Regan Camp

Regan Camp

About Regan Camp

Regan Camp is the Managing Director of the MST Advisory Services group. He leads a team of subject matter experts who assist financial institutions nationwide in accurately interpreting and applying federal accounting guidance. He is a nationally recognized speaker, writer, thought leader and trusted advisor on the ALLL and CECL.

BPI Proposal Seeks to Soften CECL’s Impact on Earnings

With mandatory conversion to CECL from the present incurred-loss allowance model set to begin Jan. 1, 2020, financial institutions and their representative associations are alternately calling for delays in required implementation dates and changes in the standard that will ease the anticipated blow to their earnings. On November 5, an advocacy group of bank corporations under the banner Bank Policy Institute (BPI) penned a letter to FASB Chairman Russell Goldman proposing a re-structured approach to CECL that “would retain the CECL methodology’s intent of establishing an allowance for the lifetime of an asset on the balance sheet, but recognize the provision for credit losses in three parts.”  The letter listed the three parts as “(1) for non-impaired financial assets, loss expectations within the first year would be recorded to provision for losses in the income statement with (2) loss expectations beyond the first year recorded to Accumulated Other Comprehensive Income ("AOCI'') and (3) for impaired financial assets, lifetime expected credit losses would be recognized entirely in earnings.” The expressed intent of the BPI proposal is to reduce the impact of CECL on bank earnings at its inception date – that is, keep the expected future losses and changes in expected future losses from impacting earnings (or spread them).  Moreover, a problem related to CECL as it currently stands that they would seemingly like to avoid is the earnings hit both from booking new loans and from an increase in expected future losses. They want to avoid these hits to earnings and capital as well as the pro-cyclical effect of booking big losses in earnings when the economy is going into a depression. However, they would also have to convince the regulators to ignore the resulting large debit to OCI when computing regulatory [...]

2018-12-21T09:28:34+00:00December 21st, 2018|Blog, CECL|

Forecasting: Considerations for a Reasonable and Supportable CECL Forecast

Forecasting might not be top of mind as you prepare for CECL. Understanding the standard, deciding whether to handle the transition internally or engage third party assistance, gathering data, pooling, choosing a methodology – those issues drive our concerns well before we encounter a “reasonable and supportable” forecast. The forecasting piece is, in large part, what makes CECL different from incurred loss estimating. The Great Recession revealed the insufficiency of being able to reserve only for a probable or already incurred loss event; those years proved the incurred loss model “too little, too late.” The FASB determined we needed a forward-looking component to be prepared for an economic downturn when it comes – and not only a Great Recession, but a local economic jolt, like the closing of a factory that employs a significant portion of the local population. CECL allows us to do that, even to the extent of reacting to a rumor, be it from a credible source. Ultimately we are forecasting why the future is different from the past, be it better or worse. We do that using economic factors. External factors can be broad in scope, such as political turmoil or a trade war. Or they can be local, such as a weather event or the opening of a new business that will increase employment in your area. And they can reflect internal factors, like losing a quality loan officer to another institution, or signing new loan talent, or the closing of a competing institution. Here are a few things to consider when developing the forecasting piece of your CECL process: Initially, identify the variables that will determine expected losses. What specific factors apply to your population, your institution? Hone in on the most important factors; don’t complicate [...]

2018-11-05T13:17:42+00:00November 5th, 2018|Blog, CECL, Economic Forecasting|

FASB Proposes CECL Extension – What’s the True Impact?

As you may have read or heard, the Financial Accounting Standard Board (FASB) has proposed extending the Update 2016-13 (or CECL) effective date for non-public business entities (PBEs) to fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.  While at first this proposed extension may seem to offer a full year of additional relief for many private banks and credit unions, the true impact falls short of that expectation.  […]

2018-10-24T10:54:40+00:00August 4th, 2018|CECL|

CECL Methodologies for Small Institutions: Agencies Make Recommendations

On February 27, representatives of several regulatory agencies, including the FDIC, FASB and the SEC, hosted a webinar to offer sample CECL methodologies considered appropriate for “smaller, less complex” financial institutions. The speakers referenced three methodologies: snapshot or open pool method, remaining life method and vintage method.  […]

2018-10-30T16:02:51+00:00July 13th, 2018|CECL, Current Expected Credit Loss|

Data Fields: What Types of Data Should You Gather for CECL?

The first and most often biggest concern of institutions as they transition to CECL is data – not only how much is required, but what kinds of data. Accordingly, there is no shortage of information available on the various data fields that could be required to estimate losses under CECL, but the data you’ll actually need will depend on other determinations during your transition to CECL estimation, including, but not limited to, how you segment your portfolio and which CECL-compliant methodology, or methodologies, you choose to employ.  […]

2018-10-23T12:45:29+00:00December 29th, 2017|CECL, CECL Accounting, CECL Education|

CECL: “How Do I Get Others to Care?”

MST regularly partners with the Risk Management Association (RMA) on educational programs on the allowance and CECL for bankers responsible for their institutions’ allowances. An open forum at our most recent RMA-sponsored program in Boston, Mass., led to an extended discussion about a lack of concern about CECL among bank departments not directly responsible for allowance estimates.  […]

2018-10-23T12:45:29+00:00December 15th, 2017|CECL|

How CECL Can Improve Your Bottom Line

Bankers and other financial professionals tend to approach the new CECL (current expected credit losses) accounting standard with an enthusiasm typically reserved for toothaches and telemarketer calls, and may well be skeptical of the potential of CECL to bolster their institutions’ bottom lines. […]

2018-10-30T15:08:51+00:00August 22nd, 2017|Advisory, CECL|

Revise Don’t Replace

When the Financial Accounting Standards Board (FASB) introduced the new accounting standard for credit losses, Current Expected Credit Loss, which we now know commonly by its acronym “CECL,” many were quick to suggest that financial institutions would need to replace their current incurred loss ALLL methodologies of today with much more sophisticated and/or data-intensive methodologies for CECL of tomorrow.  […]

2018-10-25T10:58:17+00:00August 18th, 2017|Advisory, CECL|