Independent Banker - July 2022 - 8

ADVER T ORIAL
Simplifying CECL Compliance:
Timing Is Everything.
by Shawn O'Brien, President, QwickRate
T
he CECL deadline is looming ever
larger. You can't avoid compliance.
But you can sidestep the stress of
getting there.
For many banks, the biggest challenge is
simply adopting an unfamiliar process for
calculating reserves. Fortunately, regulators
have made strides toward minimizing
possible disruptions. In fact, they've
addressed many concerns head on.
Where should banks start?
Regulators believe a bank's CECL
solution should equal the sophistication
of its loan portfolio. So they expect
KPLYLU[ IHURZ [V \ZL KPLYLU[ ZVS\[PVUZ
to calculate reserves. For banks with
fewer losses, overly engineered solutions
add no value - one reason solutions
based on call report data are popular.
Process complexity can vary greatly
among methodologies. When evaluating
solutions, don't mistake precision for
accuracy. No current or past losses to
work with? Future loss forecasts more
often come from qualitative adjustments
than from quantitative adjustments.
Methodologies such as loss rate,
remaining life, migration or vintages
are less complicated, but generally less
precise. Likewise, other methodologies
(i.e., probability of default, discounted
JHZO ÅV^Z HYL TVYL WYLJPZL I\[ TVYL
KPJ\S[ [V KL]LSVW 0Z P[ ^VY[O [OL L_[YH
work? Many banks say no, preferring to
continue using their Q factors to support
or defend CECL, as they did for their
ALLL reserve.
So where can you turn for practical
assistance?
What to do?
QwickAnalytics®
CECLSolver™ was
developed with community banks and
their challenges in mind. Getting started
is simple and the tool is easy to use.
CECLSolver utilizes a weighted average
YLTHPUPUN TH[\YP[`>(94 MVJ\Z [V
automatically display historical losses over
WARM periods. This eliminates the need
to compile past information, enabling
" QwickAnalytics is by far one of
the best solutions we use with
regards to our CECL modeling,
Stress Testing, and UBPR
comparisons. "
-Ryan D. Thomas, CRC, Assistant Vice
President, Community Bank of Louisiana
X\PJR LHZ` HUHS`ZPZ VM KPLYLU[ SVZZ
scenarios. CECLSolver also displays loss
histories of selected peer groups (UPBR/
Z[H[L	J\Z[VT MVY PKLU[PJHS WLYPVKZ
We'll help you with WARM calculations
whether they're performed by your team
PM KH[H PZ H]HPSHISL VY I` V\YZ
We expect that banks will continue to
address qualitative factors. Regulatory
statements in regards to assessing the
JVSSLJ[HIPSP[` VM JHZO ÅV^Z OH]L JH\ZLK
many banks to stress - and there's
no need to. We believe banks should
continue to utilize qualitative adjustments
currently conducted as part of their
incurred loss calculation. They've
been doing this successfully for years.
Furthermore, you and your regulators are
familiar with and believe in the process.
As for the CECL " forecasting " element,
bankers should focus on what might
cause future portfolio losses and
diminish your ability to collect on loans.
Document and quantify your answers,
again not mistaking precision for accuracy.
Focus on being directionally accurate,
considering your portfolio plus possible
scenarios. If your mortgage portfolio
PZ ZPNUPÄJHU[ JVUZPKLY OV\ZPUN WYPJLZ
unemployment levels, etc. Understand
how they're trending and the potential
ULNH[P]L LLJ[ VM YL]LYZHSZ >L JHU OLSW
you update current qualitative adjustments
[V YLÅLJ[ MVY^HYK
SVVRPUN WLYZWLJ[P]LZ
Designed for
community banks
CECLSolver provides banks with a
WVY[MVSPV
SL]LS ZVS\[PVU IHZLK VU JHSS
report information - plus the ability to
WLYMVYT TVYL JVTWSL_ SVHU
SL]LS HUHS`ZPZ
as required. Our approach is to start,
monitor and if necessary, adjust.
CECL compliance is as complicated
as you want to make it - but delaying
the inevitable isn't the wisest strategy.
Schedule a demo today to see your
historical numbers and how CECLSolver
can help.
Shawn O'Brien is President of QwickRate, providing
WYHJ[PJHS HUK HVYKHISL ZVS\[PVUZ MVY JVTT\UP[` IHURZ MVY
TVYL [OHU `LHYZ (U 0*)( 7YLMLYYLK :LY]PJL 7YV]PKLY
Request a demo with your data. Find out why hundreds of community banks
are already using CECLSolver to become compliant. info@qwickrate.com
Independent Banker - July 2022

Table of Contents for the Digital Edition of Independent Banker - July 2022
