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CECL – Manage the change

Libby Bierman
Posted by Libby Bierman
accountants identify advisory services

The changes inherent in the shift from FASB’s incurred model to the current expected credit loss model (CECL) present many challenges for financial institutions and accounting professionals alike. However, the transition from an incurred model to estimating expected credit losses is not meant to be a cumbersome process, let alone…...

Commercial risk rating: Case study

Libby Bierman
Posted by Libby Bierman

Banks and credit unions are in the business of measuring and managing credit risk. At a recent Sageworks event, we discussed a specific case study regarding components of risk rating for a particular business loan to see how the institutions in the audience would have handled a particular scenario.  …...

Understanding and defining qualitative risk rating factors

Libby Bierman
Posted by Libby Bierman

Risk rating is a primary function at any bank or credit union, and the methodology used will impact everything from the loans the institution will originate, to concentration limits and lending strategy to reserve levels and, as a result, bank earnings. With such a widespread effect throughout the bank, getting…...

Stress testing – how often are stress tests run at your bank?

Libby Bierman
Posted by Libby Bierman

Banks and credit unions recognize that stress testing their loan portfolio is an important step in sound credit-risk management, and that sentiment has been reinforced by regulators for even community-based institutions. But like other “good for you” activities, with what frequency should an institution perform stress tests? It’s recognized that…...

How do you teach tax-return analysis at the bank?

Libby Bierman
Posted by Libby Bierman

During an April 2014 webinar, RED Flags and GREEN Lights in Tax Return Analysis: Don’t Get Your Signals Crossed, Sageworks polled 277 bankers to determine how junior lenders and new hires within the bank learn tax return analysis and underwriting standards at the institution. Overwhelmingly, the poll found that bankers…...

How to justify an expected monthly payment when performing a cash flow impairment analysis

Libby Bierman
Posted by Libby Bierman

As part of Sageworks’ ongoing video series addressing some of the challenging issues and questions regarding allowance for loan and lease losses calculations, Sageworks consulting staff explain how to justify an expected monthly payment when using the cash flow impairment method to perform your FAS 114 calculations. One of the…...

How should a financial institution best capture business cash flow or handle K-1 distributions?

Libby Bierman
Posted by Libby Bierman

This video is a segment taken from a recent webinar hosted by Sageworks and DM Analytics LLC’s owner, Dave Matricciano. For the full recording, visit “Global Cash Flow Analysis – What, When, Why, and How”. From the video The challenge with owners of Partnerships or S-Corporations is the issue of…...

Poll: Which of the 3 P’s of credit analysis needs the most improvement in your institution?

Libby Bierman
Posted by Libby Bierman

A financial institution’s first defense against excessive credit risk is the initial credit-granting process which is based on sound underwriting, an efficient, balanced approval process and a competent lending staff. These three pillars are the keys to effective credit analysis and can also be referred to as the 3 P’s:…...

Loan pricing for bank portfolio management

Libby Bierman
Posted by Libby Bierman

In a webinar hosted by Sageworks, Jon Winick of Clark Street Capital explained how an institution can “rebalance” its loan portfolio if, after reviewing stress test results, bank management finds that risk levels aren’t where they need to be or that the portfolio is too heavily concentrated in certain segments.…...

What is global cash flow?

Libby Bierman
Posted by Libby Bierman

This video is a segment taken from a recent webinar hosted by Sageworks’ Chuck Nwokocha and DM Analytics LLC’s owner, Dave Matricciano. For the full recording, visit Global Cash Flow Analysis – What, When, Why, and How”. From the video Starting off, I have an example from one of my…...

What is FAS 114?

Libby Bierman
Posted by Libby Bierman

A principal source of guidance on accounting for impairment in a loan portfolio under GAAP, Accounting Standards Codification Subtopic 310-10 was formerly known as the Statement of Financial Accounting Standards No. 114 (FAS 114), “Accounting by Creditors for Impairment of a Loan”. Under FAS 114, a loan is impaired when…...

Preparing financial presentations for board meetings, shareholders

Libby Bierman
Posted by Libby Bierman

Board meeting presentations can cause a CFO, consultant or business owner headaches, both in the preparation and in the actual presentation. For the financial portion of the presentation, knowing what to include can be a big source of frustration: too much financial detail can be overwhelming or completely uninteresting to…...

FAS 114 worksheet for collateral-dependent loans

Libby Bierman
Posted by Libby Bierman

In their 2006 guidance, Questions and Answers on Accounting for Loan and Lease Losses, the Federal Reserve answers the question of what documentation is necessary for FAS 114 loans, loans that are evaluated for impairment as part of the ALLL calculation. Foremost, the institution should sufficiently document the analysis used to…...

Benchmark your business & win the horse race

Libby Bierman
Posted by Libby Bierman

Maybe it’s an inherent competitiveness or just the pursuit of improvement, but it’s commonplace for people to seek out benchmarks they can use to assess their relative position or performance. It interests people to know how they compare to their peers. Benchmarks have a place in business, too, and can…...

Stress testing’s “black box”

Libby Bierman
Posted by Libby Bierman

The recent results of the 2013 CCAR and CapPR tests remind bankers, at institutions of all sizes, the regulatory commitment to and the benefits that can come from stress testing and capital planning. While smaller banks may sufficiently benefit from simpler stress testing models than those utilized in Dodd-Frank compliance,…...

Credit analysis benefits of a probability of default analysis

Libby Bierman
Posted by Libby Bierman

Financial institutions may inject a probability of default (PD) analysis into several steps of their credit risk processes, and each use-case provides a different benefit to the bank that directly impacts its workflow efficiency, credit decision quality, and most likely profitability. Before any financial statements have been spread, a PD…...

ALLL methodologies: Migration analysis

Libby Bierman
Posted by Libby Bierman

The Allowance for Loan and Lease Losses (ALLL) calculation can be one of the more complex processes in running an efficient and regulatory compliant financial institution. Specifically, determining the most appropriate ALLL methodology is a significant challenge institutions face in calculating an adequate allowance. While regulatory guidance is scarce, latitude is…...

What is a probability of default model?

Libby Bierman
Posted by Libby Bierman

Since 2009, more than 400 financial institutions have become insolvent. Each institution was determined by examiners to be ill-equipped to cover the unforeseen level of borrower defaults and resulting losses they had to recognize. The common sentiment amongst these banks – “if only we had seen this coming or had…...

Definitive guide to understanding global cash flow analysis

Libby Bierman
Posted by Libby Bierman

Sageworks recently released a new whitepaper that answers many of the questions that financial institutions encounter regarding global cash flow analysis. Why should I conduct a global cash flow analysis? When should I look at global cash flow? How should I combine guarantors and businesses into a global entity? What…...

Become a trusted business advisor – 3 ways

Libby Bierman
Posted by Libby Bierman

When a business owner is searching for an accountant, his or her choice is not so simplified. Financial services—despite what some of your tax-only clients may believe—is far from a commodity. And in many cases, location and even price are immaterial. What, then, is the best way to acquire clients…...

Financial data isn’t enough – 3 Reasons why

Libby Bierman
Posted by Libby Bierman

When your vehicle’s gas tank is nearing empty, you generally have a multitude of gas stations to choose from. They all have similar offerings, so your choice is largely dictated by your location at the time and maybe the reward card you have for a certain chain. And while the…...

Why are private companies important?

Libby Bierman
Posted by Libby Bierman

Sageworks collects data on the financial performance of private companies, but why do private companies matter? Out of the 27 million businesses in America, only about 6,200 are publicly traded on the major exchanges. The rest are privately held. --Small businesses drive over 50 percent of GDP. --Small businesses create approximately…...

Private Companies are Growing, but Unemployment is High For Now

Libby Bierman
Posted by Libby Bierman

Good but not great news came from the U.S. Bureau of Labor Statistics this morning, when analysts announced that 103,000 jobs were added in September. This addition was not enough, though, to change the unemployment rate, which continues to be elevated at 9.1 percent. Most of the jobs added during…...

“Five Takeaways from the Debt-Ceiling Debate”

Libby Bierman
Posted by Libby Bierman

Regina Lewis of DailyFinance gives her five lessons-learned from the recent US debt crisis; among them is Sageworks Chairman Brian Hamilton's take on private companies and stagnant hiring. Her five lessons (read the full article here): #1. Cash is king. #2. (Political charades are) ridiculous.  #3. Leave us alone: “Companies are looking for…...

Know How to Choose an Accountant?

Libby Bierman
Posted by Libby Bierman

Katie Morell, a contributor at the American Express OPEN Forum, joined forces with Sageworks and other financial firms across the country to gather best practices about how to choose the right accountant for your business and then how to optimize your time with them. To learn how you can achieve…...

CFO Corner: Nick Araco, A “Connector” for Accounting and Finance Professionals

Libby Bierman
Posted by Libby Bierman

1. What was the biggest challenge your company faced over the last 12 months and how were you able to overcome it with financial leadership? Having had the opportunity to work closely with the 2,000+ CFO Alliance Members and Partners over the past 12 months, I can say with confidence that…...

Key performance indicators: Principles of selection for nonprofits

Libby Bierman
Posted by Libby Bierman

Key Performance Indicators (KPIs) are a popular buzzword among the for-profit crowd, but they also have their appropriate place among NPOs. KPIs are quantifiable measurements of an organization’s health or success. Organizations may use KPIs to their advantage, allowing them to benchmark their progress against peer organizations for context about…...

Ten Ways to Make the Most of Your Time with Your Accountant

Libby Bierman
Posted by Libby Bierman

If you are running a business, you probably understand the operations behind it. A bakery owner knows how to craft a decent cupcake, and a plumber knows the cause and cure for a leaky faucet. For most business owners, financial management of their company is less intuitive and seemingly less urgent…...