That may have been the right answer back then and even today,but how times have changed. Given the tumultuous financiallandscape, ensuring safety and soundness at the management levelhas shot to the top of the list, said Alonzo Swann, NCUA Region IIIdirector, told attendees at the African American Credit UnionCoalition's annual meeting.

The rest of Swann's top five list is the liquidity part ofasset-liability management, asset quality, earnings and capitalcoming in dead last. With that said, capital, asset quality,management, earnings and liquidity or overall CAMEL ratings areprobably not the most pressing concern for credit unions right now.Navigating in a troubled economy takes precedence, he believes.

"There are a lot of credit unions that used to manage to 1%ROA," Swann said. "You should manage to the best interest of yourmembers."

Swann oversees exam activity for more than 1,800 federallyinsured credit unions in Alabama, Florida, Georgia, Indiana,Kentucky, Mississippi, North Carolina, Ohio, Puerto Rick, SouthCarolina, Tennessee and the Virgin Islands. Florida in theparticular has been hammered with real estate loan losses. Somecredit unions that previously saw examiners there once every 18months are now visited every three months.

"We've got a lot of red ink bleeding right now. There are creditunions with million dollar losses, mostly in Florida," Swannsaid.

Credit unions in troubled markets can expect more visits fromexaminers, Swann said, adding NCUA is "reallocating resources as wespeak" to provide additional guidance. More scrutiny is certainlynecessary given the dips in the National Credit Union ShareInsurance Fund. If the industry adds up the total hits to the fundover the last 15 years, 2007's withdrawals were more, he pointedout. Over that same 15-year time period, the focus in Region IIIhad been on ensuring the smaller credit unions were up to par. Thathas since shifted to helping out larger credit unions again, mainlyin Florida, and other localized spots.

NCUA modified the CAMEL rating system by eliminating the matrixthat measured financial ratio results against benchmarks forcapital adequacy, asset quality and earnings, according to theagency's December 2007 07-CU-12 supervisory letter. The focus nowis on CAMEL evaluation on risk consistent with NCUA's risk-focusedexam program.

Swann said changes to the rating system will be minimal, buteven so, NCUA has been prepping for the adjustments for some time.For one, examiners always had the judgment to change the matrixbased on global conditions. Swann recalled the early days of hiscareer in Gary, Ind., when examiners used the "early warningsystem" to spot potentially troubled credit unions.

"Using peer averages wasn't a good idea, because in the 1980s,thrifts were tanking," Swann said. "The ratios were so bad forthrifts that being insolvent was good."

In the past, numbers were crunched to reveal trends and exploremanagement components to see where a credit union was headed.Today, more emphasis is on forward projection. Still, when lookingat asset quality, "the biggest determinant is pastperformance."

With the changes to CAMEL, Swann said he can not say enoughabout liquidity.

"If everything happening now happens again in ten years,liquidity may be a problem" he warned. "If we don't come out ofthis with a lot of shares, there could be a problem."

For members, CAMEL may as well be a desert animal that can gofor long periods of time without water.

"I'm a member of three credit unions. When I walk in I want tosee how fast the service is and if I'm getting the best returns onmy savings," Swann said. "Members could care less about CAMELratings."

A CEO at Swann's session questioned an examiner's recentquestions about reputation risk regarding the credit union'smarketing plans.

"Reputation risk is in the eye of the beholder," Swannresponded, later saying in another part of his talk that examinersdo not have a component to evaluate member service.

"That's your job," he reminded the attendees.

Swann acknowledged that a retraining of examiners aims to helpthem make better judgment calls. He also said credit unions arebeing held to the same standards as banks and thrifts. They toohave to adhere to CAMEL with an added "s"--"sensitivity," hesaid.

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