15 PUB. 12 2022 ISSUE 1 PCBB has a C&I program that can increase your loan portfolio. To learn more, please contact Jay Kenney at pcbb.com or jkenney@pcbb.com. you are likely to see your reserves increase. However, most successful community banks are reasonably prudent and are likely to expect minimal changes in their final reserve rate (assuming similar economic conditions). Myth busted! Myth 3: CECL requires lots of data. It is true that when discussions with CECL started, we were among the very many who advised that you focus on your data. After all, CECL requires an adequate history of loss data. Over the years, we’ve found that most successful community banks don’t have a deep history of losses. Furthermore, with the release of SCALE, the use of supplemental data has come into full acceptance. If you have access to relevant supplemental data (assuming no deep history of losses), you don’t need to spend time and energy cleaning and auditing historical data. Instead, focus on cleaning your current period data and identifying the right supplemental data for your institution. Myth busted! Myth 4: Adopting CECL takes time. This myth contains elements that are true. It’s true that it takes time to understand what’s different under CECL, as would be the case with the adoption of any new standard. Internalizing this complex standard takes time. However, running in parallel helps you understand it better and provides time to test and validate assumptions. Having said that, with reasonably clean data and vendor support, our experience has found most community banks can get CECL estimates within 90 days (assuming, of course, that you and your vendor answer each other’s questions promptly). For information on finding the right vendor, review our previous BID article on this topic. Myth mostly busted! If you are not using a vendor, then you have much more to learn, research, and discuss. You’ll need to verify that you have relevant and predictive sources of supplemental data appropriate for an institution of your size and complexity. You’ll want to review your model assumptions for completeness and suitability, and you’ll need to talk with your auditors and examiners about how your model was built. Hopefully, by myth-busting these CECL assumptions, we have given you the information you need to move forward with CECL implementation. If you find that your CECL adoption is not going as smoothly as you would like, are unsure if SCALE is for you, or need additional guidance, we can help. w If you are not using a vendor, then you have much more to learn, research, and discuss. You’ll need to verify that you have relevant and predictive sources of supplemental data appropriate for an institution of your size and complexity.
RkJQdWJsaXNoZXIy MTIyNDg2OA==