Anyone who has ever had an NCUA examination and experienced a disagreement over their level of loan loss reserves can appreciate the reasoning behind NCUA's recent assessment.
With current reserves of $1.2-billion for credit union losses, NCUA feels justified in assessing credit unions $933 million. This will bring the reserves to more than $2.1 billion. So far so good; the industry is in dire straights and this appears prudent.
However, a closer review indicates that total credit union losses thus far in 2010 are only $215 million. Additionally, in all of 2009 the fund only experienced $124 million in losses. So, why do we need over $2 billion in reserves? NCUA is quoted as saying of the $1.2 billion in reserves as of August 2010, $1 billion is not specifically allocated to any specific credit union loss. You would think that would be a sufficient cushion for the remainder of 2010. So it appears that NCUA is assessing credit unions for projected losses.
Since no one has a crystal ball and can foresee losses accurately, why not give the industry a break and wait and see if these losses materialize? Nine-hundred thirty-nine million dollars would go a long way towards helping credit unions pay dividends and avoid layoffs.
Congress mandated that the NCUSIF fund not go below 1.2%. So, NCUA, go to Congress, explain the mistakes you made in regulating the corporates and the high mortgage concentration levels you permitted credit unions to attain in the sand states and let them know you have a plan to correct all this. After all, Congress is letting the FDIC run a negative equity ratio, so an NCUSIF ratio of 1.1 to 1.2% would look pretty good.
Tim Richey, CEO
Columbus Metro CU, Columbus, Ohio