Monday, April 23, 2012

Texans Reality Check

Credit Union Journal is reporting that that Texans CU turned a profit of $5.9 million for the first quarter of the year.

Credit Union Journal quotes Keith Morton, NCUA Region IV Director and Agent for the Conservator, as saying that "{w]e see significant progress in all of these areas (reduced expenses, streamlined operations, retooled infrastructure, and began the process of returning Texans to the core credit union business model), and we are very encouraged by the credit union’s positive financial results for the first quarter of the year."

While it is true that Texans Credit Union reported a profit, the credit union is still critically undercapitalized and delinquencies continue to rise.

Total delinquent loans rose $5.1 million during the first quarter going from $74.3 million to $79.4 million. Loans more than a year past due went from $4.5 million to $21.3 million and loans 6 to 12 months past due went from $19.8 million to almost $40 million.

Texans Credit Union only charged off $1.1 million during the first quarter. You would expect to see a jump in future charge-offs as you are talking about over $61 million in the six month or more past due bucket.

Moreover, the improvement in profits are due to a significant decline in its provisions for loan and lease losses during the first quarter compared to a year earlier. During the first quarter of this year, provisions for loan and lease losses increased by $807,000 compared to almost $14.4 million a year ago.


  1. Banks, their economists and regulator/insurer might be better to watch their own house when it comes to possible losses. Congress might ask why NCUA can run on a $225 million annual budget, yet how messy might bankings’ predicted failures be if FDIC needs a regular $13.5 billion in annual assessments? Despite that, a FDIC fund balance at year end 2011 of only $11.8 billion covering more than $13 trillion in bank assets – at the same time the NCUSIF balance was $11.7 billion covering less than 1 trillion in CU assets? Banks say they need until 2020 to get their fund to the required target equity ratio of 1.35%, but NCUA can make its targets now? Wasn’t FDIC just recently upside-down at negative $20.9 billion? Pre-announcing 50-60 more known bank failures in 2012? Maybe it’s FDIC and the whole of banking, not Texans, that has a newsworthy problem portfolio with notable losses and charge-offs in the future.

    1. There are a lot more banks than credit unions. Credit unions go out of business either in a merger or liquidation at the rate of one per day. That is a fact.Why is it when anything is brought up about credit union it turns to "banks are bad see, look" Since credit unions are not taxed is why so many are not understanding the method of pay and benefits at credit unions as opposed to banks that are taxed.

    2. But Keith, is it true that the FDIC fund balance of $11.8 billion is 'real' money that was already a reduction to every bank's capital while the NCUSIF balance of $11.7 billion is only a pledge of 'real' money, a refundable deposit from credit unions that has not yet been a reduction to every credit union's capital. If true, then the reality is either a tangible NCUSIF balance of zero, or an overstatment of credit union system capital of $11.8 billion, or roughly 13%.

  2. That is not a "pledge" but real money that is sent to NCUA twice a year to keep the one percent NCUSIF deposit. By the way, the NCUSIF deposit is the reason why credit unions have a seven percent capital requirement for well-capitalized while the banks are at six percent. The bankers used that argument to get the higher capital requirements foisted upon credit unions in 1998.



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