Publication | BRG
CECL Reserving and Credit Benchmarking Study | Q2 2020
Paul Noring, John DelPonti, and Joe Sergienko
COVID-19’s adverse impact on loan performance and current Coronavirus Aid, Relief, and Economic Security (CARES) Act financial reporting and disclosure relief arrived simultaneous to the implementation of the controversial Current Expected Credit Losses (CECL) accounting standard for loan-loss reserving. Analysis and comparisons would have been difficult under any of these circumstances. However, the interplay of all three factors has made analyzing bank loan performance and reserving levels even more difficult.
In an effort to provide financial statement preparers and users more insightful information to better benchmark activity across a representative cross-section of banks (given asset size, geographic location, and business mix), BRG’s Financial Institutions Advisory practice has commenced a quarterly CECL Reserving and Credit Benchmarking Study. The study compares allowance levels, charge-offs, nonperforming loans (based on CARES Act classification/reporting relief), COVID deferrals, and other key credit metrics across multiple predominately domestic US institutions.
This inaugural study selected twelve representative banks with total assets as of June 30, 2020, ranging from $31 billion to $459 billion (and includes a $97 billion median).