How United Prairie Bank Prepared for CECL with Abrigo
Streamlining CECL allowance calculations with Abrigo
Financial institutions across the country are deciding whether to build their own CECL model using spreadsheets or buy a solution through a third-party vendor before the January 2023 CECL implementation date. CECL requires more inputs, assumptions, analysis, and documentation than the old standard, and institutions must decide how to determine their allowance levels efficiently and accurately. With staffing tight as COVID-19’s aftershocks impact financial institutions’ operations and results, the option to automate and modernize the process looks attractive to busy banks and credit unions.
United Prairie Bank, which faces the 2023 deadline like so many other institutions, knew that using software for CECL was the way to go. The bank had first-generation software for calculating the allowance. But the system had its challenges due to manual, repetitive processes for data collection. Uploading files to the software by hand once a month and manually pulling reports before working on the calculation was taxing and time-consuming. United Prairie wanted an upgrade to an online, cloud-hosted system.
United Prairie Bank’s calculation has been up and running since December 2021. When the bank started their software search in 2021, they knew they didn’t have much time to select, learn, and test a calculation software. A fast implementation process would be crucial, and having advisors to help when necessary would give them the confidence to push forward quickly. Whatever they chose, staff wanted to make sure they would be able to understand the new software. Abrigo’s user interface stood out as intuitive and customizable.
“We wanted a software that could run multiple inputs for field calculations, and our software couldn’t handle that,” said Brett Gauer, Accounting Manager at United Prairie Bank. “After a few different demos, it was clear that Abrigo was the best choice for United Prairie from a cost vs. functionality standpoint.”
Gauer identified three key benefits Abrigo’s platform offered:
- Client-led integration
- Quick implementation
- Specialists on standby
A user-friendly, client-led integration process
The client-led integration route was the right choice for United Prairie. Gauer and his team wanted to understand the inputs going into their calculation rather than hand over their data to Abrigo without learning what their software was doing behind the scenes. Gauer was pleased with the support offered by their integration specialist, who made sure he was available if United Prairie had questions.
“The implementation was a very simple process,” Gauer said. “No implementation is particularly fun or easy, but the process Abrigo had in place made it seamless and not too time-consuming on our part. The upgrade to the software was worth it.”
Having a specialist on standby gave United Prairie confidence as staff decided which fields would make the most sense to include in their calculation. The result was an allowance calculation that United Prairie knew backward and forward and a learning experience for Gauer and his coworker.
“We didn’t want a ‘black box’ situation where we felt we couldn’t thoroughly explain our allowance calculation ourselves,” Gauer said. “Hands-on integration gave us an overall understanding of the calculation and how it is driven. Knowing that we put each field in for a reason, knowing the whys behind our principal balance and rates, and understanding the software and how it is calculating our allowance gave us peace of mind.”
An efficient data input method for bankers
Efficiency gains resulting from United Prairie’s partnership with Abrigo during implementation and beyond have played an important role in bolstering the bank’s CECL confidence. For example, Abrigo helps to centralize all business customer documents so that the information is digital and all in one place.
“Now that we’re not taking those extra steps to get data ready, we’re using the saved time to better understand the inputs and outputs of the calculation. We get to focus on how our portfolio is changing, rather than just the one-two-three steps to get data into the system and reconciled,” Gauer noted.
Manual report management had also been a pain point in United Prairie’s allowance calculation process. With Abrigo’s CECL solution, daily reports are run automatically and inputted into the software. Efficient data collection and testing have increased United Prairie’s confidence in their calculation, while eliminating the reporting step saved valuable time.
“With Abrigo, we can set up as many different models and projections as we want without back-and-forth with a specialist. We can experiment with changes that might affect our allowance at our own discretion because we know the software.”
Brett Gauer, Accounting Manager, United Prairie Bank
Ultimate flexibility and confidence
The flexibility afforded by Abrigo’s CECL solution was also important to United Prairie, helping the bank during initial CECL adoption and allowing it to maintain compliance in the future. United Prairie built an allowance calculation using six loan categories. With Abrigo, quickly changing that input to include eight or four categories is no problem. The software allows clients to test different scenarios with a fully customizable calculation. “We have more freedom to do what we want,” Gauer said. “With Abrigo, we can set up as many different models and projections as we want without back-and-forth with a specialist,” he said. “We can experiment with changes that might affect our allowance at our own discretion because we know the software.”
United Prairie Bank’s efforts to get CECL implemented ahead of the 2023 deadline through their Abrigo partnership paid off. They are happy with their results, confident in their allowance, and prepared to answer questions about their calculation in 2023.