CECL Group Maintenance

System Management System Management CECL Group Maintenance

This document provides comprehensive technical guidance for users managing CECL (Current Expected Credit Loss) Group Maintenance within the FLEX system. The FLEX CECL program assists in calculating the required manual adjustments to the General Ledger.

Overview

The FLEX CECL program:

  • Calculates the amount or percentage that needs to be manually moved in the General Ledger.
  • Exclusions: Does not include third-party loans (e.g., credit cards, participation lending).
  • Scope: Currently available only for closed-ended loans; open-ended loan functionality will be added soon.
  • Data Retrieval: Can pull historical data as far back as 2018.
  • Calculation Model: Utilizes the Vintage model for calculations. An example spreadsheet is available for understanding calculations and for credit union-specific calculations.

Accessing CECL Group Maintenance

To access CECL Group Maintenance:

  1. Navigate to System Administration.
  2. Select General Configuration.
  3. Choose Managerial.
  4. Click on CECL Group Maintenance.

Managing CECL Groups

The CECL Group Maintenance screen allows you to manage existing groups and create new ones.

Main Actions

From the main CECL Groups screen, you can perform the following actions:

  • Add: Create a new CECL Group record.
  • Edit: Modify details of an existing, highlighted record.
  • View Subgroups: Access subgroups associated with a highlighted group.
  • View Detail: View detailed information for a highlighted group.
  • Delete: Remove a highlighted record.
  • Audit: Review audit logs for changes made to a record.

Adding a New CECL Group

To add a new CECL Group:

  1. Click the Add button.
  2. Complete the Group Info fields:
    • Group ID: Enter a unique identifier for the group. This ID will link to Loan Type Configuration.
    • Description: Provide a descriptive name for the group.
    • Model: Select the calculation model:
      • C-Current Balance Modified Vintage:
        • Calculates End of Month (EOM) date and number of years to report (default: 5 years).
        • Includes total count and original balance of loans charged off in the current month.
        • Calculates loss by dividing total charged-off amount by total original balance.
      • V-Original Balance Modified Vintage:
        • Calculates EOM date and number of years to report (default: 5 years).
        • Includes total count and current balance of loans opened in that month/year, and total count and charged-off amount in the current month.
        • Calculates loss by dividing total charged-off amount by total current balance.
    • Credit Option: Choose whether to use the member’s Credit Score or Credit Grade.
    • #Years Life Expectancy: Enter the number of years expected to be included in CECL for the loan. This value will display in the Subgroup Detail information.

Assigning Loan Types to a CECL Group

After defining the group information, assign relevant loan types:

  • Available Types: Lists loan types not currently assigned to other CECL Groups.
    • Highlight a type and click the arrow to move it to Selected Types.
  • Selected Types: Displays loan types chosen for the current CECL Group.
    • Highlight a type and click the arrow to move it back to Available Types.
  • All Assigned Types: Lists loan types already assigned to other CECL Groups.
  • Add All: Moves all available loan types into Selected Types.
  • Remove All: Moves all selected loan types back to Available Types.

Adding Subgroups to a CECL Group

Subgroups allow for more granular categorization within a CECL Group.

  1. Highlight the desired CECL Group.
  2. Click the Subgroups button.
  3. On the Subgroups screen, you can:
    • Add: Create a new Subgroup.
    • Edit: Modify an existing, highlighted Subgroup.
    • Detail: Retrieve detailed information for a highlighted Subgroup.
    • Delete: Remove a highlighted Subgroup.
    • Audit: Review audit logs for the Subgroup.

Creating a New Subgroup

To create a new Subgroup:

  1. Click the Add button on the Subgroups screen.
  2. Enter the following information:
    • Description: A descriptive name for the subgroup.
    • Purpose Code: (If applicable)
    • Security Code: (If applicable)
    • Credit Score From/To or Credit Grade From/To: Define the range based on the “Credit Option” selected for the parent CECL Group.
      • Note: Duplicate entries for score or grade ranges will result in an error message.
  3. Click Save to save the Subgroup.

Recreate History

The Recreate History function is crucial for updating data after group or subgroup changes.

  • Purpose: Recreates the historical data for the group.
  • When to Use: Should be used after CECL Groups or Subgroups are created or modified.
  • Automatic Process: End of Month (EOM) processing automatically creates history, finalizes, and generates reports.
  • Prerequisite: Subgroups MUST be added before history can be displayed.

Viewing Detail Information

Detail views provide in-depth insights into loss percentages and amounts at both the Group and Subgroup levels.

Group Detail

To view Group Detail:

  1. Highlight the desired CECL Group.
  2. Click the Detail button.
  3. The Group Detail screen displays:
    • Last Data Acquired Date: The date of the last data acquisition.
    • #Years Life Expectancy: The value entered during CECL Group setup.
    • Loss Percentages:
      • Displays total loan balance for loans opened in a designated year.
      • Column headers vary based on the chosen calculation method (original or current balance).
      • Year Loss % columns show [loss amount for that year] / [original balance or current balance].
    • Loss Amounts: Displays total loss amounts for loans opened in a displayed year, with a total of all losses for that year over time.

Subgroup Detail

To view Subgroup Detail:

  1. Highlight the desired Subgroup.
  2. Click the Detail button.
  3. The Subgroup Detail screen provides similar information to Group Detail, but specific to the selected subgroup.

Understanding Key Detail Fields

  • Total Unadjusted: Represents open loans and charged-off months.
    • Unadjusted Loss $: The calculated dollar amount, representing the total of all loss amounts.
    • Unadjusted Loss %: The calculated percentage, representing the average of all Total Loss % values.
  • Adjustment: Allows credit unions to enter predicted losses.
    • Entry Point: Can only be entered through the Detail option within the Subgroup.
    • Impact: This value increases the actual Unadjusted values to generate the Total Allowance values.
    • Adjustment %: Credit union-defined percentage amount.
    • Adjustment $: Credit union-defined dollar amount.
    • Note: Entering either a percentage or a dollar amount will automatically calculate the other.
  • Total Allowance: The calculated total of the Total Unadjusted and Adjustment amounts and percentages.
    • Allowance $: Calculated dollar amount of the unadjusted and adjusted values.
    • Allowance %: Calculated percentage of the unadjusted and adjusted values.
    • Adjustment Reason: Will display when the Subgroup is finalized.

Finalizing a Subgroup

Finalizing a subgroup locks the entries made, preventing further modifications until the next End of Month (EOM) process.

  1. In the Subgroup Detail view, enter the Adjustment % or Adjustment $ and the Adjustment Reason.
  2. Click Finalize.
  3. Once finalized, the subgroup will be marked as finalized in the overview.
  4. When all subgroups within a group are finalized, the parent CECL Group will also show as finalized.

Month Detail

To drill down further into monthly data:

  1. Highlight the Subgroup.
  2. Select Month Detail.
  3. You can select different years to view.
  4. The Month Details screen provides a monthly breakdown of:
    • Original Balance
    • Adjustment Reason
    • Unadjusted Loss $
    • Unadjusted Loss %
    • Allowance $
    • Allowance %

Adding the CECL Group to Loan Type Configuration

To link a CECL Group to specific loan types:

  1. Navigate to the Loan Type tab in Type Configuration.
  2. Select the desired Loan Type.
  3. Under the Miscellaneous tab, locate the CECL Group ID field.
  4. Select the appropriate CECL Group ID.
    • Note: If this step is missed, the group will automatically be added to Type Configuration at End of Month.

CECL Reports

Two reports are available for CECL analysis:

1. CECL Report (LL5300R)

  • Location: Found under the Managerial Reports section.
  • Purpose: Shows information on the Subgroups.
  • Format Options: Can be run as a Summary or Detailed report.
  • Parameters:
    • Detail or Summary
    • Group ID
    • Sub Group ID
    • Begin Year
    • Begin Month
    • End Year
    • End Month

2. CECL End of Month Report (LL3005R)

  • Purpose: Shows the details for each of the Subgroups.
  • Run Frequency: Typically run with End of Month processing, but can be run at any time.
  • Prerequisite: All Subgroups MUST be finalized to run this report; otherwise, an error will display.