A recent independent review of the June 30, 2014 financial statements of $29.1 billon State Employees' Credit Union in Raleigh, N.C., by consulting firm CliftonLarsonAllen showed that the cooperative had seven times the necessary funds to cover the credit union's most recent annual loan losses.
The allowance for loan and lease loss is a key factor that measures a credit union's financial stability and, as its name implies, the institution's ability to cover financial losses attributable to loans and leases.
SECU's $16 billion loan portfolio was deemed to be high quality by the consulting firm, with strong loss reserves available as a prudent measure to protect members. The credit union's ALLL account balance was more than $212 million as of the June 30 fiscal year-end. Loans with a 90-day delinquency equaled 0.99%, or less than 1%.
Fiscal year loan losses were $28.7 million, representing 0.18% of outstanding loans, a level that is three to five times lower than SECU's credit union peers and 10 times lower than average bank loss rates.
SECU loans, underwritten using effective guidelines, were primarily secured by some form of collateral, such as a home, vehicle or shares. The portfolio is made up of consumer-only loans, with no commercial or business loans on the books.
"SECU is pleased that CliftonLarsonAllen's review confirmed the methodology that SECU uses to determine a well-funded ALLL reserve account," according to Mike Lord, SECU's CFO.
"The practice of underwriting and servicing our own loans has afforded SECU the opportunity to develop lending products that are beneficial to members, providing a low-cost alternative to some predatory loan options in today's marketplace."
Earlier this month, CliftonLarsonAllen evaluated SECU's liquidity coverage ratio, noting that it was 20 times the minimum banking requirement. The ALLL study was another in an ongoing series of independent evaluations the credit union is undertaking in preparation for revised NCUA capital requirements and stress tests for larger credit unions slated for February 2015.
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