WHAT A DIFFERENCE A YEAR MAKES
As we close out 2011, now is a good time to
reflect on all we have accomplished in the
Just think—one year ago at this time, NCUA
was dealing with the largest number of
problem assets in credit union history. NCUA
had conserved three more corporate credit
unions and seized control of billions of dollars
in troubled mortgage-backed securities. We
were about to embark on an unprecedented
initiative to recover losses on behalf of the
entire credit union industry.
Among all credit unions, positive indicators are
moving in the right direction. Return on average
assets strengthened from 51 basis points to 66
basis points, while net worth rebounded from
10.06 percent to 10.15 percent.
Negative indicators look less severe. Delinquencies
dropped from 1.74 percent to 1.59 percent,
while net charge-offs fell from 1.13 percent to
The industry continues to grow, with assets up to
$951 billion and membership over 91.4 million.
Corporate Credit Unions Stabilizing
Fast forward one year—NCUA successfully
raised $28.3 billion in liquidity for the
corporate credit union system by
repackaging cash flows from those troubled
securities as NCUA Guaranteed Notes. New
corporate credit unions were chartered to
serve members of the conserved corporates,
with no interruption of services to consumer
Examiners Preventing More Failures
In 2011, NCUA hired 78 new examiners and
other specialists. NCUA’s return to a 12-month exam cycle by putting more
“boots on the ground,” has truly paid off.
By paying a $25 million NCUA budget increase in 2011, the industry was
spared $1.5 billion in additional losses to the National Credit Union Share
Insurance Fund (NCUSIF). Many credit unions that were in imminent danger
of failing have been stabilized.
Last year 28 credit union failures cost the NCUSIF $221 million. At press
time, only 15 credit unions had failed so far this year at a cost of less than
As the remaining troubled credit unions pose less risk to the NCUSIF, we
have been able to reduce the fund’s reserves and increase the equity ratio to
its highest level since May 2007.
Most importantly, thanks to NCUA’s efforts to prevent failures, credit unions
will not pay any NCUSIF premium this year.
And by negotiating $165 million in settlements,
NCUA became the first federal regulator to
recover losses on behalf of failed financial
institutions that resulted from investments in
mortgage-backed securities. The net proceeds
from NCUA’s settlements will reduce future
Stabilization Fund assessments on credit unions.
Consumer Credit Unions Recovering
At the same time, the financial conditions of
consumer credit unions are improving.
The percentage of shares in credit unions
rated CAMEL 1 or 2 rose from 77.9 percent
in December 2010 to 82.7 percent. Over the
same time, the percentage of shares in credit
unions rated CAMEL 3, 4 or 5 decreased
from 22.1 percent to 17.3 percent.
Industry Turning the Corner
It appears that the credit union industry is turning the corner. So as we close out
this year, NCUA’s emphasis is shifting from the extraordinary efforts which were
required to resolve the corporate crisis and stabilize consumer credit unions.
Now, under my Regulatory Modernization Initiative, NCUA is reviewing
existing significant regulations for those that may be outmoded, ineffective,
insufficient, or excessively burdensome, and will modify, streamline, expand,
or repeal them accordingly.
Where regulations are ineffective or overly burdensome, they will be
eliminated or streamlined. Where new risks have arisen and current
regulations are outdated or insufficient, those regulations will be modernized.
Through careful supervision by NCUA and state regulators, and diligent
efforts by credit union management and volunteers, the credit union industry
is coming through the economic downturn. Credit unions can look forward
to a future of increasing members and strengthening bottom lines.
I am gratified to reflect on how productive 2011 has been. I wish you a very
happy holiday and extend best wishes for the new year.