ALEXANDRIA, Va.– The NCUA reported last week that the number of troubled credit unions increased at the end of last year, indicating that despite signs of economic improvement the industry has a way to go before it is out of the woods.
The agency reported at its Jan. 13 board meeting that there were 368 CAMEL 4 and 5 credit unions at the end of December, compared with 351 at the end of December 2009.
Last month's number was a decline from the 372 in November.
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Last December, 5.08% of all insured shares were at CAMEL 4 and 5 credit unions, compared with 5.10% in November and 5.72% in December 2009.
Last December, there were 1,827 CAMEL 3 credit unions, compared with 1,792 in November and 1,668 in December 2009.
Last month, 18.1% of insured shares were in CAMEL 3 credit unions, compared with 18.6% in November and 13.67% in December 2009.
There were 28 credit union failures in 2010, the same number as in 2009. However, NCUA Chief Financial Officer Mary Ann Woodson told the NCUA board that the 2010 failures cost the NCUSIF $220 million, compared with $124 million in 2009.
The fund lost $45.4 million in December, but its net income for 2010 was estimated to be $283 million. Its equity ratio was 1.28% in December, compared with 1.29% in November and 1.26% in December 2009.
At the meeting, the board unanimously approved a final rule spelling out what credit unions must disclose to their members about overdraft protection programs.
The rule, which was unchanged from the interim rule approved last summer, requires credit unions to disclose in their periodic statements the total amount of the fees for overdraft protection that they are charging a member. They must use the phrase "total overdraft fees." In addition for members who have sweep accounts, the credit union must show a single balance, combining funds in the share draft subaccount and shared savings subaccount.
The rule also requires credit unions to notify members when there are restrictions on the use of the funds in their overdraft line of credit. For example, under some overdraft programs, the line of credit can't be used when using a debit card at a point-of-sale transaction.
NCUA Staff Attorney Jason Anderson told the board that agency had rejected requests from CUNA and NAFCU to use alternative language to "total overdraft fees" because that language is in the original rule issued by the Fed and because it enables consumers to "compare fees on an apple to apples basis."
The board also changed the rules for the agency's supervisory review committee to allow credit unions to appeal agency rejections of requests for reimbursements under the technical assistance grant program. The panel is now no longer required to meet once per quarter and must only meet on an "as needed" basis.
The NCUA board also approved the agency's performance budget, which set monitoring and controlling credit union risk and improving the stability of the corporate credit union system as the top priorities.
The agency will judge its risk management efforts to have been successful if there is a decrease in losses to the NCUSIF. The agency said that its program for providing annual exams for all FCUs-which should be implemented this year-will help achieve that goal.
On the corporate credit unions, the agency plans to continue the implementation of its plan for resolving the problems. The agency also aims to see to begin enforcement of the new corporate rule, which sets new capital standards and sets investment limits. The agency plans to use the leverage ratio, "which looks at corporate credit union capital and retained earnings as an indicator."
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