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If the spot is really bad, you can cut it out with a saw, and replace with doweled and glued good wood. Since you're painting, a carefully done job of this shouldn't even be visible.


What you have is a system called EIFS for short. Here is a link to get to the care and repair of this type of finish. Sto Exterior Insulation and Finish Systems (EIFS) Manuals: StoTherm EIFS Repair and Maintenance Guide


Dig out any rotted wood that you can get to. Soak the wood with wood hardener around the patch area to stabilize the rotted/deteriorated wood that you couldn't get to. Fill with bondo or wood filler in 1/4" layers until slightly bulging from the patch area. Chisel/file/sand down when the final layer is almost completely dry with a sanding block. Prime ...


Best way is to find some more of the same (or similar) material, clean out or expand the hole to make it easy to patch, cut the new material to match and glue it in. Caulk if necessary and paint to match.

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