Speaking before the Credit Union National Association Government Affairs Conference on February 26, National Credit Union Administration Board Member Todd Harper discussed three issues on the horizon that will impact credit unions.
First, Harper focused on liquidity. Harper noted that the industry's loans-to-shares ratio bottomed out in 2012 and 2013 at approximately 66 percent, but it has since rebounded due to strong loan growth. The ratio now is about 84 percent nationally and in some states like Vermont and Wisconsin, it exceeds 90 percent. He cautioned that credit unions of all sizes need to maintain ample access to cash to withstand unexpected emergencies.
Second, Harper addressed the issue of consumer debt. He pointed out the total household debt is higher than before the Great Recession. While he stated that asset quality remains good at credit unions, there are some warning signs. The percentage of credit cards that are 90 days or more past due exceeded 5 percent. He warned that if a recession occurs, delinquencies and charge-offs will rise. He told the credit union attendees that they should be carefully evaluating new credit risk and taking steps to mitigate delinquencies in their consumer loan portfolios.
Third, Harper addressed the issue of succession planning. He stated that approximately 20 percent of credit unions do not have a succession plan. He commented the lack of succession plan is one of the top two reasons for credit union mergers. He then pointed out that a large proportion of credit union CEOs and executives are Baby Boomers, who will be part of a retirement wave. He encouraged the credit union officials to raise the issue of succession planning in board discussions to ensure the survival of their credit unions.
Other topics he discussed included diversity and inclusion and compliance with consumer financial protection.
Read the speech.
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