Key Ratios

March 1, 2011

edward lis General , , , Leave a comment

Key ratios are relatively unimportant in isolation. Board members should monitor trends (e.g., ratio this month compared to same month last year) & compare your ratios to peer averages or another type of benchmark (i.e., ratio compared to other credit unions with similar characteristics).
The following 8 key ratios will give you a very good picture of your credit union’s performance.

Net Economic Value

Capital/Assets Ratio

Return on Assets (ROA)

Loan to Share Ratio

Net Expense to Assets Ratio

Delinquency Ratio

Loan Charge-off Ratio

Checking Accounts to Members Ratio

This blog entry you have just read was written by Edward Lis who is a former senior executive of three different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com or by calling 518-420-2108.

Related Articles

Related articles

3rd Party Due Diligence

February 22, 2011

edward lis General , , , , Comments Off on 3rd Party Due Diligence

To expand their services and product offerings, credit unions are increasingly outsourcing functions and programs through collaboration with third parties.  Third party relationships are essential and can enable credit unions to become their members’ primary financial institution.  That said, not managing and controlling these relationships can result in unanticipated costs, legal disputes, and financial loss.
The regulators goal is to ensure credit unions clearly understand the risk they are assuming and balance and control these risks considering the credit union’s safety and members’ best interests.

The vendor due diligence objectives for credit unions are to:

  • Ensure that outsourced relationships are initiated based on a sound business case and comprehensive due diligence in the selection process.
  • Ensure that outsourced relationships are effectively managed by providing for consistent, risk focused controls and processes.
  • Ensure that the credit union is in compliance with regulatory guidance and requirements pertaining to outsourced relationships.

Credit Unions can achieve these objectives by maintaining an active vendor management oversight function.  Specific practices should be supported by guidelines and checklists that ensure that vendor performance is monitored, contractual requirements are in place and regulatory requirements are met.

Herein is an overview of the key areas when developing a vendor due diligence program in your credit union:

  • Identifying key vendors and their risk levels;
  • Gathering information for due diligence reviews;
  • Conducting initial and ongoing reviews;
  • Tracking and documenting; and
  • An in-house  compared to an outsourced programs.

This blog entry you have just read was written by Edward Lis who is a former senior executive of three different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com or by calling 518-420-2108.

Related articles

Asset-Liability Management

February 1, 2011

edward lis General , , Leave a comment

ALM is a subject that has constantly evolved over the years.  It is expected that the knowledge level of the credit union personnel responsible for ALM evolve as well. ALM is a process and involves more than simply reporting on ALM result or just having an ALLL Policy

Here are some key points to remember relative to ALM:

  • ALM is the process of coordinating actions to control the credit union’s risk and reach it financial goals;
  • Every action taken by the credit union sooner or later affects the ALM position;
  • Good ALM measurement and management processes are a must;
  • The ALM Policy sets the guidelines for the ALM process including key measurements; and
  • The “red zone” shows whether the credit union is in compliance with these measures.  If not, take action.

ALCO and the board should be aware of ratios or trends that may signal an existing or potential problem by analyzing the past, present, and future direction of the credit union.

ALCO should be alert for the appearance of “red flags”, investigate their sources, and if necessary, develop action plans to address the issues.

Asset-Liability Red Flags: More

The Future of Online Banking-Online Financial Management

January 25, 2011

edward lis General , , , , , , , , , Comments Off on The Future of Online Banking-Online Financial Management

Banks and credit unions continually assess new online services to offer their consumers and members.

One of the newer online services is online financial management (OFM). Online financial management allows users to:

1) aggregate their financial accounts in one place;

2) have their transactions automatically categorized;

3) establish and monitor a budget; and

4) set financial goals and track their progress.

It’s been unclear whether online financial management’s capabilities would resonate enough with users to make them a more avid users of their primary financial provider’s online banking site.

OFM represents possibility the next evolution of online banking.  It’s about putting the consumer in control of their finances without any software to install or information to download.  OFM enables its users to see trends in their spending and even find ways to save – regardless of how many accounts they have or with what financial institutions.  OFM allows users to manage financial accounts from thousands of financial providers – including their credit cards, loans, deposits, investments, utility bills, etc. – all in one place.

More than 2 million people have already turned to third-party Web sites for personal financial management tools. According to Forrester Research, 8 out of 10 consumers would prefer to manage their finances at the place they trust most with their personal financial data – their financial institution.

OFM empowers consumers to manage their money with easy-to-use tools and automatic updates.  The product drives customer satisfaction, leading customers or members to log into your Web site more often, recommend your institution to friends and family, and adopt other online banking products.

Small Business Solutions:

With 27 million small businesses generating annual sales of $2 trillion, this segment offers significant revenue potential. In fact, because of their specific business needs, one small business is, on average, at least twice as profitable as two consumers.  Many OFM providers offer tools for small businesses.  Tools they need – and want – so they can better manage their business.

This blog entry you have just read was written by Edward Lis who is a former senior executive of three different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com or by calling 518-420-2108.


Related articles

Older Entries Newer Entries