ASSETS

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ASSETS
The Language of Business:
Accounting
Board responsibilities:
Fiduciary. An individual in whom another has
placed the utmost trust and confidence to
manage and protect property or money
RESPONSIBLE FOR MANAGING YOUR CREDIT
UNION’S ASSETS
• 701.4 (b) (3) Rules and Regulations
CLASSIFICATION OF ACCOUNTS
INCOME STATEMENT
BALANCE SHEET
REVENUE
_
EXPENSE
=
NET
INCOME
ASSETS
=
LIABILITIES
+
CAPITAL
Income Statement Items
INCOME (revenue)
- EXPENSES
= NET INCOME
** gets transferred to
Equity
Measures Profitability!!!
Income Sources
Interest on Loans
Interest on Investments
Fee Income
Operating Income
More on EXPENSES
• Salaries usually one of largest
• Provision for loan loss – when we need to
replenish the ALLL (allowance for loan a
account)
Card processing expense, utilities expense,
benefits expense, property tax expense, data
processing expense, postage expense
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A tool
What you think will happen this year
Estimated guess
Can be changed
Balance Sheet Items
ASSETS - things owned (size of your credit union)
LIABILITIES - things owed
Capital (Equity) (Net worth) –
net income accumulated over the years
ASSETS= LIABILITIES + CAPITAL
Capital/Equity /Net Worth
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Funded by net income
Reduced by net losses
Cushion against losses
Solvency
**You can’t just make a deposit to this account!
Balance sheet
Assets:
Cash
Loans to members
Investments
Land
3
9
6
4
Building
Total assets
8
30
Liabilities:
Accounts Payable
2
Shares
Share Certificates
15
3
Share Drafts
6
Total Liabilities
26
Equity(net worth) (capital)
4
Total Liabilities and Capital
30
ALLL Account
• Allowance for Loan Loss
• Most misunderstood account
• Estimated losses on loans
• Found on Balance Sheet -Subtract from loans- to
properly state assets – we don’t expect everyone to pay
back
Write offs deplete ALLLThe ALLL gets replenished by
provision for loan loss expense
Asset Liability Management
Managing risks due to mismatches of assets and
liabilities on balance sheet.
Rate sensitivity!
Loans
Shares
Equity
Trend Analysis
Looking for patterns to help in making forecasts
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Asset growth
Loan growth
Share growth
Gross income growth
Key Ratios
• Capital-measures solvency
• ROA-measures profitability
• Delinquency and chargeoff ratios- how well
managed is your loan portfolio
• Loan growth
Additional hot topics!
• CECL
• IRR
• Alternative Capital
• Risk based capital
• Capital Shares discussion
QUESTIONS!!!

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