LOOKING AHEAD TO 2012 (FROM PAGE 8)
Over the past 20 years, significant increases in the
unemployment rate have been associated with declines in
lending. And the modest improvement in lending in 2011 was
associated with the modest decline in unemployment during
the year. The lower chart shows the relationship between loan
charge-offs and the overall unemployment rate. Over the past
20 years, significant increases in the unemployment rate have
been associated with rising charge-off rates. Again, charge offs
moved lower in 2011, as the unemployment rate edged down.
In this slow-to-moderate economic growth economic climate
for 2012, credit unions should experience:
; Moderate loan growth—more robust than 2011, but well
below historical norms;
; Moderate deposit growth—somewhat faster than the past
two years; and
; Delinquencies and charge-off rates that continue to ease,
but remain elevated.
Despite the modestly positive forecast, there is considerable
risk that U.S. growth will be weaker than the consensus
expectation. Key risks to growth include the unresolved Euro-area crisis and the prospect of a significant Euro-area
economic contraction, another round of U.S. budget/fiscal
impasse along with the risk of oil price spikes due to the
continued instability of the Middle East. One or more of these
factors could deliver a heavy blow to consumer confidence.
Reflecting these risks, we remain concerned that the U.S.
could experience an abrupt shift in our financial markets that
would cause interest rates to jump. While we have
experienced an exceptionally low interest rate environment,
rates have nevertheless been volatile over the past two years.
A shock to interest rates—in particular a surge in short-term
rates or a rapid flattening of the yield curve—poses an
especially high risk for CUs with loan portfolios tilted heavily
toward long-term, fixed-rate loans.
CORPORATE STABILIZATION COSTS NOW ON NCUA WEBSITE (FROM PAGE 1)
; Legacy Asset concentration by state;
;Legacy Asset origination by year (also
known as “vintage”);
;Overview of the risk characteristics
affecting the value of the Legacy Assets,
such as the unemployment rate; and
;On-going NGN Program balance and
performance metrics, including the
amounts of principal pay-downs, current
realized losses, and implied write-downs.
NCUA will refresh and update the
information on these websites twice a year.
Interested parties can now track actual
Legacy Asset losses until the Stabilization
Fund expires in 2021. Projected remaining
corporate stabilization assessment ranges,
expressed in basis point terms, are shown in
the adjoining graph (taken from the website).
Future losses will depend on a variety of
economic factors, but under current
estimates are likely to fall within the
remaining estimated loss range of $1.9
billion to $6.2 billion.
Stakeholders seeking information about the
size of actual Legacy Asset losses and
projections for future losses now have access
to the most reliable resources possible at
www.ncua.gov.
Range of Remaining Projected Assessments
and Estimates of Assessments from 2012 through 2021
7 90
For illustration purposes only. This graph shows an example of assessments based on the high and low end of the
current range of projected defaults. Actual assessments will be determined each year by the NCUA Board.
80
6 6. 2
70
5
Billions
3
4
Range of remaining
projected assessments
60 8 bps**
50
Cumulative amount of assessments
(2012 – 2021)*
40
Basis points (bps)
30
2 1.9
2 bps** }
20
1
$0.86 11 bps**
$0.62 8 bps**
10
0
1
2011 2012 2013 2015 2016 2014 2017 2018 2019 2020 2021
* For illustration purposes only. The NCUA Board must determine the annual assessments each year based on a variety of factors including Stabilization Fund cash needs, projections of losses and cash flows on the Legacy Assets, actual performance of the Legacy Assets, and projections of losses related to disposing of other assets of the asset management estates. The NCUA Board formal estimate of the 2012 assessment is 8–11 basis points of insured shares. On a straight- line basis, the annual assessment from 2013 to 2021 would be approximately 2 basis points to reach cumulative assessments of $1.9 billion for the low end of the current projected loss range. To reach the high end of the current projected loss range, $6.2 billion, the annual assessment would be approximately 8 basis points. Actual assessments will be determined by the NCUA Board based on the factors discussed above.
