ALEXANDRIA, Va. – The number and size of credit unions that are failing is generally pretty low, according to information obtained from NCUA via the Freedom of Information Act.
First quarter 2006 saw five credit union failures, including four liquidations and one assisted merger. The total assets of these institutions were $2.6 million and the average asset size was $527,458. These are some of the lowest first quarter figures since 2000.
Annualized that is just over $10.5 million, by far the lowest aggregate assets of failed credit unions in that time, the next lowest being $68.3 million from all of 2004. However, the 2006 annualized figure could be significantly skewed if just one large credit union hits a rocky patch it cannot recover from.
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Importantly, NAFCU Chief Economist Tun Wai pointed out, "Last year we had Katrina, so you can see the Katrina effect and the news is there really aren't any down there."
He added, "A low number of failed institutions may indicate what is happening now, but not what may happen down the road." Wai noted that the number of problem credit unions has been creeping upward, which is partly a product of the economy, but is relatively steady while the amount of insured shares has been rising.
Wai also emphasized that nowhere near all the assets of failed credit unions are counted as losses against the NCUSIF. Often mergers or purchase and assumption deals are worked out with other credit unions. "In terms of total costs to the insurance fund, it's not that bad," he said. NCUA's year-end insurance report summary said the 10 liquidated and five merged credit unions from 2005 recorded at that time cost the insurance fund $21 million or just four cents per $1,000 of insured shares.
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