ASC 450-20 (FAS 5)
The ASC 450-20 (FAS 5) portion of the ALLL calculation includes loans that have not been individually identified as being impaired (i.e. loans performing in accordance with contractual terms).
In accordance with guidance, when measuring estimated credit losses, these loans are grouped into homogenous pools and evaluated collectively considering both quantitative measures, such as historical loss, and qualitative measures, which come in the form of environmental adjustments.
Related Asset - Blog
How much should you segment your ASC 450-20 (FAS 5) pools?
Excerpt Pulled From Blog:
"The benefits of segmentation within the allowance for loan and lease loss calculation are many. Institutions can gain more insight into sub-segmented performance, conduct more sophisticated loss methodologies such as migration analysis and can make better-informed lending decisions over time. However, institutions must not risk over-segmenting to the point of losing statistical relevance. Thus, institutions must be cognizant of how much segmentation they should apply to their portfolios and arrive at a point that both they and their examiners are comfortable with."
Related Asset - Whitepaper:
How to Calculate Your ASC 450-20 (FAS 5) Reserves
How to Calculate Your ASC 450-20 (FAS 5) Reserves - Download the PDF