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Q2 Technical Series: Quantifying the Qualitative

ASC 326 Current Expected Credit Loss (“CECL”) brought many changes to the allowance process but one item that remained the same: the need for qualitative factors. While many may have hoped that reliance on qualitative factors would be largely eliminated, extremely low historical loss experience and model limitations have resulted in lower-than-expected quantitative losses and supported the continued need for qualitative adjustments. CECL guidance states that the allowance calculation is a combination of historical losses, as well as adjustments for current conditions and a reasonable and supportable forecast of future losses. To the extent the bank believes the historical experience in their CECL model does not represent a bank’s expectation of future losses, banks should consider the use of qualitative factors.

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Date: Jun 22, 2022

Time (EST): 2:30 pm

- 3:30 pm

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This whitepaper will take the opportunity to debunk some of the misconceptions or myths in the market surrounding CECL. Our insight comes from what we have seen from those institutions that have already adopted CECL as well our clients we are currently assisting with implementation.

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