CECL: A New Era of Credit Loss Estimation 

The Current Expected Credit Loss (CECL) standard represents one of the most significant changes to bank accounting in decades. Unlike the incurred loss model, CECL requires forward-looking estimates that incorporate a wide range of data, assumptions, and economic forecasts. 

For many community banks, this has created challenges in both process and documentation. Without clear, defensible support, credit loss estimates can be vulnerable to examiner criticism or audit findings. 

Best practices for CECL compliance include: 

• Document assumptions clearly – Provide rationale for every model input, overlay, and qualitative adjustment. 

• Incorporate peer benchmarks – Validate reasonableness against industry trends and similar institutions. 

• Prepare for examiner and auditor reviews – Proactive documentation reduces surprises during regulatory exams and year-end audits. 

Done well, CECL documentation is not just a compliance requirement. It strengthens the accuracy of financial reporting and equips management with better data for strategic decisions. 

ICFR: Building Governance and Trust 

Internal Control over Financial Reporting (ICFR) is another cornerstone of strong governance. Reliable controls ensure financial statements are accurate and transparent, critical for maintaining the trust of regulators, investors, and board members. 

Steps to strengthen ICFR include: 

• Map reporting risks to controls – Connect risks directly to documented control activities. 

• Develop narratives, flowcharts, and matrices – Clearly demonstrate design and operating effectiveness. 

• Test regularly – Go beyond annual reviews with ongoing effectiveness testing and remediation. 

Effective ICFR documentation does more than satisfy FDICIA and SOX 404 requirements. It improves audit quality, reduces the likelihood of repeat findings, and builds confidence in leadership decisions. For banks considering mergers, acquisitions, or capital raises, strong ICFR can directly influence valuation. 

The Bottom Line 

Investing in CECL and ICFR documentation is not about checking boxes—it is about building resilience, protecting credibility, and positioning your bank for growth. 

YHB’s Financial Services Team helps community and regional banks strengthen CECL documentation and ICFR compliance. With decades of experience, regulatory insight, and proven methodology, we deliver practical solutions that stand up to examiners and support long-term success.