Allowance for loan and lease losses

Financial institutions face intense scrutiny of its allowance for loan and lease losses (ALLL) policies and procedures, but might only have minimal direction on critical calculations and adjustments. The Crowe credit risk services group has extensive experience helping financial institutions of all sizes maintain compliance with ALLL interagency guidance and relevant Financial Accounting Standards Board standards, including Accounting Standards Codification (ASC) 450-20-30 and ASC 310-10-35.

Crowe offers an industry-driven ALLL solution that addresses five areas of critical concern:

• Documentation: comprehensive policies and procedures
• Methodology: portfolio segmentation based on homogenous risk characteristics
• Qualitative factors: quantified and rationalized
• Data and systems: accurate and transparent
• Reporting: sufficient, concise information for management and the board

Crowe credit risk professionals have a comprehensive understanding of ALLL calculation, including:

• Periodic validation of allowance models
• 2001 and 2006 policy statement requirements
• Requirement to be performed by an independent party
• CECL model
• Prohibition of external auditors from performing under independence requirements (for institutions with more than $500 million in assets)