Case Study: HomeStreet Bank achieves CECL readiness and confident capital forecasting with Abrigo

HomeStreet Bank and Abrigo (formerly MST) team up for phase one of the bank’s CECL transition initiative

HomeStreet Bank engaged Abrigo to guide its transition to the CECL accounting standard after the 2016 Guidance. Facing a move from an incurred-loss to a life-of-loan expected-loss model, HomeStreet — which had automated its allowance process with the MST Loan Loss Analyzer platform — lacked long historical loss data for some pools and needed timely answers for capital forecasting, pooling, methodology selection, and Q-factor determination. Abrigo Advisory Services was retained to provide third-party expertise and validation.

Abrigo implemented its CECL Blueprint: assessing HomeStreet’s data, redefining pool structures, applying a PD/LGD methodology with loss-function curves to fill data gaps, calculating weighted-average loan lives, and improving Q‑factor ranges using Abrigo’s Loan Loss Analyzer and MST Shadow Loss Analysis. The work completed phase one, positioned HomeStreet to run parallel incurred vs. CECL estimates to quantify the allowance impact, and gave management the information needed to forecast capital (HomeStreet expects an increased reserve and plans to defer adoption until 2020), demonstrating Abrigo’s measurable support in preparing the bank for CECL.

HomeStreet Bank

Pam Molvar

HomeStreet Bank