Message from Mike Percy, Managing Partner, Financial Services
Dear FIEB readers,
There seems to be a consensus that we can expect an economic recovery in 2021 – the question is in which quarter. Deploying the most recent stimulus, including reopening the Paycheck Protection Program, and distributing vaccines are encouraging signs for an economic recovery.
With the vast majority of earnings releases in, a picture of how the industry fared in 2020 is taking shape. As a group, CECL adopters saw a significant decline in provision expense as a percentage of average loans. Those still using the incurred-loss model also saw a significant decline in the fourth quarter, whereas the first three quarters were very consistent. Both groups, on average, experienced small declines in nonperforming loans as a percentage of loans while nonaccrual loans as a percentage of loans remained comparable with the third quarter.
Of course, we will have a better picture of the health of the financial institution industry as 2021 unfolds. Meanwhile, I hope this message finds you, your friends, your family, and your colleagues safe.