Top Allowance for Loan and Lease Losses Resources of 2016

Dec 14, 2016

Taking stock of the past year before a new one begins is always an educational trip down memory lane. This year, we wanted to pull together the most viewed Sageworks ALLL resources, and while CECL and associated methodologies are front and center in our list, it is clear that the ALLL under current guidance still presents challenges and opportunities to learn and refine processes. Here a list of our top 5 downloads and our top 5 pages of the year with a little of the allowance present and future in the mix.

Top Whitepapers & Downloads

Our top downloadable resources of 2016 are all about the “how to” in ALLL calculations. Here are our top 5 by number of downloads this year.

Basics of Vintage Analysis

Vintage analysis is a method of evaluating the credit quality of a loan portfolio by analyzing net charge-offs in a homogenous loan pool where the loans share the same origination period. Experts suggest that under the CECL model, this type of loss rate calculation will become a new standard for banks and credit unions in calculating the ALLL. Download the paper for a discussion of how to perform the calculation, how qualitative and quantitative factors will impact loss rates, and the role vintage analysis is expected to play under CECL.

The Basics of PD/LGD

This whitepaper provides an overview of probability of default/loss given default (PD/LGD) analysis with a discussion of its rising popularity, benefits and challenges associated with the methodology, and, of course, how to calculate PD/LGD.

ASC 310-10-35 (FAS 114) Impairment Worksheet

Proper FAS 114 impairment analysis is critical for a bank evaluating the collectibility of its loans and for determining the proper reserve calculation. Use this downloadable ASC 310-10-35 (FAS 114) loan impairment worksheet for a simplified, collateral-based analysis.

How to Calculate Your FAS 114 (ASC 310-10-35) Reserves

The allowance for loan and lease losses (ALLL) calculation requires a documented approach to make certain banks and credit unions follow guidance every step of the way. Evaluating FAS 114 (ASC 310-10-35) loans for impairment is one of the most critical steps in the process. This paper discusses how to classify loans as either FAS 5 (ASC 450-20) or FAS 114, valuation methods for FAS 114 impaired loans, and when it’s appropriate to move a loan from FAS 114 back to FAS 5 status.

Migration Analysis: The Way Forward for an Effective ALLL

Despite the challenges implementation can present, migration analysis is one of the more comprehensive methods used to determine historical loss when evaluating pools of loans. This whitepaper discusses why some institutions chose not to use migration analysis and why migration analysis might improve a methodology and includes steps for how an institution can begin implementation.



Top Site Resources

It is no surprise here that resources dedicated to unpacking CECL saw lots of activity this year. Here are our top visited pages by unique pageviews.

ALLL Regulations / FASB’s CECL Model 

This page captures FASB updates and includes links to other helpful resources regarding the current expected credit loss model.

Quantitative Calculation / ASC 310-10-35 (FAS 114)

A handy reference for evaluating FAS 114 loans for impairment, this page discusses methods for valuating impairments with links to additional resources to aid in the process.

Banking Industry Challenges / ALLL Methodology 

This page offers an overview of common challenges associated with calculating the allowance for loan and lease losses (ALLL). From this high-level overview, browse regulations or watch related videos about planning for the allowance today and under CECL.

FASB’s CECL Prep Kit

The darling of our resources of the year, FASB’s CECL Prep Kit is a one-stop shop for the latest news and best practices regarding the new current expected credit loss model. This complimentary tool kit aggregates industry resources to help institutions better prepare for CECL and is continually updated with new resources and information about best practices. The most recent addition is a data “field guide” taking folks through all data points needed for ALLL calculations under CECL.

ALLL Regulations / CECL Model Changes: Life of Loan Concept

In comparison to current guidance, the shift in FASB’s  CECL model shift to accounting for expected losses over the entire life of the loan represents one of the largest changes. To perform more robust, forward-looking calculations, bankers will need access to loan-level data. This page introduces the life-of-loan concept at a high level and pulls together resources for a deeper dive.


For more on CECL to take you into 2017, see our upcoming CECL Methodology Webinar Series.