CECL

visible equity

CACU is excited to partner with Visible Equity in order to help our members prepare for the implementation of CECL.  Visible Equity is recognized as the leading analytics company for financial institutions, continuing to evolve and develop award winning products. 

Along with data warehousing, analytics and visualization software – Visible Equity provides a comprehensive ALLL/CECL software that allows users to segment your portfolio, analyze individual loans for impairment and expected loss, collectively review loans using CECL-compliant loss rate methods, incorporate qualitative and environmental factors and reasonable/supportable forecasts, run stress test scenarios and instantly produce a suite of reports and disclosures.

With Visible Equity software it is easy to create custom segments and classes for use in your allowance analysis and reporting. Whether you're looking forward to new CECL requirements or performing more traditional allowance calculations, properly segmenting your portfolio forms the basis for solid analysis.

One of the biggest changes CECL will bring to your allowance calculations is to use “life of loan” loss methods, instead of a more traditional 1-yr charge-off ratio. Visible Equity provides the following CECL compliant life of loan loss methods:

Static Pool

Static Pool is the simplest of CECL methods Visible Equity offers, but sometimes the simplest solution is the best solution. The Static Pool method goes back in time and creates a static pool. The loss rate is calculated by taking the losses from the pool, divided by the starting balance of the pool.

Vintage

The Vintage method uses your historical data, just like static pool, but puts a finer point on the calculation. The vintage method calculates a different loss rate for each vintage (typically origination year) and each future period of the loan’s life. Loss rates are calculated by segmenting the portfolio into vintages and dividing historical losses by the appropriate balance and then weighting the results.

Probability of Default (PD)

Our Probability of Default models are simply awesome. With different models for each asset type (residential mortgages, home equity lines of credit, credit cards, auto loans, student loans, commercial real estate, commercial and industrial loans, etc.), our models are the most elegant solution to CECL requirements on the market today.

Our PD models seamlessly incorporate collateral values, key economic variables, including reasonable and supportable forecasts, and loan and borrower level attributes, to estimate losses over the life of the asset. The best part is you don’t need a lot of historical data because we have built the models for you!

Discounted Cash Flow (w/ PD)

Our Discounted Cash Flow models takes discounted cash flow (DCF) analysis to a new level. Instead of relying on loss rates to estimate the portion of cash flows that won’t be collected we use our state of the art PD models. Cash flows are estimated for each future period of a loan’s life by estimating the probability of default, the probability of prepaying, and the probability of staying active. The results of each loan’s analysis are rolled up to arrive at the expected cash flows for the portfolio.

For more information, please contact us at services@corpam.org or (800) 292-6242.

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