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Forward-Looking ALLL: Computing Qualitative Adjustments

With the current expected credit loss (CECL) model for the Allowance on the horizon, bankers will be asked to create future-looking methodologies that adjust for reasonable and supportable forecasts. Without adequate modeling experience, that can be a challenge for community banks and credit unions.

Under current GAAP, many institutions are struggling to use qualitative factors to state an Allowance in excess of the low historical experience over the three, four and five-year historical horizons. External auditors are focusing on these qualitative components, which make up more than 80% of a reserve calculation in many cases.

Brandon Russell and Garver Moore of Sageworks discuss advanced techniques in credit risk modeling under current and future GAAP.

Listen to this webinar to learn:

  • How to use regression analysis to justify qualitative adjustments in light of low – or high – historical loss experience
  • How to use statistical markers to justify applications of intuition and policy
  • The calculation and application of loss emergence periods