SECU Financials Test Positive Under Stress.
Byline: Michael Muckian
After two months, three outside consultants and about $1 million in consulting fees, the $29.1 billion State Employees' Credit Union in Raleigh, N.C., said it is ready for the rigors of NCUA-mandated stress testing.
SECU, one of five credit unions with more than $10 million in assets required by the NCUA to undergo stress testing similar to that applied to banks, undertook its own testing to create benchmarks against which the regulator's test can be measured.
SECU's results follow on the heels of the Nov. 21 deadline for submitting financial information to the NCUA to be measured against three prospective scenarios to see how well the credit union would withstand economic shocks to its system.
In past years, SECU has been using Federal Reserve Bank stress requirements as a guide to measure the effects of challenging environments on credit union capital, according to SECU CFO Mike Lord.
The credit union has also historically benchmarked its balance sheet to FDIC and Basel capital standards to measure capital and risk comparability with FDIC-insured banking institutions.
"While SECU's member-owners should be confident in the ability of their not-for-profit financial cooperative to withstand severe economic conditions, similar to those experienced in the Great Recession, it is always wise for the credit union to also have the confirmation from outside industry experts," Lord said.
In October, SECU hired financial consultancy Promontory Financial Group to help design an updated capital plan to provide a firm base for future capital planning and risk management.
In addition, global accounting advisory firm KPMG was brought in to conduct a formal analysis of SECU's capital and risk measurements under a variety of alternative financial requirements. KPMG separately evaluated and confirmed the stability of SECU deposits as a long-lived, reliable source of credit union funding.
CliftonLarsonAllen LLP, a national accounting and professional services firm, reviewed SECU's analysis and planning to meet regulatory liquidity coverage ratios and the adequacy of the allowance for loan loss calculations to accommodate potential loan losses in the lending portfolio. CLA confirmed that SECU's methodology and estimations are reasonable in relation to the consolidated financial statements as a whole and are in accordance with GAAP.
"Having benchmarked with the experience-tested Federal Reserve guidelines required of other financial institutions, our highly positive results should be an excellent signal as to the strength of SECU's overall capital and financial position," Lord said. "We look forward to the new NCUA stress testing program in 2015."