# Credit Union Accounts - Key Ratios



## RainyDay (20 Nov 2005)

I presume that those of us who are CU members will be receiving our annual accounts around now. Would it be an interesting exercise for us to record some of the key figures across a range of credit unions? It's very difficult for me as a member of a single credit union to assess the figures for travel & subsitence, entertainment, ad debts written off, general reserves etc? However, if we had these figures for a fairly broad range of CU's over a few years, it would make it much easier to pick out key areas for attention. If we can get comparable sets of figures posted in a consistent manner in this thread, I'll look after getting them into a spreadsheet form for ease of analysis.

I'll make a start with the figures for Dundrum Credit Union for 2005 (year end Sept 2005) . I'm open to suggestions for other figures that we should be tracking.

*General*
Number of directors - 14 (CU Act requires odd number, min 7, max 15)
Number of supervisors - 2 (CU Act requires 3 or 5)

*Income & Expenditure*

Total Income: €4,321,060
Total Expenditure: €2,434,833

Proposed Dividend:
Divident on Shares (2%) €1,205,972
Loan Interest Rebate (5%) €150, 682 
T/f to statuatory reserve €206,111
Undistributed surplus €298,306


*Balance Sheet;*

Total Assets €83,194,705

Members Shares €64,953,758
Total Liabilities €83,194,705

*Management Expenses;*

Travel & Subsistence 21,200
Entertainment costs €6,019
Supervisory Cttee €4,963
Bad Debts written off €181,741


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## Brendan Burgess (20 Nov 2005)

Good idea Rainyday

I will get the Sandymount figures and post them. 

I would think that the profit before tax would also be a key figure. 

A key problem facing Credit Unions at the moment is that they cannot lend all the money coming into them. So the percentage of money lent would be a very interesting statistic. It would be something like Loans to members/Deposits from members. 

Do they all have the same year-end? What is the period to which the Dundrum accounts are made up to? 

Brendan


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## CCOVICH (20 Nov 2005)

Cost income ratio is a standard measure of efficiency for financial institutions.  

Comparing income to expenditure for Dundrum, it looks like it's 56%, which would be considered quite high.  

Return on equity of 3% (net income/members' shares) of 3% isn't great. 

Bad debts written off as 4% of income (and 4% of net income as well), strikes me as somewhat high.  

Dividend cover of just over 1.5 times, is low for a corporate, but I don't know how relevant this is for CU members.


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## ClubMan (20 Nov 2005)

I will post the details for the _Premier/Navan Road, D7 CU _when I get them.


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## RainyDay (20 Nov 2005)

The financial year for Dundrum is to end Sept 2005.

I don't think CU's have a profit figure, as they are non-profit organisations. Should we simply track income & expenditure and note any surplus remaining?


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## ClubMan (20 Nov 2005)

I found an annual report for my _CU _from a few years back and the income and expenditure account states a figure for "excess of income over expenditure" and one for "undistributed surplus carried forward" which is the previous figure less stuff like (well in this specific year anyway) transfers to statutory reserve, proposed dividend, write off loss on investment, transfer from special reserves and under provision for dividend. I guess that the first figure is akin to gross profit and the latter is akin to net profit?


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## Brendan Burgess (20 Nov 2005)

In a for profit business, the key measures would be profit and return on capital employed.

The objectives of the Credit Union are to provide cheap loans and to encourage savings. So I think the primary measure of a Credit Union's performance should not be profit, but the rate of interest they charge and the dividend they pay. 

The solvency of the Credit Union is very important as well, so some ratio of loans to reserves would also be relevant. 

Efficiency is important but not as important as it is for other organisations. 

Brendan


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## ClubMan (20 Nov 2005)

The same annual report that I mentioned above (from 2002 as it happens) makes no mention of the rate charged on loans and, in my experience, it has often proven difficult to get a clear answer (i.e. an _APR _that included all costs including the cost of keeping money on deposit/in shares). I suppose I should really attend the _AGM _and ask but (a) it's always on too close to Christmas for me to attend and (b) I'm only still a member because inertia has prevented me from closing my account and putting the money elsewhere since I am unlikely to ever need to use the services provided by the _CU_.


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## asdfg (22 Nov 2005)

> Members Shares €64,953,758
> Divident on Shares (2%) €1,205,972


 

2% of €64,953,758 is €1,299,075
What happened the difference?


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## jem (22 Nov 2005)

I will post roscrea's I do not in the past few years they have done a lot of sponsorship of major events in the town so I would expect that profits will be affected.I assume they will apear http://www.roscreacu.ie/content.asp?section=59


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## ClubMan (22 Nov 2005)

asdfg said:
			
		

> 2% of €64,953,758 is €1,299,075
> What happened the difference?


 Is the dividend payment calculated on the shares outstanding at the year end or the start of the year or averaged over the year etc...?


			
				RainyDay said:
			
		

> Number of supervisors - 2 (CU Act requires 3 or 5)


 Are they not in breach of the regulations here?



> Bad Debts written off €181,741


 2% of total assets? Seems pretty high? At least somebody's getting a good deal from the _CU _(i.e. loan defaulters)!


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## CCOVICH (22 Nov 2005)

I would have thought that efficiency is just as important to credit union as to any other business as surely the more efficient the CU in question is, the lower the rate of interest it can charge it's members?

I wonder if the bad debts figures include loans written off that had been advanced to members who had died during the year (AFAIK, CUs write off the balance outstanding when a member dies)?


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## ClubMan (22 Nov 2005)

CCOVICH said:
			
		

> I wonder if the bad debts figures include loans written off that had been advanced to members who had died during the year (AFAIK, CUs write off the balance outstanding when a member dies)?


Shouldn't do since all (?) _CU _loans come with "free" (except it's not really) life assurance which clears the loan if the borrower dies. See [broken link removed]. Although maybe some of the bad debts were excess above the pay outs on such policies that were not met?


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## Brendan Burgess (22 Nov 2005)

*Sandymount Credit Union *
*Analysis for the year ended **30 September 2005*

   Loans to members: €10.2m (2004: €9.2m)
   Total reserves:€20.7m (2004: €18.5m)

   Growth in loans: 11% 

   percentage lent: 50%

   Proposed dividend: 2% (2004: 2%)


   Standard rate of interest: 8.93% apr  ( 9.4% less 5% rebate) 
   Cheapest rate of interest:5.65% apr (5.95% less 5% rebate) on loans over €30k
Note: No provision is made for the obligation to keep money on deposit at 2% while borrowing. This could push the true apr up to 12% or more.

   Total expenditure: €459k (2004: €391k)

   Expenditure as a percentage of total reserves: 2.2% (2005: 2.1%)

   Bad debts written off: €54,780 (€17,919)
   Bad debts recovered: €13,679 (€17,578)
   Net bad debts: €41,000 ( 2004: nil) 
   As percentage of loans outstanding at end of year: 0.4%


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## Joe1234 (22 Nov 2005)

ClubMan said:
			
		

> Is the dividend payment calculated on the shares outstanding at the year end or the start of the year or averaged over the year etc...?



I think the dividend is calculated on the average balance held in the account over the year.  Most credit unions seem to have a year end of 30th September.


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## ClubMan (22 Nov 2005)

Brendan said:
			
		

> Standard rate of interest: 8.93% apr  ( 9.4% less 5% rebate)
> Cheapest rate of interest:5.65% apr (5.95% less 5% rebate) on loans over €30k


Do these _APRs _include the cost of keeping money on deposit/in shares while borrowing?


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## Brendan Burgess (22 Nov 2005)

Hi ClubMan

How remiss of me! 

I have amended my earlier post to highlight the fact that they don't. 

Brendan


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## Crugers (22 Nov 2005)

Brendan said:
 


> No provision is made for the obligation to keep money on deposit


It is not just an obligation, it is the LAW! See Credit Union Act, 1997 Section 32.

If, when you draw down a Credit Union loan, you have savings, either in Shares or Deposits, the Credit Union is obliged BY LAW not to allow you to withdraw to a level below 25% of your outstanding liability.

However that does not mean you need to have 25% of the loan value in savings before you get a loan. It's a case of suck it and see. If you want a loan ask what you need to do to get it. If you are obliged to lock away 25% or more of the value then do the maths. Darag's calculator gives a good indicator of the ultimate price you'll pay. Now whether it is an accurate APR, or the alternative "...TRUE APR...", that's just semantics... 

Did Sandymount CU ask you to "...keep money on deposit at 2% while borrowing...", and if they did how recently did they do that?

Many Credit Unions don't!

I somehow doubt if Mr Kenny of Bishopstown Credit Union who is quoted in the I.T. of Fri 18th Nov as having said, 





> ...that the credit union hoped to be in a position to offer mortgages in January at the latest...


, will require you to have 25% of the mortgage value locked in for the next 25 or 30 or 40 years...


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## Brendan Burgess (23 Nov 2005)

HI Crugers

This thread is for discussing the performance ratios of Credit Unions. If you want to discuss the merits and demerits of this requirement/law, please do so on one of the other threads which has discussed it.

Brendan


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## Crugers (23 Nov 2005)

Hi Brendan
So which performance ratio is 


> Note: No provision is made for the obligation to keep money on deposit at 2% while borrowing. This could push the true apr up to 12% or more


 referring to?
I just thought I'd explain your red herring!


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## Observer (1 Dec 2005)

Just received figures from e-services and communications credit union (aka the old Telecom Eircom Staff Credit Union)
Tried as best I can to stick to Rainyday's original format.......

Highlights are:

*General*
Number of directors – 13
Number of supervisors - 3

*Income & Expenditure*

Total Income: €10,170,371
Interest received on member loans: €4,825,855
Interest paid on member deposits/SSIA (€927,486)
Investment income: €6,100,211

Total Expenditure: €2,500,986

Proposed Dividend on Shares (2.75%) €3,692,465
Loan Interest Rebate (20%) €975,171 


T/f to statutory reserve €2,759,687
T/f to other reserve €394,465
Undistributed surplus €1,993,364


*Balance Sheet;*

Members Loans €57,111,921
Bank deposits and investments €151,981,639
Total Assets €213,928,686

Members Shares €133,810,154
Total Liabilities €213,928,686

*Management Expenses;*

Travel & Subsistence: not separately identified
Entertainment costs: not separately identified
Board and committee expenses: €31,683
Treasurers Honorarium €12,000
Supervisory Committee €15,879
Loan/Share benefit claims €518,429 (CU self insures this now; used to insured with ILCU joint policy;  provides for loans to be cleared and share balance doubled on death of member)
Bad Debts written off €251,706
Bad Debts recovered €197,299

*Provision for Bad and doubtful debts *
Balance b/f €2,263,410
Provision €392,222
Balance c/f €2,655,632 (= 4.65% of loans!)

*Loan Interest Rates (before 20% rebate)*
8.9% Standard 
6.5% Fixed 3 year car loan 
5.5% Secured property loan


My Comments:

Seems to be very well run. Fairly modest expenses. Competitive loan and dividend rates especially after 20% rebate. I believe, "anecdotally", that loan to share ratios of well over the standard 4/1 are available depending on circumstances.
Good return achieved on investment income.
A bit shocked at high level of bad debts/bad debt provision. Although it seems a very conservative policy is in effect which maybe goes overboard on making VERY prudent provision. EG 100% provision is made for loans where the principal is more than 53 weeks in arrears. In fairness, the actual written off figure is quite low.


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## Riddler (1 Dec 2005)

Observer

There's a legal requirement for Credit Unions to fully provide for loans 53 weeks in arrears...part of the way Credit Unions are regulated. 

Brendan
PBT dosen't arise as CU's are tax exempt. Would suggest net operating income as a proxy here. Also I would look to net interest margin before investment income.

Have a stab at average loan interest ie average loans/interest income where rates are not provided. 

Certainly the investment to total loans+investments ratio is key as this indicates (a) the degree of liquidity and (b) is an indication to the scale of underlending.  

Efficiency ratios such as cost/income are somewhat open to interpretation given that some CU's use a greater number of volunteer/unpaid staff than others. Average salary/employee would be a better indicator here. Also try gross income per employee cost.

Also there is a differing cost profile between the community and employee based operations. Generally employee cost income ratios are lower refeleting lower fixed and variable operating costs.

Word of warning: accounts are reported differently ...so adjustments have to be made. 

To get a better picture or create a benchmark performance index it's probably better to use a tiered scale ie Community CU's with assets less than €10m,€50m and €50m+ and likewise for employer CU's. Given the number of CU's it's best to use a sampling system would suggest 5 of each category.


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## Observer (5 Dec 2005)

Riddler said:
			
		

> Observer
> 
> There's a legal requirement for Credit Unions to fully provide for loans 53 weeks in arrears...part of the way Credit Unions are regulated.


 
Fair enough, I didn't know this, thanks.


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## polaris (6 Dec 2005)

*St Patrick's (Cork) Credit Union*
*Year ending 30th September 2005*

*General*
Number of directors – 9
Number of supervisors - ?

*Income & Expenditure*

Total Income: €485,844
Interest received on member loans: €340,409
Sundry Income: €1,198
Investment income: €144,237

Total Expenditure: €212,956
Excess of Income over Expenditure:             €272,888
Add:
Dividend Overprovided in Previous Year:        €   2,195
Loan Interest Overprovided in Previous Year: €   1,047


Proposed Dividend on Shares (2.0%) €114,526
Loan Interest Rebate (10%) €34,041 


T/f to statutory reserve €111,938
T/f to general reserve €15,625
Undistributed surplus carried forward €0

*Balance Sheet;*

Cash and Balances at Bank: €160,674
Members Loans €2,975,763
Less: Provision for bad and doubtful debts: (€101,948)
Bank deposits and investments €2,998,372
Tangible Fixed Assets: €1,084,678
Debtors, Prepayments and Accrued Income: €9,726
Total Assets €7,127,265

Members Shares €5,649,973
Total Liabilities €7,127,265

*Management Expenses; Total: €106,170*

General Insurance: €39, 124
Promotion and Advertising: €4,744
Bad Debts written off €11,769
Bad Debts recovered €372

*Provision for Bad and doubtful debts *
Balance b/f €101,948
Provision €20,000
Balance c/f €121,948
*Loan Interest Rates (before 10% rebate)*
APR 12.6%


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## Guest122 (7 Dec 2005)

*Clogherhead Co. Louth CU*

No of Directors - don't know
No of supervisors - don't know

Total Income                                 € 314,117
Total Expenditure                 € 153,214

*Balance Sheet*
Deposits & Investments             € 1,880,357
Loans to Members                     € 3,310,896
Total Assets                              € 5,553,237

Members Deposits                      € 542,217
Members Shares                         € 4,164,459
Total Liabilities                    € 5,553,237

*Reserves*
Statutory Reserve                       € 456,000
Undivided Earnings                      € 20,743
Development Reserve             € 41,088

Proposed Dividend 2.5% (2004 2.5%)

*Management Expenses*             € 154,801



Notes…
I don’t know how many Directors/Supervisors there are. It is not stated on the accounts.  How does one find out?  Is it really that important to the ordinary saver/borrower?

More figures are available; if anybody wants them I can post them.

What does these figures mean to me?  How does Clogherhead CU compare to other ones apart from the fact that they seem to be much smaller?  Is 2.5% dividend a reasonable rate? (I presume this is the “interest” they pay on savings).  How does one find the Loan interest rate and/or Loan Interest rebate?

BB


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## Riddler (10 Dec 2005)

BB
Some CU's use interest rebates, some don't. It's up to the board. If an interest rebate is paid then this has the effect of reducing the amount available to pay a dividend on shares. Dividends are currently ranging 2.25-3.0% this year. 

R


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## Joe1234 (27 Apr 2006)

Monaghan Credit Union held their AGM last night.

Total income 6.5 million
Total Expenditure 5.6 million

Total assets 98.5 million

Proposed dividend 1% (2004 = 1.75%)

Loans at start of year 73.1 million
Loans written "down" 7.15 million

Loans at end of year 57.7 million

Directive received from regulator preventing payment of proposed dividend.


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## Joe1234 (27 Apr 2006)

Riddler said:
			
		

> BB
> Dividends are currently ranging 2.25-3.0% this year.



How the other half live!!


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## RainyDay (28 Apr 2006)

See RTE  news report of Monaghan credit union.


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