Shared National Credit Program Review
By: Stephen Rountree
Annually, when the Shared National Credit Review is published by Federal Regulators, we compare the average & median loan classifications within the SHPCO client group to adverse classification within the SNC program. The 2021 SNC review was published during February 2022.
A SNC is defined as a ≥$100 million aggregate loan commitment & shared by over three banks. The 2019 SNC population totaled $4.8 trillion in commitments. Total commitments increased by $396 billion, or 8.9%, from the third quarter of 2018 to the third quarter of 2019.
The 2020 SNC population totaled $5.1 trillion in commitments. Total commitments increased by $242 billion, or 5%, from the third quarter of 2019 to the third quarter of 2020. Nonaccrual commitments totaled $67.4 billion.
The 2021 SNC population totaled $5.2 trillion in commitments. Total commitments increased by $107 billion, or 2%, from the third quarter of 2020 to the third quarter of 2021. Nonaccrual commitments totaled $52.3 billion.
Classified assets totaled $204.1 billion in 2019, $365.9 billion in 2020, as compared to $332.8 billion currently. Special mention loans totaled $131.2 billion in 2019, $263.9 billion in 2020, as compared to $217.3 as of Q3 2021.
A SNC is defined as a ≥$100 million aggregate loan commitment & shared by over three banks. The 2019 SNC population totaled $4.8 trillion in commitments. Total commitments increased by $396 billion, or 8.9%, from the third quarter of 2018 to the third quarter of 2019.
The 2020 SNC population totaled $5.1 trillion in commitments. Total commitments increased by $242 billion, or 5%, from the third quarter of 2019 to the third quarter of 2020. Nonaccrual commitments totaled $67.4 billion.
The 2021 SNC population totaled $5.2 trillion in commitments. Total commitments increased by $107 billion, or 2%, from the third quarter of 2020 to the third quarter of 2021. Nonaccrual commitments totaled $52.3 billion.
Classified assets totaled $204.1 billion in 2019, $365.9 billion in 2020, as compared to $332.8 billion currently. Special mention loans totaled $131.2 billion in 2019, $263.9 billion in 2020, as compared to $217.3 as of Q3 2021.
The SNC review attributes the portfolio’s asset quality improvement to rising commodity prices & the resulting improvement within the gas and oil industry. However, the rebound in gas & oil was partially offset by weakening within the CRE market – particularly within non-OOCRE segments including hotel, office, and retail sectors.
The Review references the direction of risk during 2022 will be driven by ongoing COVID-19 disruptions. It references other concerns that are likely attributable to managing a community bank loan portfolio. The concerns included:
• Inflation
• Supply chain imbalance
• Labor challenges
• High debt levels
• Rising rates
For comparison, average classified loans to total loans within the SHPCO peer data totaled 2.12% as of YE 2019, 1.59% as of YE 2020, as 1.42% as of YE 2021. SHPCO peer data median classified loans to total loans was 1.61% at YE 2019, 1.15% at YE 2020, and 0.89% at YE 2021.
The Review references the direction of risk during 2022 will be driven by ongoing COVID-19 disruptions. It references other concerns that are likely attributable to managing a community bank loan portfolio. The concerns included:
• Inflation
• Supply chain imbalance
• Labor challenges
• High debt levels
• Rising rates
For comparison, average classified loans to total loans within the SHPCO peer data totaled 2.12% as of YE 2019, 1.59% as of YE 2020, as 1.42% as of YE 2021. SHPCO peer data median classified loans to total loans was 1.61% at YE 2019, 1.15% at YE 2020, and 0.89% at YE 2021.