CUNA Overstates Number of CUs Impacted by Business Loan Cap

CUNA is inflating the number of credit unions that are near or will be near the business loan cap.

In a September 20 letter to House Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett and Ranking Member Maxine Waters, CUNA wrote that 355 credit unions are near or will be near the business loan cap of 12.25 percent of assets.

Specifically, CUNA wrote:

"Today,there are approximately 175 credit unions that are essentially at the cap (> 10% of total assets); another 180 credit unions are quickly approaching the cap and will likely be capped within 2-3 years (7.5% - 10% of total assets)."

I tried to replicate CUNA's analysis and could not get their numbers.

As best as I can tell, CUNA's analysis includes credit unions, which were either chartered for the purpose of making member business loans or have a history of primarily making member business loans. Furthermore, CUNA's analysis appears to include credit unions that either have a low-income designation or are community development financial institutions. These credit unions are excepted from the aggregate business loan cap.

According to footnote 12 of NCUA Chairman Debbie Matz's testimony on June 16, 2011, there were 120 credit unions, which were either chartered for the purpose of making member business loans or have a history of primarily making member business loans. Additionally, 59 of the 120 credit unions have a low-income designation.

That means there are 61 credit unions that were chartered for the purpose of making member business loans or have a history of primarily making member business loans, which are not low-income.

Using credit union call report data supplied from Highline FI, I found that 56 credit unions with a low income designation have a member business loan to asset ratio greater than 10% as of June 2011. This reduces the number of credit unions that are impacted by the cap to 119. Additionally, assuming that the 61 credit unions, which were chartered for the purpose of making member business loans or have a history of primarily making member business loans, were above the 10% threshold, this means only 58 credit unions are actually impacted by the cap -- not 175 credit unions.

Furthermore, I only found that 99 credit unions, which are not low-income designated, have an member business loan to asset ratio between 7.5% amd 10% of assets.

In conclusion, it appears that CUNA's analysis greatly inflates the number of credit unions impacted by the bsuienss loan cap.