Current through Register Vol. 47, No. 38, September 22, 2023
The classification system described in this Section applies
to all assets or portions of assets held by a savings bank.
1) Substandard - assets classified
substandard are inadequately protected by the current paying capacity of the
obligor or of the collateral pledged, if any. Assets so classified must have a
well-defined weakness or weaknesses. They are characterized by the distinct
possibility that the savings bank will sustain some loss if the deficiencies
are not corrected.
2) Doubtful -
assets classified doubtful have all the weaknesses inherent in those classified
Substandard with the added characteristic that collection of the asset in full,
on the basis of currently existing facts, conditions, and values, is highly
questionable and improbable.
Loss - assets classified loss are considered uncollectible and of such little
value that their continuance as assets without establishment of a reserve is
not warranted. This classification does not mean that an asset has absolutely
no recovery or salvage value, but, rather, that it is not practical or
desirable to defer writing off a basically worthless asset even though partial
recovery may be effected in the future.
c) Implementation of Classification System
1) In connection with examinations of a
savings bank or its affiliates, the examiner shall have authority to identify
problem assets and, if appropriate, classify them.
2) Each savings bank shall classify its own
assets on a regular basis. In addition to any other remedies available to the
Division under applicable statutes and regulations, a savings bank's failure to
set aside prudent valuation allowances, or to monitor portfolio risk with an
effective self-classification procedure, will be considered by the examiner in
determining the amount of valuation allowances to be established by the savings
3) In its reports to the
Division , each savings bank shall include aggregate totals of assets that the
savings bank has classified in each of the 3 asset classification categories,
and the aggregate general and specific valuation allowances established. To the
extent a savings bank's specific valuation allowances have decreased from the
previous reporting period, the savings bank shall identify the amount of the
decrease attributable to a savings bank's between examination upgrading of
Effect of Classification
1) When, pursuant to
this Section, a savings bank has classified one or more assets, or portions of
assets, substandard or doubtful, the savings bank shall establish prudent
general allowances for loan losses. When, pursuant to this Section, an examiner
has classified one or more assets or portions of assets substandard or doubtful
and has determined that the existing valuation allowances are inadequate, the
savings bank shall establish general allowances for loan losses in an
appropriate amount as determined by the examiner, subject to approval of the
2) When, pursuant to this
Section, either a savings bank or an examiner has classified one or more assets
or portions of assets loss, the savings bank shall either establish allowances
for losses in the amount of 100% of the portion of the assets classified loss,
or charge off that amount against current income.
3) Adequate valuation allowances consistent
with generally accepted accounting principles shall be established for
classified assets. Asset evaluations (and the corresponding allowances) that
are consistent with the practice of the federal banking agencies may be used
for supervisory purposes.
e) Assets Deserving "Special Mention"
Assets that do not currently expose a savings bank to a
sufficient degree of risk to warrant classification under this Section but do
have credit deficiencies or potential weaknesses deserving management's close
attention shall be designated "special mention" by either the savings bank or
the examiner. Special mention assets have a potential weakness or pose an
unwarranted financial risk that, if not corrected, could weaken the asset and
increase risk in the future.
f) Delegations and Interpretations
1) The Director or designee may approve,
disapprove, or modify any classifications of assets made pursuant to this
Section and any amounts of allowances for loan losses established by a savings
bank or required by examiners pursuant to this Section.
2) When an appraisal is required or made in
connection with any reevaluation of assets, the Director may approve or reject
the appraisal and any valuation related to it.
3) The Division shall, from time to time,
issue supervisory interpretations and other informational material regarding
classification of assets.
Amended at 30 Ill. Reg. 19068, effective December 1,