Parsing the Possible Harm Awaiting NCUSIF
Every now and again it’s interesting to study the statistics of the credit union industry. Some we find merely satisfy an idle curiosity, while others can have far more serious implications.
For example, well over half of the credit unions under $100 million in assets are experiencing declining membership, according to a peer-to-peer analysis run by a credit union CEO that he shared with me. In fact, one credit union that shall remain nameless had a capital ratio north of 19%, yet was declining in membership and checking penetration over the past three years after more than 700% promotional cost per member.
On average over the two-and-a-half years, the NCUA has liquidated these credit unions at a 17% loss ratio. At the same time, the FDIC took median hits (I know median is not the same as average, but I’m working with the data I have) of 23% for 2011, 23% for 2010 and 29% in 2009, according to SNL Financial.
Getting back to that 17% figure of deposit insurance losses for failed credit unions, let’s look at the now $1.5 billion Texans Credit Union, which is under NCUA conservatorship. The credit union is so large and geographically confined, it’s limited in potential merger partners. At 17%, which would be historic average over the last few years, that could be a $255 million hit to the NCUSIF, greater than the $170 million hit from St. Paul Croatian’s failure.