A bank has an allowance for loan loss of $4.5m at the beginning of the year and $4.2m at the end of the year, non performing loans of $6.2m at the beginning of the year and $5.8m at the end of the year, and has net charge offs of $2.7m in bad loans. what was the bank's provision for loan loss for the year?

Question

Ariella Silva

Business

24 June, 10:10

A bank has an allowance for loan loss of $4.5m at the beginning of the year and $4.2m at the end of the year, non performing loans of $6.2m at the beginning of the year and $5.8m at the end of the year, and has net charge offs of $2.7m in bad loans. what was the bank's provision for loan loss for the year?

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Mikayla Bell · Answer 1

0.259

Explanation:

difference in loan loss allowance in the year = 4.5-4.2 = 0.3m

difference in non performing loans in the year = 6.2-5.8 = 0.4m

Provision for loan loss = (difference in loan loss allowance + difference in non performing loans) / net charge offs

provision for loan loss = (0.3+0.4) / 2.7=0.259