FINC 3302 - Assignment 2

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Tarleton State University *

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3301

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Economics

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May 24, 2024

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Articulating University Federal Credit Union’s Objectives Nicholaus Guerrero, Nathaniel Rojas, and Nancy Flores Tarleton State University FINC-3302: Financial Intermediaries

Introduction University Federal Credit Union (UFCU), based in Austin, Texas, is a member-owned, non-profit cooperative that prioritizes fair products and exceptional member service. UFCU’s vision is to create a financially stable community by increasing opportunities in education, employment, and housing. Their values revolve around membership, with a member-first approach, compassionate service focused on listening to members’ needs, and integrity, which fosters trust by consistently doing the right thing. Loan Portfolio UFCU’s commitment to building a financially stable community can be measured from its loan portfolio and its trends. Since 2018, 1 st Mortgage Real Estate Loans at UFCU had declined, however, in 2023, there was a 7.2% increase. Compared to its class, UFCU slightly beats its peers with a 39.46% allocation of mortgage real estate loans in its portfolio against a class average of 39.41%. Student loans, however, have seen a consistent decline in UFCU’s loan portfolio allocation from 2018 to 2022. Compared to its peers, UFCU’s non-federally guaranteed student loans allocation is at 0.02% against the class’s average of 0.59%. Moreover, vehicle loans (both new and used) have declined since 2018, resulting in a portfolio allocation from 34.34% to 31.48% in 2022. Despite this decline, UFCU maintains a significant lead over its peer average, with a combined share of 42.16% against 29.41%. Examining UFCU’s loan portfolio provides an idea of to what UFCU actively funds through its loans and services. These numbers are in line with UFCU’s vision of building

financially stable communities and expanding opportunities in education, employment, and housing. Lines of credits UFCU provides various lines of credit services to its members, demonstrating its commitment to promoting financial stability and supporting the community. The credit is helpful for those who need it such as variety expenses, unexpected bills, home improvements, or education costs even. UFCU also achieves its goal and value of providing financial solutions that follows with its mission of expanding opportunities in education, employment, and housing. In 2023, UFCU reported a 10% increase in the utilization of its line of credit compared to 2022, indicating a dependence of members on this useful financial option. With a total line of credit limit of $50 million, UFCU ensures that members have access to sufficient funds to help their diverse financial needs. Low interest on loans UFCU stands out through its offering of competitive interest rates, as it values financial stability among its members. With an average interest rate of 3.5% on 1 st Mortgage Real Estate Loans, UFCU ensures that homeownership remains not only affordable but also accessible to its community. UFCU student loan interest rates also fall below the market average, with an average rate of 4.2%. UFCU also extends its thoughtful generosity of rates with vehicle loan rates, averaging 2.9% for new vehicles and 3.5% for used vehicles. UFCU fulfills their mission of promoting financial stability and helping their community by offering loans with low interest rates. The competitive rates not only make financial services more affordable but also reach their goal of creating a financially secure community.

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Common-Sized Statements The common-sized statements summarize their primary financial statistics and were ranked among their competitors. The following statistics mostly indicate that UFCU is successfully running their credit union the way they were intended to. Each percentile will be the five-year average from 2018 to 2022. Some statistics were not included in the analysis because they were very close to the median percentile, and only the statistics near the 25 th or 75 th percentile was analyzed because they explain how UFCU is managed differently than other credit unions. The cash on hand was above the 75 th percentile, which indicates that UFCU has good liquidity. UFCU tends to keep their investments low because they make most of their money from loans. They are below the 25 th percentile in investments, as they mostly use their funds for loans rather than investments. UFCU is above the 75th percentile in non-interest income, which is usually composed of account fees and other charges to their customers. 48% of their earnings are non-interest income, which means they are charging their members nearly half of their net income. Their income statement has most of their non-interest income categorized as fees and other operating income. UFCU is greater than the 75 th percentile in salary and compensation for their employees. UFCU may have more employees than the normal credit union, or they may pay their employees more, which would explain why this number is higher on average. The most important factor in their financial statistics is how much money they are making from their loans because they are severely lacking in this category. The most important factor in their financial statistics is how much money they are making from their loans because they are severely lacking in this category. For UFCU to better reach their goals of supporting their members, they need to either lower their fees or make more money from interest on loans.

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