Friday, October 23, 2009

The State of Privately Insured Credit Unions

As of June 30, 2009, there were 156 privately insured credit unions, representing about 2 percent of all credit unions in the country.

Nine states currently permit state chartered credit unions to be privately insured; but most privately insured credit unions are located in 5 states. Ohio had the most privately insured credit unions with 63 as of June 2009; followed by Illinois with 29, Idaho with 18, Indiana with 17, and California with 15.

However, the bulk of the assets in privately insured credit unions were concentrated in five states:
• 25.6 percent, California;
• 20.4 percent, Nevada;
• 20 percent, Illinois;
• 15.7 percent, Ohio; and
• 12.3 percent, Indiana.

Assets, Shares and Loans Increase

Assets, shares (deposits), and loans at privately insured credit unions grew over the last year. As of June 2009, privately insured credit unions held slightly more than $12.2 billion in assets and $10.7 billion in shares and deposits. Total loans were $8.2 billion. Compared to a year ago,

• Assets were up 3.8 percent;
• Shares and deposits grew by 4.8 percent; and
• Loans increased by 2 percent.

Thirty-two credit unions were larger than $100 million in assets with 9 exceeding $550 million. Sixty-one privately insured credit unions are smaller than $10 million in assets.

Privately Insured Credit Unions Lose $68.9 Million thru June

Privately insured credit unions reported a loss of $68.9 million through the first six months of 2009. In comparison, these same institutions reported a profit of $25.4 million for the same time period in 2008. The return on average assets for privately insured credit unions was -1.14 percent as of June 2009 compared to 0.44 percent one year earlier.

Approximately 47 percent of privately insured credit unions were unprofitable as of June 2009. Losses at unprofitable credit unions were $82.5 million through the first six months of the year.

Privately insured credit unions in California and Nevada have been particularly hard hit by the recession. Only one privately insured credit union in each state did not report a loss through the first six months of this year. California privately insured credit unions reported losses of almost $28.2 million. In Nevada, losses were $45.5 million.

Net Worth Falls, But Most Are Well Capitalized

The net worth of privately insured credit unions fell by 6.2 percent from a year ago to almost $1.275 billion. The average equity to asset ratio for privately insured credit unions was 10.35 percent, while the median equity capital ratio was 12.89 percent.

The vast majority of privately insured credit unions are well capitalized. Only 7 privately insured credit unions, if they were subjected to prompt corrective action, would not meet the regulatory requirement of adequately capitalized.

Credit Quality Deteriorates

Asset quality fell over the last year at privately insured credit unions. Loans 60 days or more delinquent increased from $81.9 million as of June 2008 to $152.8 million a year later – an increase of 86.5 percent. An additional $127.8 million loans were in one month to two month delinquency bucket.

The percent of loans that were two or months delinquent stood at 1.87 percent at the end of the second quarter of 2009, up from 1.02 percent a year earlier.

Total charge-offs more than double from a year ago to almost $60.7 million. Foreclosed and repossessed assets were up almost 183 percent to $40.1 million.


  1. Dr. Leggett your point with this "piece" of journalism is? If the point is "scoreboard," then banks exceed credit unions with the number of failures, number of consumers impacted, dollars needed to finance the failures and the total dollars needed from taxpayers to pay for bankers' mistakes.

  2. I decided to write this piece after an article appeared in the Las Vegas newspaper about Cumorah CU. As a general rule, there is a lack of information about privately insured credit unions and how they are performing.

  3. I recognize this blog was started by someone working for the bankers, but I still think it's useful.
    For a very long time I questioned the CFO and CEO of Silver States about why they had not been taking write downs. I had a CD at Silver States, so I had a reason. After a brief time , they stopped replying to my emails. I think I recall the CFO saying there was no reason to reply because they were aware of my views. I had planned to seek a member vote to return to NCUA when it was possible to do so--like Patelco did--, but the CD matured and I saw no point. At one point I became frustrated and emailed the CEO and CFO encouraging them to properly reflect the financial position of the CU, and telling htem I had a genuine concern for them because i didn't think they fully had though through the potential personal ramifications .
    Stepping back, I met with the CFO in August , 2007, before most of email communiques, and expressed my concern that the bond market was presaging problems for borrowers, amd that Las Vegas was likely to be disparately impacted, in my view.

    About 9 months ago they started reserving. What is really interesting are several facts:

    1) SSCSU has reserved $42 mill this year, has abt 15 mil in the ALLL, and about $52 mill in 60+ day delinqunecies. other CU's in Nevada are reserving 100% of delinquencies. 60+ delinqunecies are rising despite the new provisions.

    2) SSCSU isn't unique. If you look at Nevada Federal, their 5 q delinquency trend has gone from 1.47 to almost 7%, yet they are still at 9% captial.
    3) I have previously discussed the institution with ASI . Subsequent to my email, SSCSU did take it's first large write-down of $10 million (not that it was due to my email)

  4. Gee, a banker doing a disparaging piece on a credit union...what a shock! I think Mr. Leggett should remember what they say about those who live in glass houses. But, I guess this is yet another banker's way of trying to divert us away from the fact that it's the banks that got the nation into this mess. Notice these issues are coming to credit unions almost two years after the banks collapsed our financial system. Thank you Mr. Leggett for reminding us that no matter what happens, bankers will never take responsibility for their actions and will likely lead us down this same path in the future.

    Yes, it appears that credit unions are suffering the symptoms from the disease bankers and the American Banker's Assocaition brought on all of us. Before you try and advertise the mote in the credit union system's eye, you should probably remove the beam in the banking system's.

    I, for one, am very glad there are alternatives to banks. Without them, we would all be subject to the greedy bankers who have reaped millions while the rest of us are losing our jobs, houses and retirements. Thank you for that Mr. Leggett.

  5. I notice you don't have anything here about the bank insurance fund about to go bankrupt. I would think you would put something like that up to not come off one sided or only pushing your industry's agenda. Given big bank's role in all of this, do you have anything showing the relative balance?



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