Credit Unions: A Capital Idea In Decline?

   Poorly managed CU capital!

😎 Know casual readers are probably tired of talking about capital/reserves and want to move on, but bear with it one more round or two. Why?  Because those reserves/capital belong to you as a member-owner of your credit union. Is it being managed effectively, in your best interest? 

✔ Anonymous December 18, 2025 at 5:02 PM [click to see full commentary]

"That's what you don't get. 7.01% is not a safe level, even if over the well-cap MINIMUM of 7%. How do I know that? Because in 2008 and 2009 you were unsuccessful keeping it above 7%. Explain how your statement that we've always been well-capitalized is not a lie. "

Our commenter is correctly "holding my feet to the capital fire"!  SECU did fall below 7% in 2008 and 2009 and under federal law was considered "adequately capitalized". What happened in 2008/2009 that caused the drop? What does the "plunge" (to 6.97%/6.83%) indicate about capital adequacy at SECU?

First, way back then, SECU managed its capital/reserves to a board-approved range of between 6% to 8%, with a target of 7%. SECU wanted to be well-capitalized (7%+). If the ratio fell below, it would be increased; and would be reduced, if it rose above 8%. That range reflected the well-analyzed and well-considered risk on the SECU balance sheet (potential loan losses, operational snafus and other similar facts of life!) 

Here's the SECU capital track record at year-end, per NCUA data -  prior to "new/new": 

2003 - 7.34%; 2004 - 7.55%; 2005 - 7.55%; 2006 - 7.32%; 2007 - 7.24%; 2008 - 6.97%; 2009 - 6.83%; 2010 - 7.29%; 2011 - 7.43%; 2012 - 7.39%; 2013 - 7.32%; 2014 - 7.80%; 2015- 7.84%; 2016 - 7.75%; 2017 - 8.01%; 2018 - 8.43%; 2019 - 8.50%; 2020 - 7.95%; 2021 - 8.37%. (Pretty consistent !)

During this 18 year period, SECU grew from $11 billion in assets to $51 billion in assets, added @1.5 million members, grew every year, added 100+ branches, and never suffered a loss.

✔ So your questions to consider: 

1) Was SECU appropriately and adequately capitalized during this period?

2) Why the crash in capital in 2008/2009? 

3) Was the board approved capital plan effective?

3) Why wouldn't an "industry standard" capital ratio of @11% be better?   

😎 Talk to you tomorrow...

  Risk comes from not knowing what you're doing - Warren Buffett 

Credit Unions: Now A Financial Mixed Metaphor?

  

✅ "A well-crafted metaphor uses consistent imagery ("hitting the nail on the head”). When you start mixing imagery ("hitting the nail on the nose"), you can create a type of malapropism known as a mixed metaphor."

The mixed metaphor thought came to mind in reading a follow-up story in CUToday [link] on the call, by the leadership at DCUC, for unity among credit unions [see Golden Rule/Retriever post]. “If we’re serious about unity, this is how we achieve it; it's one hour a quarter”

As you'll note, the Monday unity meeting drew scant interest, with fewer than 40 of the 180+ DCUC members "showing up". A poorly attended unity meeting smacks of mixed metaphor!  

Another classic was launched by DCUC chief lobbyist, Jason Stverak: "“When we’re doing the blocking and tackling on Capitol Hill, it’s critical that we’re rowing in the same direction.”  Blocking and tackling don't seem to logically mix with rowing; and rowing on a hill is also a bit of a stretch. 

DCUC CEO Hernandez clarified, "Complicating those efforts, are what he described as “muddy” factors... that affect how and when we can move (presumably rowing) forward (presumably uphill).”

✔ Credit unions used to be a "well-crafted metaphor" - a not-for-profit, member-owned and member-controlled cooperative, providing financial services to a limited group of individuals, particularly those of modest means.

😎  Hesitate to muddy the waters further, but the actual unity problem is simple: Credit unions are no longer in the same boat. 

Have credit unions become a malapropism, similar in look to the original definition...  but in practice, now a vacant vessel sailing down hill?

 Better lower the life boats and start rowing... it's an uphill climb!