Webinar: Challenges in the Estimation of ALLL

02/12/2013 - 02/12/2013

Telephone Seminar

Time: 11:00 am Eastern | 10:00 am Central | 9:00 am Mountain | 8:00 am Pacific

Length: 60 Minutes

Can your bank's Allowable Loan and Lease Losses (ALLL) hold up to the examination of outside auditors and regulators? In today's banking environment you need to have a careful understanding of the challenges associated with ALLL estimation. This session will also examine new techniques and solutions for ALLL management.

This webinar will cover:

  • Introduction: Why is ALLL estimation important?
    • Regulatory perspective
    • Internal auditor and BOD perspective
    • The direct impact of ALLL estimation on a community bank's earnings and capital
    • The inherent difficulties involved with ALLL calculation/estimation.
  • Identifying the key challenges of ALLL estimation
    • The manual, time-intensive nature of the process
    • Keeping up with changing regulatory guidance, FASB accounting standards, and internal guidelines
    • Additional FASB disclosure/reporting requirements
    • Increased scrutiny on FAS 5 assumptions
    • Increased scrutiny regarding FAS 114 reserves
  • Steps to evaluating a FAS 5 methodology
    • Avoiding broadly segmented risk pools
    • Determining a historical loss factor within each risk pool
      • The historical loss rate approach
      • The migration analysis approach
    • Making qualitative adjustments
      • The Interagency Guidelines on the ALLL approach
      • The correlation analysis approach
  • Challenges and improvements in FAS 114 Calculation
    • Determining which loans need to be evaluated under FAS 114
    • Distinguishing between loans evaluated under FAS 114 and Pooled Loans
    • Ensuring loans aren't being double counted for reserves under both FAS 5 and FAS 114
    • When to evaluate using the "fair market value of collateral" vs. "present value of future cash flows."
    • Using the appropriate and updated values for impairment analysis under either method.
      • Using the "fair market value of collateral" method
      • Using the "present value of future cash flows" method
    • Reassigning loans to their respective pools
  • Other Potential Topics
    • Making proper qualitative factor adjustments
    • Implementing migration analysis and overcoming challenges

Speaker Bio: Mike Lubansky is a director of consulting services at Sageworks, where he oversees product development, market research, and implementation in the financial institutions market. He serves as the in-house ALLL expert for Sageworks, and has led the implementation of an automated ALLL solution more than 70 financial institutions ranging in size from $37 million to $15 billion in assets. Mike has spoken for several different audiences, including several regulatory agencies, on matters pertaining to the community banking industry.


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* All options include handouts.

1 CPE Credit

Program Level: Basic-Intermediate

For more information, call 800-422-7285.