Whitepapers

Migration analysis proves to be one of the more comprehensive methods used to determine historical loss when evaluating pools of loans. Although implementation can be difficult for institutions who do not have advanced data processes, more and more banks and credit unions are beginning to make the switch to this methodology. This whitepaper covers: why some institutions chose not to use migration analysis, considerations for why it might improve your ALLL calculation and steps for how an institution can begin implementation.

Regulators interpret a bank's reserve as a key barometer of financial health, and as a result, they have been placing more pressure on banks and credit unions to appropriately calculate adequate ALLL provisions. In an effort to comply with regulator and examiner demands while also protecting bank earnings, management at many financial institutions are revisiting the ALLL reserve to see if a change should be made in methodology. This whitepaper describes the criteria a bank should use to evaluate its ALLL as well as recommendations on how to support a change.

The ALLL is only successful given the accurate calculation of reserves for ASC 45-20 (FAS 5) pools and determining the right measure of loss. However, there are various ways that banks and credit unions can calculate this portion of the ALLL. This whitepaper discusses the various methodologies used, pros and cons of historical loss, migration analysis, PD/LGD and loss discovery method, and provides a brief overview of how to determine which method is right for your institution.

Evaluating ASC 310-10-35 (FAS 114) loans for impairment is one of the most critical steps in the ALLL calculation. It can also be one of the more complex components of the calculation. This whitepaper aims to shed light on the process by detailing how to classify loans as either ASC 450-20 (FAS 5) or ASC 310-10-35 (FAS 114), valuation methods for impaired loans and when it is acceptable to move a loan from ASC 310-10-35 status back to ASC 450-20 status.

This eBook covers each overarching component of the ALLL calculation, including ASC 450-20 (FAS 5) and ASC 310-10-35 (FAS 114), qualitative and environmental factors, disclosure reporting and the changes expected to come about from the FASB's CECL model.

Although a novel could be written to address all of the varieties of information that may be appropriately utilized in documenting and supporting ALLL conclusions, the intended scope of this paper includes the presentation and discussion of the primary and most common documentation to consider when aiming to satisfy examiner expectations.

The allowance for loan and lease losses (ALLL) is subject to intense review during federal examinations. As the ALLL is so important throughout the course of an exam, the data collected that drives this calculation is paramount.
This whitepaper discusses most important data collection elements in the ALLL, methods to gather supporting documentation for Q factors in the ASC 450-20 (FAS 5) calculation and how institutions can obtain and extract accurate loan portfolio information.

An important component of a bank’s allowance calculation is identifying ASC 310-10-35 (FAS 114) loans for impairment. This whitepaper discusses when to use collateral for ASC 310-10-35 analysis, how to gather the necessary collateral data to perform the analysis, and why the Fair Market Value of Collateral is important for a bank or credit union's ALLL calculation.

The estimation of the allowance for loan and lease losses (ALLL) has been a part of the bank and credit union accounting process for years, but it has taken on increased importance over the last several years. This whitepaper describes several challenges that bankers and credit union professionals face, primarily in the ASC 450-20 (FAS 5) and ASC 310-10-35 (FAS 114) methodologies.

In calculating year-end reserves, banks and credit unions can act upon three key steps to improve their ALLL process going into the following year. This whitepaper outlines the importance of prudent data collection for the ALLL, disclosure reporting and how to bring consistency into your methodology.

The FASB issued ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses in July of 2010. This update required a swift change surrounding disclosure requirements involving the credit quality of financing receivables and the allowance for credit losses. More than four years later, however, bankers’ interpretation of this update has been largely inconsistent and ineffective. This whitepaper discusses the reasoning behind the FASB update, the key items that the guidance mandates be disclosed and the challenges presented in generating these reports.

This whitepaper covers the ASC 450-20 (FAS 5) portion of the ALLL calculation. It starts by defining what ASC 450-20 (FAS 5) is, then delves into the differences between ASC 450-20 and ASC 310-10-35 (FAS 114), specific challenges related to creating ASC 450-20 pools, historic loss rates, qualitative and environmental factors, and understanding different historical loss rate methodologies.