Data-driven solution calculates and analyzes loan portfolio fair values

CHICAGO (March 13, 2018) – To be compliant with a new accounting standard, many banks must change the way they calculate fair value for financial statement disclosures. To assist with these calculations, Crowe Horwath LLP has introduced the Crowe Credit360 for Valuation solution. Crowe is one of the largest public accounting, consulting and technology firms in the U.S.

As background, public business entities (PBEs), including banks that file or furnish financial statements with the U.S. Securities and Exchange Commission (SEC), are now subject to Accounting Standards Update (ASU) 2016-01, which changes the fair value disclosure requirement for loans carried at amortized cost. The Crowe Credit360 for Valuation solution is a loan-level modeling solution that calculates and analyzes loan portfolio fair values and expected cash flow scenarios. Crowe uses a valuation methodology that is customizable with macro risk factors, credit risk metrics, discount rate build-up methodologies and other loan-level assumptions.

According to Chad Kellar, Crowe advisory services partner, under the new standard, PBEs must use a complex exit pricing methodology for disclosing the fair value of their financial instruments. The change is effective for fiscal years beginning after Dec. 15, 2017, including interim periods in those years. For calendar year-ends, the change is effective for March 31, 2018, interim financial statements. Calendar year-end PBEs that are not SEC registrants will need to comply for their Dec. 31, 2018 annual financial statements, unless they regularly issue GAAP-compliant quarterly financial statements. For more details on effective dates, please visit: www.crowehorwath.com/insights/new-fair-value-disclosure-reqs-2018.aspx.

“Many institutions used their in-house or third-party asset liability management system to generate the entrance price fair value under the old standards,” Kellar said. “Typically, these systems will not be adequate for performing the granular analysis and specialized fair value exit pricing required under the new standard. At Crowe, we understand the rush involved with meeting financial reporting deadlines, so we created the Crowe Credit360 for Valuation solution to make the process run more efficiently. Our system offers real-time scenario modeling with updates to customized assumption sets for each reporting period.”

The Crowe Credit360 for Valuation solution:

• Allows institutions to combine a technology platform with an assigned Crowe financial instrument valuation specialist who can assist with standardizing and converting loan data into the proprietary interface, constructing base assumption sets and customization for unique fact-patterns inherent in the portfolio, and analyzing the results of the scenario output, including sensitivity analyses and primary-driver analytics.
• Provides customized portfolio valuations on a loan-by-loan basis with comprehensive portfolio analytics, aggregation and reporting.
• Improves portfolio reliability with more robust assumption sets and scenario modeling capabilities.
• Provides the level of support and details necessary for external auditors, regulators and markets.

According to Rick Childs, Crowe advisory services partner, the Crowe Credit360 for Valuation solution also delivers valuable insights for merger and acquisition transactions related to portfolio valuation and deal pricing during the tight timelines established for due diligence. “Acquirers typically only have a few weeks to analyze and value the portfolio of their target. This tool can identify misalignments between portfolio valuation and deal pricing, leading to smarter acquisition decisions,” he said.

The Crowe Credit360 for Valuation solution joins the existing suite of Crowe credit analysis solutions, including the Crowe Credit360 for Stress Testing solution, the Crowe Portfolio Analyzer solution, the Crowe Financial Data Automation solution and the Crowe Collateral Analysis for Automotive Lenders solution. For more information, please visit: www.crowehorwath.com/credit360val-nr.

About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting, and technology firms in the United States. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in nearly 130 countries around the world.

# # #