NCUA Board Meeting Coverage: The Lessons from Four CU Failures

ALEXANDRIA, Va.–After no credit union failures during Q1 of this year, four credit unions failed during the second quarter, representing a $17 million hit to the NCUSIF, leading to some discussion during the NCUA board meeting as to what happened and what lessons can be learned. 

“Nobody, including us, went through all that effort to see them closed and to see them taken over, and we certainly didn’t go to all that effort to then have to write a check, but that’s what insurance is,” said Hauptman. “Part of having a thriving credit union system is having member trust in financial institutions.

He noted the four CUs represented a total of approximately $60 million in assets, and “if you’re looking for a canary in the coal mine I don’t think you’re going to find it there.”
Hauptman added that while the four CUs closed, overall membership continued to grow.

The CU Daily has related coverage about the failures and the performance of the NCUSIF here.

The Key Factors

Following her presentation to the board meeting on the health of the NCUSIF, Melissa Lowden, acting CFO, was asked by Hauptman what lessons the four failures might offer to credit unions. 

“While each institution did vary, there are some key factors that we identified in the credit union failures,” said Lowden. “They were risk management weaknesses, operational deficiencies, persistent net losses, high operating expenses and, lastly, governance and leadership issues. Enhancing risk management practices, improving operational efficiencies and ensuring robust leadership could help mitigate these risks and decrease the likelihood of future failures.

“As a reminder, we do offer lessons learned content on our website that summarizes that weaknesses that have led to historical failures and identifies the leading practices that credit unions may consider in their own operations to avoid similar problems,” Lowden added.