Staff Level: Client Services and Operations

Highlights of Ardmore’s 2021 RMA Annual Conference Session

We are pleased to present some of the highlights from Ardmore’s session at 2021’s RMA Annual Conference.

The session, entitled Identifying Emerging Credit Risks to Assist All Three Lines of Defense, featured Ardmore’s Peter Cherpack, Lou Dunham, and Suzanne Storm, discussing the importance of all three lines of credit risk defense, and how they have been tested throughout the COVID-19 pandemic.

We are pleased to share with you some of the highlights of that presentation, with the clips below. Please enjoy!

Suzanne Storm details the first two lines of credit risk defense
Suzanne discusses how the first line of defense reacted to the COVID crisis
Lou Dunham discusses common techniques used by the second line of defense
The Ardmore panel discusses how the COVID pandemic impacted the delinquent classification.

Peter and Suzanne discuss using exceptions as a leading indicator of credit risk

Peter and Suzanne discuss how the COVID pandemic brought emerging risk to the forefront
Peter discusses the importance of stress testing bank portfolios.

Ardmore Involved in RMA’s South Central Pennsylvania Chapter Loan Review Panel

Ardmore is pleased to be involved with an upcoming loan review panel to be presented by the Risk Management Association’s South Central Pennsylvania Chapter.

Moderated by Peter Cherpack, Ardmore’s Executive VP and Senior Director of Credit Technology, the virtual event, scheduled for Tuesday, December 7th at 10 AM EST, will feature John Sawn, Loan Review Director at Fulton Bank, Justin Freeman, Director of Risk Consulting at RSM US LLP, and Scott Muyskens, Sr. Manager of FS Internal Audit Loan Review for Crowe.

The panel will share their experiences and views on the emerging risks, processes, and field questions from the listeners.

To register for the event, please click here.

Ardmore Founder Sandy Spratt Published in Bank Director

We are proud to share that Ardmore Banking Advisors Founder, Board Chairman & CEO, T. Alexander (Sandy Spratt) was recently published in Bank Director.

The article, “The Gap in the Three Lines of Credit Risk Management Defense,” details how deficiencies in each of these vital pieces of a Bank’s team can lead to major issues for institutions, and offers methods to proactively identify weaknesses and mitigate them.

To read the article, please click here.

Ardmore Banking Advisors Sponsors and Presents at Bank Audit & Risk Committees Conference – Presented by Bank Director

We are pleased to announce that Ardmore Banking Advisors recently sponsored and presented at the 14th annual Bank Audit & Risk Committees Conference, presented from October 25-27 in Chicago by Bank Director.

Peter Cherpack, Ardmore’s EVP & Senior Director of Credit Technology, appeared on a panel discussing “5 Risks Every Board Should Talk About”, which included digital shifts, market conditions, and more in the current environment.

Other topics covered at the event included universal concerns across the financial services industry about cybersecurity threats, the shift to more remote workplaces due to the COVID-19 pandemic, the challenge of developing and retaining talent, and the opportunities and challenges of digital currency.

Ardmore Team Presents Session at RMA 2021 Annual Conference

Three senior members of Ardmore Banking Advisors had the opportunity to present a session at the Risk Management Association’s annual conference earlier this week.

Peter Cherpack, Lou Dunham, and Suzanne Storm presented “Identifying Emerging Credit Risks to Assist All 3 Lines of Defense” for the virtual conference, touching in topics including the importance of an independent loan review, the best ways to identify emerging risk by industry, and reading potential delinquency patterns.

A large portion of the presentation focused on various banks’ reaction to the COVID-19 pandemic, and how different institutions managed their credit risk during that unprecedented period.

Ardmore Banking Advisors Volunteers Prepare Meals for MANNA

Volunteers from Ardmore Banking Advisors recently had the opportunity to prepare prepackaged meals for participants in the Metropolitan Area Neighborhood Nutrition Alliance (MANNA) program.

Ardmore volunteers worked at MANNA’s Philadelphia location, preparing nutritious, medically appropriate meals that will be distributed to Philadelphia recipients who are battling life-threatening illnesses such as cancer, renal disease, and HIV/AIDS.

Since its establishment 30 years ago, MANNA has delivered over 16 million meals to 31,000 Philadelphia-area neighbors.

“MANNA is a tremendous organization,” said Ardmore President Thomas Spratt. “The services they provide to some of the most vulnerable members of our community, particularly in the midst of the COVID pandemic, are invaluable, and we are happy to have done our small part to assist in their efforts.”

For more information on MANNA, including information on volunteering, please visit their website.

Ardmore Banking Advisors Announces Additions to Company Leadership

Ardmore Banking Advisors, Inc. is proud to announce the following changes to its leadership structure that will ensure that the company will continue to provide our world class service to clients well into the future.

Thomas Spratt Named President

Thomas Spratt, a lawyer who specialized in creditors rights with leading law firms and technology with HP and other providers of services, has been named Ardmore’s President. He will continue his focus on developing Ardmore’s future during the new paradigm for delivery of professional services, while Sandy Spratt will remain as CEO and Chairman of the Board.

Thomas Spratt, Lara Hartin, Jorge Leon and Jim Hamlet Join Board of Directors

Lara Hartin, who has been with Ardmore for over 20 years, currently serving as the Executive Director for Quality Standards and Control of Consulting Services, has been named to Board of Directors with Thomas Spratt.

In addition, Jorge Leon, currently serving as a corporate executive at a major overseas bank and a former executive in risk management and strategic planning for a regional U.S bank, and Jim Hamlet, a partner at Isdaner & Company, LLC, a prominent regional CPA firm, have been named Special Advisors to the Board.

Jorge Leon
Jim Hamlet

Both advisors bring a wealth of experience in the financial services industry and/or private business enterprises to their new role. Their unique perspective will be greatly appreciated as Ardmore continues to provide premium credit risk consulting services to financial institutions across the country.

“We are delighted to have this talented group of executives to build on our 30 year foundation assuring the most relevant and superior services to our clients in a quickly changing environment,” Chairman Sandy Spratt commented. “They exemplify our core values of respect, integrity, fairness, quality and value for our clients.”

Ardmore Banking Advisors Sponsors and Presents at Risk Management Association’s Annual Conference

Ardmore Banking Advisors is honored to sponsor RMA’s 2021 Annual Risk Management Virtual Conference, happening virtually from October 25-28, 2021. ​

Check out our session titled Identifying Emerging Credit Risks to Assist All 3 Lines of Defense: Tuesday, October 26th from 10:30am – 11:00am. Our panel includes Peter Cherpack, Suzanne Storm, and Lou Dunham.

We hope to see you there!​

​​Register: https://bit.ly/2WOkGT2

Ardmore’s Peter Cherpack Published by American Banker

We are pleased to announce that Peter Cherpack, an Executive VP and Senior Director of Credit Technology Solutions at Ardmore, published a recent American Banker article focused on recent activity surrounding CECL – including a whitepaper published by the American Bankers Association calling for a delay in its implementation and criticism from members of Congress. However, the Financial Accounting Standards Board (FASB) has shown no signs that CECL will be delayed, resulting in a sense of paralysis among community bankers looking for guidance and clarification on what their next, and in some cases, first steps should be.

To read the full article, click here.

If your institution is struggling with CECL, including data collection, best practices or implementation, please contact Peter at pcherpack@ardmoreadvisors.com.

Ardmore’s 30th Anniversary Celebration Continues

Ardmore Banking Advisors, Inc., a leading credit risk and management consulting firm specializing in loan review, credit consulting and credit technology solutions, including the myLoanReview™ platform for banks, is proud to continue its commemoration of its 30th anniversary of serving financial institutions by announcing the most recent beneficiaries of our charitable giving program, and taking a look back at the second half of the company’s history to date.

To commemorate the 30th anniversary year, Ardmore wishes to give back to both the local and national communities that have helped the firm reach this impressive milestone. To that end, the company is focused on assisting its clients in dealing with the financial disruptions of the COVID-19 pandemic, and establishing a monthly charitable donation program to aid charities that serve individuals and small businesses that have been severely impacted.

During the second quarter of 2021, Ardmore donated to Blessings in a Backpack (a national food program for children), NAMI (a national mental health program) and the American Red Cross.

As part of our anniversary commemoration, we are highlighting some of Ardmore’s major milestones and accomplishments during the company’s history, from the founding in 1991 through 2021. As a follow-up to our previous recap of our first 15 years, the following represents a few of the many highlights during our second 15 years:

30th Anniversary Milestones

2006 – 2011

The fourth five years of Ardmore Banking Advisors paralleled the roller coaster ride for the financial services industry during this time. The early part of the period featured a red hot economy when competition was fierce and banks were aggressively lending.

However, things soon went from boom to bust during the financial crisis of 2008. Regulators reacted strongly, and suddenly Ardmore was helping many banks with defined credit issues to deal with regulatory demands and issues of portfolio management and problem loans.

2011 – 2016

During this time, Ardmore developed the third generation version of our proprietary automated loan review platform (myLR™) that improved consistency, efficiency, reporting, and workflow quality, security and control. For the first time, we also began offering this platform as a subscription-based Software-as-a-Service (SaaS) to banks nationally.

In addition, increased M&A activity resulted in many due diligence assignments for clients specifically related to loan portfolios or bank acquisitions in multiple states.

2016- 2021

Pandemic and economic challenges created urgencies for banks, including the need to receive services remotely. As Ardmore’s professional staff, who reside in 10 different states, had been providing services nationwide remotely for over a decade, the company was able to accommodate all of our clients’ needs seamlessly. Services included Loan Review, Due Diligence, Stress Testing, Appraisal Reviews, and specialized credit risk management consulting engagements.

Ardmore Team Presents Webinar in Partnership with RMA

Ardmore was honored to recently team with the Risk Management Association to present “Evolving Bank Credit Best Practices Based on Observed Approaches During the Pandemic”, an educational webinar presented on Tuesday, October 20th.

The COVID-19 pandemic has triggered a shift in the way that bankers conduct business, sending its impact throughout every type of portfolio imaginable. The bankers that act proactively and aggressively will position themselves to successfully navigate the situation, while those do not adjust will be left behind. During the webinar, Ardmore presented five or six key areas in which banks have the opportunity to either act proactively or kick the can down the road, and gave examples of banks that have established procedures that will help in the long run, and those that still have some work to do.

Thomas Spratt, Suzanne Storm, Lou Dunham and Peter Cherpack made up the Ardmore team presenting this webinar to nearly 200 bankers that were on the call.

Ardmore Banking Advisors Sponsors & Moderates RMA Philadelphia’s Virtual Presidents Panel

Ardmore Banking Advisors was proud to once again be the Gold Sponsor for the 2021 RMA Philadelphia Virtual Presidents Panel. The event, which was held on Wednesday, June 2, was moderated by Lou Dunham, Ardmore’s Senior Vice President & Senior Director of Credit Risk Consulting, and featured four bank leaders discussing the hot topics in the financial services industry.

Ardmore Banking Advisors Sponsors & Moderates RMA Regulator Panel

Ardmore Banking Advisors was proud to sponsor the recent Regulator Panel presented by the South and Central Pennsylvania Chapters of the Risk Management Association.

The event was held on Thursday, June 10th at 2 PM EST.

Lou Dunham moderated the panel, which featured four regulators who shared their insights into the current regulatory environment and regulatory outlook for the future.

The panel was be made up of:

  • Tyler B. Bland: Field Supervisor (Risk Management), Philadelphia Territory – Federal Deposit Insurance Corporation
  • Julie Pleimling: Assistant Deputy Controller – Office of the Comptroller of the Currency
  • Mary E. Rutkowski: Chief, Depository Field Examinations Program PA Department of Banking and Securities – Bureau of Bank Supervision
  • William T. Wisser: Vice President – Supervision, Regulation, and Credit – Federal Reserve Bank of Philadelphia

Topics included whether or not there is a new normal when it comes to Risk Ratings and ALLL in the wake of the COVID-19 pandemic, how banks should treat TDR’s, non-accrual classification and charge offs when deferrals have been granted, and the regulators’ main enterprise risk concerns moving forward.

Update on Ardmore’s COVID-19 Response

A message from T. Alexander (Sandy) Spratt, Founder & President of Ardmore Banking Advisors

The news on Covid-19 is getting worse every day from many states, the Federal government, Moody’s, the news services, CPA firms, and other professionals. This appears to be something that will be with us into the summer or longer. It is quite apparent that the very expansive Stimulus package may be insufficient, and that we may be facing an extended global recession. At Ardmore, the executive management team meets daily to evaluate any impact to Ardmore, our people, and our clients. We also meet weekly with our senior credit professional leadership team, and monthly with our entire company, to enhance internal communication and learn of how we can improve our work environment and our services for our clients. Incidentally, everyone at Ardmore is working from home, which many of us typically do as we supply most of our services remotely to our clients. We have actively had discussions with a number of clients, particularly those who have scheduled reviews during the first and second quarters. We have learned a lot about their preparedness and actions that gives us some insight into best practices and the needs of many banks. All banks are in uncharted waters, and no matter how prepared any of them are, this is a massive challenge and a disrupter. We understand what banks are going through as we face some of the same issues at Ardmore. With recent talk about bank failures and credit risk issues, we believe that the most success long term will be achieved by those who act pro-actively and strategically now, by focusing on, among other things:

  • Discussion(s) on market best practices being observed at banks that are forward-looking and prepared for the inevitable credit risk elevation and scrutiny by regulators
  • Additional non-scheduled exams not covered by our contract on specific segments or portfolios
  • Stress testing on a limited number of borrowers, segments or portfolios
  • Credit data assessment to identify needed modifications

Please contact any of our Leadership Team or me if you have some questions or needs that you think we could help you meet. Thank you and stay safe. T. Alexander Spratt President & CEO 484-417-2080 taspratt@ardmoreadvisors.com

Ardmore Announces 30th Anniversary Commemoration and Foundation of Our Charitable Giving Program

Ardmore Banking Advisors, Inc., a leading credit risk and management consulting firm specializing in loan review, credit consulting and credit technology solutions, including the myLoanReview™ loan review platform for banks, is proud to celebrate the commencement of its 30th anniversary serving financial institutions.

Since June 1991, Ardmore has served over 200 clients in thirty states across the United States with a concentration in the Mid-Atlantic states.

To commemorate the 30th anniversary year, Ardmore wishes to give back to both the local and national communities that have helped the firm reach this impressive milestone. To that end, the company is focused on assisting its clients in dealing with the financial disruptions of the COVID-19 pandemic, and establishing a monthly charitable donation program to aid charities that serve individuals and small businesses that have been severely impacted.

The January donation of this program was pledged to Feeding America, a national food bank program.

“Ardmore believes we have a responsibility to help our greater community in time of need, and we are pleased to make that commitment,” said CEO T. Alexander Spratt. “While it is Ardmore’s business to assist banks in mitigating the financial impacts of this pandemic, it is our calling to offer aid to those whom have been severely impacted by COVID-19.”

Ardmore Pleased to Sponsor RMA Southern New Jersey Chapter’s Credit Risk Panel

Ardmore is proud to once again sponsor the Southern New Jersey Chapter of RMA’s upcoming Credit Risk Panel Discussion.

The event, which will be held virtually on March 10, 2021, will be moderated by Ardmore’s Senior Director of Credit Risk Consulting, Lou Dunham, and will feature various officers from financial institutions discussing the issues that banks are facing today.

The panel includes Nicholas J. Riccuiti of TD Bank, Keith Rada of Brunswich Bank and Tom Harrity of Fulton Bank.

Ardmore’s Peter Cherpack to Present at Upcoming RMA CAVA Event

We are pleased to announce that Peter Cherpack, an Ardmore partner and Senior Director of Credit Technology will be presenting at the Risk Management Association’s Virtual Annual Carolinas-Virginia Chapter Event, scheduled for April 28th, May 12th and 26th.

Peter’s presentation, Best Practices in an Unprecedented Economic Crisis is scheduled for the May 12th session.

For more information, or to register for the event, please click here.

Ardmore & RMA Team to Present Webinar & Conference Session on Banks’ COVID-19 Response

We are pleased to announce that Ardmore Banking Advisors will be teaming with the Risk Management Association this fall for a pair of educational programs that will document how various financial institutions are dealing with the fallout of the COVID-19 pandemic, and some of the evolving Best Practices that have been implemented to manage the additional risk.

The first program, a webinar entitled “Evolving Bank Credit Best Practices Based on Observed Approaches” will be held on Tuesday, October 20th at 1 PM EST. During this presentation, Ardmore will present five or six key areas in which banks have the opportunity to either act proactively or kick the can down the road, and give examples of banks that have established procedures that will help in the long run, and those that still have some work to do. Some topics covered will include adherence to the FFIEC Pandemic Guidance, risk rating methodology, concentration identification, stress testing, and many others. To register, please click here.

Subsequently, Ardmore will be sponsoring and presenting a 25-minute panel at the RMA’s virtual Annual Conference the week of November 9th. During that session, Peter Cherpack and Lou Dunham of Ardmore will discuss Bank United’s response to the pandemic with Walter Shields, the institution’s Executive Vice President & Director of Credit Review. The discussion will detail how the bank proactively recognized the need for immediate triage and the ability to rapidly determine the scope and impacts of the virus on its portfolio, and the tools and expertise that Ardmore provided to assist.

To register for the conference, please click here.

Ardmore Team Presents Webinar in Partnership with RMA

Ardmore was honored to recently team with the Risk Management Association to present “Evolving Bank Credit Best Practices Based on Observed Approaches During the Pandemic”, an educational webinar presented on Tuesday, October 20th.

The COVID-19 pandemic has triggered a shift in the way that bankers conduct business, sending its impact throughout every type of portfolio imaginable. The bankers that act proactively and aggressively will position themselves to successfully navigate the situation, while those do not adjust will be left behind. During the webinar, Ardmore presented five or six key areas in which banks have the opportunity to either act proactively or kick the can down the road, and gave examples of banks that have established procedures that will help in the long run, and those that still have some work to do.

Thomas Spratt, Suzanne Storm, Lou Dunham and Peter Cherpack made up the Ardmore team presenting this webinar to nearly 200 bankers that were on the call.

Ardmore’s Lou Dunham Moderates RMA CCO Panel

We are pleased to announce that Lou Dunham, Ardmore’s Senior Vice President & Senior Director of Risk Management Consulting, was once again selected to moderate the Risk Management Association’s Philadelphia Chapter’s Chief Credit Officer Panel.

The virtual session, entitled “What Impending Credit Issues Are Keeping Our Credit Officers Up At Night?” featured Mel Washington, Chief Risk Officer of TriState Capital Bank, Liam Brickley, Senior Vice President and Chief Credit Officer of Bryn Mawr Trust Company and Sarah Hudak – Senior Credit Officer / Administrative Vice President at M&T Bank discussing their top concerns and the state of the industry, particularly in the wake of the COVID-19 pandemic.

Bank Director Magazine Publishes Article by Ardmore Team

We are pleased to announce that Bank Director magazine has recently published an article written by the Ardmore Banking Advisors Credit Risk Management Team.

The article, Approaching Credit Management – Risk Ratings Today, discusses some credit risk management best practices that our team has assembled to help our client institutions examine their portfolio in the midst of the coronavirus-induced economic crisis.

To read the full article, please click here.

Ardmore & RMA Team to Present COVID-19 Stress Testing Webinar

Ardmore is pleased to announce that our credit risk professionals recently teamed with the Risk Management Association to present a webinar related to the COVID-19 pandemic, and the importance of stress testing portfolios.

Peter Cherpack, Ardmore’s Executive Vice President and Senior Director of Credit Technology, and Todd Sardich, Senior VP of Credit Risk Management Consulting presented “Portfolio Stress Testing for the Pandemic,” to nearly 100 bankers last week.

This webinar explored how financial institutions can use portfolio stress testing to identify dangerous vulnerabilities and potential capital shortfall in their portfolios. Attendees learned how to prioritize concentrations, potential risks associated with certain CRE segments affected by COVID-19 and the types of metrics to apply to build stress testing scenarios around. The presentation included an example of real stress testing results, and all attendees were encouraged to ask questions of our industry experts.

Ardmore Proud to Sponsor RMA Philadelphia’s Annual Presidents Panel

Ardmore Banking Advisors was proud to once again be the Gold Sponsor for the Presidents Panel, held by the Risk Management Association’s Philadelphia Chapter.

This year’s event was held virtually on Wednesday, May 27th.

Moderated by Lou Dunham, Ardmore’s Senior Vice President and Director of Credit Risk Management, the panel featured Tim Abell, President of Firstrust Bank, Scott R. Gamble, Principal of Patriot Financial Partners, L.P.., Jay Junior, Managing Director of Investment Banking for D.A. Davidson & Co. and Christopher Maher, Chairman, President and CEO, of OceanFirst Bank.

The always informative event was COVID-centric and focused on the pandemic’s eventual impact on various aspects of the banking industry, including M&A, Organic Growth, Capital and Liquidity, Operational and Regulatory Risk, and many others.

Portfolio Stress Testing for the Pandemic Webinar Now Available

The COVID-19 pandemic has thrown the banking industry into turmoil with many customers having to close their doors, resulting in missed payments and uncertain futures. Deferrals and workouts are a certainty, but how can a bank quickly identify the areas of the portfolio that will be more impacted than others?

The answer is stress testing, and Ardmore Banking Advisors has been on the forefront of this process for years, having developed a proprietary tool in 2008 that allows financial institutions to quickly and accurately run shock tests on their portfolio to reveal the hidden weaknesses that could be exacerbated by a prolonged downturn.

This webinar, originally presented on Friday, April 17, 2020, gives bankers a first-hand look at some of the early stress tests conducted during the advent of the COVID-19 pandemic and shares the tools used to generate those results. Please click below to view this presentation.

Ardmore Presents Portfolio Stress Testing for the Pandemic Webinar

Portfolio Stress Testing for the Pandemic – Friday, April 17th at 1 PM EST

Click Here to Register

As the industry is embroiled in the worst economic crisis of a generation, the use of portfolio stress testing (“sensitivity shocks”) can help banks identify dangerous vulnerabilities and potential capital shortfall in their portfolios. By segmenting the portfolio into key CRE property types and C & I industry categories, and then simulating the impact of loss of income or collateral on those borrowers, banks can get a directionally correct view of their potential critical areas to address as the crisis unfolds. Join Ardmore Banking Advisors – nationally recognized thought leaders in portfolio stress testing – for an overview of the techniques and trends in stress testing and how to use the actionable results. Attendees will learn how to prioritize concentrations, potential risks associated with certain CRE segments affected by COVID-19 and the types of metrics to apply to build stress testing scenarios around. The presentation will include an example of real stress testing results, and all attendees will be encouraged to ask questions of our industry experts.

Please join us on Friday, April 17th at 1pm for this timely and important presentation.

Please click here to register

Ardmore Banking Advisors’ COVID-19 Response

At Ardmore Banking Advisors, the health and safety of our employees, clients and community are our top concerns. An equally important priority is delivering excellent service to our clients.

As we address the ongoing coronavirus pandemic, we are mindful of these priorities. We would like to update you on the measures we are taking to ensure our priorities are met.

First, we are currently operating without any interruption in our service to clients, and have not been directly affected by the coronavirus. We have a strong infrastructure in place to support our business continuity efforts that includes the safekeeping of our data and all client information. Ardmore has decided to implement certain additional steps to ensure consistent client service delivery The Ardmore Way without putting our employees or clients at risk. Those steps include:

  • Utilizing our technology infrastructure for our entire firm to work remotely This is not difficult as we already have many on the Ardmore team working remotely on a regular basis.
  • Making possible alternatives to in-person meetings and onsite delivery of our services available to clients. Some examples include videoconferencing, conference calls, and remote loan review and consulting services. These alternatives are being explored as appropriate with clients by our senior managers with whom our clients typically interact;
  • Honoring client requests to reschedule visits to their sites
  • Requiring employees who exhibit cold or flu-like symptoms to remain at home and not visit our clients;
  • Continuing to urge our Ardmore team members to follow the recommended personal hygiene protocol in the rare instances when they may be visiting clients.

The Ardmore team continues to regularly monitor updates and guidelines from the CDC, World Health Organization, and the Pennsylvania Department of Health. We also are carefully following the actions of the Federal and state governments regarding programs to assist companies and individuals, and also of banking regulators that could affect the banking industry and the risk profiles of banks.

We will continue to provide updates on our actions relevant to our services as developments warrant. Our goal is to continue to be able to provide our clients with the highest quality services that they deserve while keeping our employees, clients and their families healthy and safe.

If you have any specific questions or concerns about our coronavirus response, please don’t hesitate to contact T. Alexander (Sandy) Spratt, President & CEO or Eileen Gaul, SVP and HR Director.

Peter Cherpack Moderate’s RMA Southern New Jersey’s Presidents Panel

We are pleased to announce that Peter Cherpack, Ardmore’s Executive Vice President, Partner & Senior Director of Credit Technology, recently moderated the Presidents Panel presented by the Southern New Jersey Chapter of the Risk Management Association.

The event, held November 20th in Deptford, NJ, featured Rob Curley, SJ Market President of TD Bank, Joseph Tredinnick, Market President of Republic Bank and James Andreacci, Market President of BB&T Bank discussing topics including CECL, indicators of an upcoming downturn and more.

Peter Cherpack Moderates RMA Philadelphia CECL Session

Peter Cherpack, Ardmore Banking Advisors’ Executive Vice President & Senior Director of Credit Technology, recently moderated a General Conversation About CECL, presented by the Risk Management Association’s Philadelphia Chapter.

The event, held on November 12th at the Federal Reserve Bank in Philadelphia, featured panelists Robert J. Ilik and William Wisser from the Fed, and topics ranged from why CECL will not “go away” or “be cancelled” to how CFO’s and CCO’s should work together to ensure CECL success.

Peter has become a thought expert on CECL, having given presentations, written articles and moderating discussions on the topic for organizations including the Risk Management Association, the American Bankers Association and the American Banker.

That expertise has been applied to Ardmore’s CECL solutions, including our credit data assessment service and our Credit Portfolio Management Suite, which includes modules for ALLL (CECL-compliant), stress testing and portfolio reporting & analytics, leveraging a comprehensive central data mart to get the most value out of your credit data.

Ardmore Banking Advisors Sponsors Annual RMA Conference

Ardmore Banking Advisors was pleased to once again serve as a gold sponsor for the Risk Management Association’s Annual Conference, held from October 27-29 in New Orleans, LA. Ardmore has sponsored the event for nearly 20 years, at which more than 400 bankers from institutions across the country met to discuss industry trends, a potential upcoming recession, CECL and more.

Ardmore was able to contribute some great content to the event, as Peter Cherpack, Ardmore’s Executive VP and Senior Director of Credit Technology was featured in two breakout sessions. In the first, First CECL Lessons Learned for Community Banks, Peter discussed some of the interesting results and trends that have surfaced as some of Ardmore’s CECL client banks have begun their parallel runs in preparation for the transition.

Peter also moderated a Chief Credit Officer’s panel featuring Michael Nassy of FVC Bank, Seth Waller of TIAA Bank, and Michelle Moss of USAA Federal Savings Bank. The conversation focused on preparations for a potential economic downturn focused on each CCO’s specialty area of construction, commercial and consumer, respectively.

RMA Blog Post: New FASB Ruling Creates Hundreds Of “CECL Orphans.” What’s A Prudent Banker To D

We are pleased to announce that Peter Cherpack, Ardmore’s Executive VP and Senior Director of Credit Technology was recently published in the Risk Management Association’s blog.

Mr. Cherpack’s article, “New FASB Ruling Creates Hundreds of ‘CECL Orphans.’ What’s a Prudent Banker to Do?” details the recent decision by the Financial Accounting Standards Board to push back the implementation date of the new Current Expected Credit Loss (CECL) standards for smaller community banks from 2020 to 2023, and the impact that the delay has had on banks of all sizes in various stages of the changeover.

To read the article, please click here.

Ardmore CECL Webinar Series – Halfway to CECL Compliance: Creating a CECL Plan In The Year 2020

Ardmore Banking Advisors is pleased to present the latest webinar in our CECL series, “Halfway to CECL Compliance: Creating Your Bank’s CECL Plan In the Year 2020”.

Back in July, the Financial Accounting Standards Board (FASB) released new information about the Current Expected Credit Losses (CECL) model for smaller institutions, updating their expectations for community bankers as the CECL implementation date approaches.

This webinar breaks down the newest information, helps you keep on top of the changing CECL requirements, summarizes what FASB is saying about creating ‘reasonable and supportable projections’ and what regulators are expecting you to do in 2020.

Also, learn how the Ardmore/CSI CECL Boot Camp can help you stay up-to-date with the constantly shifting regulatory updates and requirements, and how the CECL solution developed by Ardmore Banking Advisors & Argus Solutions can help you take stock of your credit data, analyze your needs prior to the changeover and help you automate your process.

Is Your Bank In Compliance With The Current Small Business Administration’s SOP Regulations?

In several due diligence efforts recently, Ardmore identified a need for community and regional banks to review their SBA portfolios to ascertain if they are following the current SBA Standards of Procedures (“SOP”). Too many banks believed they reduced their credit risk of a borrower by obtaining an SBA guaranty, only to find out that the guaranty was negatively affected by non-compliance with the SOP.

Ardmore believes that SBA programs are an acceptable and valid form of lending for banks that have the skills, experience, and processes to perform them properly. The banks that do not display these attributes have an increased risk of loss due to inadequate administration and credit risk. Unfortunately, this has caught several banks off guard when their guarantees were not honored or were limited by the SBA due to non-compliance.

Typically, banks request an SBA SOP compliance audit for several reasons, including the sale of the bank due to a merger or acquisition or for their own originated portfolios in order to evaluate any process weaknesses.

Generally, auditors will review credit memos, loan authorizations, notes, guarantees, tax returns, risk rating reviews and other critical areas of the loan file to determine if there are material errors in the forms and process areas but mostly to get an outside opinion of the validity of the SBA guarantee. In other words, if the borrower defaults, is the guarantee still valid?

When an SBA lender asks the SBA to honor its guarantee, the burden of proof is always on the lender to prove that any documentation or process deficiency is not material and did not cause the failure of the business. The SBA has several options including repairing the guarantee or denying it all together.

The top reasons for partial repair or full denial from the SBA are the following:

  1. Failure to obtain the proper lien position, failure to perfect security interest, failure to fully collateralize the loan at origination when additional collateral is available (generally a repair).
  2. Unauthorized use of proceeds such as proceeds disbursed for purposed inconsistent with the loan authorization or subsequent modification without business justification (could be repair or denial if early default and the improper use of proceeds caused the failure of the business).
  3. Liquidation deficiencies such as failure to conduct site visit which resulted in missed recoveries, improper safeguarding or disposition of collateral which resulted in missed recoveries and misapplication of recoveries to conventional loan when SBA loan has lien priorities (generally a repair unless harm is the full value of the outstanding balance).
  1. Undocumented Servicing Actions such as liens not properly renewed, release or subordination of collateral without documented business justification, allowing hazard insurance to lapse on major collateral that was subsequently destroyed, and failure to maintain life insurance on principal and principal subsequently dies (generally a repair).
  2. Early Default issues such as missing or unsupported verification of equity and verification of borrower financial information with the IRS where the information was relied on in lenders credit analysis (denial if determined to be the reason for business failure).
  3. SBA eligibility issues such as ineligible businesses, ineligible loan purpose, and ineligible loan recipient (denial).

In cases of repair the SBA and bank agree to a specific dollar amount that will be deducted from the purchase amount to fully compensate SBA for the actual or anticipated loss caused by the lender. Denials allow the SBA to be released from its guarantee in full or in part for any reason set out in the CFR or SOP. Generally the SBA only denies liability when the bank’s actions or omissions caused or could cause a material loss to the SBA. However, the SBA may deny the guarantee in the absence of material loss if the lender’s misconduct is deemed material to the soundness or integrity of the loan program. This is especially true if the loan was ineligible or the lender failed to disclose or misrepresented a material fact to SBA or the lender breached SBA’s conflict of interest regulations.

Ardmore continuously expands and updates its SBA SOP Compliance auditing services, which we have been providing to banks for years, to help banks assure they are in compliance with the current SBA regulations and guidelines limiting any reduction in the SBA guaranty.

Our services include ongoing quarterly audits for existing bank SBA portfolios for potential guaranty issues and compliance reviews for banks seeking to acquire other portfolios through acquisitions or purchases.

Ardmore’s area of focus includes, but is not limited to, eligibility, credit standards in underwriting, collateral appraisals and environmental policies, loan authorizations, SBA loan policy development and or a GAP analysis on existing policy, closing and disbursements, and the servicing operation.

Commonly, the scope of work includes:

  1. Providing bank management with an objective analysis regarding the quality of the bank’s SBA loan portfolio, the adequacy of the administrative function, and the supervision of credit risk for the SBA portfolio;
  2. Identifying any gaps or weaknesses in the SBA policy, underwriting, funding and servicing of the SBA loans that are non-compliant with SBA regulations and could present a risk that the SBA will not honor its guarantee;
  3. Evaluating the performance of the portfolio against norms in the industry;
  4. Evaluating the bank staff, processes and systems for adequacy in managing the existing portfolio and potential growth; and
  5. Making recommendations for improvement in staffing, policies, processes, and systems to enhance credit risk management for the SBA portfolio.

Ardmore’s Senior Consultant, Doug Hood, has performed all the critical functions in underwriting, closing, funding, administering, liquidating, and auditing SBA loans for over 35 years. Doug is a former banker specializing in SBA loans and was the Southeast Sales Manager for AT&T Capital (formerly one of the largest SBA lenders in the U.S.). He has been a trusted advisor and auditor on SBA loans for numerous banks on the Eastern coast, Mid-Atlantic and Mid-Western United States. Doug has served on the Georgia and National SBA Advisory Council and has received awards from the U.S. Small Business Administration.

Ardmore believes banks should be prepared and not surprised by the SBA responses to their guaranty requests when a credit is deteriorating.

If we can help assure your portfolio is in conformance with guidelines, and unfortunately many are unknowingly not, please contact us for a quote on services.

Ardmore Sponsors and Moderates RMA Philadelphia’s Annual Presidents Panel

Ardmore Banking Advisors was once again proud to be a gold sponsor of the Philadelphia Chapter of the Risk Management Association’s Annual Presidents Panel, which was held last week at the Union League in Center City.

In addition to sponsoring, Ardmore’s Senior Vice President & Senior Director of Risk Management, Lou Dunham, moderated the panel, which featured Joseph G. Meterchick, Regional President, PNC Bank, Christopher P. McGill, Market President, Bryn Mawr Trust and Jeane M. Vidoni, President and CEO, of Penn Community Bank.

The panel’s lively discussion touched on topics ranging from the future use of technology in banking, the potential for increased bank consolidation and developing and monitoring risk appetite.

(From Left: Meterchick, Dunham, Vidoni and McGill)

Webinar: The CECL Journey – First CECL Lessons Learned for Community Banks

We are pleased to present this recording of our most recent webinar in the CECL Journey series: “First CECL Lessons Learned for Community Banks”

This year, Public Business Entity (PBE) Banks who must be CECL compliant in 2020 started their parallel runs. Running actual community bank portfolio data through the CECL models has surfaced some interesting results – and some important best practices to know.

In this webinar, Peter Cherpack, EVP and Partner of Ardmore shared some of these initial findings and outlined the Regulators’ most recent guidance on CECL and made suggestions as to how community banks can prepare themselves to meet or exceed regulatory expectations in this evolving area.

Lou Dunham Moderates RMA South Central PA Chapter’s Bank Presidents Panel

We are proud to announce that Lou Dunham recently moderate the Presidents Panel of the South Central Chapter of the Risk Management Association.

The event, held on Friday, May 10th at the Heritage Hotel Lancaster, featured Patti Husic, President & CEO of Centric Bank, Gene Draganosky, President & CEO of York Traditions Bank and Aaron Groff, President, CEO, and Chairman of the Board of Ephrata National Bank.

The panel discussion ranged from topics including talent retention, FinTech, budgeting for technological improvements, enterprise risk management and where the next recession concerns are.

CECL Industry Update – CECL Calculations and How Life of Loan, Loss Calculation Methodologies and Co

We are proud to present the latest whitepaper in our CECL Industry Update series – “CECL Calculations and How Life of Loan, Loss Calculation Methodologies and Components Can Impact ACL Amounts for Community Banks.

In this whitepaper, Peter Cherpack, Senior Director of Ardmore Banking Advisors’ Credit Technology Group and a nationally recognized thought leader on CECL and stress testing, presents one of the first documents on CECL that contains “hands-on” findings, gained through running actual bank data through the models and calculations. This has allowed Mr. Cherpack to begin identifying early Best Practices for the new process.

To read the full whitepaper, please click here.

Ardmore Publishes CECL Industry Update

Ardmore Banking Advisors is pleased to present the April 2019 edition of our CECL Industry Update.

As Ardmore works with its software partner Argus Information and Advisory Services to assist our clients preparing for their 2020 CECL transition, we are seeing some trends in early testing that are discussed in this summary. We have also incorporated some of our commentary on the FDIC CECL FAQ update issued earlier this week.

Please click here to read more.

Ardmore Publishes CECL Industry Update

Ardmore Banking Advisors is pleased to present the April 2019 edition of our CECL Industry Update.

As Ardmore works with its software partner Argus Information and Advisory Services to assist our clients preparing for their 2020 CECL transition, we are seeing some trends in early testing that are discussed in this summary. We have also incorporated some of our commentary on the FDIC CECL FAQ update issued earlier this week.

Please click here to read more.

Webinar: The CECL Journey – CECL Transition Project Planning for Community Banks

We are pleased to offer you the recording of our recent webinar, The CECL Journey: CECL Transition Project Planning for Community Banks.

In this presentation, Peter Cherpack, Ardmore’s Executive VP and Senior Director of Credit Technology helps financial institutions identify where they should currently be on the road to CECL compliance and discusses a walkthrough of the important considerations and components of building an effective CECL transition project plan.

Peter Cherpack Quoted in Two Cloud Computing Articles

Ardmore’s Executive VP & Senior Director of Credit Technology, Peter Cherpack, was recently quoted in two Independent Banker articles focused on cloud computing in community banks. The first, published in late February, is entitled Storms Ahead for Cloud-Based Infrastructure? and discusses banks more frequently embracing cloud computing and the bumps along the way.

The second, How Banks Can Follow Amazon’s Strategy of Constant Connection examines the balance that community banks are striving to maintain in an increasingly digital society while not losing the personal touch that such financial institutions can offer to customers.

Is Your Bank Prepared for the Next Economic Downturn? Credit Administration in Good Times & Ba

There have been a lot of conversations around loosening underwriting standards in banks nationwide and regulators raising the issue at their safety and soundness exams at individual banks. The adage that we approve our worst loans in good times comes to mind. It is when credit officers face their biggest challenges as production goals and overconfidence take precedence over credit risk management.

Credit risk is typically defined as the risk that a financial institution’s earnings and/or capital is at risk due to losses from the decline or elimination of the value of assets (including off-balance sheet assets such as letters of credits, counter party agreements, etc.) due to a deterioration in the financial condition of a borrower or relationship to which credit is provided and any collateral pledged.

Bank management should take the opportunity to ensure the development and establishment of a system for credit risk management is current, including strong policies and procedures and a credit risk rating system that produces accurate and timely risk ratings, ensuring the soundness and appropriateness of a financial institution’s risk profile and complexity in changing times. Management should be charged with, and responsible for, taking the initiative in developing, establishing and implementing the proper checks and balances, taking into consideration both the bank’s strategic objectives as well as safety and soundness. The Board should assure risk management systems are not only in place but are routinely reviewed in times of economic (and other) change. Management should determine in the good times, not the bad, that the credit risk management system is functioning effectively and performing as outlined and approved in policy. Policy should be forward looking and not just in the rear-view mirror, which is what affected many banks in the “Great Recession” just 10-11 years ago. If policy has not been reviewed for current issues and concerns, we recommend that changes need to be made in the near term to assure profitability and safe and sound practices have been addressed. When regulations and economic changes occur, management should assure policies and procedures and other internal controls are changed to promptly comply with the new rules and economic conditions. Further, when regulations change, management should not just do “what is required”. Thought must be put into the changes looking forward and not backward. Ardmore hears routinely from banks “we have never done it that way” or “we have never had that issue” or the “regulators are not forcing us to do it so why should we?” We do not believe this thought process is beneficial to producing a proactive response to change. As an example, regulations regarding appraisal and appraisal reviews have changed, allowing banks to have higher thresholds for obtaining appraisals vs. evaluations. This could conceivably allow banks to take on additional risk unintentionally if not properly monitored and changed in policy. Let’s review an example of how this could play out in a bank. Effective April 9, 2018, minimum thresholds under FIRREA appraisal requirements were raised as follows:

  • The appraisal threshold for commercial real estate (CRE) transactions increased to $500,000, up from $250,000:
  • CRE transactions below $500,000 now require an evaluation rather than an appraisal.
  • Banks may use appraisals even below the $500,000 threshold in appropriate circumstances such as for higher-risk transactions.
  • Single Family 1-to-4 residential property, including a construction loan for that property, remains subject to the $250,000 threshold.
  • The threshold for qualifying business loans (i.e., owner occupied real estate, or C&I loans secured by real estate that is relied upon and not taken as an abundance of caution) remains at $1,000,000. (Smaller loans require an evaluation.)

Ardmore has been hearing from clients and others that regulators are now more focused on evaluations than they have been historically, and it seems reasonable to expect that, given the higher threshold for appraisals, there will be even more attention on the quality of evaluations going forward. It is critically important that banks follow existing guidance on evaluations, including their content and the fact that they, like appraisals, must be reviewed. But are banks following that process? We are not confident they are in many cases.

The existing guidance on evaluations provides that they should contain sufficient information detailing the analysis, assumptions, and conclusions to support the credit decision. At a minimum, an evaluation should contain:

  1. Property location
  2. Property description, current and projected use
  3. Estimate of market value as is, with any limiting conditions
  4. Method used to confirm actual physical condition and extent of inspection
  5. Analysis performed and supporting information
  6. Description of supplemental information considered
  7. Sources of information used
  8. Preparer name and contact information (when a person)

Ardmore has seen a spate of examples of banks not being familiar enough with, or not putting into practice, the guidance issued in 2010 on appraisals, evaluations and appraisal reviews. It appears that the regulatory agencies have been observing that as well. A new FIL was issued addressing many of the examples that Ardmore has been observing including:

  • An appraisal must be obtained and reviewed before a final credit decision.
  • An appraisal is required for all CRE transactions > $500M and C&I transactions secured by RE > $1MM (with certain exemptions):
  • Farmland counts as C&I if repayment comes from sale of crops or livestock; it’s CRE if the land is rented to a third party.
  • There is a fairly long list of exemptions in FIRREA, but the most common are size and abundance of caution.
  • For transactions below these thresholds, an evaluation is required in lieu of an appraisal.
  • The FIL addresses abundance of caution requirements for documenting the sufficiency of sources of repayment other than the real estate but does not address term/amortization, which we have seen regulators use also to determine that something is not really abundance of caution. If it is structured like a real estate loan, there is a chance it will be considered non-AOC.
  • Every appraisal or evaluation obtained must be reviewed. That can be done internally, but whoever performs the review must be qualified and independent of the transaction, including not voting on approval. For complex and/or large transactions the bank is urged to consider a third-party review.
  • Appraisals prepared for another bank may be accepted, if they meet regulatory requirements and the bank’s policy – but they must be reviewed by the bank. Another review cannot be accepted.
  • Every renewal or modification requires assessment of whether market conditions or the collateral may have deteriorated. The regulatory Q&A has a very good decision tree (set out in examples) as to whether an appraisal or evaluation is required in each case – and then points out that an existing appraisal or evaluation may still be valid, and how the bank should document that it has made that decision.

The above example of regulatory change and the lack of compliance at some banks raises the question of whether your bank has adjusted policies and procedures and internal controls to ensure regulators do not find issues in your next exam. Not just the appraisal, evaluations and reviews but an overall look at where the bank is and needs to go.

Ardmore recommends the following for bank management and board consideration:

  • Prompt Policy and Procedures Review to assure they meet industry best practices and regulatory changes.
  • Determine if the bank’s risk rating matrix is sufficient for the risk profile and complexity of the bank.
  • Determine if you will meet the CECL guidelines in a timely manner including data collection.
  • Review of Roles and Responsibilities for:
  • Management
  • Board of Directors
  • Review strategic objectives of the bank:
  • Does policy clearly define its risk appetite?
  • Review exceptions to policy and ascertain how they are performing vs. loans with no exceptions:
  • Approving exceptions to policy is considered loosening standards.
  • Increasing levels of policy exceptions can be a red flag to regulators, especially if there is more than one exception granted in a loan approval.
  • Evaluate Board Reporting:
  • Has the Board of Directors appropriately specified matters that require reporting and those that require approval?
  • Is Management reporting the current status to the Board of on a regular and timely manner?
  • Does the Board of Directors review whether the reporting system is sufficient for the bank’s risk profile?
  • Is there a clear and demonstrable balance between the Line Lenders and Credit Administration?
  • Roles and Responsibilities of Credit Risk Management.
  • Roles and Responsibilities of Lending Management.
  • Roles and Responsibilities of the Board in the credit process.
  • Roles and Responsibilities of Problem Loan Management Division.
  • Roles and Responsibilities of the Loan Review function and its ultimate reporting line.
  • Management of Credit Concentration Risk parameters defined.

Ardmore’s team of experienced professionals would be happy to discuss the above recommendations with your management group and or the Board, prior to the bad times coming at some point in the future. We encourage you not to wait for the economy or the loan portfolios to deteriorate or until the Regulators tell you it is time to change. Lou Dunham is a Senior Vice President & Senior Director of Credit Risk Management at Ardmore Banking Advisors. Suzanne Storm is a Vice President of Credit Policy & Risk Management.

Presentations by Lou Dunham and Peter Cherpack Highlight Annual Risk Management Association Conference

Professionals from Ardmore Banking Advisors were in the spotlight during the Risk Management Association’s (RMA) Annual Conference, as both Lou Dunham and Peter Cherpack presented well-attended sessions during the event in Washington, DC earlier this month.

Mr. Dunham, Ardmore’s Senior VP & Senior Director of Credit Risk Consulting, had a standing room-only audience as he moderated the conference’s Chief Credit Officer panel, featuring Michael Nassy of FVCBank, Bill Harrod of First Financial Bank and Daniel Eilert of INTRUST Bank.

The panel’s discussion ranged from topics such as the balance between risk and growth, trends in portfolio management, and adhering to the bank’s risk appetite structure.

Mr. Cherpack, Ardmore’s Executive VP and Senior Director of Credit Technology, presented “CECL Implementation for Community Banks”. The presentation distilled information from recent regulatory articles and webinars to try and make the expectations for community banks clearer as their institutions prepare for the CECL deadline, and gave some advice on where they should be focusing their efforts now so they are ready when the new rules go into place.

Peter Cherpack Teams With Risk Management Association to Offer CECL Podcast

We are pleased to share a recent podcast produced by the Risk Management Association (RMA) featuring Peter Cherpack, Ardmore’s Executive Vice President & Senior Director of Credit Technology, discussing the impact of the new Current Expected Credit Loss (CECL) rules on community banks.

It is just the latest of a long list of appearances for Mr. Cherpack this fall, as he shares his CECL expertise and how Ardmore’s solutions can both prepare bank data for the transition, and automate the CECL calculation process.

Please click here for the podcast.

Lou Dunham Moderates RMA Southern Jersey Presidents Panel

Lou Dunham, Ardmore’s Senior Vice President & Senior Director of Credit Risk Management, recently moderated a President’s Panel presented by the Southern New Jersey chapter of the Risk Management Association (RMA).

The panel, presented on October 23, 2018 at the Tavistock Country Club in Haddonfield, NJ brought together Rob Curley of TD Bank, Dave Hanrahan of Capital Bank of New Jersey and Brian W. Jones of the First National Bank of Elmer for a conversation about the most pressing issues in the banking industry and the differing viewpoints that presidents of banks of varying size have in addressing issues.

Nearly 100 bankers attended the event, which included opinions on loan concentrations, the overall state of the economy and its impact on banking in Southern NJ, CECL and merger and acquisition speculation.

Peter Cherpack Contributes CECL Article to RMA Journal

Peter Cherpack, Ardmore’s Executive Vice President & Senior Director of Credit Technology, recented contributed an article on CECL’s impact on community banks to the RMA Journal.

The article, published this month, states that while smaller banks may have been slowest to begin preparing for FASB’s new rule change, expecting that their lower asset size meant that they could keep doing what they are doing, that regulators are still expecting banks of all sizes to begin gathering and housing pertinent data, change loan segmentation and use the new calculation.

This has resulted in a great deal of uncertainty, which Peter has attempted to clarify using regulators’ information released during a series of webinars this summer. To read the full article, please click here.

Ardmore Presents CECL Workshop at American Bankers Association Event

Peter Cherpack, Senior Director of Ardmore’s Credit Technology group, recently conducted the pre-conference CECL workshop with Michael Gullette , Senior VP of Tax & Accounting for the ABA during the American Bankers Association’s (ABA) annual CFO Exchange Conference last week in Austin, TX.

50 bankers attended the workshop, entitled “Comprehensive Q-Factor Analysis Under CECL for Community Banks” which explored best practices in CECL implementation. The presentation addressed the best use of Q-factors and loss estimation scenarios through hands on access to Ardmore’s software partner Argus’s analytical tools, which give bankers the ability to organize their data for CECL and automate the calculation and reporting processes.

Ardmore Banking Advisors Featured In CECL Educational Events With The American Bankers Association

Ardmore Banking Advisors, a financial institutions market leader in risk management consulting and CECL solutions for community banks, is pleased to announce that it will be partnering with the American Bankers Association, the Risk Management Association, Computer Services, Inc. and other financial industry leaders this Fall to offer comprehensive assistance to community banks as they approach the CECL compliance deadline. Ardmore will offer guidance on practical solutions that help community bankers meet the CECL challenge while, at the same time, improving their overall credit risk management processes.

Peter Cherpack, Ardmore’s Executive Vice President & Senior Director of Credit Risk Technology, has been selected by the American Bankers Association to facilitate their 2018 CFO Exchange pre-conference workshop: “Comprehensive Q-Factor Analysis Under CECL for Community Banks” in September, just days after presenting “Your Bank on the CECL Journey: Where You Need to Be in 2019” at the Computer Services, Inc. (CSI) Annual Customer Experience conference, attended by hundreds of the core provider’s client banks.

Later this fall, Mr. Cherpack will be presenting “CECL Implementation for Community Banks” at the Risk Management Association’s Annual Conference, as well as leading a session of their audioconference series, and publishing an article in the October RMA Journal.

“Ardmore is pleased to be recognized by so many industry-leading organizations as thought leaders and for assisting community bankers to solve the CECL problem,” said Mr. Cherpack. “With the help of our software partner, Argus, we can tailor the best CECL solution for community banks available and enable our clients to organize their credit data to improve their overall credit risk management processes. We look forward to working closely with these organizations as the CECL journey continues for community banks.”

Known for integrity, quality and independence, Ardmore Banking Advisors has been providing their clients in the financial services industry with risk management solutions including loan review, CECL preparation and automation, stress testing, due diligence for mergers and acquisitions, and credit policy and procedure analysis for over 27 years.

Ardmore’s Lou Dunham Quoted in Independent Banker Article

We are pleased to announce that Lou Dunham, a Senior VP and Senior Director of Risk Management Consulting at Ardmore, was quoted in a recent Independent Banker article focused on the decisions that a bank must contemplate before merging.

Lou, a subject expert in mergers and acquisitions, and one of Ardmore’s senior due diligence personnel stresses that mergers aren’t for every bank, and every institution has different pros and cons to consider when deciding on a transaction.

If your institution is considering a merger, sale or acquisition, please contact Lou at ldunham@ardmoreadvisors.com.

To read the full article, click here.

Watch: The CECL Journey – “Step # 1: The Must-Dos”

We are pleased to present this recording of our recent webinar, The CECL Journey – Expectations for Community Bank Stress Testing.

Peter Cherpack, Executive Vice President, Senior Director of Credit Technology, and an Ardmore partner, presents the first step of “The CECL Journey”. Peter’s presentation focuses on what regulators are expecting community banks to do as the CECL implementation deadline approaches, and some logical first steps in the process.

Watch: The CECL Journey – CSI’s CECL Boot Camp – Evaluate Your Progress on the Road to CECL

We are pleased to present this recording of our most recent webinar in the CECL Journey series: “CSI’s CECL Boot Camp – Evaluate Your Progress on the Road to CECL.”

Peter Cherpack, Executive Vice President, Senior Director of Credit Technology, and an Ardmore partner, presents CECL updates for smaller institutions including newer regulatory and audit expectations. This webinar also includes solutions offered by Ardmore and its partners to help you on your CECL journey.

Peter Cherpack Presents at Risk Management Association’s Annual CAVA Spring Conference

Peter Cherpack, Executive Vice President, Senior Director of Credit Technology, and an Ardmore partner, recently had the privilege to speak at the Risk Management Association’s Carolinas-Virginias chapter’s annual spring conference.

The event, held May 10-11 in Charleston, SC, gathered bankers from the mid-Atlantic states to discuss topics including risk appetite and optimizing risk management, among others. Justin Bakst, Director of CoStar gave a presentation about his expectations for the future of CRE, which indicated that growth is likely in the coming year, which will also increase volatility.

Peter’s presentation, “The CECL Journey – Regulatory Expectations for Community Bank Implementations” focused on what regulators are expecting community banks to do as the CECL implementation deadline approaches, and some logical first steps in the process.

Ardmore Sponsors RMA Philadelphia Chapter’s Annual Bank Presidents Panel

Ardmore Banking Advisors was pleased to once again sponsor the RMA Philadelphia Chapter’s annual Bank Presidents Panel at the Union League on May 8, 2018.

The panel was moderated by Lou Dunham, Senior VP & Senior Director of Risk Management at Ardmore, and featured Gerard Cuddy of Beneficial, Mike Keim of Univest, Travis Rhodes of BB&T and Ira Brown of M&T Bank in a discussion about the current state of the banking industry, touching on topics including fintech, bitcoin, CECL and training the next generation of bankers.

The programs also included a touching tribute to Don Frueh, an Ardmore Partner and Executive Vice President, who had moderated this event for a number of years and been a very active Board Member prior to his passing in March.

Pictured (l to r) Lou Dunham, Ira Brown, Gerard Cuddy, Mike Keim, Travis Rhodes

Lou Dunham Moderates Regulator Panel for the Central Pennsylvania Chapter of RMA

Lou Dunham, a Senior Vice President and Senior Director of Credit Risk Consulting for Ardmore moderated a discussion among regulators for the Central Pennsylvania Chapter of the Risk Management Association yesterday.

The event, held in Altoona, brought together Catherine Goni of the FDIC, Robert Ilik of the Federal Reserve Bank of Philadelphia, Robert Lopez of the Pennsylvania Department of Banking & Securities, and Skye Amber Perry from the OCC to discuss a wide variety of topics, including managing concentrations, concerns about CECL and its implementation and whether or not there has been a recent loosening of underwriting standards.

Yesterday’s event was just the latest in a line of successful collaborations between RMA and Ardmore, including Lou’s moderation of the Presidents Panel for the Philadelphia chapter earlier this month, Peter Cherpack’s presentation at RMA’s Carolina and Virginia Chapter event, and Ardmore’s support of RMA’s annual risk management conference in Boston last year, where Lou moderated a panel of Chief Credit Officers and Peter Cherpack discussed CECL’s potential impact on a bank’s credit culture.

Watch: The CECL Journey – Regulatory Expectations for Implementation – With Special Guest Michael

We are pleased to present this recording of our recent webinar, The CECL Journey – Regulatory Expectations for Implementation.

It was our pleasure to have Michael L. Gullette, Senior VP of Tax and Accounting of the American Bankers Association as our guest on this webinar, and give his opinions on what regulators are looking for from community banks as they begin to implement CECL.

Presented by Peter Cherpack, this webinar summarizes the messages delivered by regulators in recent guidance on the topic, and gives suggestions on how community banks can get started now on the path to CECL success.

Peter Cherpack Published in American Banker

We are pleased to announce that Peter Cherpack, Ardmore’s Executive Vice President and Partner, was published in today’s American Banker.

His article discusses the fact that while regulators do not necessarily have the same expectations of community banks implementing CECL than they do the larger banks, that community banks still need to comply, and that effort should begin now.

To read the full article, click here.

Right-Sizing Your Vendor Management

In today’s fast-paced banking environment, many institutions are outsourcing services such as loan review, asset and liability management, internal audit, compliance, stress testing, policy development, risk consulting, and other services so that their own internal resources are used most efficiently and effectively for customer service, business development and strategic initiatives. It simply makes more economic sense for many institutions to use outside skilled experts on a part-time basis for such services, as opposed to staffing with full or part-time employees who may not be experts or have the level of experience necessary in these risk management disciplines. Regulatory agencies have made it clear to all banks that vendors accessing portfolio data and borrower information need to be properly vetted to ensure that they have appropriate data and security controls in place to reduce exposure of the bank to cyber crime, fraud and other data security concerns. However, there is a fine line between prudent management of your outside vendors, ensuring the safety and security of your bank’s data, and excess paperwork and due diligence dealing with non-pertinent aspects of a vendor that can disrupt important work for the health of your financial institution. The OCC’s guidance on vendor management, released in October 2013, clearly states, “The management plan should be commensurate with the level of risk and complexity of the third-party relationship”. Many vendor-provided services are internally focused “advisory” or “consulting” assignments, and as such, not considered “critical” to the bank’s risk profile or any threat to the security or assets of the bank’s customers. It should be noted that if something is designated as “not-critical”, that does not mean it is not important. It can be a challenge for banks today to “right size” their third party vendor management program for these types of service providers. What is too much or too little vs. “just right”? The OCC is very detailed in explaining risks and what is expected of banks to mitigate those risks. Clearly, the OCC and other regulators expect vigorous risk management, but also differentiate between “critical” vendors and other vendors, and they do not expect every non-critical vendor to be required to fill out every question in the “one size fits all” questionnaires that banks often use by default. Industry best practices would be to customize what level of information is needed from a vendor, taking into consideration the complexity and level of risk in the vendor relationship with the bank.

Prudent Measures

The regulatory advisories and guidance on third-party risk management focus on applying the appropriate controls for the level of risk that the vendor service or activity represents to the bank and its customers, but this nuance is not often recognized as part of the process in real life. Banks that apply a “one size fits all” approach to vendor management, treating smaller vendors of internally facing non-transactional risk management services at the same level as full scale critical vendors such as core processors, place an unusually onerous burden on the smaller non-complex and non-critical third-party expert firms. This “one size fits all” process and result is similar to a bank regulator expecting the same compliance level for regulations from both the “Too big to fail” systemic institutions and smaller community banks. Some examples of these disproportionately demanding burdens include asking providers of non-bank critical services, where commercial client data is reviewed but no “Gramm–Leach–Bliley Act Confidential” data is retained, such as asset and liability consulting or loan review. This “one size fits all” process forces non-critical vendors to fill out lengthy forms, produce excessive liability insurance, and audit documentation at the same level as a “critical” banking system provider that has access to transactional data and consumers’ confidential personal information. This type of “one size fits all” thought process could eventually eliminate the niche expert provider that has the ability to deliver excellent value at reasonable cost to community banks. Smaller non-critical vendors typically care intensely about their clients’ business and provide essential independent and objective perspective to bank management, acting as a sounding board, and trusted advisor as well as provider. Often, larger vendors have rotating junior staff and offer less leadership and guidance to the smaller institution as that is “out of the scope.” Alternately, some banks may choose to ignore all controls and prudent measures of third-party vendor management with their smaller risk service providers, including sole proprietor audit and risk review companies. This also exposes the bank to added risk if they do not ask for any audit controls (such as SOC 1), appropriate professional insurance or proof of data security controls. Lowering the due diligence process to this level exposes the bank to unnecessary risk of data loss or breaches of confidential information. So where is the balance? How can a bank retain a third-party vendor in a way that will protect the bank’s systems and data in an efficient manner? Ardmore would recommend that the prudent course of action is to apply some reasonable controls, but not unnecessary “check the box” due diligence that wastes time and added expense for both the bank and vendors. It also may cause the vendor’s work or proposals to be delayed. The prudent risk controls for a provider of “non-critical” and non-confidential data retaining services would generally include:

  • A SAEE 16 SOC 1 Audit control document – attesting to adequate controls for the vendor relevant to their activities;
  • Documentation of adequate controls of the vendor’s hardware, software, networks, network penetration testing results and laptop controls such as encryption, remote wipe capabilities, anti virus and asset tracking; and
  • Reasonable professional insurance thresholds to match the criticality and complexity of the services offered.

By taking prudent steps to “right size” vendor management, banks can protect themselves appropriately for the risk and complexity of the provided services, but also enable smaller vendors to continue to thrive and be “trusted advisors” to financial institutions. As always, a balanced approach serves both parties well.

Julie Hawthorne is VP & Director of Client Services & Operations at Ardmore Banking Advisors

Webinar: The CECL Journey – Stress Free Stress Testing: What Regulators are Expecting & How Ardm

Stress testing is on the mind of many community bankers right now, with almost 80% of participants in a recent Risk Management Association (RMA) survey indicating that stress testing was the aspect of Enterprise Risk Management that regulators most want to see implemented.

However, many community bankers are unsure of exactly what processes regulators would like to see put in place, and how to begin gathering data, implementing the systems and training their staff so that those processes can commence.

Our recent webinar featured a discussion about what regulators are expecting from community banks when it comes to stress testing, the most efficient way to begin gathering and organizing data so it can be put to best use, and how to keep the process going.

We also presented options available from Ardmore to implement a stress testing process for your institution, from fully outsourced to an automated solution that you can use yourself.

Regulatory Update: CRE, HVCRE and HVADC

Ardmore Banking Advisors (ABA) regularly monitors new and proposed guidance issued by the bank regulatory agencies, other news and analysis related to the banking industry, and stays in close touch with client banks about what they are hearing from the regulators.

One of the topics we have heard discussed consistently and increasingly by regulators is commercial real estate (CRE). Regulatory issuances and on-site exams have addressed CRE concentrations and the elements of the enhanced risk management framework that regulators expect to be in place if a CRE portfolio is growing rapidly or if it has exceeded the 300% total CRE 100% acquisition, development and construction (ADC) thresholds. Recently clients have reported an even stronger focus by their examiners on banks being expected to maintain strong underwriting discipline and prudent risk management practices in the face of rapidly growing CRE portfolios. We expect that this focus will continue as the economic cycle remains strong.

Earlier this month the regulators issued for comment the proposed guidance aimed at simplifying the capital rules related to higher risk construction/development lending. The following changes are proposed:

  • Name change from High Volatility Commercial Real Estate (HVCRE) to High Volatility Acquisition, Development, and Construction (HVADC)
  • Reduce the risk weighting for risk based capital analysis on HVADC from 150% to 130%
  • Eliminate requirements for minimum cash equity in projects and that the equity must stay in the projects
  • Clarify the definition of transactions affected, those exempted from this classification, and what constitutes a “permanent loan”
  • HVADC is a credit facility that primarily finances or refinances (note that the terminology “is secured by” is NOT a part of the definition; thus an unsecured loan that passes the purpose test would be classified as an HVADC even without real estate security) as follows:
  • The acquisition of vacant or developed land
  • The development of land to prepare to erect new structures (including site improvement and demolition of existing structures)
  • The construction of buildings or dwellings or other improvements including additions or alterations to existing buildings or dwellings

EXCEPTIONS:

Loans to finance construction of 1-4 family residential structures, including loans that combine land acquisition, development, and construction, and including lot loans. (Note that 1-4 family homes definition for exclusion from HVADC includes townhouses or row homes, but does not include condominiums or cooperatives (unless they contain less than 5 units))

Facilities financing ADC projects for which the primary purpose is community development as defined by the CRA

Facilities financing the purchase or development of agricultural land

The HVADC designation is not applied to permanent loans, defined as a prudently underwritten loan that has a clearly identified ongoing source of repayment sufficient to service amortizing P&I payments (whether the loan is actually amortizing or not) other than from the sale of the property. Typically an owner occupied construction project would NOT be considered HVADC, provided that the owner has sufficient capacity at origination to repay the loan from ongoing operation

If a loan is structured as construction to perm, once the property is generating sufficient revenue the HVADC treatment can be eliminated

  • Note that these changes would only apply to loans originated after the final rule is implemented. Any loans currently considered HVCRE will remain HVCRE and retain their current 150% risk weight.
  • Note also that the risk weighting is proposed to be reduced to 130% because the regulators believe that the projects with sufficient equity / low LTV will now be included in HVADC, and thus arguably the overall risk will be lower.
  • However, with this inclusion of formerly excluded high equity projects, and as the purpose definition will include other projects that are not specifically secured by the assets being acquired and developed more loans will meet the definition of HVADC.
  • While this proposal is thought to simplify the process, the unintended consequences will be a considerable amount of analysis by all banks to determine the specific projects to be included and the risk weighting impact on those assets and risk based capital. It is likely to generate significant discourse from the banking community.

The proposed rulemaking addresses capital-related subjects other than HVCRE as well; the Community Bank Summary from the FDIC website is recommended reading by credit and financial professionals.

If you have any questions on these new regulations, or would like more information on how Ardmore can help your bank address these changes, please contact us today.

Suzanne Storm has been a Senior Consultant for Credit Policy & Risk Management at Ardmore Banking Advisors since 2014. She previously served as Director of Risk Policy for Wachovia, overseeing credit policy, operational risk policy, and corporate risk governance. Following the merger, she was head of Corporate Credit Policy for Wells Fargo and oversaw the integration of lending authorities and credit policy.