1. TCCU Financial Strength
Everyone who works for Telesis can make a difference in the health of the organization.
Every day each of us makes decisions that affect our bottom line.
How can YOU help Telesis achieve its goals and remain financially strong?
By understanding how the Credit Union works we can all make a difference in TCCU’s financial strength!

2. Members make use of funds while paying lower CU rates.
How TCCU Works
MEMBERS
Members bring in money to deposit in savings accounts, certificates, etc.
Members make use of funds while paying lower CU rates.
SHARES
Grow Capital
LOANS
Earn Interest Revenue
The money our members deposit with us is then loaned out.

3. How TCCU Works
MEMBERS
With just over 30,000 members we want to continue to grow our member base
Members earn more from their share accounts because we pay higher dividends.
Members take out loans such as auto loans, Real Estate, & business loans.
We need our loan balance to grow with both secured loans, such as Business loans, and unsecured loans, such as personal loans
Lower cost deposits such as checking and savings accounts help keep us on track to meet our goals
SHARES
Grow Capital
LOANS
Earn Interest Revenue
The money we earn in interest on these loans is used to pay the dividends on our share accounts.

4. DEFINITIONS
Assets- Assets are everything you own that has any monetary value, plus any money you are owed. They include money in your checking account, your stocks, bonds, and mutual funds, 401(k), your equity in real estate (value of your house minus the amount you owe on it), the value of your life insurance policy, and any personal property that people would pay to own, such as a car, television, DVD player, etc.

5. DEFINITIONS
Assets (con’t.)- Similarly, a company's assets include the value of its physical building, its inventory, and less tangible elements, such as its reputation. For Telesis this means all the property that is available to pay off any debts. For example, loans (we own the houses and cars we lend money for until they are paid off), cash investments (money we invest with other institutions in certificates, money market accounts, etc.) and fixed assets (our corporate office, furniture, computers, etc.)

6. DEFINITIONS
Capital- Capital is any asset that is used to generate income or make a long-term investment. For example, on a personal level, the money you use to buy shares in a mutual fund through your 401(k) is considered capital. So is the money you use to make a down payment on a house.
Businesses use capital, which is often money from loans or earnings, for reinvestment, expansion, and acquisitions. For example, companies sometimes acquire loans from other banks or credit unions then use the money to invest in new equipment or even loan the money out at a higher rate to help them earn more money.

7. DEFINITIONS
Equity- the amount something is worth above and beyond what is owed on it. Another way of saying this is: the difference between the asset's current market value — the amount it could be sold for — and any debt or claim against it. For example, if you own a home valued at $300,000 but still owe $200,000 on your mortgage, your equity in the home is $100,000.

8. DEFINITIONS
Liability- a financial obligation of the organization. In business, liabilities refer to the claims against the assets of a corporation, and may include accounts payable (bills received, such as utilities, that we make payments on), wages and salaries, dividends (the money paid to members for deposits, similar to the interest banks pay to their customers for deposits), taxes, and debt obligations, such as bank loans the CU has taken out and which we are required to repay.
Personal liabilities can include the bills you pay each month, such as car payments, utilities, etc.

9. DEFINITIONS
Liquidity- the ability to meet the demand for funds. If you can convert an investment easily and quickly to cash, with little or no loss of value, you have liquidity. For instance, Telesis has certificates with other institutions which can be cashed out quickly if necessary. The term is also sometimes used to describe investments you can buy or sell easily.
Net worth- the total value of all assets, such as house, car, furniture and investments, minus all debts, such as mortgages and credit card bills.

10. DEFINITIONS
Ratio- a relationship between two numbers expressed as a percentage (ex. ROA is Net income divided by Average assets which equals a percentage).
So if Net Income = $8 mil. & Average Assets = $340 mil. then the ratio is 2.3%.
Spread- the difference between interest earned and dividends and interest paid. To put it another way, it is the difference between the gross rate of a loan and the net rate. So if we have a loan where the gross rate = 6% and the net rate = 5%, the spread is 1%, which is collected from the borrower and retained as revenue to the CU.

11. EQUATIONS ASSETS How do we figure out what our assets are?
An easy equation gives us this number:
Liabilities + Capital = Assets
So, if your Capital is $400 million and your
Liabilities are -$35 million, your total assets
are $365 million.
Liabilities are by definition a negative, so
you take that amount away from your
Capital amount to find your total Assets.

12. EQUATIONS RETURN ON ASSETS This measures how effectively TCCU uses
the assets at our disposal.
To calculate this you divide our Year to Date
net income by the Average Assets for the
year.
So, if our net income is $8 million and
our average assets are $340 million, our
Return on Assets would be about 2.4%

13. The equation is Net Worth divided by Assets:
EQUATIONS
NET WORTH TO ASSETS
Net worth to assets: looks at our net worth as a percentage of our assets. This demonstrates the financial strength of TCCU.
The equation is Net Worth divided by Assets:
If our Net Worth is $35 million and our Assets are $360 million then our Net Worth/Assets would be 9.7%

14. EQUATIONS LOAN TO SHARE RATIO
The Loan to Share ratio looks at the total
balances we carry in loans compared to the
total balances we have on deposit in shares.
To get the amount you divide the loan total by
the share total:
So if we have $290 million in loans divided by
$325 million in shares, your LTS ratio is 89%.
Said another way: 89% of our shares are “loaned out”.

15. How it all makes sense To understand this on a personal level, let’s
look at a sample household and figure out the
calculations for that. Our sample household
has the following values:
Assets: $130,000
Capital: $150,000
Liabilities: $20,000
Net Worth: $12,000
Net Income: $2,000

16. How it all makes sense ASSETS How do we know our household assets are
$130,000? Easy- we added our Capital to our
Liabilities (always a negative) to come up with
our total assets. Since our Capital is $150,000
and our Liabilities are $20,000 the solution is:
$150,000 - $20,000 = $130,000.

17. How it all makes sense RETURN ON ASSETS
To figure out how well our household is using
its assets, we divide our Year to Date net
household income by the Average Assets for
the year:
$2,000 / $80,000 = 2.5% ROA

18. How it all makes sense NET WORTH TO ASSETS
We need to know our household net worth to
assets to determine how financially sound our
household is. To calculate this we take our Net
Worth and divide that number by our Assets:
$12,000 / $130,000 = 9.2%

19. How it all makes sense All of these numbers tell us how financially
sound our household is just as the CU
numbers tell us how financially strong
Telesis is. Once you understand where the
numbers come from, it is easy to determine
the financial stability of any organization, no
matter how big or small.

20. Take the following quiz to see how much you remember!
Conclusion
Now that you have learned about the different financial terms and equations it’s time to test your new knowledge.
Take the following quiz to see how much you remember!

21. Quiz What is an “asset”? Your “net worth” is:
An ability or talent you have
Something with a monetary value
A type of bank check
A tax write off
Your “net worth” is:
How much your house is worth
Something you catch fish in
The total value of all your assets minus all debts
A product or service the credit union offers members

22. Quiz The term “liquidity” refers to: A “ratio” is: Stocks and bonds
An alcoholic drink
Keeping all your money in certificates
The ability to convert investments into cash easily
A “ratio” is:
A relationship between two numbers expressed as a percentage
The difference between interest earned and dividends or interest paid
Something you listen to music on
When you subtract one number from another

23. Quiz
The equity in a home that is worth $250,00 and has a balance owed of $175,000 is:
$25,000
$50,000
$75,000
$100,000
The equation to calculate assets is:
Capital / Liabilities = Assets
Liabilities x Capital = Assets
Liabilities + Capital = Assets
None of the above

24. Quiz To calculate Return on Assets (ROA) you would:
Multiply your YTD Net Income with your annual Average Assets
Divide your YTD Net Income by your annual Average Assets
Subtract your annual Average Assets from your YTD Net Income
None of the above
Examples of “capital” are:
The down payment for your house
Money you use to buy stocks
Your monthly car payment
Both a & b

25. Quiz “Spread” is best described as:
The difference between interest earned and dividends or interest paid
The amount something is worth above and beyond what is owed on it
A type of condiment
The total of all your assets
You can help the Credit Union achieve its goals by:
Helping to bring in deposits and loans
Understanding the key terms and equations
Helping to keep costs down and productivity high
All of the above

26. THE END Thank you for participating in the Credit
Union Financials Training. Hopefully this
has given you the foundation you will need to excel in your your career here at Telesis. Good luck!

27. Assistance provided by:
Credits
Created By:
Jean Seymour
Animation:
Edited by:
Assistance provided by:
Clip Art
Copyright 2004:
Telesis CCU
All Rights Reserved