CECL doesn’t have to stress you out. The Level1 model makes CECL easy, allowing for WARM and Roll-Rate methods in calculating your Allowance for Credit Losses (ACL).

Loss Rate (WARM method):

Based on historical losses adjusted for expected changes in credit quality over the Weighted Average Remaining Maturity (WARM) of the loans.

PD/LGD/EAD (Roll-Rate method):

L1A's proprietary migration model calculates:

• The Probability of each loan defaulting (PD)
  The Loss Given such a Default (LD) at the Expected Time of Default (EAD)
  The product of PD x LGD is the expected loss on each loan

All loss estimates are done at the loan level and are based on monthly cash flows. It’s never too early to consider how you’ll tackle CECL this year: start now on your implementation of ASC-326, and avoid stress down the road.