Collateral value is only formally re-appraised every few years. Continuous monitoring re-values this asset each quarter, so credit risk surfaces as it develops — on a basis that traces to source and holds up under examination, rather than waiting for the next appraisal cycle.
Collateral is formally re-appraised roughly every three years; until then the books carry the origination value — a flat line. Continuous monitoring re-values each quarter, so a decline is reflected as it happens. The shaded region is the value change not yet recorded on the bank's books.
Value = NOI ÷ cap rate, so every move decomposes exactly into an income effect and a cap-rate effect.
Each quarter's change attributed to income vs. cap-rate movement.
| Quarter | Value | Δ | ← Income | ← Cap rate | Cap % | Implied NOI | LTV |
|---|---|---|---|---|---|---|---|
| Jun 2026 | $37.07M | -2.1% | +0.8% | -2.9% | 6.31% (+18) | $2.34M | 70% |
| Mar 2026 | $37.86M | -2.5% | +1.1% | -3.7% | 6.13% (+22) | $2.32M | 68% |
| Dec 2025 | $38.85M | -2.3% | +1.3% | -3.7% | 5.91% (+21) |
The inputs the monitoring model is carrying for this asset today.
The market yield applied to stabilized income. Re-estimated each quarter from observed transaction and survey evidence; a lower rate implies a higher value for the same income.
Derived as value × cap rate. Reflects the monitoring model's current view of stabilized income; the originating appraisal's NOI is shown for comparison below.
Stabilized income normalized to the subject's size for comparison against the competitive set.
The 90% interval is wider than a fresh appraisal because monitoring re-values from market movement rather than a new inspection and full three-approach reconciliation.
Each enrolled asset is re-valued every quarter; a fresh signed appraisal is recommended when a material-change or covenant alert fires.
How each key input has moved since the originating appraisal.
Probability of default (PD) is modeled at 18.0%. PD rises with leverage and a deteriorating value trend; at the current LTV of 70% and a trailing trend of -8.4%, the model places the asset in a watch-risk band.
Loss given default (LGD) is 3%, reflecting the shortfall if the collateral were liquidated at a distressed CRE haircut (~32%) net of selling costs against the outstanding loan balance.
Expected credit loss (ECL) = PD × LGD × loan balance = 0.48% × $25,900,000 = $125,093. This feeds the CECL reserve. The model is illustrative; a production CECL model incorporates macro scenarios, borrower financials, and guarantor support.
Since enrollment, the monitored value has decreased 8.4%, from $40,456,000 to $37,066,451 across 6 quarterly re-valuations. Decomposing the move, 4.7% is attributable to the income effect (implied NOI moved from $2,233,171 to $2,338,893) and 13.1% to the cap-rate effect (the market yield moved from 5.52% to 6.31%). The dominant driver over the window was the movement in market capitalization rates.
With the loan balance fixed at $25,900,000, the loan-to-value ratio is now 70%. This remains within covenant tolerances.
The figures above are produced by the quarterly monitoring model, which re-values from observed market movement in cap rates and income. They are a screening view; a fresh, MAI-signed appraisal — with a new inspection and full three-approach reconciliation — is recommended before a credit decision, and automatically whenever a material-change or covenant alert fires.
| $2.30M |
| 67% |
| Sep 2025 | $39.75M | -2.4% | +1.2% | -3.6% | 5.70% (+20) | $2.27M | 65% |
| Jun 2025 | $40.72M | +0.7% | +0.3% | +0.4% | 5.50% (-2) | $2.24M | 64% |
| Input | Origination | Today | Δ |
|---|---|---|---|
| Loan-to-value | 64% | 70% | ▲ +5.9% |