About Us We have a long, rich history here in the islands. Find out why you should join our HCFCU ohana.
From Your President July 30, 2011NCUA Completes Risk Analysis
Persistent, long-term effects of the national economy continue to have a local impact.
On the national front, no real recovery has been sustained in the jobs market or housing starts, and decreasing values continue to dampen the real estate markets. As a result, Federal regulators are increasingly requiring banks and credit unions to plan for and decrease risk.
Federal Examiners from the National Credit Union Association recently completed a risk-focused examination of HCFCU concentrating on Credit Risk, Interest Rate Risk, Liquidity Risk, Transaction Risk, Compliance Risk, Strategic Risk and Reputation Risk.
Over the past 75+ years, our credit union has been the primary real estate lender to many HCFCU members for home loans. We have a high concentration of real estate loans on our books, equal to 81% of the overall loan portfolio. Even though 98% of our real estate loans are current, Federal Examiners feel this high real estate concentration equates to a higher level of risk, especially as interest rates rise during weak economic conditions and real estate property values languish.
In response to Federal Examiners, HCFCU will be funding an additional $4 million to our Allowance for Loan Losses account as a safety precaution in the event HCFCU experiences higher than expected loan losses. Note that HCFCU has not incurred a $4 million real estate loss, it is a precautionary allowance. With this additional $4 million, our total HCFCU Allowance for Loan Losses account balance will amount to $6.7 million.
This one-time $4 million expense will decrease risk, better ensure safety and soundness and preserve members’ capital for the future. Prior to this $4 million expense, we projected a $1 million net profit for 2011. This adjustment recalculates our projections and will result in a net loss of approximately $3 million in 2011.
Hawaii Community Federal Credit Union remains highly capitalized with a strong net worth and, like all well managed credit unions, we are prepared for changes in the economic environment.