I doubt that I am the only CEO who reviews the financial performance of my neighboring credit unions. So I'll admit I've been watching one credit union in particular–they are of heightened interest because their parking lot adjoins our parking lot.

I noticed that the credit union had been in a slow decline for some time and was only somewhat surprised to learn in January that it had decided to merge with the large credit union in town. There was no merger vote, so I assume this was done at the forceful direction of the regulators. Upon reviewing the year-end figures, I see that after the DFI/NCUA examination, it was forced to record a large adjustment to the allowance for loan losses. This drove the capital ratio to 3.65%, and we all know what happens to small credit unions with a capital ratio below 4.0%.

I was very surprised when I then saw the final financial report for the first quarter of 2011. Lo and behold, the credit union posted an ROA of 4.09% (before NCUSIF assessment), and capital was back to 4.50%.