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Balance Sheet & Income Statement

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Presentation on theme: "Balance Sheet & Income Statement"— Presentation transcript:

1 Balance Sheet & Income Statement
SemiFCU Balance Sheet & Income Statement

2 Statement of Financial Condition (Balance Sheet)
Assets = Liabilities + Equity

3 Balance Sheet Assets Liabilities Equity Loans Cash Investments
Accounts Receivable Land, Furniture, and equipment Liabilities Notes Payable Accounts Payable Equity Shares Reserves Undivided Earnings

4 Assets (Dec. 31, 2013) Cash & Equivalents $201,826
Total Investments $3,806,802 Total Loans $9,607,495 ALLL (contra asset) ($35,215) Other Assets $237,288 Total Assets $13,818,196

5 Liabilities & Equity (Dec 31, 2013)
Total liabilities $ ,458 Total Share & Deposits $11,955,604 Regular Reserves $ ,423 Undivided Earnings $ 1,229,711 Other reserves $ ,000 Total Liabilities & Equity $13,818,196

6 Income Statement Income – Expenses = Net income (loss)

7 Income Statement Add Less Equals Income from loans
Income from Investments Fee income Other income Less Operating Expenses Non-operating expenses Provision for Loan Loss Expenses Cost of Funds (dividends) Equals Net income or loss

8 Income Statement (Dec. 31, 2013)
Loan Income $392,727 Investment Income $ 55,400 Other Income $122,797 GROSS INCOME $570,924 Salaries & Benefits $250,564 Member Ins $ 11,149 Other Operating Exp $222,268 Cost of Funds (Dividends) $ 34,264 Provision for loan losses $ 4,961 TOTAL EXPENSES $523,206 Net Income $ 47,718

9 Ratios NCUA – Financial Performance Reports Brick – Quarterly Reports

10 Trend Analysis Compares the component parts of a structural ratio to itself over several periods Enables identifying, questioning, and evaluating the changes in results of operations Paints a financial picture of the credit union’s actual performance Serves as pertinent statistical or quantitative data in evaluating performance over time

11 CAMEL Rating Components
Capital Asset Quality Management Earnings Liquidity and Asset Management

12 Capital C – Capital Net worth ratio A – Asset Quality Deliquency ratio Charge off ratio M – Management E – Earnings ROA ratio L – Liquidity & Asset Liability Management Regular Share/Total Shares and Borrowings Total Loans/Total Shares Cash and Short-term Investments/Assets

13 Why is Net Worth Important?
Net worth is a cost-free source of funds Net worth supports credit union growth Net worth provides a cushion against losses Net worth protects against insolvency

14 Capital Adequacy Well Capitalized = 7% or above
Adequately Capitalized = 6 – 6.99% Undercapitalized = 4 – 5.99% Significantly Undercapitalized = 2 – 3.99% Critically Undercapitalized = less than 2%

15 Asset Quality Ratios The Delinquency Ratio Net Charge Off Ratio
Delinquent loans/Total Loans Delinquent loan > 2 months Divided by total loans Net Charge Offs/Average Loans Charge Offs less recoveries on previously charged off loans divided by average loans

16 Management Credit Union Management is responsible for:
Balance Sheet Composition Strategic/Business Planning Annual Operating Budget Operating Policies/Procedures Oversight of Daily Operations

17 Earnings Return on Average Assets (ROA)
ROA = Net income/Average Assets Net income = net income before any reserve transfers Average assets = total assets for the current period + total assets for the prior year-end period divided by 2

18 Why is ROA Important? It determines the credit union’s ability to: Provide member products & services Pay a competitive dividend Charge lower loan rates & fees Grow and maintain net worth Sustain asset growth

19 Liquidity & Asset Liability Management
Total Loans/Total Shares (Loan pricing & portfolio composition) Cash and Short-term Investments/Assets (Investment mix) Net long-term Assets/Total Assets (Fixed or Non-earning Assets) Regular Shares/Total Shares and Borrowings (Share pricing and product mix)

20 7 Supervisory Risks Credit Liquidity Interest Rate Compliance
Strategic Transaction Reputation

21 Credit Risk Risk to earnings or capital arising from: Risk factors
An obligor’s failure to meet terms of any contract or otherwise fail to perform as agreed Credit union investing or lending with the expectation of repayment Risk factors Collateral administration Credit reviews Due diligence Allowance for Loan & Lease Loss

22 Liquidity Risk Risk to earnings or capital arising from a credit union’s: Inability to fund obligations as they come due Inability to manage funding sources Failure to recognize or address changes in market conditions Risk factors Contingency plans On-hand liquidity Funding sources Cash flow & analysis

23 Interest Rate Risk Risk that changes in market rates will impact the Income Statement & Balance Sheet Risk Factors Risk limits Volatility of funds Separation of oversight & risk taking Level of mismatches

24 Compliance Risk Risk to earnings or capital arising from: Risk factors
Violations of, or noncompliance with laws, regulations, internal policies and procedures, or ethical standards Exposure to fines, civil money penalties, payment of damages, and the voiding of contracts Risk factors Authority and accountability Level of violations or noncompliance Training and resources Litigation and complaints

25 Strategic Risk Risk to earning or capital arising from: Risk factors
Adverse business decision, improper implementation, or lack or responsiveness to industry changes Compatibility of strategic goals, business strategies, available resources, and the quality of implementation Risk factors Risk management Strategic planning Turnover MIS and measurement tools New products & services

26 Transaction Risk Risk to earnings and capital arising from:
Fraud or error that results in an inability to deliver products or services Function of internal controls, information systems, employee integrity, and operating processes Risk factors Volume/complexity of processing System controls Operating & Information systems Conversions

27 Reputation Risk Risk to earning or capital arising from: Risk factors
Negative public opinion or perception Inability to establish new relationships or services Risk factors Overall operations Risk management Net worth exposure Litigation & complaints Disaster recovery plans

28 Risk Management Risk Identification - Management understands the risks that may arise from a business initiative Risk Measurement – Management accurately measures risks Risk Control – Management should establish and communicate control limits through policies and procedures Risk Monitoring – Management should monitor risk levels regularly


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