WHAT IS
SAFE AND SOUND?
Capital works as a cushion against losses and affords protection for members when a credit union is experiencing financial trouble. Therefore, when it comes to measuring an an institution's financial strength, capital is essential. From a safety and soundness perspective, more capital is better.
LOCAL 804 did better than the national average of 15.65 points on our test to measure the adequacy of a credit union's capital, racking up 30 out of a possible 30 points.
LOCAL 804 appears to be stronger than its peers, with a capitalization ratio of 30.00 percent in our test, higher than the average for all credit unions.
In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the credit union's capitalization and allocated loan loss reserves.
Having a large number of these kinds of assets suggests a credit union may have to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, LOCAL 804 scored 40 out of a possible 40 points, exceeding the national average of 38.09 points.
Troubled assets made up 0.00 percent of the credit union's total assets in our test, beneath the national average and suggestive of greater financial strength than other credit unions.
How successful a credit union is at earning money has an effect on its safety and soundness. A credit union can retain its earnings, boosting its capital cushion, or use them to address problematic loans, likely making the credit union better prepared to withstand financial trouble. Losses, on the other hand, reduce a credit union's ability to do those things.
On Bankrate's earnings test, LOCAL 804 scored 0 out of a possible 30, failing to reach the national average of 10.11.
One indication that the credit union is running ahead of its peers in this area was its earnings ratio of 0.00 percent in our test, above the average for all credit unions.
Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.
Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.