1. The Language of Business: Accounting

2. 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

3. CLASSIFICATION OF ACCOUNTS
INCOME STATEMENT
BALANCE SHEET
REVENUE
ASSETS =
LIABILITIES +
CAPITAL _
EXPENSE =
NET INCOME

4. Income Statement Items
INCOME (revenue) - EXPENSES = NET INCOME ** gets transferred to Equity Measures Profitability!!!

5. Income Sources
Interest on Loans Interest on Investments Fee Income Operating Income

6. 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

7. A tool
What you think will happen this year
Estimated guess
Can be changed

8. 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

9. Capital/Equity /Net Worth
Funded by net income
Reduced by net losses
Cushion against losses
Solvency
**You can’t just make a deposit to this account!

10. Balance sheet
Assets: Liabilities: Cash 3 Accounts Payable 2 Loans to members 9 Investments 6 Shares 15 Land 4 Share Certificates 3 Building 8 Share Drafts 6 Total Liabilities 26 Equity(net worth) (capital) 4 Total assets 30 Total Liabilities and Capital 30

11. 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 ALLL-
The ALLL gets replenished by
provision for loan loss expense

12. Asset Liability Management
Managing risks due to mismatches of assets and liabilities on balance sheet. Rate sensitivity! Loans Shares Equity

13. Trend Analysis Looking for patterns to help in making forecasts
Asset growth
Loan growth
Share growth
Gross income growth

14. Key Ratios Capital-measures solvency ROA-measures profitability
Delinquency and chargeoff ratios- how well managed is your loan portfolio
Loan growth

15. Additional hot topics! CECL IRR Alternative Capital Risk based capital
Capital Shares discussion

16. QUESTIONS!!!