Straight From The Horse's Mouth!
Credit unions and other federally insured financial institutions are
heavily regulated. The federal government insurer for credit unions is
the National Credit Union Administration (NCUA). The federal insurer for
banks is the Federal Deposit Insurance Corporation (FDIC). As you might
imagine, the federal insurers watch the institutions closely, impose many
regulations and rules, and require frequent reporting.
There is a second important group which reports on the financial health of credit unions and banks - external, independent certified public accountants (CPAs). The CPAs conduct annual audits of each institution's financial records, which are then published to shareholders. Auditing and financial reporting requirements are prescribed by the Financial Accounting Standards Board (FASB), which all CPAs must follow.
✅ Every financial institution must abide by federal regulations and follow FASB financial accounting standards - including SECU.
One important regulatory and accounting requirement is for SECU to estimate its future loan losses. There are several techniques and rules which must be followed, but the rules and requirements are the same for all.
😎 In June, 2023, SECU had a loan portfolio of @$31.9 billion and had set aside a reserve of $330 million for estimated future loan losses.
😎 In June, 2024, SECU had increased its loan portfolio to @$34.4 billion, up 7.8%. SECU had also increased its reserve for future loan losses from $330 million to $410 million, up 24.2%
So, SECU has reported to regulators, that while its loan portfolio increased last year by +7.8 %, the credit union is also expecting an increase in its future loan losses of +24.2%!.
❋ Hope it is clear to the SECU Board what your staff is telling you - SECU loan losses are going to remain high in the future.
... still pretty sure former CEO, Mike Lord didn't make any of those loans last year!
