MINNEAPOLIS – A top NCUA official told state lawmakers this week that credit unions have few of the risky holdings that are troubling banks, even as state regulators reported the number of credit unions on its "watch list" of problem institutions has risen to 21, out of a total of 94 state charters.
"While there are credit unions that pursue aggressive strategies, as a whole, Minnesota credit unions have not been significantly affected by the loans and investment products that have been the subject of market and media attention during the economic crisis," Keith Morton, director of NCUA’s Midwest Region Four, told members of the state Senate’s Commerce Committee, during a hearing on the growing bank failures in the state.
Deputy Commerce Commissioner Kevin Murphy, the state's top banking regulator, told lawmakers that the state's watch list of problem banks has grown to 71 institutions, up from 50 at the start of the year. There also are 21 credit unions on the state watch list. Together, these institutions account for about one-fifth of all banks and credit unions in the state.
But Morton told the panel at mid-year there were only three credit unions considered under capitalized, with net worth of less than 6%, and rated CAMEL 4 or 5, and two of them are recent charters that have trouble building capital.
In general, Morton told lawmakers that the state federally insured credit unions are in good condition, with slightly net worth (10.19%) than the national average (10.03%) and lower loan losses.
He told the Senate panel that few credit unions in Minnesota have engage din the more risky behavior associated with the current banking crisis, like the purchase of private-label mortgage-backed securities; the offer of interest-only and other non-traditional mortgages and member business lending. Even so, "NCUA is mindful of the volatile and uncertain economic climate and has progressively increased staff in Minnesota since early 2008 in order to adequately and assertively manage any safety and soundness problems," said Morton.
The hearing followed last Friday’s closure of Jennings State Bank in Spring Grove, the fifth bank failure in the state in 2009.
