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15 Ratios Credit Union Board Members Should Know | Credit Unions

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If you would like to know your credit union ratios as discussed in this article compared to your peer group, just drop me an e-mail ncofcu@ncofcu.org and I will send them to you compliments of "PEER-to-PEER".
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15 Ratios Every Board Member Should Know

Key metrics to evaluate your credit union and bridge the gap between macro trends and micro performance. By Lydia Cole of CreditUnions.com 
In December, the NCUA passed a rule requiring Board members of federally insured credit unions to have a “working familiarity with basic finance and accounting practices.” The extent of financial literacy that volunteers must meet varies depending upon each credit union’s complexity, but there are basic concepts, definitions, and formulas every volunteer should know. To that end, CreditUnions.com is breaking down 15 ratios by providing definitions and describing how the ratios affect the balance sheet. For personalized information on your credit union, check out Callahan & Associates’ two-year financial comparison, available on CUSP Online.

 

1) 12-Month Loan Growth

Loan growth is the year-over-year change in outstanding loans. These are loans the credit union holds on its books, not the loans it makes over the course of the year. In 2010 credit unions granted $84.5 billion in first mortgage loans. Because of the low-rate environment, many credit unions sold these loans to secondary market vehicles to manage asset-liability risk. As such, these loans do not appear on credit union balance sheets. Advanced Metric: If outstanding shares grow faster than loans, the loan-to-share ratio, a measure of credit union liquidity, decreases. In this circumstance, the credit union has additional shares available to lend if it desires.

 

2) Provision For Loan Losses

This line item is the point for transferring funds to the Allowance for Loan Loss account. As credit unions foresee or experience worsening asset quality.  
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15 Ratios Credit Union Board Members Should Know | Credit Unions

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