ABA Banking Journal - August 2008 - (Page 16A) The Headache: Handling the Commercial Real Estate Exam Process W e’ve been hearing stories about examiners pushing for writedowns of loans beyond what the bank was expecting, or had done on its own. We asked our Pass the Aspirin “prescribers” if their banks had made any changes to loan review, allowance for loan and lease losses (ALLL), or related measures since such stories have started circulating. Here’s some of what we heard. If you’d like to share your experiences, for publication on www.passtheaspirinplus.com, please send them to scocheo@sbpub.com Also, ABA members will want to take advantage of the latest, updated version of the ABAWorks on Commercial Real Estate. Members can find this free aid at http://www.aba.com/members+only/abaworks_cre.htm Remedy 1 Thomas E. Wolf, president, Platte Valley Bank, $50.5 million-assets, North Bend, Neb., We are expecting state examiners in the next couple of months, so I am not sure what tack they will take on commercial real estate loans, and loans in general. However, in talking with a neighboring bank that just had examiners in, they said it was not bad at all with regards to loan classifications, writeoffs, etc. We have just begun the new loan loss allocation procedures, so we will see how the examiners take to our new approach. The new method requires us to reserve considerably less than we had been reserving, but we are not changing our loan loss reserve at this time. Michael M. Quick, chairman, Susquehanna Bank DV, $3.2 billion-assets, Bryn Mawr, Pa., speaking for his holding company, where he is executive vice-president and group executive. Susquehanna Bancshares, Inc. is a $13 billion-assets financial holding company with offices in New Jersey, Pennsylvania, Maryland, and West Virginia. (Due to its proximity to our West Virginia and Maryland locations, we consider Northern Virginia to also be part of our trade area.) As a publicly traded company, we have spent time this past year with our three rating agencies, the analysts that follow our company, and the examiners. Their heightened concern over real estate exposure in the banking industry has moved our company in the direction of a more proactive measurement of our portfolio of loans. What we have included in this response to your question is our reaction to the increased scrutiny that has been requested. It is our goal to create a system that will not only meet the expectations of the outside parties outlined above, but allow our management to be proactive in the composition of our portfolio for the foreseeable future. (Continued) Remedy 2 http://www.passtheaspirinplus.com http://www.aba.com/members only/abaworks_cre.htm
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