Posted By: jaymclaw


What are your thoughts on loan maturities and the upcoming CECL model? Is it safe to assume that a 25 year maturity loan will carry more reserves than a 5 year maturity loan? Does it make sense to have shorter or longer maturities to reduce the initial impact of implementation? What about after implementation?

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Rob Ashbaugh

I want to be careful not to speculate because we have not seen the final language, but in theory, because CECL will be a life of loan calculation, a 25 year loan could have a higher reserve than a five year loan. There could also be situations where the five year loan could still take higher reserves given exposure to things like business cycles related to their industry. Because the phase in period may be a few years long, I would caution against doing anything today without seeing the new regulations, which should be any month now.

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