Skip to main content

The ALLL today – data challenges

Sageworks
October 25, 2016
Read Time: 0 min

With the recent release of the Financial Accounting
Standards Board’s (FASB) guidance on the CECL model, banking professionals and
consultants have been theorizing about the impact the standard will have on
current bank processes. While it is important for these banking professionals
to be prepared, consultants are stressing the importance of tackling today’s
allowance challenges too.

One of the challenges impacting financial institutions under
current GAAP is Data Management. While data gathering and management are
critical steps in the preparation process for CECL, it is important to gather
and manage accurate data when calculating the allowance today.

“Data quality is not just a concern for CECL, issues are prevalent
today; specifically, methodology options may be constrained by the data that is
available, but there seems to be a lack of accurate loan-level data for
decision makers,” said Sageworks Director of Consulting Aaron Lenhart.

Common Data Challenges:

  • ·        
    Disparate loan systems/loan servicers
  • ·        
    Inconsistent loan coding through time – “pool
    jumpers”
  • ·        
    Handling of renewals and modified loans
  • ·        
    Lack of accurate historical loan-level data

Data Solutions:

  • ·        
    Data warehouse set-up to synthesize multiple
    loan systems and servicers:

o  
Consistent source for internal/external
reporting

o  
Long-term storage of loan-level history

  • ·        
    At a minimum, create and store loan-level
    extracts of month-end snapshots:

o  
Usable formats (not PDF!)

o  
Many core accounting systems store only 12-13
months

Yes, this is a CECL issue as well. Consider the different
methodologies you may employ for CECL as your institutions goal should be to
avoid a “lack of data” being a roadblock.

If you would like more information about the challenges impacting the ALLL today, watch Understanding the ALLL Today before CECL.

About the Author

Sageworks

Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!

Looking for MainStreet Technologies? You are in the Right Place!

MainStreet Technologies is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the contact us button here, or the link in the top navigation, to reach product support for your MST products.

Make yourself at home!

Looking for Sageworks? You are in the Right Place!

Sageworks is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Sageworks products.

Make yourself at home!

Looking for Farin? You are in the Right Place!

Farin is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Farin client portal.

Make yourself at home!

Abrigo acquires construction loan management solutions

Coupled with our lending suite, Construct and +Pay from BankLabs enable end-to-end automated residential/commercial construction loans.

Read the press announcement

BankLabs Logo Abrigo Logo