Unraveling the CECL Guidelines and a Practical Approach to Adoption

We're not going to go back to a lot of the basics, we'll do it at a high level for those who are familiar with it, it won't take much time and for those who aren't as familiar, it will help give you some context. then we'll talk a little bit about how your institutions will be affected by this change, a little bit about the calculation methodologies involved and the data requirements to support this new rule, we'll talk a little bit more also about the disclosures that are It will be something that all institutions will have to do and then conclude with what you and your institution should do now to prepare the um art morph intellic solutions.

I'm the CEO as Austin introduced us to and Sunny is the COO. Um Ardore Bank Advisors and Felic Solutions joined as partners early last year to provide solutions to the small institution market here in the US and Ardore Bank Advisors has been involved to help smaller financial institutions with credit risk data . and policy issues for 25 years and Felic Solutions has been developing offshore banking compliance solutions for the last 10 years, so we believe that the combination of the two of us provides a real opportunity to smaller institutions that want a more

approach

. or less turnkey to uh, solve compliance problems using technology, uh, but we also need someone who really understands the local core systems, the accounting systems and the data sources that you use, so that's what we represent and we are excited to work with an

approach

to provide our solutions to the banks that use their services, so just to start and Sunny will make comments as she thinks they are necessary, she usually corrects me when I'm wrong so she has a role here, but I'll walk you through this, basically.

Cecil was created to address the issue of the fact that in the previous economic crisis, as I'm sure you know, the amount of reserves was less than the amount of losses, so when we look back and base all our reserves on what happened in the past, we were underreserved for what actually happened because looking back we didn't see problems in the past, so we applied that model to the future and then we were similarly underreserved in the second scenario described here. We are too reserved now because when we look back at those losses, although the economy has now recovered and our credit levels have improved, we are still reserving for the bigger problems of the past, so this delay has created a need to address more proactive measures around the Reserve and that's really the crux of the matter, so Cecil um Cil means current expected credit loss, which is almost kind of an oxymoron in itself for how you can stay up to date and be expected at the same time, but the idea is to be proactive and try to more appropriately link reserves to actual loss cycles and it is based on this idea of ​​LOL, which means in our case, credit loss useful life, so LOL It's not what you think it is, at least not with Cecil, the idea.

Here is that you are going to project losses over the life of the loan when you purchase the loan, so this assumption applies to Consumer and Commercial Auto Direct. um, you know, any type of loan that is made in an advertised way is involved and under this new rule the institution will have to say when they reserve this credit what is the duration of the credit loss that I expect and this credit loss projection has to incorporate reasonably sustainable economic projections of the future and that are reasonably bearable is in quotes because it is not defined and one of the things that you will find as we spend the next 40 minutes talking about this is that there is an enormous amount of subjectivity in the rule, there is flexibility , which means that the institution can choose various options and how they want to reserve, but on the other hand, it has to meet the requirements of regulators, it has to meet the requirements of auditors and external accounting firms that analyze how your student, how do you make a reasonably sustainable economic projection, that's something that institutions are trying to deal with now, some larger institutions, and I mean really large ones, having to deal with downright stress testing or even with SEC rulings, which are the largest financial institutions, they have already developed methods to make correlations of past losses with economic cycles, uh, that is one of the ways you can do it, however, just as I said, it is not The only way is just one of the ways that the useful life of the loan and current expected credit loss projections are necessarily the same. and I'll explain to you that the next concept we really want to talk about is that you know what's in and what's out, so for your institutions, depending on their size and complexity, this may or may not apply as much to you, but basically amortizing the cost basis, one of the values ​​of the new rule was to bring all of that under one rule, so you can see there are some exclusions, whether or not they apply to your institution, you know you don't have to , but basically everything that is in the advertised cost is considered part of the solution, and just to add to that, there are a couple of other things that the

guidelines

cover besides finance receivable, since, as the

guidelines

call it , makes changes to the way we provision AFS values.

So that part of how we do sourcing is modified, secondly, it also makes substantial changes to the way we do PCI accounting today, so for those of you who are involved with AFS or credit impediments purchase, there are parts of the guidelines that change them significantly as well, thank you, so you probably know the timeline, for SEC filers, it's 2019 for unauthorized filers, smaller institutions, 2020, and then it starts to deal with interim periods for private institutions and the like. um there's an opportunity for early

adoption

, it's probably not something that the institutions that are on the phone here are that interested in, but if you wanted to, you could actually adopt Cecil's guidelines early, so let's talk about the financial impact of this in your institution. um the loss curve is very important and I know that for many of you, um, who don't have a lot of business loans, this may or may not apply as much or you may not be as familiar with this, but the current loss, uh The amount that is placed in reserves based on the incurred loss model that we follow today represents basically four quarters of loss based on what you see in your portfolio, so in this graph it could represent the green bar below the life of the loan loss from Cecil, depending on where the loan is located. is in the cycle, that is the amount you will have to provision for, so for example, if you are on the left side of the curve, meaning the portfolio is largely full of U new loans, you have much longer useful life. you have to calculate loan loss, whereas if you're at the other end of the curve and have a very seasoned loan book then you'll have a lot less to provision for, in any case it's pretty obvious if you look at the yellow versus the green you're going to have more provisions than you have today, that's why we so often hear about big increases of 20 to 50% of potential in reserves, the way the loan is written, the way the rule is written Excuse me, there is a one-time hit to your capital that will be effective only the first time you reserve, so this is very important because institutions are encouraged to do their capital management with a generally minimum view of four quarters , if not with a Nine Quarter View, so it will be important for all institutions to be able to estimate what the capital impact of this one-time impact will be when changing from the single methodology for calculating their reserves to another, so as we speak a a little bit later on the timelines, it's It's important that institutions today start thinking about this because they really need to know for 2019 what the minimum capital will be that it will reach, um also if it's in acquisition mode and I think I just read about a uh in the American Banker of all places about a credit union that is looking to try to buy a Savings Bank, or if you are simply working internally within your institutions, you need to give some thought to the fact that now, if you acquire a portfolio of unseasoned loans, that is, it is going to have a much greater impact on your capital than if you acquire a portfolio, whether through the acquisition of another institution or simply bringing in new lenders to add to your loan pool, it has an impact on your strategy.

There is also some confusion in the financial services industry about exactly how difficult it will be to do this. We see people at the FED suggesting that this is going to be really difficult. And the FED has already held webinars where they talk about some of the more complex topics. methodologies that can be used, on the contrary, the FDIC actually made a statement a couple of months ago that this should not have a big impact on you, that you can pretty much use what you do today, so there is confusion in the industry. and it's understandable and I might add that I was at the risk management association annual conference last time about two weeks ago and the FDIC representative there said two things that left everyone looking at each other, he said that we in the FDIC believes that for a time smaller institution, it is very likely that it will be able to use its current lending structures and processes to support Cecil.

SC is available, but you need to start preparing now because it's a big change, so we all look at each other. Well wait a minute if it's the Same as Now, so what does a big change look like and how do we prepare? There is definitely confusion in the industry and we are going to try to give you our opinion. We did a cost-benefit study last year. the new guidelines and we presented the results of that study to the OC team, the OC chief economist was also present during our analysis presentation and I don't know what you took away from that discussion, but my feeling was The reality will probably be somewhere in the middle between people saying this is a minimal change compared to people saying all H is going to be dropped, so we'll see as the guidelines and their interpretations evolve. a period of time, but in all likelihood the reality will probably be somewhere in between, with institutions that start preparing early and have a definite advantage.

Yeah, I think from what we've seen, it's not like the sky is falling and everyone is going to have to do it. Heck, shell out, you know, $50,000 to buy a system, but on the other hand, it's not going to be as simple as just doing what you're doing now and adding a professional projection at the end. One of the advantages of the on approach is that if you're working with to get closer to your data, which is what's really key to all of this, that's what we're going to talk about for the next 10 minutes or so, it will already be in a place in a Sea of ​​data, excuse me, a data warehouse, um. in a focus that can then be leveraged to do these calculations, if it's not a focus client then you'll have to build your own data warehouse, your own data mart to feed into Cecil, so either way it will be a change.

Whether it will be a wholesale change that will cost you a lot of money over time or whether it will be an adjustment with some additional data management will largely be determined on an institution-by-institution basis. I agree, okay, so uh. One of the things the rule says is that an institution has to consider all the relevant information available when making its loss projections, so that includes what is happening in its portfolio today, what happened in the past and what is a reasonable and sustainable forecast. could include external information internal information uh there are some statements in the rule that may not require you to go out and find something that is not quote unquote reasonably available how is that to find I don't know um and that you may find that you do have the information that you need. , but it has to be tailored to the current specifics of the assets and other things we're going to talk about, so it's a data-intensive process and we think the impact will be big on institutions that will be asked to change the way they that pool their assets and we've already heard from, for example, KPMG, a third-party auditor used by many community banks, saying that they fully expect their banks to start being more risk-oriented in their pooling structure not just through you you know any kind of call codes or regulatory coding that they need to do risk characteristic management, so what are those risk characteristics that you need to worry about now and that you need to worry about in the future? from the beginning, from therule says you should consider adjusting your historical credit loss, which is where you start making your projections to account for borrowers' financial characteristics.

You can see some of the items here. credit rating credit score um you know uh, because of the particular type of asset and this would be looking at your set of, let's say, direct or indirect or other consumer commercial or retail loans and looking at the characteristics of how the asset performs over the time, including advance payments, something you may not be worried about. about now, but under this rule it wouldn't make much sense if you have a 15-year mortgage. Doing a 15-year loss projection when there are prepayments, it's actually an average of nine years, so if you can demonstrate that.

If you have prepayments whose weighted average age, say, of the asset is not, then you can make a projection of nine years instead of 15, so there are things to think about besides the Q factors or the qualitative factors. The factors that should included could extend to the processes, procedures and standards of institutions, as well as environmental factors, and this would have to take into account projections of what could happen to the economy, based on the best information available and taking into account everything counts. All this has to be audited. All this will be analyzed by regulators when it does not have a sustainable forecast.

You're supposed to forecast as much as you can and then go back to your typical credit loss or term. There will be no further adjustments to that historical loss rate, so the problem for some institutions, of course, is that they have not retained loss rate information over the life of the multi-year term loans, where do they go from there? to obtain that data? uh, in the rule it says maybe you're going to look at other peer entities that have similar assets, maybe you're going to buy an external third party database of loss information, um, there's a lot of different ways, and again, as we mentioned this.

It's actually up to the institution how they want to do it, so with that in mind, let's also take a look at the type of calculations that need to be done so the typical institution process is to first review their pool to see if they are incorporating risk characteristics. in the way they structure their credit loss reserve funds, so if your institution is very basic, has very homogeneous asset types and small volumes, you may not have to change your funds at all, unless your auditors tell you so. you say that's what they believe is the spirit of the rule and they want to see you do it, that's the kind of comments we've been seeing from some of the accounting firms now, but the first thing you need to do is look at your funds and decide whether they really reflect the risk sufficiently.

You then need to calculate your historical loss rates, which could be loss rates or probability of default, depending on how you want to measure your losses. with a reasonable and sustainable forecast for these assets and groups and, um, incorporate them into the loss rates or create adjustment factors in your a l to reflect that and then once the reasonable and sustainable forecast period has passed, go back to their loss rates for the unavailable. uh information so that's a high level what you're going to need to do and again if you have questions please fill out your questions panel uh and we'll try to address them at the end of the discussion a couple of times. comments I just wanted to add in regards to the groups.

I think one of the things to keep in mind is the granularity of those groups, so if you think you have a relatively homogenous portfolio, how much do you want to segregate? that's also a question that I think would require some attention, it may not be the case as of now, but in the future you may need to take a look at it, that's one part, one second, I think I think in as far as the forecasts are concerned, we have many sources that are available even today, you can check the report that the local feds give, even the C car scenarios that come from the feds, they also have projections, so you can trust some of these. projections when it comes to your sustainable forecast, of course, the hard part is how to match your losses to those forecasts and that's something your institution obviously has to do itself and we'll talk about data sources in a minute. about some data sources that institutions can use just to give you an idea about the calculations.

I'm not going to go into this in depth. I'm not an accountant. I can't even account for myself. I'm not going to give an account of their institution, but you can see here the current methodologies, historical loss rate and migration are the ones used today, in addition to those, four other types of loss calculations are considered acceptable in the rule with their examples. I encourage you. to read it is a long rule, maybe you read a little and get to the end where they give examples, but it is important that you do that too. The FED released an attached document summarizing what I think are the key things you might want to take a look at.

I think it's probably helpful to know that the standard was written with winage analysis in mind as the approach many financial institutions would prefer, so when you read the standard, if you do, it might be helpful to know that it was written with winage analysis in mind. vage analysis is the preferred approach. As we go along we'll also talk about disclosures and you'll see that even the new additions in them are in way based on the analysis of Vintage itself, correct harvesting is something that was clearly intended to be a way to do this more easily by adding data by date of origin, however the feedback we've been getting from the industry is that I'm probably not going to go classic because it's quite different from what they do today, but we'll see, here's an example of a very quick calculation, these These are all the calculations that we are going to do on this call and that's it.

If you see on the left side in gray, the current and current loss of a group could be calculated this way, and you could see the call code perhaps or a regulatory code listed in the group balance. eight years and for each year there is an annual loss amount. So based on that, you can see that a calculation is done to create an annual loss rate for the pool and you can see the way we do it now if we go to make an incurred loss model based on the loss rate, we would take the average loss rate over that 8 year period which is in this Cas. 29% uh uh we would also add Q factors for any current Uh factors that you have to consider, which would be things like changes in banking policy, the current economic environment, a combined portfolio regulatory environment, so you could start with a 0. 29 for the pool based on the average of those eight years and then add a summary Q factor of 0.50 uh for all of these different factors, come up with 0 79, multiply that by the pool uh balance in 2020 and you get $23,000 in reserves now under Cecil on the right side in yellow um in this case you're going to summarize all the losses over the eight year term of the loan and that's not the average, it's the sum of everything and that's obviously much higher. percentage than 0.29, comes to 1.43 um, in addition, these projections must be added in which there are additional Q factors or group loss factors that would be forecasts that reflect economic measures such as unemployment in the real estate sector that could arise. with more like 1.76, when you multiply by the fund balance you can see that it's more than double what the other calculation is, so now this is just representative, it's not necessarily the only way to do it, but we think that It might be useful to get some insight, do you think Peter?

This might be a preferred approach for many smaller institutes, perhaps simpler, it's simpler in what they already do. However, you have to add not only the credit loss life, but also the projections. Just like that, uh, let's put it this way. I think it will vary depending on the institution's portfolio mix. I'm also showing a vintage analysis here if you're not familiar with vintage, the idea here is to take credits that have a similar asset risk characteristic and group them by year of origin and then make projections that are represented in pink for what you don't have. over the life of the loan loss and then create the totals and create a crop by crop. pool the advantage of this is probably fewer pools at least because you don't have to divide it by all kinds of different asset characteristics because the idea here is that the year of origination depends on the economic situation and we talked a little bit about things. to consider which ones include uh advance payments um and you know that judgment will have to be applied um as the institution looks at what the options are if you want to know more about vintage and you want to understand more about the bundling process um you can contact us, we can talk to you about it, so let's talk about data requirements.

This is very important, especially for smaller institutions that probably don't track much data for any particular reason these days, other than perhaps internal reporting and rallies. You will need internal data and by internal data I mean we are typically looking at loan origination information. This information could be in your credit notes. It could be in your credit information extraction. Credit scores. Experian beon information that speaks. about the Char risk characteristics of the borrower and the risk characteristics of the assets, so a lot of this data is not currently stored in central systems or across multiple institutions, so we have a list of all the items that we believe that might be needed, but right now there's no recipe that says this is definitely what you're going to need, so, but we think this is the kind of information, if you're not storing it now, you need to store it, and in many cases it is like that.

It's difficult if you are using one of the less complex core systems, there may not be places to put it. Additionally, you may find it difficult to obtain historical information, which is why we believe it is very important that you begin to establish your own credit brand. which is simply a place to store this information along with balances, with monthly snapshots, you may need to look at historical loss data in ways you haven't seen before, this would typically be if you are suffering a loss grid. Book now using historical loss rate What are the groups? What are the rates?

You may need to go into greater granularity or detail because you may be asked to analyze specific credits and what their risk characteristics are when they failed, so you can see how this could be difficult. We know a lot of institutions that keep this information in spreadsheets because they only have three or four credits that maybe have gone wrong in the last five years, so it's important to understand that that's really the basis. For many Cecils, you may need some transactional data. By that we mean that it may be that certain things like prepayments and trades are not stored in the core, in a monthly snapshot, in which case needing to pull them out of some sort of daily feed is probably not a big deal for the population of people who They are here on the phone.

Larger institutions may face more challenges this way, but you also have to worry about external data, um, if you're going to be making loss projections, linking them and justifying them based on economic performance over time, then you're going to have to be able to produce empirical data that supports your assumptions about your loss projections and these are the kinds of things you may need now. This information is usually free and available. One of the things that the Armor Felic solution will include is that a lot of this data will be integrated into our solution so that you can pull this publicly available U data directly into your calculations instead of having to go out and find it.

This is one of the reasons why, for example, you may decide that working on a spreadsheet is not going to be enough because not only do I have to make all these groups and have all this justification with these risk characteristics and test different scenarios, but I have to get this external data, it could be a lot of number crunching trying to do it in Excel, even if you have fairly homogeneous groups and again with projections. you might want to use um Sunny reference the DODF Frank stress test project fictional information that's available at the FED um you might want to take advantage of that, I mean, it makes sense to say well, if the government is. producing, you might want to use it uh but we also know that the government has been pretty bad at projecting what's going to happen, they've been saying that interest rates are going to go up for the last five years, so we'll see that the audit would be easy, although if Reserve projections were usedFederal, I think it would help with the audit, yes, it would, unless the auditors say, well, guess what those projections are at the national level?

I'd like to see something that reflects your local market more appropriately, local food is probably the way to go, so a few questions. What you need to think about here is whether you have an internal central accounting system with all this data or are you using a hosted solution. How much history is there? You may want to contact your provider and tell them you know how. Can I access my data? How much did you save for me online? How many backups do you have? If they are not available, is it something they have archived somewhere? For many major providers, they can keep, for example, maybe two. two or three years online and then archive the rest.

This is something you're going to need to know. And you have to consider where you want to store this data. Can you store them all in your central accounting system? have a data warehouse or data marts where you can capture this. One of the things we learned from doing that cost-benefit study that Sunny referenced was that the course will charge you, they will charge you a lot, so if you don't take control. of your data yourself, then you're constantly going back and asking them for files that they're going to charge you for, so you have to really think about how you want to develop this to some extent for a smaller institution.

That's not very complex. The data warehouse could be something like an internal Data Mart that is quite simple and inexpensive to maintain. There are also tools today for hosted Data Marts, which means you don't even need to have the database in your store. Our program, for example, also has a hosted data center. And again I mentioned write-off and recovery data is usually kept in spreadsheets. We talk about the impact of acquiring a portfolio, I think sometimes. Institutions forget when making an acquisition that closed-end loans will also be needed over time, over and over again. Data integrity.

How accessible is historical? If you come back if you are going to change your groups, how does that affect the history? data if you have to have a new methodology and again there will be costs in the budget for this so it's something to think about now as well just to touch on the disclosures, they are going to change and become more difficult to manage just by nature. of the fact that now we are doing, we are actually looking at the underwriting or the decision of the loans because they are going to affect, they are going to have an impact on the cancellations, excuse me, on the initial deed.

The disadvantages are like this, for example, if you're making a decision based on some automated process, your auditors can look at this and say, well, you decide to put this loan in this group that directly impacts your capital because it impacts your provision. Can you justify it? and disclose why you decided this way so you can see here on the screen some examples of disclosure guidelines that are required. We know that enhanced disclosures will be required because one of the reasons this rule was created was that the agencies, the government felt that during the economic downturn there was not enough information available to an investor about what exactly was happening within credit management. from the bank, so many of these disclosures are intended to show more transparency in your credit performance. processes and the performance of your assets, so you need to show much more on a regular basis.

Here is an example of an advertised cost basis. Broken down by year of origin. This is taken directly from the guide itself. Must show five years. of performance and balances broken down by risk grades, for a consumer, you need to be able to create risk grades to be able to show this type of granularity, for example, you can use a combination of delinquency status and credit score to create these types of breakdowns , but they have to be based on risk characteristics displayed over a five-year period. I just wanted to quickly add here that for this disclosure that is broken down by vintage, there are for the institutes that are not publicly traded.

You don't have to do this from day one, you can slowly transition over a period of time to all of these five years, so you start with the data you have and over a period of time build up the five-year right of disclosure of privately. you can do it for three years and then add the fourth and add the fifth here's another example here's an example of P du you can see the consumer split it into credit cards and other residential automobiles um and this has already happened again this is the guy of things so there will be a lot more of this in the pipeline, it would certainly be easier if you had an automated solution that generates these things, but it doesn't prohibit you from doing it by hand if that's the way the institution wants to go. so let's wrap it up let's talk for a few minutes about what you should do now and what you should do next year M because you know 2020 is really right around the corner and there are some considerations that you should make that everyone should make.

Think of um as a small institution, like most of you, uh, it's important that there be communication about what's going on with Cecil, so we highly recommend, as a first step, that you meet with key areas of the bank or the consumer. Credit Union who are affected by this and have some communication about how Cecil is going to impact it. We've already talked about data, so we know that your IT groups or your My groups will be responsible for helping you gather the information you need. I need that and it includes reporting and data storage and the core.

We also know that credit people will be involved. We also know that the people who originate loans will be involved because their strategies may change depending on the way they uh. Cecil Works obviously has finances involved, so you need an interdisciplinary team, even if in your institution people play many roles, there is still more than one person responsible for this and how it affects the institution, so from the point of view From a data perspective, you know five years of data, so you know you really needed to start collecting data in 2015. You may have to reconstruct some of this.

Most of your cores don't have more than 13 months of monthly snapshots, so you'll have to start thinking about that, in addition to prepayments and peer data recoveries, it's another thing we're aiming to have in our version of Cecil . In fact, we already have a pilot of this where you have the ability within the product to create peer data so you can fill in the gaps. uh for information that you don't have on losses Capital considerations, we talked about the fact that you know 20 20, you need to know in January 2020 what the capital impact is going to be because it needs to be written off, you don't want to try.

To find that out in 2019, right before it happens, you need to know that way in advance, so you really need to start thinking about the impact of capital and, you know, the people involved in the bank that can help and, again, the biggest of the big problems. it's really the audit and how the auditors are going to require more information, more detail, more justification behind how you're making your estimates, including what we call Q factors or those qualitative factors, they're also going to look at the underwriting. process as I mentioned before in more detail, so if you have a very informal underwriting process or decision process about your credits and it's not very documented, well, and the criteria for why you would choose to qualify or categorize a loan by risk characteristic, We recommend that you start documenting those procedures and processes from any origination or decision-making process so that you are ready to explain to auditors and the like what you are doing and what you can be doing now and what you should be doing now?

Right now, really the areas for banks in early 2017, we think credit unions as well, basically any financial institution that's smaller than the billion doll line for the DOD Frank, are you really? You have to take a look at your credit data and make an assessment of what you have, what your gaps are and what you need to do to prepare yourself for a happy life. We provide that service for institutions. We've done it for about a dozen so far. where we come for two days, we take a look at your origination process and decision-making process from the moment the request is approved to what data flows into your corporate accounting system and then where it goes next for reporting and analysis and how supports not only Cecil but also other more proactive risk management practices that agencies are looking for institutions to undertake, so right now is a good time, if you haven't already, to start looking at your risk creation processes. information about the risk characteristics of the things that we listed earlier in the presentation and where and who owns it, who verifies it, who makes sure that it is robust and consistent and that the criteria for assigning these codes are actually being managed, look some of the solutions that are being implemented. to be available in the market today, we have ours, there are others available, you should start thinking about what the impact will be for data storage for the cost of a solution automation solution and start correcting your data, so that once you identify your What we do is put together a roadmap basically that says you know from an industry perspective.

This is where you should look. This is where it rates compared to typical institutions. Here are some areas we think you can address in the short term and listen to some in the long term. concerns so that by mid-2017 you can start looking at possible automation alternatives, instead of trying to do this by hand, maybe look for solutions like ours on the market, so that by 2018 you can start running parallel runs with calculations of Cecil, as well as your current calculation, you cannot go early or relax at Cecil, you must continue with your current process and then make a change, which is where the Capital hit occurs, so you really want to do it in 2019 in the lo The last thing you want to do is make adjustments, you don't want to be in the process of trying to figure out how to do it, so it may seem like a long road, but it's actually not that far away until 2020 if you think about it. the steps you have to take and you know it makes sense to start now and that's why, for example, the regulator said that in the risk management association it's a small adjustment to what you're doing today, obviously it varies depending on the amount of providing you the amount of information you need.

Also, this is more of a marathon than a sprint, so we'll learn things as we go, find out where your resources will be, for example, felic armor, uh, working. With On Approach, we will be doing a series of educational webinars as new regulations are released and new requirements coming out of uh Auditors. We will be able to send that information to On Approach clients and our morph intellic make sure you are up to date on what the regulators want and what the auditors want. Another thing to think about before closing here is that there really is some advantage to doing all this other than simply meeting the requirements.

Cecil requirements and that is, let's face it, today for most smaller institutions there hasn't been a lot of focus on data management and saving this information and using it will require a lot of cleaning so that I know it makes sense to start evaluate what you have and set your goals, identify where your gaps are and then really try to get to a long-term goal state of having a version of the truth that you can use for Cecil and if you want to stress test, you can use it for regulatory board reporting, so our real view is that you know, create the data once and use it in as many ways as possible, so why not use it in data structure approaches?

They can help. they exclude you because they have already created a data flag with all the fields required or that we understand today and you can start sending them your data, which becomes a receptacle of historical data that is backed up, auditable, stored, and then can hang. applications that, in the approach as partners, like arm morph intellic for all of us, we also have a stress testing program so that, again, this data is used again and again and becomes your source of truth, so which to conclude, shameless self-promotion. Here and then we can answer some questions.

What we can do to help you is if you are interested in a data assessment and you don't think you have the internal resources to do this at this time. We recognize it. It's a little difficult to change tires on a car that's moving down the road like most of you. um, we can do that assessment for you. It's a two-day on-site visit and then we write you areport. um, we've done it. This is often welcomed by the banks we do because they find the reports we create easy to understand and really helps align with what agencies expect in the future.

We can do that. We also have a software package hosted in the Credit Portfolio Management Suite that will work off of the focus data structure and includes portfolio stress testing, not the complicated DODF Frank ones, but the kind regulators want us to do. small institutions do, in addition to analysis and portfolio. and report for the concentration on the board uh and uh the uh and the management I guess I should say for you and U also the Reserve with the calculations ready from Cecil so that we see the financial institution taking their credit data sources pumping them to come closer to your um data mart, excuse me, to your data warehouse and then we would take specific information from that for the data flags that are needed for a Cecil stress test and deliver it to you through our application through reports and dashboards. control, um our application is a workflow based approach, you can have one person who does it from start to finish, you can have a manager who has to approve it, it is considered one of the simplest and easiest programs to use because it It guides you through the process in a logical way, and helps automate the heavy lifting and we use a sort of dashboard approach which is what you see here.

If you are interested in this, please contact the focus people we will be. We'd love to talk to you in more detail about how. This works and at this point I guess I would hand it over to Austin if there are any questions from the audience and people on the call. Yes, thanks Peter and Sunny. It was very educational. The only question we have. I've got today so far anyway, and feel free to log in for more questions if you have any. Will we receive a handout of this presentation so you can provide the PowerPoint? Absolutely, absolutely, you can contact us, here, these are our email addresses or you can contact us.

You know the people who will contact us and we can send this to them. Great, and we'll also send you a thank you email after this. all the attendees who joined here today and in that we will include uh that PowerPoint presentation as well as a link to the recording of this webinar, so with that I don't think we have any additional questions, but after that comes an email from Thanks, although I think a question might have arisen. and you know we're available to do some webinars. If, for example, you think this information is important for your management to understand and you would like us to do so, we can get a group together and do a similar webinar. to this with maybe a little more detail where we can show you examples of the types of solutions that are available today.

Thank you if there are any other questions about Armor Intellic from Sunny and I, we appreciate your time and attention. In approach, thank you. again for your support and we look forward to working with you uh really with the entire community here great yeah thank you both thank you all for coming and like I said we'll be sending out a thank you email shortly after this. If you guys come up with any additional questions that you couldn't think of during this webinar, it's a good opportunity to ask those questions and we can pass them on to Peter and Sunny, if not. belong to some that we could handle on our own, so oh, another question might have come up here oh no, just a thank you, okay, so with that, you know, thanks again, thanks everyone, have a good rest of the week and good rest of your day.

Okay, yes, thank you.