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FDIC Federal Register Citations

Kennebunk Savings Bank

From: Jay Hallam []
Sent: Wednesday, June 29, 2005 4:05 PM
To: Comments
Subject: Interagency Proposal on the Classification of Commercial Credit Exposures

Thank you for the opportunity to submit a response to the proposed changes to the commercial classification system.
Although the present system has been a sufficient monitoring tool in classifying commercial exposures for many years, the proposed changes have merit. This will allow for the reduction in classified credit totals based on the realistic loss exposure. Further breakout of the classifications can only result in a more informed management team and uniformed approach to portfolio risk.
However, consideration should be given to the following:
1. Some conservative institutions place “substandard” relationships on non-accrual status and aggressively charge off uncollectible portions of the exposure, thereby forsaking the use of the “doubtful” and “loss” categories. If we were to adopt this new rating system, non-accrual loans would be categorized as “default”, thus potentially indicating a drop in overall credit quality simply by instituting a change in systems.
2. Does instituting a “range” of loss severity for “default” categories diminish the effectiveness of specific reserve calculations? In addition, how do the ranges relate to the overall adequacy of the ALLL if, in fact, these range are to replace the specific allocations?
3. The new process will have financial impact on small institutions that have adequate processes in place.
Thank you for the opportunity to respond to this proposal.


James C. Hallam, Jr.
Vice President
Commercial Risk Management
Kennebunk Savings Bank
104 Main Street
Kennebunk, Maine 04043

Last Updated 07/07/2005

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