utah.bank 32 view of their exposure by geography, property type (presold, speculative, etc.), underwriting characteristics –loanto-value (LTV) ratios – and portfolio liquidity. 3. Strengthen risk management strategies. Community banks should review their risk rating systems and ensure they are appropriate for the size and complexity of the institution. They should also establish reasonable LTV limits for different property types and adhere to those limits. Finally, stress testing to model the impact of a market downturn enables community banks to take appropriate action to mitigate against significant losses. 4. Plan for capital adequacy. All community banks should develop and maintain a capital plan to ensure sufficient reserves to withstand potential turmoil in the CRE market and beyond. 5. Diversify your portfolio. One opportunity to further protect your community bank from CRE concentration risk is to Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management, international services, lending solutions, and risk management advisory services. They’ve developed their C&I Loan (Shared National Credit) program to allow banks to grow their portfolios with loans from nationally recognized borrowers that provide interest income quickly while reducing your overall interest rate risk. To learn more about their C&I Loan opportunities or add one to your portfolio, contact Jay Kenney at jkenney@pcbb.com. diversify your portfolio with C&I loans. This investment will balance your exposure to a high volume of CRE loans. So far, CRE delinquency rates have remained low, and losses have been minimal — partly due to government stimulus and low-interest rates. As market conditions toughen, community banks would do well to revisit their risk management policies to ensure they are prepared for a potential market downturn. MEET YOUR UTAH RELATIONSHIP MANAGERS Bankers’ Bank of the West bBWEST.COM 800-873-4722 WHERE COMMUNITY BANKS BANK Member FDIC Scan to call now As a bankers’ bank we strive to help with every level of service and expertise, covering anything from loan participations, merchant services, ATM/Debit and much more, because we aim to answer your questions with, “…yes, we can do that too!” Lance Ni les, lniles@bbwest.com David Phi l ippi , dphilippi@bbwest.com
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