NCUA Report - June 2012

THE INTERSECTION OF INNOVATION AND REGULATION (FROM PAGE 4)

taking a medication. I submit, however, that there can be a healthy and robust intersection of innovation and regulation. A credit union’s job is to serve its members and appropriately manage the risks to the institution. A regulator’s job is to oversee and check on credit unions’ management of the risks to ensure the institution remains safe and sound.

As credit unions innovate—and they must—they need to rationally evaluate the risks to their institution and how they will manage those risks. Communication with examiners is key here. Examiners are not the decision maker when it comes to the credit union’s strategic and business decisions. That’s the role of the credit union’s board and management. However, giving examiners a heads-up on the who, what, why, when and how of the innovation can help smooth the launch, implementation and scaling of whatever your innovation is.

There is no magic pill that assures sustainability for the credit union system. Innovation comes as close as it gets. Pair innovation with solid risk analysis, due diligence, and good management, and you may well have the elixir for a bright future for the credit union system.

CONSISTENCY/STANDARDIZATION (FROM PAGE 4)

Success in being fair can only come when everyone works together and uses the same practices in the same way.

There is a line from the movie The Guardian about the efforts of the U.S. Coast Guard in handling the Katrina crisis in New Orleans. It reads “Standardization is one of the reasons we were so successful during Katrina. We had crews come in from all over the country, but it didn’t matter, because we have all been trained the same way. I didn’t know my pilot, I didn’t know my co-pilot, I didn’t know my flight mechanic. But guess what? It didn’t matter.” Starting July 1, 2012 that also applies to your examiners. That will be NCUA. Rather than “Game On,” it will be “Fair and consistent, Game On”.

CREDIT UNION ASSETS TOP $1 TRILLION (FROM PAGE 5)

Loans Inch Upward to Grow for Fourth
Consecutive Quarter

The industry’s lending rose for the fourth consecutive quarter, but in the first quarter 2012, credit unions’ total loans only inched up by $532.5 million to $572.0 billion. A rise in first mortgages, used vehicles loans, and non-federally insured student loans offset declines in other lending products like credit cards, unsecured loans, and other real estate loans. Because deposit inflows exceeded loan growth, the industry’s loan-to-share ratio declined to 66.05 percent.

Member business lending rose, too. On March 31, the industry had $37.8 billion in outstanding member business loans, a quarterly rise of 1. 4 percent, and an additional $1.9 billion in unfunded business loan commitments.

Key Credit Union Indicators Improve

With rounding, key balance sheet and income statement
indicators from federally insured credit unions improved in
the first three months of 2012. For the quarter:
n Credit union net worth increased 2. 1 percent to $100.3
billion from $98.3 billion;
n Industry total assets increased 4. 2 percent to $1,001.8
billion from $961.7 billion;

n Member total savings increased 4. 7 percent to $866.0 billion from $827.4 billion;

n Credit union investments, cash on deposit, and cash equivalents increased 11. 2 percent to $391.6 billion from $352.1 billion;

n Total loans increased 0.1 percent to $572.0 billion from $571.5 billion; and

n Credit union quarterly net income increased 21.9 percent to $2.1 billion from $1.7 billion.

For more information about the performance of the credit union industry, NCUA makes the complete details of March 2012 Call Report data available online at http://go.usa.gov/URs.

In conjunction with the release of the industry’s first quarter performance indicators, NCUA also released the first NCUA Quarterly U.S. Map Review. The review features analysis of key financial indicators on a state-by-state basis for federally insured credit unions. With this information, credit unions can make better decisions and the public can gain a greater understanding of how credit unions are performing. For more about the first map review go to http://www.ncua.gov/News/ Pages/ NW20120605Q1Map.aspx.