ALLL Methodology Review
Banks are required to maintain an adequate Allowance for Loan and Lease Losses (ALLL). The regulators have published specific guidelines (that incorporate accounting rules) for establishing the methodology for determining the level of the ALLL. An appropriate ALLL methodology is crucial to have adequately funded reserves and comply with federal regulations. Our ALLL Methodology Reviews will analyze the bank's policies and methodology to determine if they are in compliance with regulatory guidelines. In addition, we will test the accuracy of the data and formulas in the ALLL analysis. Our review includes a review of the bank's process of determining the FAS 5 reserve (historical loss rates and qualitative factors) and the FAS 114 reserve.