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ARLINGTON, Va. – As the credit union industry grows and steadily brings in ever greater numbers of people to all parts of expanding operations it can be easy to lose sight of the bottom line that, in at least one sense, mark the difference between credit union success and failure. To help keep all its readers on the same page, Credit Union Times asked the Florida Credit Union, a state-chartered $198 million CU headquartered in Gainesville, Florida provide a recent balance sheet as an example and the credit union’s Vice President of Finance, Wendy Koford, to help readers understand some of its common terms. First, the basics. The balance sheet is the standing record of a credit union’s financial life month-to-month. It’s called a balance sheet because, by the end of it, a credit union’s assets and liabilities with retained earnings need to balance. It is the most basic measure of a credit union’s financial health month to month. Assets: Assets are the entries on a balance sheet showing all properties, both tangible and intangible, and claims against others that may be applied to cover the credit union’s liabilities A credit union’s assets can include loans it has made, investments, deposits in the National Credit Union Share Insurance Fund and its real estate. Loans: The loans, allowance for loan losses, and net loans lines reflect the total loans a credit union might have outstanding. The allowance for loan losses is a regulatory measure designed to make sure that the credit union has enough room on its books to cover the losses from a catastrophic loss of loans, perhaps from a natural or other disaster, Koford explained. Credit unions must calculate the allowance every month, Koford explained, and most credit unions use a method which bases the allowance on a rolling balance of actual losses from the previous twelve months. Cash: The cash line represents the amount of cash the credit union had on hand in its branches at the end of the month. Investments, net of amortization: In Florida CU’s case this line only represents the money that the credit union has with its corporate credit union and in an account with the Federal Reserve Bank since the credit union has no investments. However, if the credit union had an investment that was growing to maturity, such as a bond, the net of amortization reflects the investments progress toward maturity. Accrued Interest Receivable: This line represents the amount of interest due to a credit union on its loans or investments but which might not be realized until a later scheduled, date. Land and Buildings, parking lots and other fixed assets, net of depreciation: These lines represents the value of fixed assets such as land and buildings the credit union might own, minus the depreciation costs which represent their cost spread out over time. In other credit union, Koford explained, the depreciation costs are broken out as a separate line. She also said other credit unions would probably not break out parking lots as a separate line. “That was the way it was when I got here and we just haven’t changed it,” she said. The lines are higher from one year to the next reflecting asset improvements and different asset acquisitions over the course of the year. NCUSIF deposit: This line represents the 1% of deposits insured by the National Credit Union Share Insurance Fund that the credit union holds. Koford noted that people sometimes forget that not all credit union deposits, those over $100,000 for example, will be part of that calculation. Other real estate owned: This line represents the value of other real estate that the credit might own but not be using or not have sold yet. Foreclosed properties, for example, might be in this category, Koford explained. Loans held for sale: This line includes all the loans that the credit union had made but not put on its own books, intending to sell. When a loan is approved through Fannie Mae’s loan approval system it be can directed to the secondary market and sequestered on the balance sheet until it is sold. Prepaid and other assets: This line represents the assets and services that a credit union might purchase by subscription or for a year in advance, Koford explained. Things like a subscription to Credit Union Times or prepaying a legal retainer would fit in this category, she said. Liabilities: The liabilities are the financial obligations entered in the balance sheet of the credit union. Member deposits: Despite being called “deposits,” these are considered liabilities because the credit union must, on demand, give those deposits back as well as pay interest on some of them, Koford explained. Notes and interest payable: This line represents any loans which might have been made to the credit union, particularly for fixed assets. Accounts payable: Money on this line represents the credit union’s own account, Koford explained, and included money the credit union has committed for goods and services it needs. Dividends /interest on deposits: This line represents the interest the credit union pays on its deposits. Other liabilities: Other liabilities often include, for example, interest that the certain deposits, such as certificates of deposit accrue but which the credit union does not pay monthly, Koford explained. Regular reserve: This is a line on the balance sheet which regulators require credit unions to show a portion of their regular earnings as a sort of “rainy day” or contingency fund, Koford explained. Appropriated undivided earnings: This rarely used line on the balance sheet is meant to reflect the portion of a credit union’s earnings that a regulator or court action can direct a credit union dedicate to some purpose. “I have never seen this line used,” Koford said, “but it’s still there.” Undivided earnings: This line represents the credit union’s total earnings starting at the beginning of the month. Unrealized gain or loss on security: This line reflects any gain or loss a credit union might have on investments it might hold. Current period earnings: Here the credit union presents its earnings for the month while total retained earnings reflects the credit union’s total earnings picture to that point, Koford explained. -

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