10 Key Ratios

Presented by Anthony Demangone, EVP/COO NAFCU [email protected]

Let’s Talk about

• Just what is an ? • 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 – Paid Average Total Assets

Ratio #7: Operating Ratio

• Measures efficiency and strategy • March 2018 – 3.08% for the industry

Operating 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