The inherent risk has increased for several reasons EXCEPT:

a.The presence of standard/usual transactions such as allowing some customers to repay their loans with grains instead of cash

b. The tough economic conditions increase the likelihood of uncollectible loans. There is a management bias to maximize asset values and income as demonstrated by Ted who advised the loans officer not to write off significant balances due to the belief that the economy will pick up over the long term.

c. The Loans are a significant account on the balance sheet and the valuation of the loans and the loss provision requires professional judgment.

d. There has been a downturn in the local economy and ACUs performance is very sensitive to economic conditions.