Whether a bank is valuing their loan portfolio for financial reporting purposes under ASC 825 or pursuing an acquisition, it is important to review the current cost structure being incurred to service different loan types.
As forbearance has been provided to certain borrowers, the cost to service these loans has likely increased and thus, has decreased the value of certain loans in the portfolio.
Reviewing these servicing costs is important to accurately price an acquisition or to fairly disclose the market value of the loan portfolio in the bank's financial statements.
