Assessing Tariff Impacts

As part of its ongoing portfolio management efforts, Alliance Partners (“AP”) seeks to identify and understand risks to the portfolio of loans it manages on behalf of both BancAlliance (“BA”) members and its own balance sheet. As you are likely aware, the current presidential administration is prioritizing the evaluation, negotiation, and implementation of new tariffs to be placed on goods and products sold in the United States that are sourced internationally. The situation remains highly fluid, with media reporting ongoing negotiations and agreements in varying stages of progress with multiple countries. 

To evaluate the potential impact of tariff changes on borrowers within the BA portfolio, AP has contacted the agent banks and/or borrowers to gather initial expectations of tariff impacts on the borrowers’ businesses. The level of information provided to date has varied and some borrowers have noted they continue to wait on tariff negotiations to finalize to better understand the potential impact and to appropriately address those impacts. Based on initial responses received and information provided by the relevant portfolio managers, the following sectors are preliminarily expected to have the highest impacts: Manufacturing (16% of portfolio by loan count as of 3/31/25), Consumer Goods (7%), Distributors (2%), and Commercial Services (13%). 

The potential impact of tariffs on BancAlliance borrowers will be addressed on an individual borrower basis. Alliance Partners intends to include a new tariff section starting with its next quarterly update memos that will summarize the latest information received from borrowers. We expect the level of detail and information provided to vary by borrower. AP will continue to gather borrower information and expectations and will update tariff write-ups in future update memos, to the extent additional relevant information is provided.