Current Expected Credit Loss (CECL)... 1 Navigating within the Application... 1 Dashboard/CECL Summary Page... 1 Notifications... 2 Help Menu... 3 CECL DataStore & Validation... 4 Monthly Update Process... 4 CECL Exceptions... 6 CECL Summary Page... 8 CECL Categories... 9 CECL Details... 9 CECL Validation Report...10 Reporting in CECL DataStore & Validation...12 CECL Analysis & Reporting...13 Reviewing/Analyzing CECL Results...13 CECL Forecast Report...15 CECL Data Fields...17 i 1999-2017 Jack Henry & Associates, Inc.
Current Expected Credit Loss (CECL) The Financial Accounting Standards Board (FASB) issued the CECL regulations in June of 2016 to improve financial reporting by requiring financial institutions to record potential credit losses before they happen. The CECL regulations change the current GAAP standards of reporting loan loss reserves on the balance sheet in which credit losses are not reported until the expected loss is determined probable. CECL requires banks and credit unions to determine potential losses for the entire loan portfolio, not just those loans that meet the probability of loss threshold. Financial institutions will need to determine losses based on a combination of historical data, current economic conditions, along with reasonable and supportable forecasts. To accurately determine potential losses under CECL, banks and credit unions will need to gather and store substantially more data than they do now to determine loan loss reserves. has partnered with Deep Future Analytics (DFA) to offer solutions to gather and store the necessary data along with CECL analysis and reporting. This guide focuses on the import and validation of the data used for the FPS CECL model along with the options to view and analyze the results of the CECL calculation. Navigating within the Application Upon opening the application, the user will be taken to a Dashboard screen. At the top right, the user name and institution name appear along with a Notifications and Help Menu icon. The ribbon just below shows each domain that an institution is licensed for as well as a Reporting and Setup menu. To return to the dashboard screen at any time, simply click the Financial Performance Suite logo. Dashboard/CECL Summary Page The CECL Summary page initially displays key information regarding the data import and validation process. Results of the CECL model can be accessed by clicking the Analysis link. 1 1999-2017 Jack Henry & Associates, Inc.
Notifications When a significant event occurs, a message will appear on the Notifications page. This can be accessed by clicking the envelope icon which is always visible at the top of the screen. If there are new notifications, the icon displays the number of unread entries. The most recent notifications are shown at the top of the list. Use the delete button right to delete notifications. on the Common events that generate notifications include: Data files have been received Exceptions have been encountered during the monthly update process The monthly update has been completed successfully Reports have been generated 2 1999-2017 Jack Henry & Associates, Inc.
Help Menu Access the online help menu by clicking the question mark icon at the top of the screen. The left-hand side displays a table of contents, index, or glossary. Click the desired topic for information to display on the right side of the screen. The search can also be used to find a specific topic. 3 1999-2017 Jack Henry & Associates, Inc.
CECL DataStore & Validation The FPS CECL DataStore & Validation involves the import and review of data via FPS along with the validation of the data provided by DFA. Monthly Update Process The diagram below shows the data flow through the monthly update process in FPS and the transmission to and from DFA. Once all the expected data extract files have been received, a notification is sent to all administrator users that the monthly update process can be performed. To perform the monthly update, click the Monthly Update Process link within the notification, or go to Setup > Monthly Update Process. Select the month that needs to be updated. If a month needs to be updated a second time, select the Overwrite option. 4 1999-2017 Jack Henry & Associates, Inc.
Click the button to begin the monthly update process. Note: Progress messages are displayed as the process moves though the update and postupdate stages. If the process encounters any exceptions, a notification will be sent. Within the Monthly Update Process page, the number of exceptions will be displayed along with the option to view the exceptions. 5 1999-2017 Jack Henry & Associates, Inc.
CECL Exceptions The CECL Exceptions Summary page displays the list of data exceptions found in the uploaded files. Each type of data exception is listed along with a value to the left indicating the number of individual data records with the exception. The value is also a link that displays the specific data records. The individual data records can be exported to PDF and/or CSV by clicking the export icon. Resolving the exceptions that were discovered may involve inputting or correcting data on the core system and/or making mapping changes within the FPS import process. Click the drop-down arrow provided for the resolution, and select from one of the following resolution methods. Changes to Mapping This option is available when the content of a particular field has not been defined in the setup. This is a permanent resolution. Temporary Correction This option rectifies the data exception for the current month processing only. Depending on the type of error, the user will input a value or select from a list of provided options. Accept with Default This method applies a zero in any field where zero is accepted. If zero cannot be used, then the field is left blank. Reject This option rejects the entire data record for the current month processing. 6 1999-2017 Jack Henry & Associates, Inc.
Once all the exceptions have been handled, the application returns to the Monthly Update Process page. To continue, click the Restart button. The progress continues to the Calculations stage. Once the update completes, a notification will be sent. 7 1999-2017 Jack Henry & Associates, Inc.
CECL Summary Page The Summary page displays information regarding the data imported for the current month and prior months. Options within the Summary page include the ability to view data exceptions, view the validation report, and confirm the accuracy of the data. Date Displays the month and year for the uploaded data files. Validation Status Displays where the CECL data is in the validation process. o o o o o Needs Approval Default status applied whenever a new set of data files is imported. A check box appears to the left of the row. When checked, Approve and Cancel buttons appear. Click Approve to transmit the data to the CECL database. This begins the validation process. Scheduled This status indicates that the data has been approved by the user and is waiting to be transmitted to DFA. Pending This status is displayed when the data has been transmitted. Pending indicates that the application is waiting for a response from DFA. Complete This status indicates that the data has been reviewed by DFA but that there are exceptions that need to be resolved. Click the link displaying the number of exceptions to display the CECL Exceptions Summary page. A validation report is also provided for data with this status. Passed This status indicates that either the data file passed the DFA validation with no exceptions or all known exceptions have been resolved by the user. Exceptions When the Complete status is assigned to a month, the number of exceptions found in the data is displayed as a link in this column. Click the link to view the CECL Exceptions Summary page. Validation Report Click this link to view a report with data ratings and recommendations provided by DFA. Active Loans This column displays the number of loans imported from the loan file which are not Closed or Charged Off. Click the number (link) to drill down to the CECL Categories page where more granular information is provided. Closed Loans This column displays the number of loans in the loan file that were closed for the reported month. Charged Off Loans This column displays the number of loans in the loan file that have been charged off. Amount of Loans The final column provides the total month-end balance from the loan file. (The amount is the sum of each loan's ending balance net of the participated loans). 8 1999-2017 Jack Henry & Associates, Inc.
CECL Categories The CECL Categories page can be accessed by clicking the value of Active Loans within the CECL Summary page. The CECL Categories page displays a summarized list of CECL categories that pertain to the financial institution s loan portfolio. The data to the right represents the number of active loans, closed loans, charged off loans, along with the current balance of active loans. Click the arrow preceding the category name to drill down to lower-level categories of loans. For each of the lower-level categories, Active Loans, Closed Loans, and Charged Off Loans numbers are displayed as links you can click to drill down to the CECL Details page, which provides instrument-level detail for each loan in the selected group. CECL Details The CECL Details page displays instrument level data for the selected loan type. 9 1999-2017 Jack Henry & Associates, Inc.
Click the column headers and/or the filter button to sort the data. The export option creates either a PDF or CSV file of the displayed data. A link to the exported file is available by clicking the Reporting link at the top of the page. CECL Validation Report The Validation Report can be accessed from the CECL Summary page once the Validation Status reads Complete or Passed. The report provides a summary of the quality and completeness of the data files transmitted to DFA. Each active loan product is broken out and scored based on three data-quality components. The score for each component can range from 0 to 5 with 5 being the best score. 10 1999-2017 Jack Henry & Associates, Inc.
The data-quality components are: Length This score refers to the amount of historical data that has been transmitted to DFA for the CECL calculation. The score considers the number of months of imported data that includes a loan pay-off and/or charge-off for each loan category. This rating will build up over time and requires at least 60 months of historical data to get a 5 rating (any amount below 60 is applied a proportional rating). Volume This score is based on the average number of charge-offs per month imported into the model from the historical data files. Ten is the minimum number of charge-offs per month necessary to get a 5-point rating for Volume. If the average number of charge-off s is below 10 then a proportional rating is applied. Completeness This score refers to missing amount of optional data fields within the files. The higher the score, the less data that is missing from the files. The Composite Score is calculated from the individual component scores and is visually represented by the adjacent star rating. The Length and Volume components are weighted heavier than the Completeness component when determining the overall Composite Score. The Validation Report provides recommendations on how to improve the quality ratings for the uploaded data. 11 1999-2017 Jack Henry & Associates, Inc.
Reporting in CECL DataStore & Validation Reports can be created to reconcile and audit imported data. Click the Reporting link at the top menu bar. Click the Create Reports link and select the CECL Data option within the Menu list. Use the provided table to select the desired time frames for the report. The report template can be saved by marking the Save as Favorite checkbox and entering the report title. By clicking the Floating option within Time Frame selection, the date range will automatically move forward each month as you import new data. Once all selections have been made, click Done. The report can be viewed by clicking the View Reports link; from there you can select all created reports to view within a spreadsheet. 12 1999-2017 Jack Henry & Associates, Inc.
CECL Analysis & Reporting The FPS CECL Analysis & Reporting solution provides the CECL results from DFA. Results of the CECL calculation are available for the total loan portfolio, at the loan product level, and at the instrument-level detail. Click the Analysis button within the CECL Summary page to access the results of the CECL calculations. The CECL Summary page allows you to review results from two different scenarios: The Base scenario and the Severe scenario. The two scenarios are based on economic forecasts provided by the Federal Reserve. The Base scenario represents the Federal Reserve s base economic forecast while the Severe scenario represents Federal Reserve s forecast if current economic conditions were to deteriorate. The economic impact the results of the CECL calculations and provide two different perspectives for risk-mitigation purposes. Reviewing/Analyzing CECL Results Results of the DFA primary CECL model can be viewed on screen by loan category and by instrument level detail. Click the link expressed as number of loans in the CECL Summary page. 13 1999-2017 Jack Henry & Associates, Inc.
CECL results are first provided by predefined CECL categories. The category list can be expanded by clicking the arrow to the left of the category title. Then, click the link expressed as number of loans to break down the CECL results by instrument level detail. The Filter option provides the ability to search for CECL results of individual loan records. 14 1999-2017 Jack Henry & Associates, Inc.
CECL Forecast Report Click the View Report link to view the DFA generated CECL Forecast Report. The report contains results for two CECL models provided by DFA: A primary model and an alternative model (also referred to as the Secondary model). The primary CECL model is a discrete time survival model that determines loan loss correlations based on unique instrumentlevel loan characteristics and multiple economic factors and then applies forecasts to such factors to estimate losses over the expected life of the individual loans. The alternate CECL model is a time series model that determines loss correlations over time at the loan category level. Table 1 of the report provides loan loss estimates from the primary CECL model. Outstanding Balance Current balance of each loan product at the time of the most recent data upload. CECL Loss Forecast Estimated loss over the expected lifetime of the loans for each product based on primary CECL calculation. CECL Loss Forecast Discounted Present value of the estimated CECL loss forecast. The discounted cash flow (DCF) option is allowed under the FASB CECL regulations. The losses are estimated to occur in future time frames and CECL regulations allow institutions to set reserves equal to the present value of such losses. Expected losses are discounted using the effective interest rates of the individual loan. 12-month Loss Forecast Estimated losses within the next 12 months. This value will be used for back testing purposes. The model will compare actual losses over the same 12-month span to the forecasted value. The primary CECL model will be recalibrated based on the results of the comparison. CECL Loss Rate Equals CECL loss forecast/the current outstanding balance. 15 1999-2017 Jack Henry & Associates, Inc.
CECL Loss Rate Discounted Equals present value of CECL loss forecast/current outstanding balance. 12-month Loss Rate Equals 12-month loss forecast/current outstanding balance. Table 2 provides loan loss estimates from the alternate CECL model. Secondary CECL Loss Forecast Estimated loss based on the alternate CECL calculation. Secondary CECL Loss Forecast Discounted Present value of the secondary CECL loss forecast. The discounted cash flow (DCF) option is allowed under the FASB CECL regulations. The losses are estimated to occur in future time frames. CECL regulations allow institutions to reserve equal to the present value of such losses. Expected losses are discounted using the effective interest rates of the individual loan. 16 1999-2017 Jack Henry & Associates, Inc.
CECL Data Fields Below is a list of required and recommended data fields for the DFA CECL models. Data Field Description Required/ Account Number Account identifier Required Bankruptcy Flag Code indicating a customer has filed for bankruptcy Call Report ID Value that defined mapping to regulatory call reports Charge Off The amount of a loan that has been Amount charged off Required Charge Off Status Identifies if loan record has been charged off Required Charge Off Type Code indicating if charge-off is full or partial Closed Date Date in which the account was closed Required Collateral Value The collateral value of a loan CRE Current LTV Current loan to value ratio for a CRE loan CRE Occupancy Occupancy % for the current month of a Fraction CRE loan CRE Property Code identifying if CRE loan is owner Type occupied or non-owner occupied Credit Limit The amount of credit extended to customer Required Credit Rating Code The current risk rating for a loan Current Balance Current balance at end-of-month Required Customer ID Unique value identifying customer; used to tie data from multiple files Required Date of Death Represents date of death of customer if applicable Days Delinquent # of days the loan is delinquent as of the end of the month Required Debt to Income Ratio Debt Protection Deferred Loan Costs (Premium) Deferred Loan Fees (Discount) The debt to income ratio of the customer Indicator of whether the customer has debt protection on a loan account (e.g., credit life insurance) Remaining balance of unamortized costs Remaining balance of unamortized fees Required Required DSCR Debt service coverage ratio for the customer Expiration Date Expiration date of a line of credit Required FICO Score Outside credit rating score Interest Income Amount of interest income for the month Interest Rate Contractual interest rate on the account Required 17 1999-2017 Jack Henry & Associates, Inc.
Loan to Value LTV calculated at time of origination Required Maturity Date Maturity date of the loan Required Net Operating Income The net operating income of the customer Next Scheduled Payment Amount The next scheduled P&I payment amount Required Next Scheduled Payment Date The next scheduled payment date Required Original Balance Amount of loan at time of origination Required Origination Date The date the account was opened Required Participation Amount The dollar amount of the loan sold or owned Required Participation % The percentage of the loan sold or owned Required Payments MTD payments made on the loan Performance Date Date indicating the month and year of the extract file Required Product ID Identifies type of loan product Required Purchases MTD advances on a line of credit Recovery Amount Amount recovered after charge-off Required TDR Code indicating a loan has been restructured Term Contractual term of the loan in # of months Required Total Deposits Total current balance of all deposit accounts Total Loan Balances ZIP Code for a customer The total amount of loans associated with the customer ID The ZIP code for the customer; used to associate data with geographical economic factors Required 18 1999-2017 Jack Henry & Associates, Inc.