Composite Rating

Credit unions in this group are sound in every respect and generally have components rated 1 and 2. Any weaknesses are minor and can be handled in a routine manner by the board of directors and management. These credit unions are the most capable of withstanding unpredictable business conditions and are resistant to outside influences such as economic instability in their trade area. These credit unions are in substantial compliance with laws and regulations. As a result, they exhibit sound performance and risk management practices relative to the credit union’s size, complexity, and risk profile, and give no cause for supervisory concern.

Credit unions in this group are fundamentally sound. For a credit union to receive this rating, generally no component rating is a 4 or 5. Only moderate weaknesses are present and are well within the board of directors’ and management’s capabilities and willingness to correct.

These credit unions are stable and are capable of withstanding business fluctuations. These credit unions are in substantial compliance with laws and regulations. Overall risk management practices are satisfactory relative to the credit union’s size, complexity, and risk profile. There are no material supervisory concerns and, as a result, the supervisory response is informal and limited.

Credit unions in this group exhibit some degree of supervisory concern in one or more of the component areas. These credit unions exhibit a combination of weaknesses that may range from moderate to severe; however, the magnitude of the deficiencies generally will not cause a component to be rated a 5. Management may lack the ability or willingness to effectively address weaknesses within appropriate time frames. Credit unions in this group generally are less capable of withstanding business fluctuations and are more vulnerable to outside influences than those rated a composite 1 or 2.

Additionally, these credit unions may be in significant noncompliance with laws and regulations. Risk management practices may be unsatisfactory relative to the credit union’s size, complexity, and risk profile. These credit unions require increased supervision which may include enforcement actions. Failure appears unlikely, however, given overall strength and financial capacity of these credit unions.

Credit unions in this group generally exhibit unsafe and unsound practices or conditions. These institutions have serious financial or managerial deficiencies that result in unsatisfactory performance. The problems range from severe to critical deficiencies. The board of directors and management are not addressing or resolving weaknesses and problems in a satisfactory manner. Credit unions in this group generally are not capable of withstanding business fluctuations.

These institutions may be significantly non-compliant with laws and regulations. Risk management practices are generally unacceptable relative to the credit union’s size, complexity, and risk profile. Close supervisory attention is required, which may include enforcement action to address the problems. Credit unions in this group pose a risk to the NCUSIF. Failure is a distinct possibility if the problems and weaknesses are not satisfactorily addressed and resolved.