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FxAMP a Fixed Asset Report from LEVEL5
Friday, September 11, 2015 6:20 AM

FxAMP

By: John Hyche & Brian Abner

After much speculation, the NCUA’s new fixed asset rule has been approved. Many credit unions see this as a new dawn for expansion after being handicapped by the former rule limiting their ability to grow and compete. The real question is: how can credit unions best utilize this opportunity to increase member services and manage the credit union’s expansion?

Under the new guidelines, prudent fixed asset management will become part of the examiner’s oversight. Credit unions will be expected to maintain safety and soundness if they choose to increase their fixed asset investment. The Fixed Asset Management (FAM) that was in the original draft of the rule is not required; however, regulators will expect the credit union’s senior management and board to manage fixed assets, ensuring the CU’s earnings and capital are not put at risk. Here’s why, according to the NCUA:

“Fixed assets not only hold member funds in non-income-producing assets, but they also typically involve a material increase in FCU operating expenses, such as depreciation, maintenance, and other related expenses.”

So having a management process in place is still warranted by credit unions going forward, even though the new rules provide more potential freedom. The good news is LEVEL5 has been providing this analytical service to our clients for more than 12 years.

Introducing FxAMP (Fixed Asset Management Plan) Developed by LEVEL5. Here’s what it does for the credit union:

  • Provides a prudent management process using “real world” analysis and financial modeling.
  • Allows fixed asset investments by proving the credit union is conducting prudent planning and analysis.
  • Evaluates fixed assets’ impact on the credit union’s balance sheets, income statement, and ratios.
  • Evaluates the overall efficiency ratio, ROA, and net worth ratios.
  • Quantifies fixed assets’ influence on the credit union’s non-interest expenses.
  • Provides a report for internal use by the credit union’s senior management and board to develop a growth strategy that ensures proper management of any ongoing risk to earnings and capital.
  • FxAMP Report can also provide examiners with the credit union’s fixed asset management strategy to ensure that earnings and capital do not encounter undue risk.

We have a strong working knowledge of the NCUA guidelines and regulations. Our management solution helps our clients achieve growth objectives while observing fixed asset considerations. Our model is a real world projection illustrating how fixed assets may affect earnings and capital. The FxAMP report offers strategic leverage for senior management teams and boards to create a growth strategy while providing management reports that show the measures taken to ensure the credit union’s safety and soundness.

To learn more about this new tool, follow this link to FxAMP: ecom.level5.com