Credit Unions with High RBC Perform Better: Metsger
NCUA Board Member Rick Metsger said credit unions that have high capital under the agency’s proposed risk-based rule perform better in key financial metrics than those that don’t.
In a recent column, CU Times Executive Editor Heather Anderson questioned whether those credit unions were among the industry’s top performers.
In response, Metsger said he asked NCUA staff to review performance data from the last five years for credit unions with more than $100 million in assets. Specifically, staff applied the proposed risk-based capital rule and compared the 100 credit unions that had the most and least resulting capital.
“The results are eye opening,” Metsger said Friday in a speech before the Tennessee Credit Union League.
Metsger’s staff concluded that over the last five years, the top 100 had almost twice the ROA (.72% vs.44%), more than twice the net worth (16.5%vs.7.9%) and70%lower loan delinquency (.94%vs.1.31%).
They also had more than twice the asset, loan and share growth and more than four times the membership growth, he said.
Metsger also pointed out that the top 100 credit unions also had50%less fee income.
“Thus their improved performance wasn’t a result of charging their members more,” he said.
His staff also compared the top 100 against the average for all credit unionsover$100 million.
“The results, while not always as dramatic, were similar. The top 100 had better ROA, higher net worth, lower delinquency, higher RBC, and higher growth rates for assets, loans, shares, andmembership,” Metsger said. “These statistics belie the common misconception that the proposed RBC rule will restrain credit unions’ growth and limit their ability to serve their members.”
Metsger also said the NCUA knows the proposed rule is not perfect.
“That’s why we look forward to your comments and why the comment period for this rule is approximately twice as long as it is for most rules the agency issues. We know it needs adjustment, and we want to hear from you where and how it needs to be adjusted so you can best serve your members,” he said.
“But this data also reassures us that adopting a risk-based capital standard is not only good for safety and soundness, it is also good business,” he added.