BankBeat #QuickTakes

Sean Doherty of Country Club Bank offers an update on CECL implementation and preparation for community banks

Sean Doherty of Country Club Bank offers an update on CECL implementation and preparation for community banks [https://bankbeat.biz/quicktakes-sean-doherty/] Sean Doherty, President of the Asset Management Group, Inc., [https://www.bancpath.com/#&panel1-1] at Country Club Bank in Kansas City, Mo., offers an update on CECL implementation and the preparation community banks need to undertake. As the new CECL standards come into implementation, banks need to incorporate forward-looking projections as well as historical data when calculating their reserves as regulators seek a more standardized approach, Doherty said. Community banks not yet subject to the new standard should have looked at the available historical data in their core system and begun considering it in light of macro-economic trends, he said. The new standards also require the creation of risk pools into which loans will be sorted. Whether community banks choose and in-house or vendor solution, they’ll need to look at the correlation between economic data and loan performance data. Depending on what that correlation shows, bankers will need to adjust their reserves accordingly. Some banks either haven’t collected adequate historical data or the data they have in their core system might be outdated, and they’ll need to rectify those gaps as implementation approaches next year. Examiners will be asking preliminary questions with some leeway this year about bankers’ plans for CECL implementation, Doherty said, but must be prepared for those questions to become more stringent a year from now. In response to customer demand and regulator support, the Asset Management Group has created its own CECL calculator that incorporates multiple models and varieties of calculations that bankers can use to more fully analyze and compare projections. The group’s goal was to create a tool that grows with its bank users, adaptable to changing situations and transparent about how it works, Doherty said.

Finding new sources of loans can require a bank to examine markets it hadn’t yet considered

Finding new sources of loans can require a bank to examine markets it hadn’t yet considered [https://bankbeat.biz/quicktakes-melissa-marsal-and-justin-fischer/], as Melissa Marsal, executive vice president and chief operating officer, West Town Bank & Trust in Raleigh, N.C., tells BankBeat publisher Tom Bengtson. Marsal describes how her bank partnered with RiskScout [https://www.riskscout.com/] to identify and work with the hemp industry, examining risk profiles, implementing necessary compliance changes and using tech to scale rapidly without needing to create an entire program from scratch. “It’s a unique source of loan growth … which gives us an incredible deposit base,” she said. Justin Fischer, co-founder and CEO of RiskScout, explains how he started the fintech to eliminate inefficiencies and fill a growing niche in banks working with marijuana, crypto or other emerging industries. Fischer, a fourth-generation farmer, has a personal connection to the issues: his father is starting to grow hemp at his farm in south Texas, causing friction in a 30-year banking relationship. Fischer leveraged his fintech experience to help banks identify their risk appetite, whatever the industry, and build out a program to help West Town Bank take advantage of the opportunities present in the new industry. “By the time we got done, we looked at each other and we said, ‘Although this is deemed high risk, this is really not that high risk. We can mitigate this risk,'” Marsal said.