It’s Too Early for CECL Fatigue
- Contributor
- Doug Mims
For various reasons, it seems like it has been a lifetime since the initial adoption of ASC 326 (aka CECL) by 152 SEC registrant banks. In January 2020, CECL adopters had total assets ranging from $1.3 billion to over $3 trillion, and the allowance for credit losses to loans was 1.06%. That amount peaked in September 2020 at 1.66% and was down to 1.24% by the end of December 2021.
Among the many banks who initially adopted CECL, 50 banks chose to delay CECL under the CARES Act, while 192 Small Reporting Companies will adopt the policy as of January 1, 2023. Approximately 4,500 community banks are still set to adopt CECL as of January 1, 2022. These institutions are generally smaller, less complex community banks, with two–thirds having less than $500 million in total assets and roughly 80% having less than $1 billion. Hence, the risk profile of 2023 adopters is very different from that of the initial adopters–but so are the resources and in-house expertise.
While all of this is happening, the community bank industry has grown weary of the topic of CECL. Once the main attraction at community banking events, in some instances, it is no longer on the agenda at all. And while it would be nice to forget all about CECL, its implementation in 2023 is fast approaching. Based on industry feedback, it appears most institutions are between deciding on loss methodology, running parallel, and everywhere in between.
Given the above, a few helpful reminders about CECL are offered below:
Contact CRI today at [email protected] or visit our CECL resources page so we can assist you in identifying and implementing an appropriate CECL solution for your institution.
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