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