Mark H. Smith Newsletter

NCUA Adopts IRR Regulation

By Mark H. Smith
CEO, Mark H. Smith Inc.

The NCUA board has finalized and adopted its proposed interest rate risk (IRR) regulation which will impose stringent requirements for identifying, measuring, and managing IRR on selected state and federal credit unions insured by The NCUSIF. The regulation defines which credit unions must conform based on a balance sheet ratio presented later in this article. The regulation also requires a written interest rate risk policy and a well-documented process to manage IRR. Click for the full article.

Searching for Gremlins (part 2)

In our most recent edition, we examined aspects of your balance sheet which, on their surface, may not be problematical, but on further examination represent a problem to be overcome now or in the future. Here are three more gremlins which may be hidden in your balance sheet.
Click for the full article

Using Segmentation Strategies to Manage
Cost of Funds when Rates Rise

Segmentation strategies continue to evolve as a tool to manage the cost of funds and optimize the flow of deposits. We began urging clients to consider segmentation strategies in 2001 and continue to advocate their use. The objectives of a segmentation strategy are

separate rate-sensitive from nonrate-sensitive deposits;
for nonrate-sensitive deposits, stop or minimize interest expense; and
provide more of what members truly want, such as service and convenience.
For rate-sensitive deposits, we attempt to minimize the cost and control the flow of funds.

Click for the full article.

15 Ratios Every Board Member Should Know

Introduction by Mark H. Smith

This month we feature the following article by Lydia Cole, an Industry Analyst at Callahan and Associates. I have been reading her work for some time and find it to be well thought out and accurate. This article is about a year old now and is one of the best I've seen that provides a synoptic outlook regarding the financial information that credit union directors should understand. I express my appreciation to Lydia and Callahan & Associates for granting permission to reprint this article. Their contact information is included at the end.

By Lydia Cole
Industry Analyst, Callahan and Associates

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. Click for the full article.

March 2012

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Economic Outlook

Inflation is a very complex topic. This is the two paragraph version. In 1966, I bought a really nice, brand-new automobile for less than $3,000. Last week, I bought my wife, Martie, a new automobile comparable to the one I bought in 1966. This time is cost me about $30,000. That's an example of the impact inflation has had on the purchasing power of the US Dollar over 46 years. Following are two forecasts with respect to inflation...Read More