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?
"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...
