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First City Bank | Proactively Managing Risk with CRE Stress Tests

The Challenge: Automating Complex Stress Testing Scenarios

Stress testing is widely discussed in banking, and First City Bank in Columbus, Ohio, wanted to stay ahead of the curve. Regulations have not required stress testing for banks of First City Bank’s size at this point; however, management at the bank knows guidance requirements are coming and wants to be forward-looking, especially given the uncertainty in the economy and the portfolio’s heavy concentration in CRE loans.

We are much further along in stress testing than our regulators were expecting. They were very impressed with the information and thoroughness of our reports and presentation as well as our in-depth knowledge of our portfolio and risk associated with it.
James Bush, First City Bank

The Solution:

First City Bank purchased Sageworks Stress Testing to better understand and proactively manage its risk. Management, including Jim Bush, Vice President at First City Bank, now uses Sageworks Stress Testing to 1) stress individual loans at the time of underwriting and annually for loan review and 2) stress its CRE portfolio. Jim and his team stress vacancy rate, cap rate, and several other factors to examine what effects changes in the market will have on the bank’s portfolio and where the exposure points are. They use the results of the individual loan stress tests to re-evaluate their loan ratings as necessary and can use portfolio or concentration level stress tests to diversify their portfolio in segments of high exposure.

The Result:
Advanced Analysis with Big Data Teams

A bank of First City Bank's size (less than $100 million in assets) is rarely in such a positive situation for reporting on and understanding risk that lies in their CRE or commercial portfolio. With the Stress Testing software, the bank has been able to impress their examiners. “We are much further along in stress testing than our regulators were expecting. They were very impressed with the information and thoroughness of our reports and presentation as well as our in-depth knowledge of our portfolio and risk associated with it,” explains James Bush.

Abrigo’s global analysis ensures accuracy, and the narrative reports provide time-savings and consistency. Our examiners have commented that they like the uniformity our software solution provides to our credit analysis.
Kevin Atwood, Bank of Cadiz and Trust Company
See How Stress Testing Can Help Your Bank
Explore the Product Download Case Study