Written By: Rhoda Lauver
Above and beyond regulatory expectations for disclosure reporting, Rhoda Lauver of Jonestown Bank and Trust Company in Lebanon, Pennsylvania, believes that reporting on ALLL results should be pervasive throughout many areas of the bank. “We gain all sorts of information when we compile our reports: inherent risk in our portfolio, segment performance and qualitative and environmental adjustment documentation,” states Lauver. And this information is disseminated throughout the bank for more informed decision making.
Jonestown Bank and Trust Company has a standard process that includes the following reports:
- Substandard and Special Mention Loans
- Charge-offs and Recoveries on Substandard and Special Mention Loans
- Charge-off Rate
- TDR Pre and Post Modification Report
- TDR Redefault Report
- Dealer Loan Report
- Past Due Report
- Risk Rating
- Portfolio Concentration
- Collateral Code
- Call Code
- NAICS Code
- Product Code
Lauver states that the information contained within these reports is invaluable both for exams and for insight into her bank’s portfolio. “Examiners have determined interest-only HELOC Loans as an area of potential risk. We have borrowers who may get comfortable paying only interest for the first five years on their term. When they are expected to start paying interest as well as principle, however, we realize that to be a risk,” she states.
“I monitor the quantity and timing of interest-only HELOCs, Junior Lien Loans and other riskier products to ensure we are aware of our exposure and adjust our actions accordingly,” mentions Lauver.
One other area bolstered by her bank’s reporting diligence is the qualitative and environmental portion of the ALLL calculation. Lauver states, “The reports we run serve as evidence of risk levels in our portfolio. Take the Interest-Only HELOCs and Junior Lien Loans… As the number of those loans that hit our books increases, we use an external [outside of the nine provided by guidance] qualitative factor to adjust for the risk.”
“We’ve found that providing these reports to examiners has been helpful” she states, “and we’ve been able to extract valuable information to use in other parts of our bank from our reporting efforts,” concludes Lauver.