"alll" about disclosure reports: key issues to know
TRANSCRIPT
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Presented By:
Ed Bayer, Sageworks, Inc.
Ancin Cooley, Synergy Bank Consulting, Inc.
Moderated By:
Regan Camp, Sageworks, Inc.
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Financial information company that provides credit and risk management solutions to financial institutions
Data and applications used by thousands of financial institutions and accounting firms across North America
Awards ◦ Named to Inc. 500 list of fastest growing privately
held companies in the U.S.
◦ Named to Deloitte’s Technology Fast 500
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Ancin Cooley, CIA, CISA, is the Founder and Managing Principal of Synergy Bank Consulting, Inc., the risk management advisory firm dedicated to helping financial institutions optimize their security, compliance and business performance.
He brings deep, first-hand experience gained from working for the Office of the Comptroller of the Currency (OCC) as an examiner. During his tenure at the OCC, he performed safety and soundness examinations at community and mid-size banks that ranged from $100 million to $4 billion dollars in total assets located in Georgia, South Carolina, North Carolina, and Florida. After leaving the OCC, Ancin worked for a regional accounting firm where he led loan reviews and internal audits.
Ancin specializes in preparing financial institutions for regulatory exams, process improvement, and project management. When not advising clients, training for triathlons, or hanging out with his young son, Ancin designs and conducts targeted professional development trainings for the banking industry.
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Ed Bayer ◦ Ed Bayer is a senior risk management consultant at Sageworks,
where he serves as a specialist in assisting financial institutions with accurately interpreting and applying federal accounting guidance.
Ancin Cooley, CIA, CISA ◦ Ancin Cooley is a former OCC regulator and the Principal of
Synergy Bank Consulting. He specializes in preparing financial institutions for regulatory exams, ALLL consulting, loan review and credit training.
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Accounting Standards Update (ASU) 2010-20 ◦ Disclosures about the credit quality of financial
receivables and the allowance for credit losses
Required for submission to the 10-K and 10-Q
Currently not required for call report*
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Released July 2010
Required for public banks: December 15, 2010
Non-public: December 15, 2011
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“ASU 2010-20 now applies to all banks that have audited financial statements” – Tom Danielson, Partner at CliftonLarsonAllen
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“The global financial crisis highlighted the need for additional information about a company’s financial instruments, including loans and other financing receivables…this update provides greater transparency for investors and other users of financial statements by requiring more information from companies about credit risk exposures for financing receivables and the related credit reserves.”
– FASB Chairman Robert H. Herz
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The amended guidance requires disclosure of the following: ◦ Credit quality indicators
◦ Aging of past due receivables
◦ Nature and extent of troubled debt restructures and their affect on the allowance for credit losses.
◦ Listing of significant loan purchases and sales of loans
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Credit quality indicators by loan class ◦ Just one or a combination of risk grade, risk profile
or performing vs. nonperforming
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Aging of past due loans by loan class
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In-depth Troubled Debt Restructuring (TDR) report by loan class for occurrences during the reporting period
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Report of TDR defaults in the past 12 months by loan class and their impact upon the allowance for loan and lease losses (ALLL).
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Roll forward schedule for allowance for credit losses ◦ Broken out by disaggregated basis of loan class
◦ Each corresponding loan’s total recorded investment listed out
Non accrual status of loans by loan class
Impaired loans by loan class, with and without reserve required ◦ Must also disclose interest income recognized
◦ Disclosure average recorded investment
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Roll-forward schedule for the allowance for credit losses now disaggregated on the basis of the loan class.
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Time requirement /resources
Cost
Availability of information – logistics of consolidating data sources
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Solution Pros Cons
Accounting Firm
•Alleviates some burden •Subject matter experts on accounting regulations •Experience & credibility
•Cost •Gather & provide data to accounting firm •No integration of data •Lack of flexibility
Internal Software
•One-time fixed cost •Control & customization
•Capital & human capital •Required on-going knowledge •Risk •Maintenance
Third Party Software
•Efficiency/time •Credibility •Potentially cheapest option •Third party responsible for knowledge and updates •Consistency •Integration of data
•Potential learning curve •Data not saved internally
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Existing Sageworks Surety users ◦ Tuesday, April 2nd at 2:00 PM EST ◦ http://web.sageworks.com/alll-solution-webinar/
Non-users of Sageworks Surety ◦ Wednesday, April 3rd at 2:00 PM EST ◦ http://web.sageworks.com/alll-solution-surety-webinar/
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LinkedIn Group – ALLL Forum for Bankers
Future ALLL Webinars
◦ April’s Webinar Topic: FASB vs. IASB Proposals
Date: TBD
Articles & Whitepapers
Sageworks Risk Management Consultants
◦ (919) 851-7474
Ancin Cooley, Synergy Bank Consulting, Inc.
◦ (224) 475-7551