RKM CREDIT ADVISORY – FREQUENTLY ASKED QUESTIONS

Are regulators (FDIC / OCC / Federal Reserve) supportive of this type of engagement?
Yes. While regulators do not require banks to engage independent portfolio-level advisors, supervisory guidance from the FDIC, OCC, and Federal Reserve strongly emphasizes the importance of independent risk identification, forward-looking credit oversight, and effective governance — particularly for institutions with material CRE, construction, or commercial lending exposure. Regulatory guidance consistently encourages banks to maintain independent challenge to underwriting and credit risk practices, identify emerging and correlated risks before migration to criticized status, ensure alignment between stated credit policy and actual underwriting practices, and strengthen board and senior management oversight of portfolio-level risk. Regulators commonly view Independent, non-operational advisory reviews as a positive governance practice.

Is this type of advisory engagement required by the FDIC or other regulators?
No. This engagement is not a regulatory requirement, nor does it replace any required function such as loan review, internal audit, or compliance testing. However, regulators routinely encourage banks to adopt enhanced, independent oversight mechanisms when portfolio complexity increases, CRE or construction concentrations rise, underwriting standards evolve, and rapid growth or market stress introduces new risk dynamics. In these contexts, independent portfolio-level advisory reviews are often viewed as evidence of proactive risk management, rather than reactive remediation.

How do examiners typically view independent portfolio-level advisory reviews?
When properly structured, examiners view these engagements favorably because they demonstrate that management and the board are actively seeking an independent perspective, focusing on forward-looking risk rather than historical performance, reinforcing governance discipline without delegating authority, and addressing risk before it becomes a supervisory issue. Importantly, examiner receptivity is strongest when the advisor is independent, has no credit approval authority, operates in a clearly defined, non-fiduciary role, and focuses on portfolio-level observations rather than transaction-level decisions. Our engagement has been intentionally structured around those principles.

How does this differ from examiner-mandated or criticized-asset-driven reviews?
Examiner-mandated reviews are typically reactive, narrow in scope, and focused on identified deficiencies or problem assets. This advisory engagement is proactive and preventive, designed to identify trends early, reinforce underwriting discipline, support consistent governance narratives, and reduce the likelihood of adverse examination findings. Banks often engage this type of advisor specifically to avoid the need for more prescriptive or corrective regulatory action later.

Why is this particularly relevant in the current credit cycle?
In the current environment, regulators have placed heightened emphasis on CRE concentration management, refinancing, and repricing risk, interest rate sensitivity, and underwriting discipline in new production. Independent portfolio-level advisory reviews align directly with these supervisory focus areas and provide banks with an additional governance tool to navigate cycle-related risk.

When is this type of advisory most appropriate?
Banks typically engage this type of advisory when portfolio complexity has increased, CRE or construction exposure is material, new production quality needs reinforcement, policy exceptions are growing, and management wants an independent perspective without hiring additional staff. It is most effective as a complement, not a replacement, to existing credit, loan review, and audit functions.

How does this engagement reduce risk?
Risk is reduced by maintaining strict non-operational boundaries, avoiding credit authority or approval roles, focusing on portfolio patterns rather than individual decisions, and documenting advisory intent and governance alignment. The engagement is structured to support management, not replace it, and to enhance oversight without creating examiner concerns around shadow management or delegated authority.

Why would a bank engage an independent advisor firm instead of a large national loan review firm?
Large loan review firms are designed to test compliance and validate risk ratings. They prefer to evaluate annual loan review requirements, file-level documentation testing, and backward-looking credit classification. Our engagement is different. Our advisory services focus on portfolio-level risk dynamics, underwriting quality and policy alignment, forward-looking structural and refinancing risks, and governance and credit culture trends. Unlike large review firms, this engagement is not just checklist-driven; it focuses on loan grading or reclassification and does not duplicate internal loan review or audit functions. Banks that work with us do so as they want sound judgment, synthesis, and perspective, not just volume processing. In practice, banks often utilize both a loan review firm for compliance and an independent advisor for credit governance insights.

Why not use a retired Chief Credit Officer or former banker?
Retired credit officers often bring historical institutional experience, but there are essential differences in their roles and risk profiles. A retired executive typically operates informally, may drift into operational or approval roles, can unintentionally blur governance boundaries, and is rarely contractually structured as a non-fiduciary. In contrast, our engagement is intentionally structured to be independent and non-operational, to avoid credit authority or decision-making, to maintain a clean separation from management responsibilities, and to be contractually defined to protect the Bank. In addition, we are actively monitoring current credit risk, regulatory, and market conditions rather than solely advising on prior-cycle experience. Banks choose our model when they want current-cycle judgment without the risk of management substitution.

What specific qualifications does your company bring that are different?
Our advisory model combines experience rarely found in a single provider, including senior-level credit risk and underwriting experience; direct exposure to regulatory expectations and examination cycles; experience across CRE, C&I, construction, and specialty assets; and perspective from both lender and portfolio risk oversight roles. Our focus is not on theoretical frameworks, but on how credit behaves across cycles, how policy drifts over time, and where governance blind spots tend to emerge.