The biggest initial impact of CECL on financial institutions
Most financial institutions understand CECL, and more specifically applying the CECL model to their loan portfolio, represents the most significant accounting change for financial institutions in recent memory. However, there is less comfort over how the standard will specifically affect each institution.
Credit unions vs. community banks: What are the different CECL challenges?
Community banks and credit unions face different challenges when preparing for the new current expected credit loss model (CECL). Often, credit unions are grouped together with community banks, although their experience will look different when building out their models. What loss rate methodologies are applicable to community banks but not credit unions? What challenges do credit unions face that are unique to their own loss history, portfolio structure and loan count?
CECL: Where Are We Now
Almost everyone has started, virtually no one has finished, and according to CECL experts, few, especially smaller institutions, are as far along as they should be. That’s the overview of CECL preparedness, as revealed in MST’s 2018 Lender Survey.
Again, this year, the MST survey tallied responses from a wide range of institutions. Participants represent institutions located in, or at least doing business in all 50 states, across mostly all asset sizes.
Validating ALLL models under CECL – What might change?
What does model validation mean for the allowance for loan and lease losses and what will it mean under CECL?
Preparing for CECL questions during upcoming bank exams
Bankers preparing for the Financial Accounting Standards Board’s (FASB) new current expected credit loss model, or CECL, have many questions about implementation, including what to expect in the way of CECL scrutiny during 2018 visits from banking examiners. They got a glimpse of an answer this week when federal banking agencies discussed the topic during a webinar for community bankers about the new credit loss accounting standard.
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Credit unions vs. community banks: What are the different CECL challenges?
Community banks and credit unions face different challenges when preparing for the new current expected credit loss model (CECL). Often, credit unions are grouped together with community banks, although their experience will look different when building out their models. What loss rate methodologies are applicable to community banks but not credit unions? What challenges do credit unions face that are unique to their own loss history, portfolio structure and loan count?
CECL: Where Are We Now
Almost everyone has started, virtually no one has finished, and according to CECL experts, few, especially smaller institutions, are as far along as they should be. That’s the overview of CECL preparedness, as revealed in MST’s 2018 Lender Survey.
Again, this year, the MST survey tallied responses from a wide range of institutions. Participants represent institutions located in, or at least doing business in all 50 states, across mostly all asset sizes.Preparing for CECL questions during upcoming bank exams
Bankers preparing for the Financial Accounting Standards Board’s (FASB) new current expected credit loss model, or CECL, have many questions about implementation, including what to expect in the way of CECL scrutiny during 2018 visits from banking examiners. They got a glimpse of an answer this week when federal banking agencies discussed the topic during a webinar for community bankers about the new credit loss accounting standard.
CECL: Hidden Complexities for Credit Unions
In this 45 minute webinar, Jared Mills of the Sageworks Advisory Group will discuss the hidden complexities when simple, expedient approaches for measurement under the CECL accounting standard are applied to credit union loan portfolios. Having worked at a credit union before as an Assistant Director of Accounting, he will discuss the impact, control and structural complexities that he knows are relevant to the industry.
The two main hidden complexities of CECL
CECL's details have been out for two years, but banks and credit unions may encounter complexities when theory collides with the reality of implementation.
Poll
What type of data do you anticipate leveraging for your CECL calculation?
Tip Of The Day
Do not “build up” reserves in anticipation of CECL; continue to reserve according to GAAP’s incurred loss model until your institution’s CECL implementation date. Many institutions are producing CECL expectations that are less than their current allocation level under Incurred Loss practices.
Alll Insiders
The biggest initial impact of CECL on financial institutions
Most financial institutions understand CECL, and more specifically applying the CECL model to their loan portfolio, represents the most significant accounting change for financial institutions in recent memory. However, there is less comfort over how the standard will specifically affect each institution.
Validating ALLL models under CECL – What might change?
What does model validation mean for the allowance for loan and lease losses and what will it mean under CECL?
CECL: A CEO’s role in improved management of credit losses
There is a reason regulatory agencies are directing their guidance on the new current expected credit loss (CECL) model to the attention of financial institution CEOs. After all, it is top management’s responsibility at the end of the day to ensure the allowance for loan and lease losses (ALLL) is adequate.
Resources
Webinar: CECL for Community Banks, The Practical Path
In this webinar, Sageworks Executive Risk Management Consultant Tim McPeak discussed how as the transition to CECL moves closer, many smaller financial institutions have started to grapple with how to apply the new standard to their ALLL process in a practical way. He followed up on some of the questions and methods presented during the February regulatory webinar and focused on the key elements of the standard financial institutions need to consider as they plan their path forward. Specific topics included portfolio segmentation, available loss rate methods, qualitative factors, and forecasts.
Whitepaper: CECL Action Plans for Community Banks
Community banks are heeding the advice of the FASB, which have directed banks to take advanced
steps to ensure effective implementation of this major change in estimating losses. implementation efforts. This whitepaper outlines five practical steps that banks can take to prepare for CECL:
1. Coordinate with other departments
2. Understand loan level data collection requirements
3. Identify new procedures and changes to current procedures
4. Make a decision on building vs. buying a solution
5. Communicate with auditors and regulators
CECL Vendor Due Diligence
Many banks and credit unions are considering how to best accomodate the transition to expected loss calculations for the allowance for loan and lease losses, and for some, the right path forward might include a third party solution or vendor. In this CECL due diligence guide, readers can identify what criteria should be used in building a vendor short list and used to compare offerings and support.
Whitepaper: A Practical CECL Action Plan for Credit Unions
This whitepaper cuts through the complexities of CECL compliance and provides today's credit unions with actionable and attainable steps to take towards expected loss modeling. It provides a realistic or Practical CECL approach. This paper is recommended for credit union management and directors who are involved in regulatory and accounting compliance.