An updated “simplified” tool for calculating current expected credit losses (CECL) at smaller credit unions was released Wednesday by their federal regulator, the agency said.
The National Credit Union Administration (NCUA) said its Simplified CECL Tool contains the latest “life-of-loan” factors (also known as the weighted average remaining maturity) factors. The update also includes the average three-year net charge-off rates (2022 to 2024) for each of the 13 loan portfolio categories, which in turn allows estimating credit losses for each loan portfolio category, NCUA said.
“For credit unions currently using the Simplified CECL Tool, the March 2025 release is provided to facilitate calculating the credit loss expense—or provision for credit losses—for the period ending March 31, 2025,” the agency said in a release.
According to the agency, the tool was developed mostly for small and “non-complex credit unions” (or those having assets of less than $500 million). It is intended to be used, the agency said, as an option for estimating the allowance for credit losses on loans and leases.
“Credit unions with assets of less than $10 million may also consider using the Simplified CECL Tool, as it could provide a more accurate measure of credit losses and serve as an additional tool for loan portfolio management,” NCUA said.
The agency typically updates the tool twice a year: in March and September.