10 Key Ratios
Presented by Anthony Demangone, EVP/COO NAFCU [email protected]
Let’s Talk about Assets
• Just what is an asset? • Easy to grow? • Different types/quality • As assets grow, they change ratios ties to assets – ROA, Net Worth to Assets, Loan to Assets Let’s Talk about Liabilities
• Just what is a liability? • Different types and “costs” • Remember what we do as credit unions…we buy and sell money
Let’s Talk about Net Worth
• Assets – liabilities = Net Worth • “Rainy Day Fund” • Easy to grow? Let’s Talk about Ratios
• Is a ratio good or bad? • Is it improving or deteriorating? • What about your strategic plan? • Peers?
Ratio #1: ROA • Return on Assets • Profitability related to assets
Net Income Total Assets Ratio #2: Net Worth • Net Worth to Assets Ratio • A measure of financial strength/reliance • Ratio of 7% is minimum…but
Net Worth Total Assets
Ratio #3: Delinquencies • Measures what percentage of loans are delinquent – 30, 60 days? – All loans? Collateral types? • How are the trends doing? Peers? Ratio #4: Loans to Assets • Helps measure liquidity • Higher the ratio, higher ROA? Risk?
Loans Total Assets
Ratio #5: Cost of Funds
• Measures how much a CU is paying for its funding • Driven by market, and internal decisions
Dividends on shares + Interest on Borrowed $$ Total Shares + Total Borrowings Ratio #6: Net Interest Margin
• Measures how much “net” interest a CU earns • Driven by efficiency, pricing, strategy
Interest Income – Dividends Paid Average Total Assets
Ratio #7: Operating Expense Ratio
• Measures efficiency and strategy • March 2018 – 3.08% for the industry
Operating Expenses Average Total Assets Ratio #8: Yield on Assets
• Measures performance of loans and investments • Driven by market and strategy
Annualized loan and investment income Average Total Assets
Ratio #9: Borrowers/Members
• Measures how deeply your membership uses your credit union for loans
Total members with a loan Total members Ratio #10: Members/FT Employees
• Measures efficiency and strategy
Total members FT Employees
Other Ratios
• Members/Potential members • Shares per member • Average loan balance per members • DD/Total Members