Volume 6, Issue 2
Page 5
ISSUES
location and economic sets,” “Loan Fees,” “Loan
Continued from Page 4
environment make rea- Impairment” and State Bank Department
sonable diversification of “Nonaccrual Status.”
link to this Notice is in-
risk at a financial institu- The accounting stan-
OFFICE
cluded in Financial Institu-
tion justifiably unrealistic, dards for TDRs are set
Continued from Page 4
tion Letter (FIL) 131-
capital and loan-loss re- forth in FASB Statement
2008, found on the
serve levels might need to No. 15, “Accounting by
visits on matters of special
FDIC’s Web site at:
be increased to offset the Debtors and Creditors for
interest such as the Bank
http://www.fdic.gov/news/news/ resulting higher degree of Troubled Debt Restruc-
Secrecy Act and risk man-
financial/2008/fil08131.html
It is expected that the
risk. turings,” as amended by
agement practices.
interagency working group
The Federal Reserve FASB Statement No. 114,
The decision to establish a
will present a final version
recently completed a “Accounting by Creditors
satellite supervision office in
of the guidelines to the
“horizontal review” of for Impairment of a
Little Rock was supported by
decision makers in each
financial institutions with Loan.”
the large number of institu-
federal bank, thrift and
significant commercial FASB statements can
tions in the region super-
credit union regulatory
real estate loan concentra- be viewed on the Web site
vised by the Reserve Bank.
agency later this year.
tions. Problems in com- of the Financial Account-
“Our Little Rock examin-
plying with interagency ing Standards Board at:
ers will allow us to be more
Commercial real es-
appraisal guidelines were
http://www.fasb.org/jsp/FASB/
accessible to the institutions
tate concentrations are
found at 75 percent of the
Page/
we supervise,”
not being taken into
institutions.
SectionPage&cid=1218220137031 said Dennis
consideration in the
A “loan modification” Blase, assistant
Financial institutions
ALLL process.
is not automatically a vice president
In reviewing their Al-
are not properly identi-
“troubled debt restructur- for the Division
lowance for Loan and
fying “troubled debt
ing.” of Banking Su-
Lease Losses methodol-
restructurings.” Lend-
A loan modification is a pervision and
ogy, financial institutions
ing and risk manage-
change in an existing loan
Blase
Regulation at
with significant concentra-
ment staffs lack famili-
contract that has been the Federal Reserve Bank of
tions of construction and
arity with troubled debt
agreed to by the borrower St. Louis. “This will enable
development loans and
restructurings, while
and lender. A loan modi- us to better develop relation-
commercial real estate
credit policies are silent
fication is considered a ships within the community,
loans should consult the
regarding them.
TDR if (1) the borrower while focusing on a secure,
Interagency Policy State-
A “troubled debt re-
is experiencing financial efficient and competitive
ment on the Allowance for
structuring” (TDR) is a
difficulty and (2) the banking system.”
Loan and Lease Losses.
restructuring in which a
lender grants a concession Another expected benefit
The statement can be
bank, for economic or
it would not otherwise of the new satellite supervi-
accessed from the FDIC’s
legal reasons related to a
consider. sion office will be a stronger
Web site at:
borrower’s financial diffi-
In addition, the Federal relationship and closer col-
http://www.fdic.gov/news/news/
culties, grants a conces-
Reserve notes, financial laboration with the Arkansas
press/2006/pr06115.html
sion to the borrower that
institutions are failing to State Bank Department.
The existence and effect
it would not otherwise
report restructured loans “We have historically en-
of any concentrations of
consider.
secured by one- to four- joyed a strong, mutually
credit – and changes in the
One good source of
family residential proper- beneficial regulatory partner-
level of such concentra-
information about TDRs
ties as TDRs. This could ship with the state banking
tions – are among the fac-
is the Glossary of the call
be due to the allowable agency,” Blase said. “Having
tors that management
report instructions, found
exclusion of these loans permanent staff in Little
should consider in estimat-
at:
from nonaccrual assets in Rock will only strengthen the
ing credit losses, according
http://www.fdic.gov/regulations/
the call report. relationships that we already
to the Policy Statement.
resources/call/crinst/2009-
A loan secured by a have with Commissioner
In addition, the State-
03/309GLOSS%20033109.pdf
In the Glossary, there is one- to four-family resi- Franks and her staff. Closer
ment notes, loan reviews a separate listing for dential property must be
collaboration should pro-
typically include “loans “Troubled Debt Restruc- reported as a TDR if it
mote more consistency and
constituting concentra- turings.” TDRs also are meets the conditions to
higher quality in our exami-
tions of credit risk.” discussed in Glossary list- be considered a troubled
nations and other supervi-
When factors such as ings for “Foreclosed As- debt restructuring.
sory processes.”
June 30, 2009
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