1/6/2024 0 Comments Operating expense ratioEmbedded options include, among other things, call features, coupon-rate caps/floors, and prepayment features. Earning asset mix indicates the percentage of adjusted total assets that a credit union has invested in gross loans, core investments, and surplus cash.Įarning Asset Yield - The annualized ratio of interest income from gross loans and core investments divided by average earning assets.Įffective Duration - The average percent change in a financial instrument's fair value per 100 basis point change in market rates over a +/-300 basis point range.Įmbedded Options - Features which allow an investment's characteristics (such as coupon rate, coupon-rate formula, final maturity, or weighted-average life) to change during the investment's term. Loss factors of 10%, 50%, and 90%, respectively, are often used by regulators for loans classified 2-6 months, 6-12 months, and over 12 months delinquent, while a 20% loss factor for OREO is typical.ĭelinquency Ratio - The ratio of delinquent loans divided by gross loans.ĭelinquent Loans - The sum of loans classified as 2-6 months, 6-12 months, and over 12 months delinquent.Įarning Assets - The sum of gross loans, core investments and surplus cash from which interest income is generated.Įarning Asset Mix - The ratio of earning assets divided by adjusted total assets. When calculating a credit union's delinquency factor, estimates are made for the percentages (i.e., loss factors) of both OREO and loan balances that are classified 2-6 months, 6-12 months, and over 12 months delinquent that are apt to be charged off over the next 12 months. Cost of funds also equals average funds cost multiplied by the average-balance total funds mix.ĭelinquency Factor - The aggregate dollar amount of loans over two months delinquent and other real estate owned (OREO) that is statistically likely to be charged off within a year. In this context, classified assets estimate the dollar amount that the book value of a credit union's total assets may be overstated from a fair-value perspective.Ĭomplex Investments - Include (a) investments with embedded options other than call features (b) fixed-rate investments with WALs greater than three years (c) variable-rate investments with next rate-adjustment periods greater than three years (d) variable-rate investments that have coupon formulas that are based on more than one index (e) variable-rate investments that have coupon formulas that are inversely related to one or more indices or (f) mutual funds (excluding money-market funds).Ĭore Investments - The sum of all investments (excluding the NCUSIF deposit) minus investments financed by reverse repurchase agreement borrowings.Ĭost of Funds - The annualized ratio of dividend and interest expense divided by average adjusted total assets. Asset yield also equals earning asset yield multiplied by the average-balance earning asset mix.Īverage Funds Cost - The annualized ratio of dividend and interest expense divided by average net total funds.īullet Investments - Investments and securities that have no embedded options and their entire principal balances are due on their final maturity dates.Ĭapital Contribution - The combined dollar impact of net operating income, non-operating income, net charge offs, interest refunds, and unexplained entries on a credit union's total capital during any accounting period.Ĭlassified Assets - The sum of delinquency factor, unrealized losses of held-to-maturity securities, and other identifiable potential losses associated with other assets if those assets had to be sold at their fair (rather than book) values. Adjusted (Adj.) Total Assets (TAs) - Reported (i.e., net) total assets plus allowance for losses minus investment-related repurchase agreement borrowings.Īsset Yield - The annualized ratio of interest income from loans and investments divided by average adjusted total assets.
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