans Made on a Speculative Basis

(Proportion of FDIC-supervised banks making such loans

either “frequently” or “commonly”)

2 In contrast to previous law, which allowed traditional subsidies tied to

prices and limits on production, this law allowed declining payments to farmers until the year 2002 for certain crops.
September 2000 5 Report on Underwriting Practices

And 11 percent either frequently or commonly made

agricultural loans on the basis of unrealistic cash flow projections (down from 14 percent previously).

Purpose and Design of the Report

In early 1995, the FDIC began to require that a supplementary examination questionnaire on current underwriting

practices at FDIC-supervised banks be filled out at the end

of each FDIC-supervised bank examination. The questionnaire focuses on three topics: material changes in underwriting practices for new loans, the overall degree of risk in

underwriting practices for new loans, and the frequency of

specific risks in underwriting practices within major categories of loans (business, consumer, commercial [nonresidential] real estate, agricultural, construction, home equity,

and credit card loans). Examiners are also asked to report

whether the institution is active in additional loan categories (unguaranteed portions of Small Business

Administration [SBA] loans, subprime loans [automobiles,

mortgages], dealer paper loans, low- /no-document business loans, high loan-to-value ratio home equity loans [up

to 125%], or any category of loan not mentioned). The systematic collection and analysis of questionnaire responses

provides an early-warning mechanism for identifying

potential lending problems.

Examiners evaluate underwriting practices in terms of

FDIC supervisory practices. Until October 1, 1998, examiners were asked to rate the risk associated with a banks

underwriting practices in relative terms: above average,

average, or below average. Beginning October 1, 1998,

examiners began rating the risk associated with a banks

underwriting practices in absolute terms: low, medium,

or high.3 New questions about underwriting practices

were also added to the questionnaire. Examiners continue

to classify the frequency of specific risky underwriting

practices as never or infrequently, frequently enough to

warrant notice, or, if the risky practice is used more often,

commonly or as standard procedure.4

The questionnaire is completed at the end of each bank

examination the FDIC conducts. Which banks are included during a reporting period, therefore, depends on how the

FDIC schedules bank examinations. Examination schedules are heavily influenced by the financial condition of a

bank, with the examinations generally becoming more frequent the poorer a banks financial condition. In addition,

the FDIC shares examination authority of state-chartered

nonmember banks (those that are not members of the

Federal Reserve System) with state bank regulators. To

avoid excessive regulatory burden, the FDIC generally

alternates examinations with state regulators, and the latter

do not fill out questionnaires. Finally, examination schedules are affected by the availability of examination staff.

For these reasons the group of banks included in any given

report is not randomly selected and therefore may not be

representative of the population of FDIC-supervised banks.

To address the potential bias that examination scheduling might introduce into the reports results, we statistically weight the responses. The weights are designed to make

questionnaire responses in the aggregate more reflective of

the population of FDIC-supervised banks. Simply put,

when we compute aggregate questionnaire responses, we

give greater weight to FDIC-supervised banks that are

underrepresented in the questionnaire (when compared

with the population of FDIC-supervised banks) and less

weight to overrepresented groups.5 Although these

weightings cannot remove all potential bias, they do allow

for more meaningful comparisons of results over time.

Nevertheless, we advise readers to interpret trends cautiously, for two reasons: (1) the lack of random selection of

banks for examination, as noted above, and (2) the small

number of responses for some loan categories.

Throughout this report, the proportions presented refer

to these weighted responses and are estimates of the underwriting practices of all FDIC-supervised banks in the

nation. In addition, the data used to weight responses in

this report are subject to slight revisions, so some of the

weighted proportions might be revised in subsequent

reports. We expect no substantive changes, however.

Six months ending . . .

26

32

42

33

26

9/30/98 3/31/99 9/30/99 3/31/00 9/30/00

0

10

20

30

40

50

Proportion

Agricultural Loans

(Proportion of FDIC-supervised banks having a “moderate”

or a “sharp” increase in carryover debt)

3 Low: The level of risk imposed on the institution does not warrant

notice by bank supervisors even when factors that might offset the risk are

ignored. Medium: The level of risk should be brought to the attention of

bank supervisors. There may or may not be factors that offset the risk imposed

on the institution; however, the level of risk raises concerns when considered

apart from these offsetting factors. High: The level of risk is high and therefore should be brought to the immediate attention of bank supervisors. There

may or may not be factors that offset the risk imposed on the institution; however, the level of risk is high when viewed in isolation.

4 Never or infrequently: The institution does not engage in the practice,

or does so only to an extent that does not warrant notice by bank supervisors.

Frequently enough to warrant notice: The institution engages in the practice often enough for it to be brought to the attention of bank supervisors.

There may or may not be factors that offset the risks the practice imposes on

the institution. Commonly or as standard procedure: The practice is either

common or standard at the institution and therefore should be brought to the

attention of bank supervisors. There may or may not be factors that offset the

risks the practice imposes on the institution.

5 Anyone who wishes more information about the weights should contact

Virginia Olin, DRS, 202/898-8711.
GENERAL UNDERWRITING PRACTICES 

Have the institutions underwriting practices materially changed since the last examination: 

If practices have materially changed, are they:1

How would you characterize the risk associated with

loan growth and/or significant changes in lending

activities since the last examination: 

RISK IN CURRENT PRACTICES 

How would you characterize the potential risk associated with the institutions current UW practices: 

How would you characterize the potential credit risk

of the institutions overall loan portfolio: 

How would you characterize the potential risk in

underwriting practices associated with loan participations purchased by the institution: 

To what extent has recent lending been made in

amounts that resulted inor contributed to

concentrations of credit to one borrower or industry:

To what extent is the institution currently engaged in

out-of-area financing: 

How would you characterize the risk associated with

loan administration: 

To what degree does the institution fail to adjust its

loan pricing on different quality loans to reflect differences in risk:2

To what extent does the institution fail to require a

material principal reduction before renewing term

loans:2

To what extent do the institutions written lending

policies differ from actual practices: 

BUSINESS LOANS 

To what extent does the institution make business

loans without a clear and reasonably predictable

repayment source: 

To what extent does the institution make business

loans to borrowers who lack documented financial

strength to support such lending: 

With respect to asset-based business loans, to what

extent does the institution fail to monitor collateral: 

CONSTRUCTION LOANS 

To what extent is the institution funding construction projects on a speculative basis (i.e., without

meaningful pre-sale, pre-lease or take-out commitments): 

To what extent are construction loans made without

consideration of repayment sources other than the

project being funded: 

When alternative repayment sources are required,

to what extent does the institution fail to take appropriate steps to verify the quality of these sources: 

To what extent does the institution fail to use realistic appraisal values relative to the current economic

environment and/or to the performance observed on

similar credits: 

To what extent does the institution fund, or defer,

interest payments during the term of its commercial

construction loans: 

RESULTS FROM THE REPORT ON UNDERWRITING PRACTICES

Percent of Respondents

(Weighted)

Six-Month Period Ending:

9/98 3/99 9/99 3/00 9/00

Yes 11.7 9.3 10.6 9.8 11.6

No 88.3 90.7 89.4 90.3 88.4

Substantially tighter NA 0.9 1.1 1.1 1.4 

Moderately tighter 5.4 4.3 4.1 3.1 3.6

Moderately looser 6.3 3.1 4.3 4.4 4.7

Substantially looser NA 1.0 1.1 1.1 1.8

Low NA 55.1 54.3 55.4 52.5

Medium NA 28.8 28.9 28.6 29.3 

High NA 3.9 4.1 2.3 4.8 

Insignificant NA 12.2 12.7 13.8 13.4 

Low NA 65.0 66.4 67.7 65.3

Medium NA 31.8 29.9 29.7 30.2 

High NA 3.3 3.7 2.7 4.6 

Low NA 66.5 66.7 68.3 66.1

Medium NA 30.4 29.0 29.0 29.1 

High NA 3.1 4.3 2.7 4.7

Low NA 79.7 77.4 78.4 78.8 

Medium NA 19.4 21.1 20.2 19.2 

High NA 0.8 1.6 1.3 2.1

Never or infrequently 77.7 80.0 78.6 79.5 77.0 

Frequently enough to warrant notice 14.5 12.9 13.9 14.1 16.3 

Commonly or standard procedure 7.8 7.1 7.5 6.4 6.7 

Never or infrequently NA 89.2 87.1 88.2 85.9 

Frequently enough to warrant notice NA 8.3 9.8 9.5 11.3 

Commonly or standard procedure NA 2.5 3.1 2.4 2.9

Low NA 64.5 63.1 65.5 62.1 

Medium NA 30.8 31.6 31.2 32.3 

High NA 4.7 5.3 3.4 5.6 

Never or infrequently 73.0 89.4 86.2 87.8 87.6 

Frequently enough to warrant notice 22.3 8.1 11.4 10.5 10.2 

Commonly or standard procedure 4.7 2.6 2.5 1.8 2.3 

Never or infrequently 62.5 76.2 75.7 76.7 77.4 

Frequently enough to warrant notice 32.7 20.2 20.9 20.8 19.3 

Commonly or standard procedure 4.8 3.6 3.4 2.5 3.3 

Never or infrequently 71.5 79.8 77.5 78.1 74.1 

Frequently enough to warrant notice 22.7 17.1 19.4 19.0 22.2 

Commonly or standard procedure 5.8 3.1 3.1 2.9 3.7 

Never or infrequently 85.2 82.9 84.1 85.1 85.1 

Frequently enough to warrant notice 12.6 13.8 13.8 13.5 13.8 

Commonly or standard procedure 2.3 3.3 2.0 1.4 1.1 

Never or infrequently 78.6 81.0 80.4 79.9 77.9 

Frequently enough to warrant notice 18.9 16.6 17.8 18.6 20.2 

Commonly or standard procedure 2.5 2.3 1.8 1.6 1.9 

Never or infrequently 83.6 77.7 78.6 80.6 79.2 

Frequently enough to warrant notice 14.4 19.5 19.0 17.3 19.4 

Commonly or standard procedure 2.0 2.7 2.4 2.2 1.4 

Never or infrequently 63.2 75.2 76.1 75.2 73.6 

Frequently enough to warrant notice 29.7 19.4 20.1 20.4 21.9 

Commonly or standard procedure 7.2 5.4 3.9 4.4 4.5 

Never or infrequently 74.3 87.3 88.1 88.0 87.4 

Frequently enough to warrant notice 22.6 11.6 10.5 10.5 10.7 

Commonly or standard procedure 3.1 1.1 1.5 1.4 2.0 

Never or infrequently 83.7 88.0 87.9 87.7 87.5 

Frequently enough to warrant notice 14.1 11.3 9.5 11.1 10.6 

Commonly or standard procedure 2.2 0.8 2.5 1.1 1.9 

Never or infrequently 86.0 89.8 87.9 89.5 87.7 

Frequently enough to warrant notice 11.8 9.9 11.2 9.6 10.8 

Commonly or standard procedure 2.2 0.3 0.9 0.9 1.5 

Never or infrequently 79.8 83.9 87.1 86.0 85.2 

Frequently enough to warrant notice 14.4 10.2 9.7 7.9 9.6 

Commonly or standard procedure 5.9 5.9 3.2 6.1 5.2 

Report on Underwriting Practices 6 September 2000

1 Prior to October 1, 1998, responses were either tighter or looser.

2 Prior to October 1998, responses were rarely, to some degree, or commonly. 
CONSTRUCTION LOANS (cont.)

To what extent does the institution fund 100% of the

cost of construction and land, with no cash equity on

the part of the borrower/developer: 

NONRESIDENTIAL LOANS 

To what extent are commercial real estate loans

made without consideration of repayment sources

other than the project being funded: 

To what extent does the institution make interestonly, extended amortization, or negative amortization permanent commercial real estate loans: 

To what extent does the institution make short-term

commercial real estate loans (Mini-perms) with

minimal amortization terms and large balloon

payments at maturity: 

To what extent does the institution fail to use realistic appraisal values relative to the current economic

environment and/or to the performance observed on

similar credits: 

HOME EQUITY LOANS 

To what extent does the institution make home equity loans that push mortgage indebtedness above 90

percent of collateral value: 

To what extent does the institution qualify borrowers for home equity credit based on initially-discounted loan rates: 

AGRICULTURAL LOANS 

To what extent does the institution make agricultural loans on the basis of land values that cannot be

supported by farm operations: 

To what extent is the institutions agricultural loan

portfolio tied to major crops affected by the phase

out of farm subsidies: 

To what extent are agricultural loans being made

based on unrealistic cash flow projections: 

How would you characterize the change in the level

of the institutions agricultural related carryover

debt since the last examination: 

CONSUMER LOANS 

To what extent does the institution make secured

consumer loans without adequate collateral protection: 

To what extent does the institution make consumer

loans to borrowers who lack demonstrable ability to

repay: 

CREDIT CARD LOANS 

Have the institutions underwriting practices for

new credit card loans materially changed since the

last examination: 

Are underwriting practices for new credit cards:1

How would you characterize the level of risk associated with the institutions current underwriting

practices for new credit card loans: 

How would you characterize the level of risk associated with the institutions credit card portfolio: 

For credit card loans in the institutions portfolio

with risk characterized as high, to what degree does

the institution fail to adjust its loan pricing to

account for this risk: 

Never or infrequently NA 88.4 88.8 88.8 87.7 

Frequently enough to warrant notice NA 9.7 10.8 9.7 11.0 

Commonly or standard procedure NA 1.9 0.4 1.6 1.4 

Never or infrequently 85.1 88.9 87.7 88.7 87.7 

Frequently enough to warrant notice 12.3 8.9 10.5 10.2 10.6 

Commonly or standard procedure 2.6 2.2 1.8 1.1 1.7 

Never or infrequently 92.8 93.4 93.4 92.7 92.5 

Frequently enough to warrant notice 7.2 6.5 5.9 6.9 6.8 

Commonly or standard procedure 0.0 0.1 0.7 0.5 0.7 

Never or infrequently 84.7 83.9 81.8 83.0 82.2 

Frequently enough to warrant notice 12.7 12.9 15.3 13.9 15.0 

Commonly or standard procedure 2.7 3.2 2.9 3.1 2.9 

Never or infrequently 89.6 92.1 90.1 91.4 88.7 

Frequently enough to warrant notice 9.9 7.7 9.5 8.2 10.1 

Commonly or standard procedure 0.6 0.1 0.4 0.4 1.2 

Never or infrequently 86.8 91.0 89.3 88.3 86.6 

Frequently enough to warrant notice 11.5 5.5 9.3 9.2 9.9 

Commonly or standard procedure 1.7 3.5 1.4 2.5 3.5 

Never or infrequently 98.3 98.0 98.1 99.0 97.3 

Frequently enough to warrant notice 1.7 1.8 1.3 0.4 2.1 

Commonly or standard procedure 0.0 0.2 0.5 0.6 0.7 

Never or infrequently NA 87.8 86.0 85.7 87.3 

Frequently enough to warrant notice NA 10.6 11.9 13.1 11.6 

Commonly or standard procedure NA 1.7 2.1 1.2 1.1 

Never or infrequently 51.2 58.6 55.0 54.6 55.6 

Frequently enough to warrant notice 27.7 23.0 22.8 24.7 23.0 

Commonly or standard procedure 21.1 18.4 22.2 20.7 21.4 

Never or infrequently 84.3 85.7 84.5 86.3 89.5 

Frequently enough to warrant notice 12.6 13.0 14.3 12.2 9.8 

Commonly or standard procedure 3.1 1.3 1.2 1.5 0.7 

Sharp decline 0.8 1.6 2.0 3.1 1.9 

Moderate decline 17.6 9.6 7.0 11.3 13.7 

No change 55.8 56.4 48.7 52.7 58.4 

Moderate increase 23.5 29.0 37.2 31.0 25.1 

Sharp increase 2.4 3.4 5.1 2.0 1.0

Never or infrequently 82.6 86.5 85.0 85.7 86.3 

Frequently enough to warrant notice 13.5 10.9 13.1 12.1 11.9 

Commonly or standard procedure 3.9 2.6 1.9 2.2 1.8 

Never or infrequently 79.5 83.7 83.3 83.1 82.4 

Frequently enough to warrant notice 16.0 13.9 14.7 14.4 15.4 

Commonly or standard procedure 4.5 2.5 2.0 2.5 2.2 

Yes 10.9 9.2 6.4 2.1 2.1 

No 89.1 90.9 93.6 97.9 97.9 

Substantially tighter NA 1.3 0.8 0.7 1.2

Moderately tighter 9.4 7.2 3.3 0.5 0.5 

Moderately looser 1.5 0.0 1.5 1.0 0.0

Substantially looser NA 0.7 0.9 0.0 0.3

Low NA 74.4 72.6 80.1 78.5 

Medium NA 24.7 24.2 18.5 20.0 

High NA 0.9 3.2 1.4 1.5 

Low NA 76.5 74.4 79.5 78.3

Medium NA 23.5 22.5 19.7 19.8

High NA 0.0 3.1 0.9 1.8 

Never or infrequently NA 0.0 84.4 100.0 60.0 

Frequently enough to warrant notice NA 0.0 15.6 0.0 40.0 

Commonly or standard procedure NA 0.0 0.0 0.0 0.0

1 Prior to October 1, 1998, responses were either tighter or looser.

September 2000 7 Report on Underwriting Practices

RESULTS FROM THE REPORT ON UNDERWRITING PRACTICES

Percent of Respondents

Weighted

Six-Month Period Ending:

9/98 3/99 9/99 3/00 9/00
Federal Deposit Insurance Corporation

Washington, DC 20429-9990

Characteristics of Banks Examined in the 

Report on Underwriting Practices

l Coverage: 1,124 FDIC-supervised banks.

l Period: Reports filed between April 1, 2000, and September 30, 2000.

l Charter types: 100 percent of the examined banks during this period were state-chartered commercial

banks.

l Size distribution of banks: assets of $1 billion or greater, 5 percent; assets between $300 million and $1

billion, 12 percent; assets between $25 million and $300 million, 68 percent; assets less than $25

million, 15 percent.

The Report on Underwriting Practices Seeks

l To identify (1) material changes in underwriting practices, (2) overall risk in new lending practices, and

(3) specific risks in underwriting practices for major loan categories.

l To track emerging issues in underwriting practices of new loans.

l To provide an early-warning mechanism for identifying potential problems.