Simplified CECL Tool for Small Credit Unions


In a Letter to Credit Unions (22-CU-10), the National Credit Union Administration (NCUA) is providing a tool to assist small credit unions with determining their allowance for credit losses (ACL) on loans and leases as required under Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses, commonly referred to as Current Expected Credit Loss (CECL). The Simplified CECL Tool is designed for credit unions with less than $100 million in assets.The CECL Tool and its supporting documentation are available on the CECL Resources page at

The CECL Tool is one of many options available to calculate the ACL for loans and leases under the requirements of the CECL accounting standard. While credit unions may choose from a variety of credit loss models under CECL (for example, expected loss, discounted cash flow, roll-rate, probability of default), the CECL Tool uses the Weighted Average Remaining Maturity (WARM) methodology.

The CECL Tool calculates the ACL for a loan portfolio category by multiplying the period-end loan portfolio balance, the average annual charge-off rate, and the WARM factor. Loan portfolio categories parallel those in the NCUA Call Report. The CECL Tool also provides the related WARM factor derived from loan-level data of like-sized credit unions and vetted to provide a relevant factor for each loan portfolio category.

Within the CECL Tool, individual credit unions should adjust the charge-off rate and the WARM factor using qualitative factors. This allows each credit union to refine the values to its specific circumstances, including current conditions and reasonable and supportable forecasts.

The CECL Tool’s data will be updated for each quarter-end, beginning Sept. 30, 2022, to provide updated WARM factors that reflect current market conditions.

To assist credit unions and their auditors in reviewing the CECL Tool, please see the Frequently Asked Questions and the Model Development documents. These documents provide the rationale, assumptions, and other analyses that support the tool’s use for calculating the allowance for credit losses on loans and leases.


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