Current Expected Credit Losses (CECL): How to Calculate and Maintain a Proper Allowance

Duration: 90 Minutes
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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 uncollectible. 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.
Current Expected Credit Losses
Instructor: Jeffery W. Johnson
Product ID: 501526
Objectives of the Presentation
  • 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
  • How to utilize software to calculate the ALLL
Why Should you Attend
The Allowance is watched not only by the major agencies responsible for supervision of the banking system, but also by the American Institute of Certified Public Accountants, the Internal Revenue Service and the Securities & Exchange Commission. All have similar but yet, conflicting perspectives on how much of an allocation should be contained in the ALLL. This program is designed to review the elements and thought process in establishing and maintaining an adequate ALLL level under the new guidance.

Areas Covered
The specific topics to be covered in this webinar include:
  • How to utilize software to calculate the ALLL
  • Establishment and purpose of the ALLL
  • Loan Grading and the impact on the ALLL
  • General framework required to establish the ALLL
    • Review of regulators expectations for the ALLL as set forth in:
    • FASB ASC 450-20 contingencies - loss contingencies (formerly FASB 5 - accounting 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)
    • Interagency policy on the ALLL issued in 2006 which revises the Policy issued in December 1993
    • FFIEC Policy Statement on the ALLL Methodologies & Documentation
    • Use of technology to aid in the calculation of Historical Loss Rates
  • Reinforce concepts with allowance calculation cases
Who can Benefit
  • Commercial Loan Officers
  • Consumer Loan Officers
  • Credit Analysts
  • Loan Review Personnel
  • Compliance Officers
  • Internal Auditors
  • Branch Managers
  • Credit Administration
  • Loan Operations Staff
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Instructor Profile:
Jeffery W. Johnson started his career with SunTrust Bank in Atlanta as a Management Trainee and progressed to Vice President and Senior Lender for SouthTrust Bank (a large Southeastern Regional Bank) and Senior Vice President and Commercial Banking Division Manager for Citizens Trust Bank of Atlanta (Community Bank).

Most of his career has been spent in Credit Administration, Lending (Commercial, Consumer and Real Estate), Business Development, Loan Review, Management and Training & Development. He has managed loan portfolios representing a cross section of loan types including: Large Corporate, High Net Worth Individuals, Middle Market Companies, Small Businesses, Real Estate and Non-Profit Organizations and managed several loan officers with portfolio management responsibilities.

Mr. Johnson is now a training professional in the banking industry by leading various seminars covering important topics relating to issues in banking. He teaches actively for fifteen state banking associations in the United States, Risk Management Association (RMA) and individual banks nationwide. He co-authored a training course entitled "Lending to Service and Other Professional Organizations" for RMA in 2001.

Mr. Johnson earned a B.A. Degree in Accounting from Morehouse College in Atlanta, GA; a MBA in Finance from John Carroll University in University Heights, Ohio; Banking Diploma from Prochnow School of Banking at the University of Wisconsin-Madison and a Graduate Certificate in Bank Management from the Wharton School of Business at the University of Pennsylvania.
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