ALLL/CECL Engagements

Validation of the CECL/ACL – CEIS’ validation will include reviewing the framework and process for the establishment of the CECL/ACL to incorporate relevant regulatory requirements, including ASC 326 and FIL-54-2020, along with other regulatory and accounting guidance documents. The considered review will include the portfolio characteristics as well as existing and prior performance of the portfolio indicated in the statistics regarding at least trends in portfolio concentrations, migration and historical losses. CEIS will also make recommendations based on industry best practices.

The resulting report that will be delivered to the Bank will include an executive summary and analysis as well as supporting schedules focusing on evaluation of the Bank’s current methodology, with respect to adherence to the Guidance and to the Bank’s own stated policy; recommendation for enhancements to the Bank’s current methodology as CEIS may determine to be appropriate.

Ultimately, CEIS will form conclusions as to whether the methodology is appropriate for determining the Expected Loss (EL) of the earning assets portfolio, in compliance with GAAP and regulatory requirements, and implemented as outlined in applicable policies or narrative documents. This presumes that the Bank’s methodology will be well-documented.

CEIS will structure its findings in terms of materiality, generally in one of three categories: (1) modifications needed in order to comply with GAAP / Interagency Guidance; (2) changes which are recommended but could be implemented over time; and (3) enhancements to the methodology which may be implemented at management’s discretion. CEIS will make recommendations based on industry best practices.

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