35 Hoosier Banker June 2015 in an institution’s current ALLL methodology (assuming economic variables are not explicitly factored into a more complex type of loss estimation model), the CECL model will likely increase the importance of relating expected losses to the economy’s condition. This is because the current prohibition on considering future forecasts is being removed, and in fact the standard expects that reasonable and supportable forecasts will be considered in ALLL methodologies. • Performance data. An institution may find that a simple record of quarterly net charge-offs is insufficient for estimating a lifetime expected loss model. While additional guidance on acceptable methodologies will be welcomed by banks working to comply with the CECL approach, it is worth exploring your institution’s ability to dig into its historical data to construct more sophisticated data sets, perhaps even documenting a given segment’s historical performance on the individual loan level. Knowing what data is and is not available and reliable will also help focus your institution’s attention on methodologies that are feasible, given the data that you have available. As with the current regulatory approach to the ALLL, the regulatory approach to the CECL transition will surely acknowledge that the methodologies employed and documentation produced should be appropriate for the size and complexity of the institution, meaning that community banks will not suddenly be expected to meet the same expectations as the nation’s largest banks. Additional information on this issue will be forthcoming over the next several years, but there is enough certainty about the general structure of the requirements at this point that all banks should begin taking some basic steps to lay the groundwork for a smoother transition. t Two new associates have joined Computer Services Inc. (CSI), Paducah, Kentucky. • Bill Crouch has joined as business development director for the Midwest region. He has 15 years of experience in community bank technology issues, most recently consulting with organizations on assoCiate MeMbers’ Corner News from IBA’s valued associate members Young & Associates, Inc. Consultants to the Financial Industry Capital Planning System Saves Time & E ort Field Tested Has Passed Regulatory Scrutiny Allows you to: • Develop a Base Case Scenario for minimum adequacy standards • Identify and Evaluate Risk for your bank • Stress Test Capital by loan classification (as recommended by the FDIC and OCC) • Perform Contingency Planning for stressed events • Generate Your Capital Plan in as little as 1 day! Pricing First Year License Fee — $1,095 Update/Annual License Renewal — $495 35 YEARS 1978 - 2015 + data center environments and information technology solutions. • Paul Dacus has joined as business development director for the Midwest and Northeast regions. He has 30 years of sales and consulting experience with financial institutions across the Midwest. t
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