United States

Webinar: Practical methods smaller community banks can use for CECL

FINANCIAL REPORTING INSIGHTS  | 

On February 27, 2018, speakers from the FDIC, FRB, FASB, SEC and CSBS (Conference of State Bank Supervisors) hosted a webinar providing a sample of spreadsheet-based, CECL-compliant loss rate methods that may serve as a starting point for smaller, less complex financial institutions in their implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL).  

The webinar covered these sample models on a conceptual level and provided specific examples of each method using a commercial real estate portfolio fact pattern and a general discussion of considerations of key data points, processes and controls. Sample spreadsheet-based loss rate methods presented included the following:

  • Snapshot/Open Pool Method
  • Remaining Life Method (two calculation options)
  • Vintage Method

The webinar did not address data management, qualitative adjustments or segmentation, which may be covered in a later session. Further, the sample loss rate methods presented were not intended to represent a complete list nor loss rate methods preferred by any regulatory body. Non-loss rate methods for computing the unadjusted historical loss experience, such as loss given default/probable default, roll-rate, migration or discounted cash flow analyses, were not in the scope of this presentation.

The webinar slide deck is available for your convenience. Additionally, a recording of the webinar, including the question-and-answer portion not covered in the slide deck, is available.

ASU 2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.