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Loan Quality 1
Criticized Segment – The average level of criticized loans to portfolio continued to decline to 2.83% at Q1 2023 compared to 2.97% at Q4 2022 and 3.43% one year earlier at Q1 2022. Classified loans relative to portfolio also declined to 1.65% at Q1 2023 compared to 1.72% at Q4 2022 and 1.91% one year earlier at Q1 2022.
Over the last eight quarters criticized loans relative to portfolio ranged from 2.83% to 3.54% while the ratio of classified loans to portfolio ranged between 1.65% and 2.08%.
Defined as the sum of Special Mention, Substandard and Doubtful
Defined as the sum of Substandard and Doubtful
Source: CEIS Data for All Banks
Loan Quality 2
Criticized Segment – Criticized loans to Tier 1 capital plus loan loss reserves continued a downward trend from 28.36% at Q2 2021 to 25.06% at Q1 2022, and further to 16.87% at Q1 2023. The more critical ratio of classified loans to Tier 1 capital plus loan loss reserves also decreased from 16.97% at Q2 2021 to 13.41% at Q1 2022 and to 9.81% at Q1 2023.
Over the last eight quarters criticized and classified loans relative to Tier 1 capital plus loan loss reserves ranged from 16.87% to 28.36% and 9.81% to 16.97%, respectively.
Source: CEIS Data for All Banks
Provisions for Credit Losses, Reserves and Net Charge-Offs
Provision / Reserve – The provision for credit losses for the CEIS client base dropped notably from FYE20 to FYE21 and then reflected an increase through Q4 2022. However, the average provision showed a decrease in Q1 2023. Loan loss reserves for the group continued to exhibit an increasing trend since Q4 2021. Net charge-offs increased from an annualized 0.04% of average loans at Q4 2022 to 0.07% at Q1 2023 but remains below the 0.11% reported at FYE20.
Reserve coverage of classified loans declined slightly to 90.00% at Q1 2023 from 97.91% at Q4 2022 and 97.59% at Q3 2022. Over the prior eight quarter period, loan loss reserves to classified loans in the CEIS client base ranged from 77.47% to 98.25%
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