CUNA's Mike Schenk, vice president, economics and statistics, said he's worried the press and public will misinterpret 1st quarter 2009 credit union financial reports.
"It's easy to report numbers that show large declines in net worth or negative ROA, but without context, it's also easy to misinterpret what those numbers mean," Schenk said, adding that the banking industry is discussing nationalizing individual banks that are larger than the entire credit union industry.
He said CUNA stress tested credit unions against corporate stabilization losses, measuring the impact of taking 100% of share insurance fund charges, plus specific corporate member capital losses, in 2009. About 90% of credit unions would report a net loss in that situation, he said, compared to only 25% without corporate write-offs.
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Despite the negative bottom line, capital ratios remain comparatively high, he said, with only about 4% of credit unions falling below 7% net worth.
However, thanks to a shift in consumer behavior that should further increase deposits and reduce loan balances, Schenk said the industry will be forced into an attitude adjustment when it comes to earnings.
"It could be a painful process in which credit union boards come to realize the 1% ROA of the good old days will not come back anytime soon," he said.
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