SAFE & SOUND® STAR RATINGS™

Memorandum on findings

ABCO
P.O. Box 247
Rancocas, NJ 08073

STAR RATING: 2 starstar
Predictive Indicator neutral
As of March 31, 2014
Credit Union ID 12679
INTRODUCTION

A credit union is a nonprofit, cooperative financial institution, owned and administered by individual members, who must meet eligibility requirements to join. Credit unions pay no federal income tax. Community development credit unions are chartered to serve the needs of low income members who reside in financially distressed or under-served communities.

The Bankrate proprietary credit union rating model analyzes capitalization, asset quality, earnings, and liquidity to produce composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions. The analyses are not adjusted for TARP funding and those institutions receiving funds may receive ratings that would differ were the TARP funds adjusted out of the analyses. You can check whether or not this institution has received TARP funding and whether or not they have paid it back at http://projects.propublica.org/bailout/list/index.

INSTITUTIONAL HIGHLIGHTS
Institution Name ABCO
Report Date March 31, 2014
Report Period 3 months
Star Composite Rating, Percentile Rank 2 /4.17
Predictive Indicator neutral
Earnings Rating, Percentile Rank 2 /42.70
Asset Quality Rating, Percentile Rank 3 /8.36
Capital Rating, Percentile Rank 1 /12.41
Liquidity Rating, Percentile Rank 2 /18.49
Institution Asset Size 214.9859 million
Deposits 198.4837 million
Loans 130.7849 million
Equity 15.3292 million
Net Profit/Loss 137.55 thousand

COMPONENT HIGHLIGHTS

Component star rating: 1 star
Capital highlights

Capitalization stands as protection against loss for credit union members, creditors and, if applicable, the insurer. Regulators place a high degree of importance upon assessments of capitalization.

Key measures of Capital AdequacyRatio (%)Assessment
Net Capital / Assets 7.13Below Peer Norm
Capital (1) / Assets 7.73Well Below Peer Norm
(1) Includes loan loss allowance.

Component star rating: 3 starstarstar
Asset quality highlights

Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon other components and regulators invest substantial amounts of time and resources in gauging the quality of loans and investments.

Key Asset Quality information and ratios:Ratio (%)Assessment
Nonperforming Asset Ratio (2)12.85Somewhat Higher Than Standard
Loss Reserve Coverage (3)63.94Well Below Normal
Asset Growth Rate 8.97Normal
(2) Nonperforming Assets/Equity plus Loss Reserves

(3) Loan Loss reserves/Delinquent Loans


Component star rating: 2 starstar
Earnings highlights

A credit union's profitability is critical to building capital and establishing adequate loss reserves.

Key Earnings information and ratios:Ratio (%)Assessment
Return on Average Assets 0.42Below Average
Overhead / Average Assets 5.27Higher Than Average
Note: The earnings assessment is based on the latest four quarters of income and expense.


Component star rating: 2 starstar
Liquidity highlights

Liquidity provides funding for normal operations and represents a reserve for unanticipated disintermediation.

Key measures of Liquidity:Ratio (%)Assessment
Balance Sheet Liquidity9.43Below average

Early warning highlights

Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in depth investigation.
For this institution we have noted:

  • Capital Adequacy
  • Overhead

Institution Commentary

OVERVIEW of Institution
ABCO is a federally chartered credit union, which, as of March 31, 2014, reported total assets of approximately $214.9859 million. At that date, loans and deposits held by the institution amounted to $130.7849 million and $198.4837 million, respectively. Equity, the difference between a credit union's total assets and total liabilities, was determined to have been $15.3292 million, which was 7.13% of total assets.

COMPOSITE SUMMARY
Bankrate believes that, as of March 31, 2014, this credit union exhibited a below average condition, characterized by well below standard capitalization, satisfactory asset quality, lower than normal profitability, and lower than normal liquidity.

CAPITAL ANALYSIS
Balance sheet structural changes, through the one year period of time ended March 31, 2014, have had little or no positive, and quite possibly a negative, impact upon the institution's capital position. Our analytical methodology does take into account the quantity, quality, durability, and direction of net worth, and, as set forth above, we have determined, based upon our series of tests, that this credit union demonstrates well below standard capitalization. Notwithstanding any of the information contained within this section, we believe, based on our analysis, that the institution should consider plans for enhancing reported capitalization.

ASSET QUALITY ANALYSIS
The institution reveals, as previously stated, satisfactory asset quality. That conclusion incorporates our analysis of data depicting regional economic conditions as well as our computations of a somewhat higher than standard March 31, 2014 nonperforming asset ratio and well below normal reserve coverage for nonperforming loans.

Credit card lending activities should not, based on our analysis of asset quality trends and conditions, have a substantial negative impact upon future results.

EARNINGS ANALYSIS
For the year ended March 31, 2014, this institution recorded a net profit of $874.60 thousand, which represented a return on average assets (ROA) of 0.42%. Year earlier four quarter results amounted to a net profit of $1,144,309, or a 0.63% ROA. ROA is the key measurement of profitability within the credit union industry, and the industry's ROA, for the three months ended March 31, 2014, approximated 0.78%.


We have concluded that, for the four quarters ending March 31 2014, the institution achieved a below average return on average assets. A significantly higher than average overhead ratio is in evidence.

LIQUIDITY ANALYSIS
As of March 31, 2014, the institution displayed below average balance sheet liquidity.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the credit union's present balance sheet, changes in the value of the current level of securities reported as might not have a substantial impact upon future net worth of the credit union.

INSTITUTION SUMMARY
This credit union has been rated below average.
Negative factors that impacted that rating follow:

  • Capitalization
  • Earnings
  • Liquidity
As noted previously, early warning indicators possibly requiring specific investigation include:
  • Capital Adequacy
  • Overhead

As stated, we have determined a Composite Star rating for this credit union of 2 starstar , indicative of a below average financial condition. At times, conditions of financial institutions change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.

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