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Hybarger & Associates

Serving Small to Mid-Size Community Banks for over Thirty Years

  • Who We Are
    • Firm's Founder and History
    • Officers
  • Who We Serve
    • Who Are Our Clients
  • What We Do
    • Asset / Liability Management >
      • Budgeting
      • Performance Analysis
      • Forecasting
      • Quality Control
      • ALM Board Reporting >
        • The Directors' Financial Digest
        • The Executive Management Series
        • The Account Level Forecasting Series
      • Alternative Planning Scenarios
    • Interest Rate Risk >
      • Reporting for Interest Rate Risk
      • Assumptions & Back-Testing
    • Portfolio Management & Accounting >
      • The InvestWise Reporting Series >
        • Portfolio Management Series
        • Financial Management Series
        • Econometric Series
      • "Total Return" Investment Strategy
    • Liquidity Risk Management
    • Capital Adequacy & Analysis
    • Dynamic Strategic Planning
    • Comprehensive Funds Management Policy
    • CECL Overview >
      • Historical Analysis
      • "Currently" Identifiable Risks
      • "Specific" Potential Risks
      • Potential "Future" Risks
      • Traditional Reserves vs CECL
    • General Consultation >
      • Holding Company Systems
      • Balance Sheet Pricing Strategies
      • Regulatory Reporting
  • What Our Clients Say
  • How We Interface
    • What happens when we become a Client?
    • How are Fees Determined?

CECL:
Current Expected
Credit Losses

("Cliff Notes")

Comprehensive
"Historical Analysis"
of Risk Experience


Primary Objective of CECL:

To have a sufficiently precise level of reserves so as not to need replacement provisions at time of loss.
Picture
  • CECL Overview
  • Assessment of "Currently" Identifiable Risks
  • Assessment of "Specific" Potential Risks
  • Assessment of Reasonably Identifiable and Potentially Probable "Future" Risks
  • Traditional Reserves vs CECL Reserves

"Experience Based" Reporting

Virtually the entirety of the CECL Methodology is “Experienced Based”
That is to say, based upon each bank’s actual Loss Experience

The only way to do that is to thoroughly & effectively
Measure & Assess all of the Bank’s Historical Losses

***This is strictly Dictated by the CECL Guidance***

Therefore, the challenge is to turn Raw Historical Data into meaningful
Analytical Tools and Processes

Picture
Loss Analysis & Assessment
  • Clearly Identified Risk Pools
  • Risk Elements Segregated by
         Discernible Risk Characteristics
  • "Statistical Significance" becomes a
         Critical Issue in Constructing Risk Pools

"Day One" Reserve assessment of Each Risk Element

Critically Important
     (Perhaps the most provocative CECL concept, but generally misunderstood.)

This provision does not require a precise "prediction" of future loss, rather...
It requires a "statistical assessment" of loss potential, given observed loss experience with similar Risk Assets.

Specific Objectives of Analysis

Discern:
  • Probability of Loss
  • Economic Impact of Loss
  • Time-Frame of Remaining Exposure

Picture
Picture

Continue Reading:

  • CECL Overview
  • Assessment of "Currently" Identifiable Risks
  • Assessment of "Specific" Potential Risks
  • Assessment of Reasonably Identifiable and Potentially Probable "Future" Risks
  • Traditional Reserves vs CECL Reserves

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  • Who We Are
    • Firm's Founder and History
    • Officers
  • Who We Serve
    • Who Are Our Clients
  • What We Do
    • Asset / Liability Management >
      • Budgeting
      • Performance Analysis
      • Forecasting
      • Quality Control
      • ALM Board Reporting >
        • The Directors' Financial Digest
        • The Executive Management Series
        • The Account Level Forecasting Series
      • Alternative Planning Scenarios
    • Interest Rate Risk >
      • Reporting for Interest Rate Risk
      • Assumptions & Back-Testing
    • Portfolio Management & Accounting >
      • The InvestWise Reporting Series >
        • Portfolio Management Series
        • Financial Management Series
        • Econometric Series
      • "Total Return" Investment Strategy
    • Liquidity Risk Management
    • Capital Adequacy & Analysis
    • Dynamic Strategic Planning
    • Comprehensive Funds Management Policy
    • CECL Overview >
      • Historical Analysis
      • "Currently" Identifiable Risks
      • "Specific" Potential Risks
      • Potential "Future" Risks
      • Traditional Reserves vs CECL
    • General Consultation >
      • Holding Company Systems
      • Balance Sheet Pricing Strategies
      • Regulatory Reporting
  • What Our Clients Say
  • How We Interface
    • What happens when we become a Client?
    • How are Fees Determined?