As we move into mid-May, many of you have reporting requirements for borrowers to provide 2024 tax returns or extensions by May 15th or 30 days after filing. It’s the right moment for credit teams and relationship managers to start gathering year-end financial data for borrowers with a 2024 fiscal year-end (FYE). Whether your borrower’s FYE aligns with the calendar year or another reporting cycle, one thing is certain: timely collection of financials is critical to assessing credit risk and monitoring covenant compliance. As we continue to have uncertainty in the market and some regulatory bodies, it is important to stay on top of your portfolios risk.
Here’s why this matters and what your team should prioritize right now.
Why Early Collection of FYE Financials Matters
Annual financial reviews aren’t just a checkbox for compliance — they’re a cornerstone of sound credit risk management. By starting early, your institution can:
- Identify deteriorating trends in cash flow, leverage, or liquidity before issues escalate to past dues or worse losses.
- Ensure covenant compliance is being met and respond early if not.
- Allocate credit and portfolio resources efficiently, avoiding backlogs and last-minute reviews before exams.
- Create time for dialogue with borrowers around capital needs, business changes, or emerging risks.
When reviews are delayed, lenders lose valuable time and the opportunity to proactively manage risk.
What You Should Be Requesting
To begin your 2024 FYE review process, reach out now for:
- Company Prepared 2024 Financial Statements (audited, reviewed, or compiled as applicable)
- Signed Copies of Filed Tax Returns (or confirmation of filed extensions)
- CPA-Prepared 2024 Financial Statements (audited, reviewed, or compiled as applicable)
- Compliance Certificates or Calculations tied to covenants (leverage, DSC, liquidity, etc.)
- Updated AR/AP Agings and Inventory Reports for asset-based or monitored credits
- Updated Debt Schedules to ensure all debts are included in reviews
- Updated Rent Rolls for Investor Real Estate (IRE)
- Guarantor 2024 Tax Returns for asset-based or monitored credits
- Updated AR and/or AP Aging and Inventory Reports for asset-based or monitored credits
This data forms the foundation for your risk rating updates, covenant monitoring, and credit action planning.
The Ongoing Importance of Covenant Compliance Monitoring
As part of your annual review process, it’s critical to ensure that loan covenant compliance is actively monitored, documented, and tracked for those with annual monitoring requirements. Covenants play a vital role in identifying early signs of borrower stress and protecting your institution from credit deterioration. This means confirming that:
- Borrowers have submitted all required compliance certificates or calculations
- Financial covenants such as leverage ratios, debt service coverage, or liquidity thresholds are being met as agreed
- Any potential or actual covenant breaches are identified and addressed in a timely, well-documented manner
Strong monitoring practices not only enhance your credit risk oversight, but also ensure readiness for regulatory exams and support proactive decision-making as borrower and economic conditions evolve.
Strengthen Your Credit Culture by Staying Ahead
Starting the annual review process now reinforces a culture of proactive credit risk management. It positions your bank or credit union to make better-informed credit decisions, while maintaining regulatory credibility and strong borrower relationships.
At CRMG, we partner with institutions like yours to streamline annual review workflows, establish clear financial monitoring practices, and build a credit culture that doesn’t rely on last-minute fire drills.
Need Support with Periodic Reviews or Independent Loan Review?
Whether you’re preparing for a heavy review cycle, trying to stay ahead of examiners, or simply need an experienced partner to evaluate credit quality and risk exposure, CRMG is here to help.
We support community banks and credit unions with:
- Periodic and Annual Review Support
Scalable assistance to meet peak review demand with accuracy and speed. - Third-Party Loan Reviews
Independent, objective analysis that satisfies regulatory expectations and uncovers portfolio-level risk trends. - Credit Risk Consulting
Strategic guidance to strengthen your credit policy, improve underwriting workflows, and reinforce a proactive risk culture.
Let’s work together to keep your credit portfolio resilient, responsive, and ready for what’s ahead. Ready to explore how we can help? Schedule a Discovery Call and see if CRMG is the right fit for your institution.
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