TOPIC: Financial Analysis

Complimentary CECL Prep: Implementation

While institutions have time before the CECL standard is effective, is important that institutions not wait to prepare. This CECL implementation prep guide covers basic tips for forming an implementation committee, crafting a project plan and introduces example illustrated timelines for implementation.

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    CECL: Accounting for Acquired Loans

    Looking for some last-minute CECL learning before the holiday?

    Adoption of the standard will have a significant operational and financial statement impact on institutions with acquired loan portfolios. A solid understanding of the accounting changes will result in an improvement to current treatment, transition planning, vendor/model selection and go-forward day 1 decisions.

    Watch this on-demand webinar to learn more:

      What do the Chinese Zodiac and Chromosomes have to do with CECL?

      Chinese Zodiac - One of my favorite memories growing up as a child was going to a Chinese restaurant and reading about my Chinese Zodiac animal sign. My sign is the Rabbit, the fourth of all Zodiac animals. Simply based on what year I was born, I am able to tell whom I will be able to get along with and whom I should avoid. The Zodiac is only one of China’s fortune prediction methods.
      What is easy to understand about the Zodiac is that it groups all peoples into twelve basic groups. The Zodiac has been around for many centuries and repeats itself every twelve years. Simply based on what year you and I were born, we should be able to know a lot about you before we even meet.

      Vintage/Static Pool Approach to CECL – CECL is an approach to calculating the Current Expected Credit Loss of a loan based on certain characteristics. One of the most common characteristics used for the analysis is the year that the loan was originated. Does that sound like the Zodiac? The basic premise is that the total loss experience over the life of the loan pool with the specific characteristic (in Vintage/Static Pool it is year of origination) will be the expected loss for each and every loan that is remaining in the pool.

      Chromosomes - A chromosome is a DNA molecule with part or all of the genetic material of an organism. In humans, each cell normally contains 23 pairs of chromosomes. Since we get 23 chromosomes from parent 1 and the 23 corresponding chromosomes from parent 2, the combinations and outcomes are limitless. However, when we do see certain groupings of these chromosomes in DNA, we can predict with deadly accuracy certain types of diseases and cancers.

      Regression Analysis Approach to CECL - Regression Analysis is a set of statistical processes for estimating the relationships among variables. The main purpose of regression analysis is to return a single value based a number factors. In CECL’s case, we are calculate a loan loss value for a loan based on a number of factors associated with the loan such as Collateral Value, FICO Score, Interest Rate, etc.

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        FAS 114 Impairment Analysis Worksheet

        Proper ASC 310-10-35 (FAS 114, as it’s often still called) impairment analysis is critical for a bank evaluating the collectibility of its loans and for determining the proper reserve calculation.

        Sageworks has created a complimentary, downloadable FAS 114 loan impairment worksheet that financial institutions can use for a simplified, collateral-based analysis. This worksheet is formatted to analyze one loan at a time with one piece of collateral.

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          Are you experiencing the build vs. buy CECL dilemma?

          If financial institutions are considering software to comply with the regulations, there are key capabilities potential solutions need, and this complimentary paper presents some of the questions institutions should use. Lean an overview of critical elements and capabilities, gain an understanding of the functionality necessary for a CECL-ready solution and receive recommendations / tactical due diligence.

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