Net charge-off (NCO) rate calculator
Work out the net charge-off rate for a portfolio or segment, annualized so monthly, quarterly and yearly figures compare.
- Annualized NCO rate
- 2.4%
- NCO rate for the period
- 0.6%
- Net charge-offs
- $1,500,000
- Recovery rate on charge-offs
- 16.7%
How to use it
NCO rate (annualized) = (Gross charge-offs - Recoveries) / Average loans outstanding x (12 / Months in period)
- Use charge-offs and recoveries booked in the period, and the average balance over the same period rather than the ending balance.
- Annualize so a quarter's figure compares with a full year: multiply a quarterly rate by four.
- Compare segments and vintages at the same age; a young portfolio can look better simply because it hasn't seasoned.
For illustration only. Use your institution's own policy definitions.
