Calculating and Maintaining the Allowance for Loan and Lease Losses
Present and Proposed Changes to the "ALLL"

The Allowance for Loan and Lease Losses (“ALLL”) represents one of the most significant estimates in an institution’s financial statements and regulatory reports. It is a valuation reserve established and maintained by charges against the bank’s operating income and is an estimate of loans that may be uncollectable. Regulators are just as interested in your bank’s methodology in calculating the ALLL in addition to the adequacy of the reserve.

Because of its significance, each institution has a responsibility for developing, maintaining and documenting a comprehensive, systematic and consistently applied process for determining the amount of the ALLL and the Provision for Loans & Lease Losses. To fulfill this responsibility, each institution should ensure controls are in place to consistently determine the ALLL in accordance with:

  • Generally Accepted Accounting Principles
  • Institution’s stated policies and procedures
  • Management’s best judgment
  • Relevant supervisory guidance

This program will also review the proposed restructuring of the ALLL as we know it today. That change is referred to as “CECL” (Current Economic Credit Losses) and will have a dramatic change in the methodology on how reserves for potential loan losses are calculated in order to in compliance with Generally Accepted Accounting Principles.

Covered Topics

  • Establishment and Purpose of the ALLL
  • Review of Regulators expectations for the ALLL as set forth in:
  • FASB ASC 450-20 Contingencies – Loss Contingencies (formerly FASB 5 – ccounting for Contingencies)
  • FASB ASC 310-10-35-2 through 30, Receivables-Overall-Subsequent Measurement-Impairment (formerly FASB 113 – Accounting by Creditors for Impairment of a Loan)
  • Various Interagency Policies on the ALLL Methodology and Adequacy 
  • Proposed changes to the present method of calculating the ALLL
  • Methodology to Quantify the Qualitative Factors under FASB ASC 450-20 (Formerly FAS 5)
  • Available software to aid in the calculation of the ALLL

After completing this course, the participant will have an enhanced understanding of the importance of creating and maintaining an adequate Allowance that is legally defensible and insures the bank is operating in a safe and sound environment.


CEO’s, Presidents & Board Members, Credit Administrators, Senior Credit Officers, Loan Review Officers, Compliance Officers, Senior Loan Officers, Commercial/Consumer Loan Officers, Loan Operation Officers, Loan Administrators.

“Practical! Answered all the questions I had. Great resources for reference. Thanks!”, Linda Keith, Linda Keith CPA


Jeffery W. Johnson started his career with SunTrust Bank in Atlanta as a Management Trainee and progressed to Vice President and Senior Lender of SouthTrust Bank and Senior Vice President and Commercial Banking Division Manager for Citizens Trust Bank of Atlanta.

Most of his career has been spent in Credit Administration, Lending, Business Development, Loan Review, Management and Training & Development. He has managed loan portfolios representing a cross section of loan types including: Large Corporate, High Net Worth Individual, Middle Market Companies, Small Business, Real Estate and Non-Profit Organizations.

Mr. Johnson is now a training professional in the financial industry by leading various seminars covering important topics relating to issues in financial institutions. He teaches actively for fifteen state banking associations in the United States, Risk Management Association (RMA) and individual financial institutions nationwide. He co-authored a training course entitled “Lending to Service and Other Professional Organizations” for RMA in 2001.

Mr. Johnson earned a B.A. Degree in Accounting from Morehouse College in Atlanta; a MBA in Finance from John Carroll University in University Heights, Ohio; Banking diploma from Prochnow School of Banking at the University of Wisconsin and a Graduate Certificate in Bank Management from the Wharton School of Business at the University of Pennsylvania.

Credit Information

Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CE Credits


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