The largest potential impact to a bank or credit union profitability occurs when there is a larger than normal charged expense to the Allowance for Loan and Lease Losses (ALLL) resulting from rising problem loans.
With PPP business stimulus ending, commercial loan and commercial real estate default rates are starting to increase and could dramatically impact your 2021 profitability unless you take steps now to implement the following:
- Transaction and Portfolio Stress Testing for early identification of loan problems and concentrations
- Centralization of Credit Management Systems for quicker and consolidated portfolio data analysis
- Implement Effective Collections and Workout System to establish problem loan workout strategies to minimize credit losses.