Guidance for Estimating the ALLL: Requirements and Procedures

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ALLL estimating is one of the most difficult and one of the most crucial techniques that there is to master. The risks involved are grave. A material overstatement or understatement of the ALLL balance at your institution could be a material distortion of an institution's financial statements. If this distortion is unintentional, the misstatement would be considered an error. However, if the distortion is intentional, the misstatement would be considered a fraud.

Many updates to GAAP rules include expanded disclosures required in financial statements related to credit quality. These expanded disclosures are designed to help shareholders and other interested parties to identify whether deteriorating credit quality conditions are adequately incorporated into the periodic loss accrual adjustments to the institution's ALLL balance.

Given the risks related to making adequate and supportable loss accruals at financial statement reporting dates, you need to ensure that all involved with the loss accrual process are well informed about GAAP and regulatory guidance related to compiling an ALLL estimate. If a regulatory examiner believes that management has not adequately developed a prudent, well documented ALLL estimate, the examiner can recommend an ALLL estimate that may result in the need for a significant loss accrual adjustment.

Guidance for Estimating the ALLL offers tried-and-true methods to protect against losses while meeting regulatory and accounting requirements, and each chapter covers a specific and important part of the important ALLL estimation procedures and methodologies that are needed to ensure compliance with GAAP and regulatory guidance.

You'll find that Guidance for Estimating the ALLL provides tools, techniques, and best practices for ALLL estimating. And given the threat that estimating errors poses to the survival of your bank, can you really afford not to have this resource in your library?

Subscribers will receive a downloadable file containing editable forms.

The eBook versions of this title feature links to Lexis Advance for further legal research options.

Chapters 9, 10, and 11 reprint material that appears in Credit Managers' Risk Mitigation, also by Gary Deutsch.

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Table of Contents

Compliance Overview

Chapter 1: Estimating the ALLL: Complying with GAAP and Regulatory Compliance
Impaired Loans

Chapter 2: Identifying Impaired Loans Through a Loan Review System

Chapter 2A: Identifying Impaired Loans Within Real Estate Concentrations
GAAP

Chapter 3: Regulatory Guidance on Implementing ALLL GAAP

Chapter 4: Implementing Updated GAAP Guidance for Troubled Debt Restructurings

Inherent Losses

Chapter 5: Identifying Losses Inherent in Groups of Smaller-Balance Homogeneous Loans

Qualitative Factors

Chapter 6: Methods for Evaluating Environmental and Qualitative Factors
Disclosures

Chapter 7: ALLL Financial Statement Disclosures: Identifying and Complying with Updated GAAP Requirements

Board Responsibilities

Chapter 8: Board Responsibilities Related to the ALLL Estimate
Resources

GAAP and Regulatory References