Guide to Projections
What is Peer Suite's Projections?
Projections is a tool that allows credit unions to visualize potential future performance. While traditional benchmarking compares past performance, Projections provides a forward-looking perspective, helping institutions understand what their future might look like under different scenarios.
Where can you use Projections?
- In your next strategic planning session to map out key financial milestones.
- During a board meeting to illustrate potential future scenarios and drive informed discussions.
- As part of your preparation for an upcoming merger or expansion initiative (see how to model a simulated merger scenario here).
Peer Suite’s Projections is available only to users with Premium or Plus level Peer Suite subscriptions. Think your team could benefit from this tool? Schedule a conversation with your account manager.
Quick Navigation:
Getting Started with Projections
- Open Your Chosen Display: Begin by selecting the display you wish to analyze. This is the foundation for your projections.
- Activate Projections Mode: Click on the Projections icon in your display's toolbar to enter Projections Mode.
- Default Projections: Once in Projection Mode, Peer Suite will automatically generate either the default projection or the latest custom projection you’ve created. This gives you a quick starting point for your analysis.
- Quick Edit & Advanced Options: Once in Projections Mode use the arrow icon (shown below) to open the Quick Edit View and to access the Advanced options menu.
The Quick Edit View is designed for simplicity and efficiency, allowing you to quickly adjust the settings of your most recent projection. If this is your first time using Projections on a display, Peer Suite’s default settings will automatically apply.
Peer Suite's default, Historical Performance, utilizes past performance data from your specified timeframe (your "look back") to generate your projection. To learn more about creating Historical Performance Projections and the other strategies available, refer to the Advanced Options section of this guide.
The options available in the Quick Edit view will vary depending on the type of projection you are viewing.
Important Notes For Your Analysis
- Projections can only be performed on a single institution, using data from your Primary institution (shown in dark blue in comparison set).
- The Projections Icon will only appear on compatible single metric displays, such as dollar, number, and ratio displays.
- Projections is only compatible with historical trending display views:
- Column Chart
- Line Chart
- History Table
Advanced Options
Projection Strategies
In the Advanced Options menu, you can choose from three different projection strategies:
Historical Performance
This approach leverages past performance data to generate future projections and is Peer Suite’s default method.
- Your Look Back Period: Select the time frame used to calculate historical performance and generate a projection rate. For example, choosing 3 years will use data from the past 3 years to calculate your projection rate.
- Options:1 year, 3 years, 5 years, or 10 years.
Peer Pointer!
- Shorter Look Back periods are ideal for metrics or markets prone to rapid changes. They can reflect recent economic conditions or shifts in strategy.
- Longer Look Back periods help uncover sustained trends, smoothing out short-term fluctuations to reveal underlying patterns. They provide insights across full economic cycles, reducing the influence of short-term outliers.
- Calculation Method:
- CGR (Compound Annual Growth Rate): The default method, using start and end points to calculate an average growth rate over time.
- ELS (Exponential Least Squares): Unlike CGR, ELS accounts for fluctuations throughout the period. It creates a 'best fit' line by analyzing volatility over time. This method is ideal for organizations with irregular growth patterns, offering more accurate projections that reflect historical volatility.
Projecting Historical Performance Use Case
- Baseline Tracking: Estimate where your credit union will be if current trends continue without changes in strategy.
- Why it matters: Tracking baseline performance helps you maintain a consistent trajectory and identify areas for improvement.
For a comprehensive analysis, pair this baseline projection other projection types. Learn how to view multiple projections at once here.
Annual Growth Rate
This option projects future performance based on expected or desired growth rates.
Projecting Annual Growth Rates Use Cases
Budget Planning
- Imagine your credit union is aiming for a 5% growth in shares over the next five years. By projecting this growth, you can plan for how much cash flow you’ll have, where to allocate resources, and how to adjust interest rates accordingly.
- Why it matters: When you project growth, you're making smart financial choices today to ensure you’re ready for tomorrow’s demands—all while staying competitive.
Expense Reduction Goals
- If your credit union plans to cut operational expenses by 5% over the next year, projecting these savings can help evaluate the impact of cost-saving initiatives.
- Why it matters: By looking ahead at potential expense reductions, you can roll out cost-saving strategies without sacrificing efficiency or service quality, ultimately boosting your profitability.
Goal Value
This strategy allows you to set a target dollar amount or value for a specific goal, helping you plan and achieve objectives.
Projecting Goal Value Use Cases
Loan Growth Targets
- Imagine your credit union has set a goal to increase total loans by $50 million within the 3 years.
- Why it matters: By projecting this target, you can assess how well your marketing strategies and loan terms are performing, allowing you to adjust things as needed to stay on track.
Membership Growth Targets
- Your credit union sets a goal to grow its membership base to 25,000 members within 5 years.
- Why it matters: Forecasting membership growth enables the credit union to allocate resources effectively, including marketing budgets, outreach efforts, and staffing levels, to attract and retain new members
Anticipating Asset Growth
- Imagine your credit union anticipates hitting the $10 billion regulatory milestone in 10 years.
- Why it matters: Projecting your assets helps ensure you're prepared for the increased regulatory scrutiny and operational demands that come with larger asset sizes. By planning ahead, you can adjust strategies for compliance, resource allocation, and risk management, keeping your credit union both scalable and sustainable.
Look Ahead
Adjust how far out your projection extends— options include 1 year, 3 years, 5 years, and 10 years. Make this modification at the bottom of the Advanced Options menu.
View Multiple Projection trend lines
You can compare up to three projections on one display by clicking the blue plus sign in the upper-right corner of the Advanced Options menu.
Peer Pointer!
Make sure to name each projection for easier tracking in the display’s legend.
Projecting Ratios
Projecting ratios follows the same process, but you’ll need to set parameters for both the numerator and denominator separately. Once set, Peer Suite will calculate the projection rate based on these inputs.
You'll notice separate Numerator and Denominator tabs in both the Quick Edit View and the Advanced Options menu. This setup allows you to strategically modify each component of your ratio individually, offering the flexibility to explore various scenarios.
Why Adjust the Numerator and Denominator Separately?
- Insight into Drivers: By adjusting each component separately, you gain a clear view of what's influencing the ratio (e.g., how income changes compared to assets).
- Sensitivity Analysis: It highlights how changes in one component impact the overall ratio.
- Targeted Adjustments: Allows focus on specific strategies (e.g., revenue growth or asset management).
- Captures Complexity: Helps reflect real-world dynamics where components change at different rates.
- Scenario Planning: Enables testing of different conditions for clearer future projections.
Projecting Ratios: Return On Assets Use Case
Let’s say a credit union sets a goal to grow its assets by 8% per year. By applying this growth rate to the asset denominator in the ROA formula, they can assess how achieving this goal impacts their ROA. They can then adjust the numerator (net income) to align with their overall growth strategy.
If your credit union sets an asset growth goal, you'll also need to adjust your net income growth to maintain a stable ROA. This tool allows you to test different scenarios and ensure that your credit union can achieve a consistent ROA while meeting growth objectives.
Why it matters: Understanding how your asset growth impacts your ROA is crucial for maintaining a healthy financial profile. By visualizing different scenarios, you can strategically align your growth initiatives with your profitability goals. This proactive approach helps ensure that your credit union remains financially sound, meets regulatory requirements, and continues to deliver value to your members.
Exporting Projections
When you’re ready share your insights or to present your projections:
- Click the download option in the upper-right corner of the canvas.
- For visualizations, use the PowerPoint Image option.
- For tables, export to Excel.
Peer Pointer!
Add custom displays or create Shortcuts to the displays you plan to apply projections to. Organize these displays into folders for easy access. (Note: Any modification, like projections will need to be reapplied after a shortcut is created)
Then drag the folder onto your canvas to open it in Tile View. From there, organize your chosen displays as needed and export everything at once using the PPT Image option for a ready-made presentation!
Conclusion
Projections is more than just an extrapolation tool—it's a strategic asset that empowers credit unions to plan for the future with confidence. Whether you’re tracking baseline performance, aiming for ambitious growth, or preparing for regulatory milestones, Projections provides the flexibility and insights needed to make informed decisions. With a variety of projection methods and customizable options, you can tailor scenarios to meet your institution’s specific needs, aligning growth initiatives with long-term financial goals.
With Projections, you’re not just planning for tomorrow—you’re shaping it. Need more guidance or creative ideas? Don’t hesitate to reach out to your account manager to schedule a conversation. We’re here to help you get the most out of Projections and fully unlock its potential for your credit union’s growth and success.