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Allowance for Loan and Lease Losses (ALLL)

TGA recently completed a review of ALLL for a client which saved them several hundred thousand dollars in unnecessary additional allocation. At another review, TGA identified where impairment analysis for Trouble Debt Restructures (TDRs) were being improperly calculated, also saving the bank money in additional reserve.

The ALLL should be appropriate for the amount of credit risk in your portfolio.  One thing we have learned in the nearly 30 years that we have been in business is that the Examiners will very rarely let you know if you are “over” reserved in the ALLL. We will. In addition, your internal and/or external auditors are more than qualified to ensure “transactions” relating to the ALLL and your accounting system are accurate; however, they are not commercial lenders nor are they qualified to assess the level of credit risk in your loan portfolios. If you are relying on these two entities to confirm whether your ALLL level is appropriate, then you may very well be over or under reserved.


As a "credit risk management" company, we are your best choice in reviewing the adequacy and the methodology of your ALLL. We have built ALLL models from the ground up and understand how the ALLL should work for community banks of all sizes. Next time you are considering having your ALLL evaluated or reviewed, contact us and rest assured knowing that we will not only let you know if you are under reserved, but over reserved as well.

ABOUT US:  T. Gschwender & Associates, Inc. is a diversified consulting company that has been providing services to financial institutions since 1984. Our clients include small community banks and credit unions with less than $100 million in assets to much larger regional institutions with over $5 billion in assets. We like to describe ourselves as a highly sophisticated "Credit Department," able to handle all functions from initial borrower due diligence to collateral liquidation, and everything in between. Our goal is to provide these services in a timely and cost effective manner, allowing our clients to tap into resources they would not otherwise be able to employ internally.  

Contact us at info@tgschwender-assoc.com for more information.