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The ALLL today – data challenges

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
  • ·        
    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:

Consistent source for internal/external

Long-term storage of loan-level history

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

Usable formats (not PDF!)

Many core accounting systems store only 12-13

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


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

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