CMS Sept 2022

Internal Use Only

HTM Securities • Accounted for under CECL methodology

• “Therefore, in contrast to today’s accounting, institutions generally will need to establish allowances for credit losses on their HTM debt securities as of the date they adopt CECL and maintain such allowances thereafter. Because CECL requires institutions to measure expected credit losses on a collective or pool basis when similar risk characteristics exist, HTM securities that share similar risk characteristics will need to be collectively assessed for credit losses.”

2019 New Accounting Standard on Credit Losses: Frequently Asked Questions

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Internal Use Only

AFS Securities • Similar to the previous standard: • AFS securities should be evaluated at each reporting date • Determine whether a decline in fair value of an individual debt security is below its amortized cost basis is a result of credit or other factors • When evaluating whether a credit loss exists on an individual AFS debt security: • Entity would not be permitted to ignore whether credit losses exist because fair value has been less than amortized cost for limited time

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