Financial regulators' credit unions in good health - generally

<p>WASHINGTON — Credit unions serving federal financial regulators have seen their sponsors go through some rough times in recent years with hiring freezes and downsizing. Two of the three credit unions serving federal financial regulators have single sponsors and appear to be doing well, their CEOs reported and an analysis of financial data suggested. At $98 million, the largest of the three federal regulator credit unions is the Treasury Department FCU, which draws its 16,000 members from two key federal regulators, the Comptroller of the Currency and Office of Thrift Supervision (OTS), along with other Treasury employees and the employees of some federal courts. The credit union will see more of its members get laid off as the OTS recently announced a 20% reduction in its workforce. The Treasury Department FCU did not return repeated calls by Credit Union Times, but a survey of key financial indicators revealed a credit union with lagging net worth, below average returns on assets and above average loan delinquencies, according to NCUA data. Treasury Department FCU’s net worth ratio has fallen steadily over the last five years, beginning at 9.21% in December of 1997 and declining to 7.87% in December of 2001. This is 3.06% lower than its peers’ average of 10.93%. The return on assets is also lower than average. At .42%, it is .13% below where it was in 1997 after having climbed to .86% in 1999. The average for the credit union’s peers is .88%. The credit union’s percentage of delinquent loans to total loans also came in higher than average. In 1997 delinquencies stood at .99% before falling to .44% in 1999 and rising again to .91% in 2001. The average for delinquent loans among Treasury’s peer group is .80, 10% lower than Treasury’s. One reason for Treasury’s higher delinquencies might be an aggressive loan program since Treasury’s loans grew 14.44% in 2001, a full 6.37% over the peer average. The next largest financial regulator credit union is the $57 million FDIC Federal Credit Union. As the name suggests, FDIC’s nearly 10,000 members are the employees, ex-employees and retired employees of the Federal Deposit Insurance Corporation and their families. Theresa Mann, FDIC CEO, acknowledged that the sponsoring agency frequently goes through hiring freezes and downsizing depending on what budget pressures might be reigning. “But we firmly believe in `once a member always a member’,” Mann said, adding that the credit union always seeks to be sensitive to the needs of the laid-off member if there has been a downsizing. According to NCUA, the credit union has shown a general rise in net worth ratio moving from 9.57% in December of 1997 and rising to 10.15% in December of 2001, compared with 10.93% among the credit union’s peers. Return on average assets is much weaker than its peer group. Its ROA for 2001 was .48%, with its peer group at .88%. Delinquencies at FDIC came in significantly lower than the peers, .24% versus the peers’ .80%. Five years ago the delinquencies stood at .55% and climbed briefly before falling. However FDIC lagged its peers in loan growth as well, actually falling to -4.40% in 2001 versus the peers’ 6.37%. The smallest of the three financial regulatory credit unions belongs to the employees of the Federal Reserve Board who make up the 3,001 members of the FRB Federal Credit Union. Of all three, FRB FCU has the most constrained field of membership, according to Pauline Dunbar-Berens, CEO of the $24 million credit union. “Our field of membership is limited to the employees of the Federal Reserve Board and the Board of Governors who are stationed in this building,” she said chuckling. “Isn’t it encouraging to hear that a single-sponsor credit union can make a go of it?” Dunbar-Berens reported that FRB FCU is “full service” and only refrains from offering first mortgages, though it offers second mortgages and home equity loans. She said credit union members could feel confident about being in a single sponsor credit union when the sponsor was the Federal Reserve. “After all, the government might contract every so often, but it’s generally a pretty stable employer,” she said. According to NCUA, FRB FCU has seen its net worth ratio rise over the last five years, moving from 8.86% in December of 1997 to 9.03% in December of 2001. Return on assets, however, has been very strong, beginning at 1.50% in 1997 and staying above 1% in three of the five years, coming to rest at 1.10 % in 2001, a full .40% above the average for the credit union’s peers. Delinquent loans, however, have climbed, moving from .11% in 1997 to .84% in 2001, although this still bettered the peer average by .56%.</p>