Credit Committee Packets

Credit Committee Packets

You produce a single JSON object that a lending committee will read. The grader compares your numbers, enums, ordering, and rounding against a standard answer, so precision and the exact procedure matter more than narrative. There is no partial credit for prose.

Everything you need comes from one read-only HTTP API and one authoritative policy document. The policy endpoint is the single source of truth for every threshold — never hardcode a band or formula from memory; fetch it and apply it.

0. Universal workflow (do this every task)

1. Read the prompt and identify: the task type (see §1), the target branch_id or segment_id, the review/as-of date, and any explicit population filter (e.g. "rated 3 or worse", "current_rating 6 or worse", the two application_ids to compare).
2. Read input/payloads/answer_template.json (or the template the prompt names). It defines the required top-level keys, every field, the enums, the ordering rule, and the rounding precision for each field. Treat it as a contract: output exactly those keys, nothing more, nothing less, and obey each declared ordering and precision.
3. Fetch the data from the API (§2). Always fetch /api/policies first.
4. Compute using the SOPs in §3–§7 for the matching task type.
5. Emit only the JSON object. No markdown fence, no commentary outside the JSON.

If the prompt mentions env/setup.sh or an "API base URL printed by setup", ignore that plumbing — the API is already live at http://127.0.0.1:8003. Do not look for local data, db, or env files; the HTTP API is the only source.

1. Identifying the task type

Match the prompt and the template's top-level keys to one of five families:

Read references/policy_and_formulas.md for the full policy schema, every band/table, and the exact arithmetic conventions. Read it whenever you are unsure of a threshold.

2. Using the HTTP API

Base URL http://127.0.0.1:8003. All responses are JSON; money/ratios are plain numbers. branch_id and segment_id are matched case-insensitively. Fetch with curl or Python urllib. The endpoints you will actually use:

• GET /api/policies — authoritative thresholds. Fetch first, every task.
• GET /api/branches/{id} — branch row: lending_capacity_q1, cre_policy_limit_pct, sector_ceiling_pct, state_code, institution_type, fdic_benchmark_set.
• GET /api/branches/{id}/metrics?quarter=YYYYQn — quarterly metrics. Use the 2025Q1 row unless the review date implies otherwise. Fields: total_loans_outstanding, nonperforming_loans, delinquency_30_plus_pct, net_charge_offs, allowance_for_loan_losses. The endpoint returns a list (newest quarters included); filter to the right quarter.
• GET /api/branches/{id}/loans — one row per loan. Key fields: loan_id, current_rating, dscr, ltv, debt_to_asset, fico, liquidity_months, payment_status, days_past_due, outstanding_balance, loan_type, sector, borrower_name, collateral_value. Some factors are null — handle missing factors explicitly (see §3). Optional filters: ?loan_type=, ?payment_status=, ?min_current_rating=.
• GET /api/branches/{id}/sector-exposures — sector, current_exposure, limit_pct, grandfathered.
• GET /api/branches/{id}/applications — pending applications. Key fields: application_id, requested_amount, dscr, ltv, fico, dti, years_in_business, bankruptcy_months_ago, sba_guaranty_pct, documentation_complete, loan_type, sector, plus CRE scoring inputs (net_income, collateral_value, existing_relationship_years, co_guarantor_strength).
• GET /api/benchmarks/fdic/q4-2024 — total_loans_noncurrent_pct, total_real_estate_noncurrent_pct, construction_development_noncurrent_pct, total_real_estate_30_89_pct, construction_development_30_89_pct.
• GET /api/benchmarks/ncua/q1-2025?state_code=XX — per-state credit-union rows: delinquency_bps, loan_to_share_pct, roaa_bps, positive_net_income_pct. Omit the filter to get all states including a US row (needed for medians/national comparison).
• GET /api/credit-union-segments/{segment_id} — segment posture inputs: minimum_checklist, peer_states, risk_tolerance, quarterly_capacity, current_outstanding, and internal_context (recent_delinquency_bps, control_issue, staffing_constraint).

3. SOP A — Regrade & rating-migration review

Population: loans whose current_rating >= target_min (the prompt states the min, usually 3 — "rated 3 or worse"). Higher rating number = worse credit.

Re-derive each loan's final rating = the worst (max) numeric rating across the factors for which data is available (dominant_factor_rule):

• DSCR rating band (policy risk_rating.dscr_thresholds): `>=1.5→3, >=1.25→4, >=1.05→5,

  =1.0→6, <1.0→7`.

• LTV rating band (ltv_thresholds): <=0.65→3, <=0.75→4, <=0.85→5, <=1.0→6, >1.0→7.
• Delinquency minimum (delinquency_minimums) from payment_status: Current→none, 30 Days Past Due→4, 60 Days Past Due→5, 90+ Days Past Due→7, Nonaccrual→8. This is a floor (the rating can be worse from another factor, never better).

final_rating = max(of the available factor ratings). If all factors are null/absent (no DSCR, no LTV, payment Current), keep the loan's existing current_rating.

Output pieces:

• target_loan_count, target_exposure = count and Σoutstanding_balance of the population.
• final_rating_exposure_totals: group the population by final_rating; per group emit {final_rating, loan_count, exposure}. Order ascending by final_rating.
• migration_from_current_rating_3: only loans whose current_rating == 3, grouped by final_rating, each with loan_ids (ascending). Order ascending by final_rating.
• watch_list_action_coverage: loans that landed on a watch action after regrade. Map final_rating → recommended_action (§8). Only watch-rated loans are covered — loans with final_rating <= 5 get monitor and are excluded from coverage. Report covered_loan_count, covered_exposure, and by_action groups (ascending by action, each with ascending loan_ids).
• material_downgrades: loans where final_rating - current_rating >= material_downgrade_notches (policy value, currently 2). Per loan: {loan_id, current_rating, final_rating, downgrade_notches, exposure}. Order ascending by loan_id.
• npa_benchmark: see §9.
• top_problem_credit: the single worst credit — highest final_rating, breaking ties by largest exposure. Emit loan_id, borrower_name, exposure, current_rating, final_rating, payment_status, recommended_action.

4. SOP B — Capacity allocation package

Goal: decide each pending application, allocate the branch's quarterly lending capacity to the strongest credits, and report concentration impact.

Per-application screen. Decline (or condition) on objective red flags. Thresholds inferred and confirmed against the policy bands — verify each against /api/policies:

• weak_dscr: DSCR below the new-loan floor (~1.15; income-producing loans only — CRE, C&I, SBA, Equipment).
• high_ltv: LTV above ~0.80 for commercial/income-producing loans. Retail loans (Consumer, Residential Mortgage) tolerate higher LTV when FICO is strong.
• low_fico: FICO below ~620 (retail loans — Consumer/Residential — screen on FICO+LTV, not DSCR).
• startup_risk: years_in_business < 2.
• recent_bankruptcy: bankruptcy_months_ago present and recent (<= ~24 months).
• capacity_limit: an otherwise-clean credit that falls below the committee's allocation cutoff this round (lowest-quality qualifying applicant when appetite is constrained).
• sector_breach: approving would push the application's sector over its limit_pct.

Decision enum: approve, conditional_approve, decline, defer, participation_required. Use conditional_approve when a credit is fundable only with a mitigant (e.g. participation for a sector breach, or SBA guaranty + startup monitoring for a young borrower). Declined apps get approved_amount = 0.0, bank_capacity_used = 0.0, conditions = ["none"].

bank_capacity_used (the capacity charge, distinct from the booked loan amount):

• Plain approve: = approved_amount.
• SBA guaranty (sba_guaranty_pct present): bank retains only the unguaranteed share: bank_capacity_used = approved_amount * (1 - sba_guaranty_pct).
• Participation required (sector breach): bank retains the maximum R that keeps the breaching sector at its limit, solved against a base that also includes only retained amounts: R = (limit_pct * (total_loans_outstanding + sum_other_retained) - existing_sector_exposure) / (1 - limit_pct) where sum_other_retained is the Σbank_capacity_used of the other approvals.

allocation block: lending_capacity_q1 (from the branch row), gross_approved_amount = Σapproved_amount over approved + conditionally-approved apps (full loan amounts), committed_capacity_amount = Σbank_capacity_used, remaining_capacity = lending_capacity_q1 - committed_capacity_amount, and priority_ranking = the approved / conditionally-approved application_ids ordered best credit first (lowest re-derived risk rating, then higher DSCR). Approved-and-conditional only — never list declined/deferred.

concentration_flags: one row per sector that a new approval pushes to/over its limit. {sector, application_id, limit_pct, post_approval_pct (ratio, 4 dp), flag (bool), handling}. Order by sector then application_id.

decline_reasons: object mapping each declined application_id → a list of reason codes sorted ascending alphabetically. Only declined apps appear.

post_approval_concentrations: one row per sector that received an approval. Use the post-book base base = total_loans_outstanding + gross_approved_amount (full approved amounts, not retained). exposure_after_approval = existing_sector_exposure + full_approved_amount_for_that_sector; post_approval_pct = exposure_after_approval / base (ratio, 4 dp); limit_pct from the sector row; over_limit bool. Order ascending by sector.

5. SOP C — Credit-union segment posture

state_metrics: the NCUA row for the segment's state_code, copied as integers exactly as reported (delinquency_bps, loan_to_share_pct, roaa_bps, positive_net_income_pct), plus state_code and benchmark_version (ncua_q1_2025).

peer_comparison: peer_states = the segment's peer_states (ascending). For each of the 4 metrics, give the direction of NC's value relative to (a) the US row (nc_vs_us) and (b) the median across the peer states (nc_vs_peer_median): higher/lower/equal. Remember the polarity: higher delinquency = worse; lower roaa / lower positive_net_income = worse.

posture (continue_approving / continue_with_tighter_conditions / temporarily_pause): choose continue_with_tighter_conditions when capacity is available but external state metrics are weaker than peers/national and there are control issues; temporarily_pause only if metrics are severely adverse or capacity is gone.

controls.required_checklist_gates = the segment's minimum_checklist (these are the gates already mandated). added_operating_controls = the operational mitigants the internal_context calls for, e.g. a missed-insurance-binder control issue → pre_close_insurance_binder_verification + lien_perfection_prior_to_funding; weak external delinquency → monthly_segment_delinquency_watch + quarterly_state_benchmark_monitoring; staffing/control issue → senior_underwriter_second_review. Both are sets — emit ascending/sorted, deduplicated.

escalation_triggers: ordered ET001, ET002, .... Each {trigger_id, condition, owner} from the allowed enums. Typical mapping: delinquency breach → segment_recent_delinquency_ge_90_bps / credit_risk_manager; insurance-or-lien gap → missing_insurance_or_lien_exception / operations_control_manager; capacity overrun → quarterly_capacity_exceeded_or_exception_requested / lending_committee_chair.

interpretation: capacity_status (capacity_available when quarterly_capacity remains), external_risk_status (weaker_than_national_and_peers when NC is worse on the risk metrics vs both US and peer median), risk_tolerance (pass through the segment's risk_tolerance), committee_message (the enum matching the posture — e.g. capacity_available_but_external_risk_weaker).

6. SOP D — Watch-list stress & workout

Population: "adverse rated" = loans with current_rating >= adverse_min (prompt states it, usually 6). adverse_loan_count, adverse_balance = Σoutstanding_balance.

risk_classes (CDFI factor scoring): for each adverse loan, sum the per-factor scores from policy cdfi_factor_scores over the available factors (skip nulls):

• FICO: >720→0, 680-720→1, 580-679→3, <580→5.
• LTV: <0.40→0, 0.40-0.60→2, 0.60-0.80→4, >0.80→6.
• debt_to_asset: same band structure as LTV (<0.40→0, 0.40-0.60→2, 0.60-0.80→4, >0.80→6).
• liquidity_months: >12→0, 6-12→1, 3-6→3, <3→5.

factor_score = that sum (report as the integer base score). Map to risk_class by band: 0-5 Prime, 6-9 Desirable, 10-13 Satisfactory, 14-18 Watch, >=19 Doubtful. Projected Loss override: a credit with ltv > 1.0 in a loss posture (Nonaccrual) is Projected Loss even if its base score sits in the Watch band. Order risk_classes ascending by loan_id. monitoring_cadence: monthly for an adverse/distressed population.

stress_results (+200bp watch-list shock): policy watch_list_formula stressed_dscr = dscr / (1 + 0.18), breach_threshold = coverage_breach_threshold (1.0), shock_label = "+200bp". Compute only for loans with DSCR available, ordered ascending by loan_id: {loan_id, base_dscr, stressed_dscr (2 dp), breaches_threshold} where breaches_threshold = stressed_dscr < 1.0. breach_loan_ids = the breaching ids ascending.

workout_queue: every adverse loan, ordered descending by exposure, then ascending loan_id. {loan_id, exposure, risk_class, payment_status, recommended_action, projected_loss}. recommended_action per §8; projected_loss = (risk_class == "Projected Loss").

severe_bucket_counts: group the adverse population by (current_rating, payment_status); {current_rating, payment_status, loan_count, exposure}. Order ascending by current_rating, then by payment_status (alphabetical — note "90+ Days Past Due" sorts before "Current").

7. SOP E — Competing CRE decision

Compare the named CRE applications and pick the stronger.

weighted_cdfi_score (policy cre_weighted_score): a weighted average of five "C" sub-scores, each on a 1–5 scale where lower is better, assigned from objective factors (capacity from DSCR, collateral_exposure from LTV / sector concentration, plus conditions, character, capital). Weights: capacity 0.45, collateral_exposure 0.36, conditions 0.11, character 0.05, capital 0.03. Report to 1 decimal. score_class by band: <=2.0 approve_quality, <=3.0 conditional, >3.0 weak. Order applications_compared ascending by application_id; reason_codes ascending alphabetically.

stress (CRE dual stress): policy cre_dual_stress_formula stressed_dscr = dscr * 0.85 / (1 + 0.18); report the formula string, threshold 1.0, and per app {application_id, base_dscr, stressed_dscr (2 dp), breaches_threshold = stressed_dscr < 1.0}. Order ascending by application_id.

concentration: CRE exposure = Σoutstanding_balance of loan_type == "CRE" loans. cre_policy_limit_pct from the branch. existing_cre_concentration = existing_cre_exposure / total_loans_outstanding. For the selected app, selected_post_approval_cre_concentration = (existing_cre_exposure + approved_amount) / (total_loans_outstanding + approved_amount) (denominator grows with the new loan). selected_policy_variance_bps = (post_conc - cre_policy_limit_pct) * 10000 (from unrounded values, 2 dp). FDIC piece uses fdic_benchmark_metric = total_real_estate_30_89_pct: branch_delinquency_ratio = delinquency_30_plus_pct; fdic_variance_ratio = branch - benchmark (4 dp); fdic_variance_bps = (branch - benchmark) * 10000 (2 dp).

recommended_path: select the lower (better) weighted score / non-breaching stress; path = its decision. For the unselected credit choose decline or defer and give its unselected_reason_codes (ascending). A breaching stress + sector breach + FDIC adverse variance on a weak-class credit typically yields defer.

conditions: the set of CRE conditions attached to the selected path, sorted ascending alphabetically (e.g. bank_retained_exposure_cap, committee_cre_exception, minimum_dscr_covenant_1_25, tenant_roll_and_lease_review, updated_appraisal_before_close, quarterly_financial_reporting, no_additional_cre_without_committee_review).

8. Final-rating / risk-class → recommended_action mapping

The watch-action ladder, consistent across tasks (action enum: monitor, watchlist, special_assets, workout, partial_chargeoff_review, legal_referral):

• final_rating == 8 or payment_status == "Nonaccrual" or risk_class == "Projected Loss" → partial_chargeoff_review.
• final_rating == 7, or 90+ Days Past Due, or risk_class == "Watch" → special_assets.
• final_rating == 6 (or other adverse-but-performing) → watchlist.
• final_rating <= 5 → monitor (and excluded from watch-list coverage in SOP A).

9. NPA / benchmark-variance arithmetic (shared)

For a branch noncurrent/NPA comparison (npa_benchmark):

• branch_npa_exposure = nonperforming_loans (metrics, target quarter).
• branch_total_loans = total_loans_outstanding.
• branch_npa_ratio = branch_npa_exposure / branch_total_loans, displayed 4 dp.
• benchmark_metric is total_loans_noncurrent_pct for an all-loans NPA review (or the real-estate / construction variant when the prompt scopes to that book); fdic_benchmark_ratio is that field from the FDIC benchmark, 4 dp.
• variance_ratio = branch_npa_ratio - fdic_benchmark_ratio, 4 dp.
• variance_bps = (branch_ratio - fdic_ratio) * 10000, 2 dp.

10. Rounding, precision, and ordering — read before you emit

These conventions are observed in the standard answers; getting them wrong fails the grade even when the logic is right:

• Currency/USD fields → 2 decimals.
• Ratio/concentration/percentage fields → 4 decimals (they are ratios, e.g. 0.1897, not 18.97). limit_pct is the raw policy value (e.g. 0.19).
• bps fields → 2 decimals.
• DSCR values (base/stressed) → 2 decimals. weighted_cdfi_score → 1 decimal.
• Compute bps from the UNROUNDED ratio, not the rounded display value. E.g. NPA ratio displays 0.1135 but variance_bps is 1037.49 (from the full-precision 0.11354…), not 1037.00. Round only at the final emission step; never chain rounded intermediates.
• breach is strict < 1.0 at threshold 1.0 (a stressed DSCR of 0.97 breaches; 1.00 does not).
• Obey every ordering clause in the template exactly: ascending loan_id / application_id / final_rating / action, descending exposure then ascending loan_id for workout queues, alphabetical for reason-code and condition lists. String fields sort lexicographically (so "90+ Days Past Due" < "Current").
• Enums are closed sets. Use only the allowed values from the template/policy; never invent a status, action, reason code, or class.

11. Common misjudgments to avoid

• Don't skip the policy fetch. Bands and formulas can change with the policy version; read /api/policies every run and apply the live values.
• Re-derive ratings — don't trust current_rating. The whole point of a regrade is that the booked rating is stale; the final rating is the worst factor band.
• Worst factor wins; delinquency is a floor only. Current contributes no delinquency rating; a clean payment status never improves a rating set by DSCR/LTV.
• Handle nulls per factor (skip the missing factor; never treat null DSCR as 0). If all factors are missing, fall back to the existing current_rating.
• Booked amount vs capacity charge are different (SBA and participation reduce bank_capacity_used but the full loan amount hits sector exposure and gross_approved_amount).
• Use the right concentration base: post-approval sector pct uses total_loans + gross_approved; CRE post-approval pct uses total_loans + that one approved amount.
• Only the required population is in scope — filter to current_rating >= min (or the stated population) before any grouping or totals; never include out-of-scope loans.
• Emit only the JSON object, exactly the template's keys, no extra fields, no prose.

When a detail is ambiguous, prefer the interpretation that is consistent across the policy document and the field semantics in the template, and recompute against /api/policies rather than guessing.