TAMPA, Fla. – Representatives of Suncoast Schools FCU yesterday disputed the assertion that low capital ratios at it and GTE FCU were part of the reason the two credit unions ended their plans for the industry’s biggest merger.
The low capital levels, 6.2% at Suncoast Schools and 6.29% at GTE were "absolutely not an issue in merger termination decision," said representatives for the $5.7 billion credit union, disputing an article in yesterday’s CU Journal Daily Briefing asserting that regulators looked askance at the diminished capital for the two credit union giants.
The combined net worth ratio of 6.22% however, is below NCUA’s prompt corrective action standard of 7% for well-capitalized credit unions, giving the proposed merger greater regulatory scrutiny.
In fact, declining assets at both credit unions have had an anti-dilutive effect on capital, or net worth of each. It is a phenomenon being seen around the country as credit unions shrink their assets in order to boost their net worth ratios.
Suncoast Schools has seen its net worth rise slightly, by $2.3 million, while assets were declining by $71 million, pushing the credit union’s net worth ratio up slightly from 6.05% at the end of the first quarter. Over the past year the credit union giant has seen its net worth fall from $456.5 to $354.8 million, while assets have declined from $6.2 billion to $4.5 billion.
GTE has seen its net worth decline by $6.9 million since the end of the first quarter, while assets declined as well by about $10 million, lowering its net worth ratio from 6.61%.
