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Board Action Bulletin

The NCUA Board unanimously approved placing Western Bridge Corporate Federal Credit Union into involuntary liquidation effective July 6, 2012.

The NCUA Board considered three supervisory matters that remain confidential at this time.

The NCUA Board considered one personnel matter that remains confidential at this time.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

ALEXANDRIA, Va. (July 7, 2012) – The National Credit Union Administration (NCUA) announced today the liquidation of Western Bridge Corporate Federal Credit Union (Western Bridge) of San Dimas, Calif. Catalyst Corporate Federal Credit Union (Catalyst) of Plano, Texas, completed the migration of Western Bridge’s 326 capitalizing members ($50.3 million capital contributed) and services last week, and Western Bridge closed at the end of the day Friday.

“The closing of Western Bridge’s doors is an important milestone for the entire credit union system,” said NCUA Board Chairman Debbie Matz. “Consistent with NCUA’s Corporate Resolution Plan, we have smoothly transferred the former corporate’s members and services to Catalyst while minimizing costs for all credit unions.”

Through the Corporate Resolution Plan, NCUA has worked to build a more structurally sound corporate credit union system and maintain confidence in the credit union system. As a result of rules adopted in 2010, corporate credit unions now need to maintain higher capital levels, while complying with stricter investment standards.

NCUA conserved the former Western Corporate Federal Credit Union in 2009 and created Western Bridge to ensure continuity of service and operations for member consumer credit unions. In 2011, the members of Western Bridge initially sought but failed to capitalize a new corporate credit union, United Resources Corporate Federal Credit Union. 

As conservator of Western Bridge, NCUA then sought an acquisition solution that would minimize service disruption to the consumer credit union members of Western Bridge and ensure the best financial outcome for the Temporary Corporate Credit Union Stabilization Fund. NCUA conducted a competitive bidding process to identify a buyer for Western Bridge. Last December, the NCUA Board awarded Catalyst the exclusive right to acquire Western Bridge.

Catalyst was created by the 2011 merger of Southwest Bridge Federal Credit Union and Georgia Corporate Federal Credit Union. With the transfer of Western Bridge’s members, Catalyst Corporate now has 1,232 members and $147 million in capital. Western Bridge is the first federally insured corporate credit union liquidated in 2012.

Board Action Bulletin

The NCUA Board voted unanimously to uphold the decision of the Asset Management and Assistance Center denying a creditor claim arising from the liquidation of Borinquen Federal Credit Union.

The NCUA Board considered two supervisory matters that remain confidential at this time.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

Board Action Bulletin

Board Saves Credit Unions $2 Million in Budget Adjustment, Renews 18 Percent Interest Rate Cap, and Proposes Emergency Liquidity Backstop

ALEXANDRIA, Va. (July 24, 2012) – The National Credit Union Administration (NCUA) Board convened its fourth open meeting in 2012 at the agency’s headquarters here today and unanimously approved five items:

• Setting the 2012 Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) assessment at 9.5 basis points of insured shares as of June 30.

• Reprogramming NCUA’s 2012 operating budget to produce a $2 million savings to credit unions that will offset the 2013 operating budget.

• Renewing the current 18 percent interest rate cap for most loans, and 28 percent for short-term small loans, at federally chartered credit unions through March 10, 2014.

• Releasing a proposed rule—with a three-tiered approach targeted by asset size—for federally insured credit unions to plan for or maintain access to emergency liquidity.

• Issuing a proposed rule to permit NCUA to declare a federally insured, state-chartered credit union (FISCU) in “troubled condition” based on NCUA’s CAMEL code 4 or 5 composite rating.

The Board also received briefings on an upcoming joint agency proposed rulemaking on appraisals, and the financial performance of the National Credit Union Share Insurance Fund (NCUSIF) and the Stabilization Fund. The NCUSIF equity ratio stood at 1.3 percent as of June 30, and the net position of the Stabilization Fund slightly improved in the quarter ending June 30.

Corporate Obligations Drive 2012 Stabilization Fund Assessment

The anticipated fixed, near-term cash needs of the Stabilization Fund drove the Board’s decision to set the 2012 Stabilization Fund at 9.5 basis points of insured shares as of June 30, an amount substantially lower than the 25 basis point assessment charged in 2011.

The funds generated by the assessment, along with funds borrowed from the U.S. Treasury, will pay $2.66 billion in net obligations due in 2012, primarily principal and interest on maturing Medium Term Notes issued by corporate credit unions and guaranteed by the Stabilization Fund.

For budgeting purposes, NCUA previously provided an estimate of between 8 and 11 basis points of insured shares for the 2012 assessment. With the assessment now declared for 2012, credit unions should consult their accounting practitioner and show the expense in August and report it on the September 5300 Call Report. The Chief Financial Officer will prepare and distribute invoices to all federally insured credit unions, with the assessment due by Oct. 9.

The 2012 assessment will raise an estimated $790.5 million. With the 2012 assessment, federally insured credit unions will have paid a total of $4.1 billion in expenses for the Corporate System Resolution Program, including $337.4 million in 2009, nearly $1 billion in 2010, and almost $2 billion in 2011. After 2012, federally insured credit unions can expect to pay between $1.9 billion and $5.2 billion in total remaining assessments from 2013 through 2021, based on current loss estimate projections from the liquidation estates of the five failed corporate credit unions.

The Board also authorized up to $2.5 billion in Stabilization Fund borrowing from the U.S. Treasury. The timing and amount of borrowing is consistent with original cash needs and uses envisioned under the Corporate System Resolution Program, including an appropriate contingency amount.

Budget Review Yields $2 Million in Savings for Credit Unions

After completing a mid-year review, the Board approved a revised and reprogrammed operating budget that will reduce NCUA’s overall expenditures for the remainder of 2012 by $2 million.

“The Board takes stewardship of the NCUA budget very seriously, and I hope today’s action sends a positive message to credit unions,” said NCUA Board Chairman Debbie Matz. “We are well aware that many credit unions, particularly smaller credit unions, are still struggling to generate positive earnings. So we have done our due diligence to ensure that this budget will be a prudent use of agency resources and credit union funds. We directed all NCUA offices to increase efficiencies and reduce line items wherever possible—without sacrificing the agency’s mission. It’s important to emphasize that effective regulation saves credit unions money, by minimizing losses to the Share Insurance Fund. This Board has a responsibility to continue providing the necessary resources to fulfill NCUA’s statutory mandate.”

NCUA’s revised budget will be $234.9 million in 2012. A $3.7 million reduction in employee pay and benefits produced the greatest savings, while NCUA anticipates spending slightly more for travel, communications, administration, and contracting.

18 Percent Loan Rate Cap Kept for 18 More Months

Mindful of the needs of both credit unions and borrowers, as well as market conditions, the NCUA Board voted to extend the current interest rate cap of 18 percent for most credit union loans for an additional 18 months.

“Allowing the cap on loan rates to revert to 15 percent would have been harmful to federal credit unions,” Matz said. “A significant number of federal credit unions make some loans between 15 and 18 percent, and lowering the rate would put greater pressure on earnings. Consistent with the requirements of the Federal Credit Union Act, we determined that market conditions existed to maintain the present interest rate cap for most federal credit union loans. At the same time, we were able to extend the 28 percent cap on short-term small loans, which provide a consumer friendly alternative to predatory payday loans. This decision also preserves access to loans for many borrowers with lower incomes or lower credit scores.”

Approximately 61 percent of federal credit unions made some loans at rates above 15 percent in the first quarter of 2012. Recent trends in short-term Treasury and federal fund rates have moved upward, a key condition for allowing the current 18 percent interest rate cap on loans to remain in effect for an additional 18 months.

The current 18 percent ceiling has been in place since May 1987. The Federal Credit Union Act caps the interest rate on most credit union loans at 15 percent, but the NCUA Board has the discretion to raise that ceiling for an 18-month period.

Proposed Rule Requires Credit Unions to Plan for Emergency Liquidity Needs

U.S. Central Bridge Corporate Credit Union (U.S. Central Bridge) is scheduled to close in late October, and that means more than 6,000 credit unions will lose access to the Central Liquidity Facility (CLF) for emergency liquidity. In response, the NCUA Board has issued a targeted proposed rule (new Section 741.12) to require credit unions to plan for emergency liquidity.

Currently, most credit unions have access to emergency liquidity by belonging to a corporate credit union that is part of the agent group headed by U.S. Central Bridge, which holds CLF stock on behalf of the entire agent group. However, when U.S. Central Bridge closes and redeems that stock upon closure, those credit unions will no longer have the CLF as a source of backup liquidity, unless they choose to join the CLF directly.

“As noted in the Financial Stability Oversight Council’s 2012 Annual Report, capital and liquidity buffers form the most fundamental protection for the broader financial system against unexpected risks or failures of risk management at financial institutions,” said Matz. “As U.S. Central Bridge works to wind down its services, including its access to the CLF, credit unions should be taking steps to make sure they have access to emergency liquidity. The targeted approach outlined in the proposed rule provides flexibility for credit unions to reset and put in place a reliable and stable source of backup liquidity.”

The proposed rule on emergency liquidity incorporates a three-tiered approach, based on the size of the federally insured credit union:

• Credit unions under $10 million in assets would have to maintain a written liquidity policy approved by their board. The policy would provide a basic framework for managing liquidity and having a list of contingent liquidity sources in emergency situations.

• Credit unions with more than $10 million in assets would have to establish a formal contingency funding plan that clearly sets out strategies for addressing liquidity shortfalls in emergency situations.

• Credit unions with more than $100 million in assets would also have to demonstrate access to at least one of the following three options for a backup federal liquidity source: 
  – becoming a member of the CLF;
  – becoming a CLF member through a CLF agent; or
  – establishing direct borrowing access to the Federal Reserve’s Discount Window.

The proposed rule on emergency liquidity builds upon comments received as part of an advance notice of proposed rulemaking issued in December 2011. The proposed rule has a 60-day comment period once published in the Federal Register.

Proposed Rule Modifies “Troubled Condition” Definition

In order to better protect the NCUSIF from losses, the Board voted to issue a proposed rule allowing NCUA to declare a FISCU to be in “troubled condition” based on the CAMEL rating NCUA assigns (Section 701.14). Currently, only a state supervisory authority (SSA) can make this declaration for a FISCU.

The NCUSIF has seen an increase in the number of credit unions with assets between $250 million and $500 million experiencing some degree of financial stress. As a result, NCUA has increased the number of joint FISCU examinations in which it participates with SSAs. In some instances, NCUA and the applicable SSA have issued different CAMEL scores.

While the actual number of examinations where this has happened is relatively small, it is nonetheless significant from a supervisory perspective, particularly given the rise in credit unions experiencing stress. The proposed rule would permit NCUA to declare a FISCU in troubled condition based on NCUA’s CAMEL code 4 or 5 composite rating. Credit unions with a troubled condition designation are subject to enhanced supervision.

The Board issued the proposed rule with a 60-day comment period, once published in the Federal Register.

Joint Agency Rulemaking on Appraisals Required by Dodd-Frank Act

The Board received a briefing from the Office of General Counsel and the Office of Examination and Insurance on an upcoming interagency proposed rulemaking on appraisals required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA).

Section 1471 of DFA established a new section in the Truth in Lending Act (TILA). This section sets forth appraisal requirements applicable to “higher-risk” mortgages, including the need to obtain written appraisals based on a physical interior inspection of the property, protections against mortgage flipping scams, and access to free appraisal reports. DFA requires NCUA, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency to jointly issue final rules to implement this new section of TILA by Jan. 21, 2013.

Each agency is working through its approval process. The agencies anticipate issuing the proposed rule on appraisals in August or shortly thereafter. After the agencies publish the proposed rule in the Federal Register, interested parties will have an opportunity to comment.

NCUSIF and Stabilization Fund Remain Stable

The Chief Financial Officer briefed the Board on the financial performance of the NCUSIF and the Stabilization Fund through June 30. Both funds remain stable.

The NCUSIF equity ratio was 1.30 percent as of June 30, which is the normal operating level set by the Board. This ratio is based on estimated insured share base of $839 billion as of June 30, and reflects the additional one percent deposit adjustment that NCUA will bill in September to account for growth in insured shares.

For the second quarter of 2012, the NCUSIF reported gross income of $53.5 million, operating expenses of $34.6 million, and insurance loss expenses of $32.3 million, resulting in a net loss of $13.4 million for the quarter. First-half net income for the NCUSIF was $5.5 million.

There have been 12 consumer credit union failures in 2012. Six were assisted mergers, and six were involuntary liquidations, of which five were assisted purchase and assumptions. The cost of these failures through June 30 was $94.6 million.

The number of CAMEL code 3, 4, or 5 credit unions increased slightly from the previous quarter. CAMEL code 4 and 5 credit unions increased by three, for a total of 399 as of June 2012. Assets and shares were $30.0 billion and $26.8 billion, respectively. As a percentage, CAMEL code 4 and 5 credit unions represent 3.2 percent of total estimated insured shares.

CAMEL code 3 credit unions increased by 17, for a total of 1,679 as of June 2012. Assets and shares were $138.0 billion and $123.0 billion, respectively. CAMEL code 3 credit unions represented 14.7 percent of the total estimated insured shares as of June 2012. Overall, 16.1 percent of all credit union assets were in CAMEL code 3, 4, or 5 institutions, a small improvement from 16.3 percent at the end of the first quarter.

As of June 30, the net position of the Stabilization Fund was negative $5.1 billion, reflecting a slight change from the negative $5.3 billion net position reported at the end of 2011. In the second quarter, the Stabilization Fund repaid $300 million to the U.S. Treasury, reducing the outstanding borrowing to $3.2 billion. The Stabilization Fund had net operating income of $17.5 million for the quarter and $126.8 million through June 30.

The 2012 financial data for the NCUSIF and the Stabilization Fund is preliminary and unaudited.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

Depósitos de los socios asegurados hasta al menos $250,000; Servicios a los socios continúan sin interrupciones

ALEXANDRIA, Va. (27 de Julio del 2012) – La Administración Nacional de Cooperativas de Ahorro y Crédito (NCUA) asumió hoy el control de las operaciones de la Cooperativa de Ahorro y Crédito Trinity (Trinity CU), una cooperativa de ahorro y crédito con seguro federal y con licencia del estado de Colorado ubicada en Trinidad, Colorado.

La División de Servicios Financieros de Colorado colocó Trinity CU en sindicatura y designo a la NCUA como síndico. El estado colocó a la cooperativa de ahorro y crédito en sindicatura debido al deterioro de su condición financiera. Mientras los servicios a los socios continúan de forma normal, la NCUA continúa trabajando con el fin de solucionar los problemas que en el presente afectan la seguridad y solidez financiera de la institución.

Los depósitos en Trinity CU permanecen protegidos. Administrado por la NCUA, el Fondo Nacional de Seguro de Depósitos de Cooperativas de Ahorro y Crédito (NCUSIF) continúa asegurando cuentas individuales de Trinity CU hasta al menos $250,000. El NCUSIF opera de forma parecida al Fondo de Seguro de Depósitos para los bancos (FDIC; Corporación Federal de Seguro de Depósitos).

Trinity CU, es una cooperativa de ahorro y crédito que sirve a los residentes del Condado Las Animas en Colorado. En su último informe financiero (Call Report), Trinity CU reportó $4 millones en activos. Durante la sindicatura, los servicios a los más de 1,100 socios de Trinity CU continuaran sin interrupciones. Los socios pueden seguir realizando transacciones financieras con normalidad—hacer depósitos y tener acceso a los fondos, hacer pagos de préstamos y utilizar su cuenta.

La Ley Federal de Cooperativas de Ahorro y Crédito autoriza que la mesa directiva de la NCUA acepte ser nombrada como síndico cuando es necesario para preservar los activos de una cooperativa de ahorro y crédito con seguro federal, proteger los intereses de los socios, o proteger el NCUSIF. Trinity  CU es la cuarta cooperativa de ahorro y crédito con seguro federal en ser colocada en sindicatura durante el 2012.

Los socios con preguntas acerca de la sindicatura pueden revisar el documento de Preguntas Frecuentes de Trinity CU adjunto a este comunicado de prensa.

Trinity Credit Union Preguntas Frecuentes

¿Mi dinero está seguro y protegido?

Sí, las cuentas de los socios en Trinity Credit Union (Trinity CU)  permanecen protegidas y aseguradas hasta el máximo establecido por la ley federal.

El Fondo de Nacional de Seguro de Depósitos de Cooperativas de Ahorro y Crédito (NCUSIF) asegura las cuentas individuales hasta al menos $250,000 y en cuentas conjuntas hasta un máximo de $250,000 por cada socio. El NCUSIF también protege separadamente las cuentas de jubilación individuales (IRA) y las cuentas de jubilación KEOGH hasta un máximo de $250,000.

Los socios con preguntas adicionales acerca de la cobertura de seguro de sus depósitos pueden comunicarse gratuitamente con el Centro de Asistencia al Consumidor de la Administración Nacional de Cooperativas de Ahorro y Crédito al 800-755-1030. El centro responde a las llamadas de lunes a viernes entre las horas de 8:00 a.m. y 5:00 p.m. (hora del este). Las personas pueden también visitar la página cibernética español.MyCreditUnion.gov en cualquier momento para obtener más información acerca de la cobertura del seguro de depósitos.

¿Cuál es el estado actual de Trinity CU?

La División de Servicios Financieros de Colorado colocó en sindicatura a Trinity CU el 27 de Julio del 2012 y designo a la NCUA como síndico.

Durante la sindicatura, la prioridad de la NCUA es proteger los activos de los socios de Trinity CU mientras continúa trabajando para que la cooperativa siga operando de forma segura y sólida.

¿Qué es la Administración Nacional de Cooperativas de Ahorro y Crédito?

La NCUA es una agencia federal del gobierno, entre otras cosas opera y administra el (NCUSIF), el NCUSIF asegura cuentas en todas las cooperativas de ahorro y crédito federales y en la gran mayoría de las cooperativas de ahorro y crédito con licencia para operar del Estado, incluyendo Trinity CU. 

¿Qué es una sindicatura?

Una sindicatura significa que, la NCUA ha asumido el control de Trinity CU para poder asegurar su estabilidad financiera y funcionamiento seguro y sólido. En una sindicatura, la NCUA trabaja para enfrentar los problemas relacionados con las operaciones de una cooperativa de ahorro y crédito y su situación financiera y a la vez continúa brindando los mismos servicios a los socios.

¿Todavía puedo realizar transacciones en Trinity CU?

Sí, Trinity CU permanece abierta durante la sindicatura.

¿Cuáles son los planes de la NCUA con respecto a las operaciones de Trinity CU?

A través de una sindicatura, la NCUA busca corregir los problemas operativos en la cooperativa con el fin de continuar protegiendo los activos de los socios y buscar solución a los problemas identificados.

¿Cuántos socios y sucursales abarca  la sindicatura?

Trinity CU opera desde una sola oficina in Trinidad, Colorado, y continúa brindando servicio a más de 1,100 socios.

¿A quienes sirve Trinity CU?

Trinity CU provee servicios financieros a los residentes del condado de Las Animas, Colorado.

¿Cuán grande es Trinity CU?

Trinity CU tiene aproximadamente $4 millones en activos según el informe financiero (Call Report) más reciente.

¿Cuánto tiempo va a durar la sindicatura?

Al tratar de resolver los problemas que afectan a Trinity CU, la prioridad principal de la NCUA es proteger los intereses de los socios de la Cooperativa. La NCUA no ha  establecido un tiempo definido para completar este proceso de resolución.

¿Cuáles son los planes de la NCUA con respecto al futuro de Trinity CU? 

Member Deposits Insured up to $250,000; Member Services Uninterrupted

ALEXANDRIA, Va. (July 27, 2012) – The National Credit Union Administration (NCUA) today assumed control of service and operations at Trinity Credit Union, a state-chartered, federally insured credit union headquartered in Trinidad, Colo. 

The Colorado Division of Financial Services placed Trinity Credit Union into conservatorship and appointed NCUA as conservator. The state placed the credit union into conservatorship due to a declining financial condition. While continuing normal member services, NCUA will work to resolve issues affecting the institution’s safety and soundness.

Deposits at Trinity Credit Union remain protected. Administered by NCUA, the National Credit Union Share Insurance Fund (NCUSIF) continues to insure individual accounts at Trinity Credit Union up to $250,000. The NCUSIF has the backing of the full faith and credit of the U.S. Government.

Trinity Credit Union serves the residents of Colorado’s Las Animas County. The credit union reported approximately $4 million in assets in its last Call Report. During conservatorship, service to Trinity Credit Union’s more than 1,100 members will continue uninterrupted. Members can continue to conduct normal financial transactions—deposit and access funds, make loan payments, and use shares.

The Federal Credit Union Act authorizes the NCUA Board to accept appointment as conservator when necessary to conserve the assets of a federally insured credit union, protect members’ interests, or protect the NCUSIF. Trinity Credit Union is the fourth federally insured credit union placed into conservatorship during 2012.

Members who have questions about the conservatorship may review the Trinity Credit Union Frequently Asked Questions document attached to this release.

Trinity Credit Union Frequently Asked Questions

Is my money safe and secure? 

Yes, member accounts at Trinity Credit Union remain safe and fully insured up to the maximums established in federal law.

The National Credit Union Share Insurance Fund (NCUSIF) insures individual accounts up to $250,000 and joint accounts up to $250,000 per member. The NCUSIF also separately protects IRA and KEOGH retirement accounts up to $250,000.

The Share Insurance Estimator  allows individuals to estimate their share insurance coverage. Once an individual inputs the required data, the Share Insurance Estimator produces a report with detailed explanations of insurance coverage.

What is the current status of Trinity Credit Union?

The Commissioner of the Colorado Division of Financial Services placed Trinity Credit Union into conservatorship on July 27, 2012, and appointed the National Credit Union Administration (NCUA) as conservator.

In conservatorship, NCUA’s priority is to protect the assets of the members of Trinity Credit Union while working to maintain safe and sound credit union operations.

What is the National Credit Union Administration?

An agency of the federal government, NCUA, among other things, operates and manages the NCUSIF. The NCUSIF insures accounts at all federal credit unions and most state-chartered credit unions, including Trinity Credit Union.

What is a conservatorship? 

A conservatorship means that NCUA has assumed control of a credit union in order to ensure a credit union’s financial stability and safe and sound operation. In a conservatorship, NCUA works to address issues related to a credit union’s operations and financial condition while maintaining member service. 

Can I still conduct business at Trinity Credit Union? 

Yes, Trinity Credit Union will remain open during the conservatorship. 

What are NCUA’s plans for operations at Trinity Credit Union? 

Through a conservatorship, NCUA seeks to fix operating issues at a credit union with a goal of protecting member assets and seeking a resolution to identified problems. 

How many members and branches are affected by the conservatorship? 

Trinity Credit Union operates from a single office in Trinidad, Colo., and service to the credit union’s more than 1,100 members continues. 

What is the field of membership for Trinity Credit Union? 

Trinity Credit Union serves the residents of Las Animas County, Colo. 

How big is Trinity Credit Union? 

The credit union has approximately $4 million in assets according to its most recent Call Report. 

How long will this conservatorship last? 

In working to resolve the issues affecting Trinity Credit Union, NCUA’s top priority is to protect the interests of the credit union’s members. NCUA has no set timeframe for completing this resolution process. 

What are NCUA’s plans for the future of Trinity Credit Union? 

NCUA has made no decisions about the long-term future of the credit union. Continued credit union service for the members, however, is a priority.

Member Deposits Protected up to $250,000; Member Service Uninterrupted

ALEXANDRIA, Va. (Aug. 1, 2012) – The Wisconsin Office of Credit Unions placed A M Community Credit Union of Kenosha, Wisc., into liquidation today and appointed the National Credit Union Administration (NCUA) as liquidating agent. TruStone Financial Federal Credit Union of Plymouth, Minn., immediately purchased and assumed A M Community Credit Union’s members, deposits, core facilities, and consumer loans.

The accounts of the new TruStone Financial Federal Credit Union members remain federally insured by the National Credit Union Share Insurance Fund up to $250,000. Administered by NCUA, the fund has the backing of the full faith and credit of the U.S. Government.

The new members of TruStone Financial Federal Credit Union will experience no interruption in services. TruStone Financial Federal Credit Union is a federally chartered credit union with $739 million in assets and more than 60,000 members. TruStone Financial Federal Credit Union serves various employer groups and individuals who live, work, worship, or go to school in the cities of Minneapolis and St. Paul, Minn.

A M Community Credit Union’s declining financial condition led to its closure and subsequent purchase and assumption. At the time of liquidation and subsequent purchase by TruStone Financial Federal Credit Union, the credit union served 15,993 members and had $121.8 million in assets. Chartered in 1933, A M Community Credit Union served persons who live or work in Wisconsin’s Kenosha or Racine counties and any Chrysler Corporation employee.

A M Community Credit Union is the seventh federally insured credit union liquidation in 2012.

Member Deposits Protected up to $250,000; Consumer Service Hotline Open

ALEXANDRIA, Va. (Aug. 9, 2012) – The Michigan Office of Financial Insurance Regulation (OFIR) today closed United Catholic Credit Union (UCCU) of Temperance, Mich., and appointed the National Credit Union Administration (NCUA) as liquidating agent.

UCCU member deposits are federally insured by the National Credit Union Share Insurance Fund up to $250,000. NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the credit union within one week.

Members with additional questions about their insurance coverage may contact the National Credit Union Administration’s Consumer Service hotline toll-free at 800-755-1030. The Center answers calls Monday through Friday between 8 a.m. and 5 p.m., Eastern Daylight Time. Individuals may also visit the MyCreditUnion.gov website at any time for more information about their insurance coverage.

An OFIR examination found that UCCU was operating in an unsafe and unsound manner and insolvent.

A federally insured, state-chartered credit union, UCCU operated one branch and served more than 200 members belonging to Catholic parishes in the Temperance/Erie area. Chartered in 1961, UCCU had deposits of approximately $303,000.

UCCU is the eighth federally insured credit union liquidation in 2012.

Board Action Bulletin

The NCUA Board voted unanimously to uphold the decision of the Asset Management and Assistance Center and deny a creditor claim appeal arising from the liquidation of Hmong American Federal Credit Union.

The NCUA Board voted unanimously to uphold the decision of the Asset Management and Assistance Center and deny a creditor claim appeal arising from the liquidation of Eastern New York Federal Credit Union.

The NCUA Board considered two personnel matters that remain confidential at this time.

The NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.

Board Action Bulletin

ALEXANDRIA, Va. (Sept. 20, 2012) – The National Credit Union Administration (NCUA) Board convened its fifth open meeting in 2012 at the agency’s headquarters here today and unanimously approved four regulatory relief items as part of the agency’s Regulatory Modernization Initiative. The Board adopted: 

• A proposed rule to provide more than 1,600 credit unions with regulatory relief by raising the “small” credit union asset threshold from less than $10 million to less than $30 million.

• A proposed rule aimed at increasing the sustainability of certain federal credit unions by modifying the definition of a “rural district” to cover greater potential membership fields.

• An advance notice of proposed rulemaking to seek comments about improving the regulation of low-cost, consumer-friendly federal credit union alternatives to predatory payday loans.

• A proposed rule to enhance risk management by allowing federal credit unions to invest in the variable-rate instruments known as Treasury Inflation Protected Securities (TIPS). 

“All four items on our September agenda address issues raised by credit unions during the Listening Sessions I hosted across the nation this year,” said NCUA Board Chairman Debbie Matz. “As we begin the second year of our Regulatory Modernization Initiative, we will continue to listen to credit unions and other stakeholders to identify further opportunities to provide regulatory relief while protecting safety and soundness.”

Regulatory Relief to Small Credit Unions Expanded
As part of NCUA’s ongoing efforts to provide regulatory relief, the Board voted to issue a proposed rule and Interpretive Ruling and Policy Statement to update the definition of a “small entity” under the Regulatory Flexibility Act to include federally insured credit unions with less than $30 million in assets.

“Small credit unions are essential to the credit union industry and to their own communities. To help more small credit unions remain viable, we need to provide greater resources and impose fewer burdens,” said Chairman Matz. “This proposed rule would provide critically needed regulatory relief by decreasing compliance costs for more than 1,600 federal and state credit unions. This proposed rule would also better position NCUA’s policies toward small credit unions in the future.”

If finalized, the rule would provide the first update of the small credit union definition since 2003, when the threshold was raised from $1 million to $10 million.

In a new effort to ensure that the threshold will be modernized more frequently in the future, the Board voted to reevaluate the small credit union definition every three years. Each reevaluation would consider credit union asset growth combined with inflation and industry consolidation.

The Regulatory Flexibility Act generally requires federal agencies to determine and consider the effect of proposed and final rules on small entities. The proposed rule would grant relief to 1,603 federally insured credit unions and bring the total number covered by the definition to 4,041, an increase of 66 percent.

When NCUA adopted the $10 million threshold in 2003, 52 percent of credit unions had asset levels that qualified them as “small entities.” Today, only 35 percent of credit unions fall under the $10 million threshold. The proposed rule change would raise the percentage of small credit unions below the threshold to 58 percent.

The threshold increase would require NCUA to more thoroughly evaluate the effect of proposed rules—including the proposed emergency liquidity regulation—to determine whether credit unions with less than $30 million in assets should be exempted from some provisions or separately considered. The Board also may use the revised threshold in the future when considering adjustments to examinations and developing policies and programs.

If finalized, the proposed asset threshold increase would also provide regulatory relief by excluding more credit unions from risk-based net worth requirements.

 
NCUA’s final interest rate risk rule, scheduled to go into effect Sept. 30, 2012, would also be adjusted to correspond with the proposed threshold increase. All credit unions less than the revised asset threshold would be excluded from the requirement to adopt and implement an interest rate risk policy. However, until the small credit union threshold is updated, credit unions from $10 million to less than $30 million in assets will be expected to comply with the interest rate risk rule, as appropriate.

The proposed rule would also make more credit unions eligible for assistance and consultation from NCUA’s Office of Small Credit Union Initiatives. The office is preparing to handle the potential increase in workload without adding staff, by increasing efficiency and employing technology.

In order to expeditiously provide small credit unions with regulatory relief, the Board issued the proposed rule with a 30-day comment period, once published in the Federal Register.

NCUA Moves to Protect Rural Credit Unions’ Sustainability

Responding to concerns about the sustainability of federal credit unions in rural areas, the Board voted to issue a proposed rule to change the definition of a “rural district” in the agency’s Chartering and Field of Membership Manual.

The current definition includes a population ceiling of 200,000 people. The proposed change would allow a rural district if the population does not exceed the greater of 200,000 or three percent of the population of the state in which it is located. If the district crosses state lines, the three-percent component would be based on the population of the state containing the majority of the district.

“This proposed rule upholds the spirit of the Credit Union Membership Access Act, providing federal credit unions more flexibility to serve consumers in rural areas who otherwise might not have access to affordable financial services,” said Chairman Matz.

The change responds to feedback NCUA received that the current 200,000 population limit for a rural district may be too small to sustain a credit union in some cases and limits access to financial services to potential members.

For example, a rural area may be anchored by a small town that serves as an economic hub. That town may be important as a community center for entertainment, medical care, and commerce, including financial services. For that reason, the NCUA Board proposes to include such a community in a rural district to enhance a federal credit union’s economic potential. However, doing that could also push the district over the current 200,000 population limit.

Another consideration is the ability of a credit union to reach existing and potential members in widely dispersed populations. Board members noted that this is a particularly important consideration, because a greater potential membership field is sometimes necessary to ensure the viability of rural charters.

Only 43 federal credit unions currently have a rural district charter. The new definition would open opportunities for federal credit unions seeking community charters based around a rural district in the 13 states with populations greater than 6.67 million.

The Board issued the proposed change with a 60-day comment period, once published in the Federal Register.

Board Seeks to Enhance Features of Payday Alternative Loans

Some federal credit unions have worked to provide their members with an affordable alternative to “payday” loans. Payday loans are small loans offered at very high interest rates and with very high fees by alternative financial services providers that may often engage in predatory practices.

In September 2010, the Board allowed federal credit unions to offer a new type of payday alternative loans (PALs) in an effort to both serve consumers’ needs and help them break the circle of financial dependency on these high-cost loans. To protect consumers, the rule, among other things, limits fees, extends payback periods up to six months and bans rollovers. Since introduction, more than 400 federal credit unions have begun to offer the product. As of June 30, those federal credit unions had 41,264 in outstanding PALs with $16.7 million in outstanding balances.

The Board currently is studying ways to improve market receptivity of these products. The Board’s goals are to increase the number of federal credit unions that offer these loans while retaining the responsible nature of PALs, to increase access to consumers who want and need them, and to protect the safety and soundness of credit unions that make them.

Through an advance notice of proposed rulemaking, the Board is seeking comments about the application fee and posing specific questions, such as: 

• Should the Board increase the permissible PAL interest rate, currently 28 percent, based on 1,000 basis points above the maximum level for non-PALs?

• Should the Board expand the permissible PAL dollar range from the current $200 to $1,000?

• Should the Board permit PAL maturities shorter than one month or longer than six months?

• Should the Board allow federal credit unions to make more than one PAL at a time to a borrower? 

The Board is also seeking information from credit unions offering other viable, responsible alternatives to payday loans and the business models they are using to execute these loan programs successfully.

The Board issued the advance notice of proposed rulemaking with a 60-day comment period.

Board Proposes Allowing Credit Unions to Invest in TIPS

Finally, the Board issued a proposed rule to allow federal credit unions to invest in the variable-rate instruments known as TIPS.

“This proposal to permit TIPS originated from an idea we first heard at our recent Listening Session in Alexandria,” said Chairman Matz. “Participants asked us to consider TIPS as a strategy to allow federal credit unions to buy government-backed investments that are not tied to interest rates. Because TIPS are backed by the U.S. Treasury, they carry no credit risk. And because TIPS are tied to the Consumer Price Index rather than a specific interest rate, they may carry less interest rate risk than other Treasury investments.”

When the rule is finalized, federal credit unions could use TIPS to protect against inflation risk. Additionally, TIPS could be a valuable part of an effective risk-management program. However, the Board noted that TIPS may not be appropriate for all federal credit unions, and the decision to use them should be based on sound due diligence and a demonstrated effectiveness at managing risk.

TIPS differ from other securities in that they provide protection against inflation. The principal increases with inflation and decreases with deflation. TIPS are currently a prohibited investment for federal credit unions, because they re-price in response to changes in the Consumer Price Index (CPI), and the CPI is a prohibited index for variable-rate instruments. Federal credit unions may invest in variable-rate instruments whose rates are tied to a domestic interest rate, such as the Fed Funds rate, Treasury rates or LIBOR.

The purpose of this prohibition is to reduce the basis risk between the interest earned on assets and dividends paid on shares. Federal credit unions with greater access to asset/liability management tools to identify and measure risk may be better equipped to manage the risks associated with using CPI as an index.

The proposed rule was issued with a 60-day comment period, once published in the Federal Register.

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