Shared National Credit
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 2019 SNC review was published during January 2020. The definition of a SNC was amended during January 2018. Historically, SNCs had been any credit facility ≥ $20 million with three or more participants. Per the January 2019 definition SNCs are now a facility ≥ $100 million with more than three participants.
For reference:
Classified assets totaled $365.9 billion in 2020, compared to $204.1 billion in 2019. Special mention loans currently total $263.9 billion as compared to $131.2 billion in 2019.
For reference:
- 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; based on a sample with a continued focus on bank-identified leveraged loans.
- 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; based on a sample with a continued focus on bank-identified leveraged loans.
Classified assets totaled $365.9 billion in 2020, compared to $204.1 billion in 2019. Special mention loans currently total $263.9 billion as compared to $131.2 billion in 2019.
SHPCO average classified loans to total loans total 1.59% at YE 2020 as compared to 2.12% for YE 2019.
SHPCO median classified loans to total loans total 1.15% at YE 2020 as compared to 1.61% for YE 2019.
Classified SNCs to the total portfolio currently total 7.2% as compared to 4.2% last year.
Market disruptions attributable to COVID-19 have driven the decline in asset quality. The industries within the SNC portfolio with the highest classifications include oil & gas, entertainment & recreation, and transportation services. Again, risks were heightened within leveraged loan transactions.
While the comparison is overly simplified, it would appear as based on this year’s review, as well as those in historical SHPCO assessments, the ‘average community bank’ loan portfolio within the Powell & Co. client base contains a lower volume of classified loans as compared to the SNC portfolio.
SHPCO median classified loans to total loans total 1.15% at YE 2020 as compared to 1.61% for YE 2019.
Classified SNCs to the total portfolio currently total 7.2% as compared to 4.2% last year.
Market disruptions attributable to COVID-19 have driven the decline in asset quality. The industries within the SNC portfolio with the highest classifications include oil & gas, entertainment & recreation, and transportation services. Again, risks were heightened within leveraged loan transactions.
While the comparison is overly simplified, it would appear as based on this year’s review, as well as those in historical SHPCO assessments, the ‘average community bank’ loan portfolio within the Powell & Co. client base contains a lower volume of classified loans as compared to the SNC portfolio.