Calculating and Maintaining the Allowance for Loan and Lease Losses

Webinar: ID# 1015148
Recorded On-Demand
About This Course:
Present and Proposed Changes to the "ALLL"

The Allowance for Loan and Lease Losses ("ALLL") represents one of the most significant estimates in an institution's financial statements and regulatory reports. It is a valuation reserve established and maintained by charges against the bank's operating income and is an estimate of loans that may be uncollectable. Regulators are just as interested in your bank's methodology in calculating the ALLL in addition to the adequacy of the reserve.

Because of its significance, each institution has a responsibility for developing, maintaining and documenting a comprehensive, systematic and consistently applied process for determining the amount of the ALLL and the Provision for Loans & Lease Losses. To fulfill this responsibility, each institution should ensure controls are in place to consistently determine the ALLL in accordance with:
  • Generally Accepted Accounting Principles
  • Institution's stated policies and procedures
  • Management's best judgment
  • Relevant supervisory guidance

This program will also review the proposed restructuring of the ALLL as we know it today. That change is referred to as "CECL" (Current Economic Credit Losses) and will have a dramatic change in the methodology on how reserves for potential loan losses are calculated in order to in compliance with Generally Accepted Accounting Principles.What You'll Learn:
  • Establishment and Purpose of the ALLL
  • Review of Regulators expectations for the ALLL as set forth in:
    • FASB ASC 450-20 Contingencies - Loss Contingencies (formerly FASB 5 - ccounting for Contingencies)
    • FASB ASC 310-10-35-2 through 30, Receivables-Overall-Subsequent Measurement-Impairment (formerly FASB 113 - Accounting by Creditors for Impairment of a Loan)
    • Various Interagency Policies on the ALLL Methodology and Adequacy 
  • Proposed changes to the present method of calculating the ALLL
  • Methodology to Quantify the Qualitative Factors under FASB ASC 450-20 (Formerly FAS 5)
  • Available software to aid in the calculation of the ALLL

After completing this course, the participant will have an enhanced understanding of the importance of creating and maintaining an adequate Allowance that is legally defensible and insures the bank is operating in a safe and sound environment.

Calculating and Maintaining the Allowance for Loan and Lease Losses
or via On-Demand
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