It can provide a high-level overview of portfolio vulnerability, assess capital adequacy, liquidity and profitability, and identify key concentration risks. 2. Transaction-Level Testing: This bottom-up approach evaluates individual key loan relationships and aggregates the results. This detailed approach provides granular insights, assists with the early identification of high-risk loans, estimates potential losses on a loan-by-loan basis and allows for more targeted risk management strategies. With global and economic conditions changing rapidly, conducting regular and tailored stress tests enables community banks to identify and respond to vulnerabilities, make informed decisions to prepare for adverse scenarios and demonstrate a commitment to sound risk management. By integrating credit stress testing into their risk management strategies, community banks can not only meet regulatory expectations but also safeguard their long-term financial stability in an unpredictable economic landscape. To continue this discussion or for more information, please contact Michael A. Johnson at mjohnson@pcbb.com. Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management services such as settlement and liquidity for the FedNow Service, international services, lending solutions and risk management advisory services. PCBB was recognized by American Banker as one of the “Best Banks to Work For” in 2024. Stay up to date from your couch, office or even the moon! TAKE US ANYWHERE! Place a 1” x 1” QR Code White on Black Here to the main website Scan to read the most recent publication. Utah Banker 15
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