Posted By: WayStar
Our qual levels have remained constant last two quarters as we wish to continue maintaining where we're at. Have heard some banks only adjust them once a year? What does guidance say about the frequency of adjusting qual levels?
Q factors should be adjusted as frequently as is necessary. That being said, risk factors such as Changes in Lending Management and Changes to the Loan Review System do not change much at all. Risk factors such Charge offs and past due loans should change somewhat frequently as the underlying trends for those metrics change. Remember, you are trying to predict one year of future losses based, in part, on the trends you are seeing today. If you review your Q factors once a year, you may be overlooking some building trends. This could force a large change to the Q factor and the corresponding reserve, rather than a gradual preferred change over four quarters.