Skip to main content

Poll: Challenges with Fair Market Value of Collateral method

July 2, 2013
Read Time: 0 min

Sageworks recently hosted a webinar, How to Calculate Your FAS 114 Reserves, which covered the three valuation methods for impaired loans and when to use them, as well as when it is appropriate for a loan in FAS 114 (ASC 310-10-35) status to be moved to FAS 5 (ASC 450-20). The most widely used valuation method, the Fair Market Value of Collateral method, is used when a loan is considered collateral-dependent. In this method, an institution determines the fair market value of the underlying collateral, less any selling costs. Any portion of the loan balance that exceeds the collateral’s fair value is identified as the specific impairment and should be reserved against.

This method, however, presents its own set of challenges. During the presentation, more than 160 bankers were polled on the most troubling aspect of performing an impairment analysis using the collateral method. Almost 50% expressed maintaining updated appraisals as their biggest challenge.

Poll Results

For help with the documentation and analysis required for FAS 114 loans, download the complimentary, spreadsheet-based FAS 114 Impairment Worksheet for collateral-dependent loans.

For more information on the three valuation methods, download the whitepaper titled: How to Calculate Your FAS 114 Reserves.

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!

Looking for MainStreet Technologies? You are in the Right Place!

MainStreet Technologies is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the contact us button here, or the link in the top navigation, to reach product support for your MST products.

Make yourself at home!

Looking for Sageworks? You are in the Right Place!

Sageworks is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Sageworks products.

Make yourself at home!

Looking for Farin? You are in the Right Place!

Farin is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Farin client portal.

Make yourself at home!

Abrigo acquires construction loan management solutions

Coupled with our lending suite, Construct and +Pay from BankLabs enable end-to-end automated residential/commercial construction loans.

Read the press announcement

BankLabs Logo Abrigo Logo