OCC UCE PraCtiCE QUEstiOn with answErs
100% COrrECt
Which of the following establishes the agency's expectations of risk management as it relates to Bank-
Owned Life Insurance?
a) OCC Bulletin 2001-43
b) OCC Bulletin 2001-47
c) OCC Bulletin 2004-56
d) OCC Bulletin 2012-31 ✔✔ C- OCC Bulletin 2004-56
In relation to hotel lending, which of the following is calculated by dividing the room revenue by the
number of rooms occupied for a given period?
a) Occupancy Rate
b) Average Daily Rate
c) Revenue per Available Room (RevPAR)
d) Vacancy Rate ✔✔ B. ADR. Once ADR has been calculated, RevPAR can be determined by multiplying
the ADR by the occupancy rate. See Commercial Real Estate Lending Handbook, pg 46
Which of the following are require to allow the OCC to extend examination frequency to 18 months.
Choose all that apply.
I. Bank is well capitalized and has total assets of less than $3 billion
II. Bank has a composite and management ratings of 1 or 2
III. Bank is not subject to a formal enforcement proceeding
IV. No person acquired control of the bank during the preceding 12-month period in which a full-scope
exam would have been required ✔✔ I, II, III, and IV. All of the preceding are required in order to extend
the frequency to 18 months. See Bank Supervision Process Handbook, Page 11
Which of the following bankruptcy chapters results in liquidation of the borrower's assets?
a) Chapter 7
b) Chapter 9
c) Chapter 11
,d) Chapter 13 ✔✔ A- Chapter 7. Chapter 7 involves the collection and selling of assets. Chapters 9, 11,
and 13 are reorganizations. See 11 USC 7.
Which of the following is not a requirement when issuing preferred stock?
I. Approval by the OCC and a majority of stockholders
II. Amending of the articles of association to reflect issuance if necessary
III. Be "well-capitalized" per PCA
IV. Bank must ensure par value of preferred stock is paid in before issuance is valid ✔✔ III- Be "well-
capitalized" per PCA. An exception is available to newly organized banks that have not issued common
stock. In addition to the three requirements listed above, the bank should provide a signed documents
specifying the amount of issue to the OCC for certification and approval. See 12 USC 2 section 51a
Which of the following risk areas are not included in the Canary report?
a) Credit Risk
b) Price Risk
c) Liquidity Risk
d) Interest Rate Risk ✔✔ B-Price Risk. Financial risk measures and benchmarks have been established for
credit, interest rate, and liquidity risks. The financial measures are leading indicators of risk taking that
are designed to be concise and intuitive. See PPM 5000-34 page 13
True or False:
As best practice, bank management should track the aggregate level of exceptions as it relates to credit
quality. ✔✔ True- When viewed individually, underwriting exceptions may not appear to increase risk
significantly; however, when aggregated, even well mitigated exceptions can increase portfolio risk
significantly. See LPM Handbook page 26
Which of the following loan categories are considered classified assets? Choose all that apply.
I. Pass
II. Special Mention
III. Substandard
, IV. Doubtful ✔✔ III and IV. Classified assets do not include pass and special mention exposures. While
special mention loans are criticized, they do not meet the definition of classified. See Rating Credit Risk
Handbook page 17
Currently, ABC Company's inventory is $900 thousand. The company reported average inventory of
$1,235 thousand and cost of goods sold at $2,173 thousand. What is the inventory turnover ratio?
a) 0.41
b) 0.57
c) 1.76
d) 2.41 ✔✔ C- 1.76 times: COGS of $2,173 divided by average inventory of 1.76 times. Inventory
turnover measures how many times a business is able to turn inventory during the year and is calculated
as COGS/Avg. Inv. A high rate is desirable. See Asset-Based Lending Handbook pg. 10
Which of the following are true in regards to national banks? Choose all that apply.
I. A national bank may not hold real estate in a subsidiary
II. A national bank may act as a general insurance agent if certain requirements are met
III. A national bank may maintain and operate a postal substation
IV. A national bank may not prepare income tax returns for customers ✔✔ II and III. A national bank may
organize a bank premises subsidiary and may prepare income tax returns for customers free or a fee.
While a national bank may act as an insurance agent, it may only do so in offices that are located in a
location with a population that does not exceed 5,000. See 12 CFR 7.
Generally, which of the following are classified as "other assets" on the call report? Choose all that apply.
I. Net deferred tax asset
II. Accrued interest receivable
III. Prepaid expenses
IV. Bank-owned life insurance ✔✔ All of the above are considered other assets on the call report. See
Call Report Instructions
Which of the following is not a minimum appraisal standard?
a) Conform to generally accepted appraisal standards (USPAP)
b) Be written and contain sufficient information and analysis to support decision
100% COrrECt
Which of the following establishes the agency's expectations of risk management as it relates to Bank-
Owned Life Insurance?
a) OCC Bulletin 2001-43
b) OCC Bulletin 2001-47
c) OCC Bulletin 2004-56
d) OCC Bulletin 2012-31 ✔✔ C- OCC Bulletin 2004-56
In relation to hotel lending, which of the following is calculated by dividing the room revenue by the
number of rooms occupied for a given period?
a) Occupancy Rate
b) Average Daily Rate
c) Revenue per Available Room (RevPAR)
d) Vacancy Rate ✔✔ B. ADR. Once ADR has been calculated, RevPAR can be determined by multiplying
the ADR by the occupancy rate. See Commercial Real Estate Lending Handbook, pg 46
Which of the following are require to allow the OCC to extend examination frequency to 18 months.
Choose all that apply.
I. Bank is well capitalized and has total assets of less than $3 billion
II. Bank has a composite and management ratings of 1 or 2
III. Bank is not subject to a formal enforcement proceeding
IV. No person acquired control of the bank during the preceding 12-month period in which a full-scope
exam would have been required ✔✔ I, II, III, and IV. All of the preceding are required in order to extend
the frequency to 18 months. See Bank Supervision Process Handbook, Page 11
Which of the following bankruptcy chapters results in liquidation of the borrower's assets?
a) Chapter 7
b) Chapter 9
c) Chapter 11
,d) Chapter 13 ✔✔ A- Chapter 7. Chapter 7 involves the collection and selling of assets. Chapters 9, 11,
and 13 are reorganizations. See 11 USC 7.
Which of the following is not a requirement when issuing preferred stock?
I. Approval by the OCC and a majority of stockholders
II. Amending of the articles of association to reflect issuance if necessary
III. Be "well-capitalized" per PCA
IV. Bank must ensure par value of preferred stock is paid in before issuance is valid ✔✔ III- Be "well-
capitalized" per PCA. An exception is available to newly organized banks that have not issued common
stock. In addition to the three requirements listed above, the bank should provide a signed documents
specifying the amount of issue to the OCC for certification and approval. See 12 USC 2 section 51a
Which of the following risk areas are not included in the Canary report?
a) Credit Risk
b) Price Risk
c) Liquidity Risk
d) Interest Rate Risk ✔✔ B-Price Risk. Financial risk measures and benchmarks have been established for
credit, interest rate, and liquidity risks. The financial measures are leading indicators of risk taking that
are designed to be concise and intuitive. See PPM 5000-34 page 13
True or False:
As best practice, bank management should track the aggregate level of exceptions as it relates to credit
quality. ✔✔ True- When viewed individually, underwriting exceptions may not appear to increase risk
significantly; however, when aggregated, even well mitigated exceptions can increase portfolio risk
significantly. See LPM Handbook page 26
Which of the following loan categories are considered classified assets? Choose all that apply.
I. Pass
II. Special Mention
III. Substandard
, IV. Doubtful ✔✔ III and IV. Classified assets do not include pass and special mention exposures. While
special mention loans are criticized, they do not meet the definition of classified. See Rating Credit Risk
Handbook page 17
Currently, ABC Company's inventory is $900 thousand. The company reported average inventory of
$1,235 thousand and cost of goods sold at $2,173 thousand. What is the inventory turnover ratio?
a) 0.41
b) 0.57
c) 1.76
d) 2.41 ✔✔ C- 1.76 times: COGS of $2,173 divided by average inventory of 1.76 times. Inventory
turnover measures how many times a business is able to turn inventory during the year and is calculated
as COGS/Avg. Inv. A high rate is desirable. See Asset-Based Lending Handbook pg. 10
Which of the following are true in regards to national banks? Choose all that apply.
I. A national bank may not hold real estate in a subsidiary
II. A national bank may act as a general insurance agent if certain requirements are met
III. A national bank may maintain and operate a postal substation
IV. A national bank may not prepare income tax returns for customers ✔✔ II and III. A national bank may
organize a bank premises subsidiary and may prepare income tax returns for customers free or a fee.
While a national bank may act as an insurance agent, it may only do so in offices that are located in a
location with a population that does not exceed 5,000. See 12 CFR 7.
Generally, which of the following are classified as "other assets" on the call report? Choose all that apply.
I. Net deferred tax asset
II. Accrued interest receivable
III. Prepaid expenses
IV. Bank-owned life insurance ✔✔ All of the above are considered other assets on the call report. See
Call Report Instructions
Which of the following is not a minimum appraisal standard?
a) Conform to generally accepted appraisal standards (USPAP)
b) Be written and contain sufficient information and analysis to support decision
