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Portfolio Risk & CECL

From Excel to Automation

Brandy Aycock
March 11, 2016
Read Time: 0 min

Small banks like National Bank of Middlebury are taking the occasion of CECL to replace Excel with an automated allowance solution. CECL promises to make life complicated. Small rural institutions like the National Bank of Middlebury in west central Vermont are used to stability and keeping things uncomplicated. Their due diligence on ALLL automation is built around doing just that.

Recently we caught up with Sarah A. P. Cowan, Senior Vice President of the National Bank of Middlebury to talk about her decision to move from Excel to an automated allowance software solution. 

Challenges with their old ALLL process

Over the years Cowan’s ALLL process has been managed by downloading data from their core system and integrating it into multiple Excel spreadsheets. Challenges that have come from this include keeping the many spreadsheets consistent and including the qualitative factors used to make adjustments to the allowance. Even though, as far as loan portfolios go, the National Bank of Middlebury’s portfolio is an uncomplicated mix of first mortgages and home equity lines complemented by small business loans and a small group of municipal loans, there was just too much room for error with the spreadsheets.tomate the ALLL with a software solution

With CECL an impending reality, Excel will no longer provide an acceptable allowance analysis. That was among several practical matters driving Cowan to begin exploring ALLL automation. Cowan says, “Most importantly, we wanted to reduce the time and human resources involved with all of these spreadsheets. We wanted a more consistent and process-driven methodology, fewer changes on the fly. We also wanted to include finance and our senior credit administrator in the process.”How to choose an ALLL software vendor
As an active participant in the Risk Management Association (RMA), Cowan became aware of RMA’s partnership with MST on training for the ALLL. Several times a year RMA and MST partner to offer hands-on workshops on Estimating the Allowance for Loan and Lease Losses. Her attendance at one of these workshops led her to include MST in the first round of vendor reviews.
After vendor reviews, demos, and talking to current users of different softwares, The National Bank of Middlebury decided that MST’s Loan Loss Analyzer software solution offered ease of use, cost, vendor support, resources and training. “The knowledge level of the vendor about the ALLL was a final deciding factor,” she added. “What became evident to us was that MST was solely focused on the ALLL. It wasn’t just an add-on to other products they sold.”
 
 
MST strives to continue to streamline and automate the allowance process now with the incurred loss model and in the future with the current expected credit loss model giving more time for analysis that positively impacts the bank or credit union’s bottom line.
 
Learn more about the Loan Loss Analyzer.
About the Author

Brandy Aycock

Brandy Aycock is Director of Event Marketing at Abrigo.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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