NCUA Releases 2010 Annual Report
The NCUA recently released their 2010 Annual Report. With the release of the quarterly State of the Credit Union reports, some of the data included in the report may be old news, but nonetheless the report does provide a wealth of information. We took a look at the report to see if we could summarize what happened to the credit union industry from 2009 to 2010 and speculate on where it may be headed.
1. Examination hours increased. The NCUA exerted approximately 635,000 hours on credit union examinations in 2010 compared with 584,000 in 2009. Combined with a decrease in credit unions from 7,554 in 2009 to 7,339 in 2010, examiners spent a little over a day longer at the average credit union. Given the continued pressure on the real estate market, a sluggish economic recovery and the NCUA’s continued attitude the application of regulatory pressure, we expect exam hours to remain high for 2011 and into 2012. Larger credit unions should expect to see an even greater affect on their exam hours. In the August 2011 NCUA Newsletter Board Member Gigi Hyland gave the idea of creating “a tiered examination system based on asset size and an institution’s risk to the NCUSIF.”
2. Increased Membership. Credit Union Membership grew to 90.5 million from 2009 to 2010. Backing into this number using a growth rate of 0.68%, that’s a modest increase of approximately 615,000 members. Based on the Q2 2011 State of the Credit Union Industry Report, membership has continued to increase (1.14% through June 30, 2011). Unfortunately credit union lending is sluggish, but the positive side is that credit unions are building the membership. When consumer spending turns around, these additional members will be looking to credit unions to fund their purchases.
I think this membership growth will continue as people continue to become more and more fed up with banks. There was a report on the local news today that Tropical Financial Credit Union is going to begin paying their members up to $5 a month for using their debit cards.
3. Number of Risky Credit Unions Remain High. Despite continued regulation and some modest turnarounds in the economy, problem credit unions continue to increase. In 2010, 359 credit unions received a CAMEL Code 4 or 5 compared with 328 in 2009. It is hard to estimate the lag between an economic shock and severe financial hardship on behalf of the consumer, especially across a wide range of regions and industries. Although charge offs and ROA continue to improve, this statistic indicates that credit union closures will remain high.
The report gives us a more detailed look into the mind of the NCUA, and getting a good idea of what they are thinking is always important when you are trying to stay a step ahead!
Dan Price, CPA
-Twenty Twenty Blogger
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