CECL Methodology Series Disclosures

Transcription

1 CECL Methodology Series Disclosures April 18, 2017

2 About the Webinar We will address as many questions as we can throughout the presentation or through direct communication via follow-up Ask questions throughout the session using the GoToWebinar control panel

3 Disclaimer This presentation may include statements that constitute forward-looking statements relative to publicly available industry data. Forward-looking statements often contain words such as believe, expect, plans, project, target, anticipate, will, should, see, guidance, confident and similar terms. There can be no assurance that any of the future events discussed will occur as anticipated, if at all, or that actual results on the industry will be as expected. Sageworks is not responsible for the accuracy or validity of this publicly available industry data, or the outcome of the use of this data relative to business or investment decisions made by the recipients of this data. Sageworks disclaims all representations and warranties, express or implied. Risks and uncertainties include risks related to the effect of economic conditions and financial market conditions; fluctuation in commodity prices, interest rates and foreign currency exchange rates. No Sageworks employee is authorized to make recommendations or give advice as to any course of action that should be made as an outcome of this data. The forward-looking statements and data speak only as of the date of this presentation and we undertake no obligation to update or revise this information as of a later date.

4 About Today s Presenter Dan Morrill Member of the Firm with Wolf and Co. Professional Practice Group Neekis Hammond Principal Consultant with Sageworks Advisory Service Group

5 Agenda Series Overview Overarching disclosure principles Disclosures Credit quality information Allowance for credit losses Past-due status Nonaccrual status Purchased financial assets with credit deterioration Off-balance sheet credit exposures Q&A

6 Series Overview Tuesday, April 18, 2017, 2-3 p.m. - Disclosures

7 Poll Question

8 Agenda Series Overview Overarching disclosure principles Disclosures Credit quality information Allowance for credit losses Past-due status Nonaccrual status Purchased financial assets with credit deterioration Collateral-dependent financial assets Off-balance sheet credit exposures Q&A

9 CECL Disclosure Principles The new CECL disclosures should allow a user of the financial statements to understand the following: Credit risk inherent in portfolio and how management monitors it Management s estimate of expected credit losses Changes to the estimate of expected credit losses that have taken place during the period

10 Agenda Series Overview Disclosure Changes Breakdown Disclosures Credit quality information Allowance for credit losses Past-due status Nonaccrual status Purchased financial assets with credit deterioration Collateral-dependent financial assets Off-balance sheet credit exposures Q&A

11 Credit Quality Information Description of credit quality indicators Amortized cost basis, by credit quality indicator For each credit quality indicator, date or range of dates information was last updated No Change Public business entities - amortized cost basis within each credit quality indicator by vintage, 5 years and thereafter. For purchased loans, use initial date of issuance, not date of acquisition.

12 Allowance for Credit Losses Description of how expected loss elements are developed Description of accounting policies and methodologies to estimate ALLL Past events Current conditions Reasonable and supportable forecasts Risk characteristics relevant to each portfolio segment Changes in factors that influenced current estimate Changes to policies, method and quantitative effect Discussion of reversion method applied for periods beyond reasonable and supportable forecast period

13 Allowance for Credit Losses Rollforward of the allowance for credit losses by portfolio segment Beginning balance Provision Initial allowance recognized on purchased loans with credit deterioration Write-offs Recoveries Ending balance Allowance is required to be shown on the balance sheet

14 Past-due Disclosures Aging analysis of amortized cost basis of past-due loans as of the reporting date, disaggregated by class

15 Non-accrual Disclosures Policy disclosures Nonaccrual policy, including discontinuing accrual of interest, recording payments and resuming accrual Past-due status or delinquency status Recognizing write-offs Quantitative disclosures for non-accrual loans by class Amortized cost basis as of beginning and end of period Interest income recognized during period Amortized cost basis for non-accrual loans with no related allowance

16 Purchased Financial Assets with Credit Deterioration For loans purchased during the period, provide a reconciliation of the difference between the purchase price and the par value, including the following: Purchase price Allowance at acquisition date Discount/premium attributable to other factors Par value

17 Off-Balance Sheet Credit Exposures Description of accounting policies and methodology used to estimate its liability for off-balance sheet credit exposure. Historical losses Existing economic conditions Reasonable and supportable forecasts

18 Question & Answer Resources ALLL.com join to network, discuss and learn about the ALLL SageworksAnalyst.com access whitepapers and the webinar archive Risk Management Summit 2017 September in Denver, CO Q&A Contact Us: Dan Morrill Wolf and Co. Neekis Hammond Principal - Advisory Services Neekis.Hammond@Sageworks.com David Kistler Marketing Manager David.Kistler@Sageworks.com

19 Poll Question

20 2017 Risk Management Summit The premier conference for lending and risk Denver, Colorado September Learn:» Sessions dedicated to lending, credit risk and portfolio risk» Led by industry experts to address your challenges around growth and risk Network:» More than 200 bankers from 130 institutions attend Apply:» 98% of attendees recommend the RMS to community bankers» Offers actionable insights to help banks grow profitably and mitigate risk