Most loans funded by financial institutions pay as agreed according to the legal documents supporting these transactions. However, there are situations in which borrowers face financial difficulties thus causing them not to pay their obligations on a timely basis or not at all. Regulators discovered that a well-planned and managed workout arrangement is often in the best interest of the financial institution and the borrower. If a workout arrangement is required in order to keep the borrower paying some portion of their loans, your bank may be facing a Troubled Debt Restructuring (aka “TDR or TDRs”).
Troubled Debt Restructurings require special treatment and must be identified, managed, and reported separately than other performing loans. In fact, all loans that have undergone a Troubled Debt Restructuring are considered impaired thus requiring an Impairment Analysis in accordance with Accounting Standard Codification 310-10-25, Receivables, Subsequent Measurement.
According to regulations, a restructuring constitutes a Troubled Debt Restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider and may include:
- A transfer from the debtor to the creditor (including via foreclosure or repossession) of real estate or other assets,
- A modification of loan terms, or
- A combination of the above
Issues most frequently discussed by Regulatory Examiners during examinations are TDR identification including 1) Determining whether a modification includes a concession, 2) Assessing whether a borrower is experiencing financial difficulty, 3) Receipt of assets in full or partial satisfaction of a loan.
- TDR Identification;
- Whether a Concession has been granted;
- Documentation executed to support the troubled debt restructuring;
- Impairment Analysis to determine the impairment amount;
- Adherence to Accounting Rules under ASC 310 in the management of the TDR and
- Regulatory Reporting Requirements
Unlike loan grading where bankers must be more aggressive in recognizing problem loans by downgrading those loans when necessary, it is in the bank’s best interest to keep loans out of the TDR category when there are valid justifications to prove they are not TDRs. As the saying goes in accounting, “Once a TDR is always a TDR”. Attending this webinar will enable you to recognize a true TDR so that regulator reporting is accurate and to know how to manage them from a lending and accounting perspective.
Who Should Attend?
Directors, Chief Executive Officers, Chief Operating Officers, Presidents, Senior Credit Officers, Senior Loan Officers, Commercial Lenders, Retail Lenders, Branch Managers, Loan Review Personnel, and Credit Administration Personnel.
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; an 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.
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