- At least quarterly, each institution must analyze the collectibility of its loans held for investment and maintain an allowance for loan and lease losses (ALLL) at a level that is appropriate and determined in accordance with generally accepted accounting principles.
- An appropriate ALLL covers estimated credit losses on individually evaluated loans that are determined to be impaired and on groups of loans with similar risk characteristics that are collectively evaluated for impairment.
- After determining the appropriate historical loss rate for each group of junior lien loans with similar risk characteristics, management should consider those current qualitative or environmental factors that are likely to cause the estimated credit losses on these loans as of the ALLL evaluation date to differ from the group's historical loss experience.
- Failure to timely recognize estimated credit losses could delay appropriate loss mitigation activity, such as restructuring junior lien loans to more affordable payments or reducing principal on such loans to facilitate refinancings. Examiners will continue to evaluate the effectiveness of an institution's loss mitigation strategies for loans as part of their assessment of the institution's overall financial condition.
Chief Executive Officer
Chief Financial Officer
Chief Credit Officer
- Interagency Statement on the Allowance for Loan and Lease Losses
- Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions
Allowances for Loan and Lease Losses in the
Current Economic Environment: Loans Secured by
Junior Liens on 1-4 Family Residential Properties
FDIC Regional Accountant or Robert Storch, Chief
Accountant, Division of Supervision and Consumer
Protection, on 202-898-8906 or firstname.lastname@example.org.
FIL-43-2009 - PDF (PDF Help)
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
To receive FILs electronically, please visit
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center, 3501 Fairfax Drive, E-1002,
Arlington, VA 22226 (1-877-275-3342 or 703-562-