What you need to know Join the meeting Review the Reports The board's response  
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the Video		 The Allowance for
Loan and Lease Losses		 Regulatory Guidance
on the ALLL		 Components of an
Appropriate Reserve		 Estimating an
Appropriate Reserve		 Practice  
 
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Senior Lending Officer Mike McCard will report on last month’s loan losses and make a recommendation on this month’s provision for loan and lease losses to maintain an appropriate reserve.

Mike noted that the ALLL balance stood at $283,000 at the end of September.  He mentioned that, for the year, the board has provided $116,000 out of revenues and that two loans, totaling $15,000, were charged-off during September.  He recommended adding another $15,000 to the provision for loan loss to replace the amount charged off during the month.

Is Mike’s recommended increase in the ALLL ($15,000) enough?  What do you need to consider in deciding?  Do you have any other questions for Mike? 

Reference View
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Meeting Materials
ALLL Policy Guidelines
Asset Quality Assessments
Basic Ratio Analysis
Making Financial Comparisons

Try This At Your Bank
What the Minutes Can Tell You
Determining an Appropriate Reserve
Disagreements Among Board Members

Lesson Objectives
After you complete this lesson, you should be able to:

  • State the purpose served by the allowance for loan and lease losses (ALLL).
  • State the responsibility of directors and management in ensuring an appropriate ALLL.
  • List the two major components that comprise the ALLL.
  • Define the term “impairment” and understand the steps needed to determine an appropriate reserve.

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