Allowance for Loan and Lease Losses (ALLL) and Loan Loss Provisions
What is ALLL (Allowance for Loan and Lease Losses)
Allowance for Loan and Lease Losses (ALLL) is a special bucket where the bank puts cash in order to make up the difference when they are taking losses on non-performing assets.
What Are Loan Loss Provisions
If Allowance for Loan and Lease Losses (ALLL) is the bucket then “Loan Loss Provisions” is the ladle that fills the bucket. Loan Loss Provisions is the amount added or subtracted from ALLL each quarter.
How to Use ALLL and Loan Loss Provisions in Your Prospecting
ALLL acts as a reserve for anticipated losses in a lenders loan portfolio. When banks add to ALLL each quarter (through Loan Loss Provisions) this indicates an expectation of more trouble in their portfolio. When the lender takes away from ALLL (through negative Loan Loss Provisions) this is an indication that the lender is more optimistic about their portfolio and expects fewer non-performing assets.
Check out this interview that goes into detail on how to use this data to find non-performing note deals.