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Board Action Bulletin

National Credit Union Share Insurance Fund report

 

NCUA’s Chief Financial Officer reported the Fund’s reserve balance totaled $726.1 million February 28, 2010, with $1.5 million charged to insurance loss expense thus far in 2010.

 

February 2010 ended with an NCUSIF equity ratio of 1.23 percent based on the amount of shares held by the nation’s federally insured credit unions at year-end 2009. Once credit unions are billed for their 1 percent capitalization deposit adjustment, due in April, the equity ratio will rise to 1.26 percent.

 

Six federally insured credit unions have failed thus far in 2010 at a cost to the Fund of $6.7 million — 4 were involuntary liquidations and 2 were assisted mergers.

 

There were 337 CAMEL code 4&5 credit unions at February 28, 2010; 20 fewer than were reported last month.

 

The current distribution of federally insured credit union assets by CAMEL code follows:

• 81.37 percent of assets are held in CAMEL code 1&2 credit unions;
• 13.25 percent of assets are in CAMEL code 3 credit unions; and
• 5.38 percent of assets are held in CAMEL code 4&5 credit unions.

 

Through February, NCUSIF’s annual revenue and expenses included total income of $42.7 million, total expenses of $23.2 million, resulting in net income of $19.5 million.

 

During February, the Temporary Corporate Credit Union Stabilization Fund made a payment of $310 million on the $1 billion note payable to the U.S. Treasury.

 

Proposal establishes federal credit union director duties, clarifies

merger and conversion requirements       

 

The NCUA Board issued a proposed rulemaking, with a 60-day comment period, that addresses several related areas affecting federal credit union operations, and it acts to protect member rights. The proposal documents and clarifies the fiduciary duties and responsibilities of federal credit union directors. It also adds new provisions establishing procedures for insured credit unions merging into banks, and it would amend some existing regulatory procedures related to insured credit unions merging with other credit unions and converting to

banks.

 

Following-up on issues addressed in an Advance Notice of Proposed Rulemaking (ANPR) issued in 2008, the proposed rulemaking includes a new §701.4, which defines the general authorities as well as management and fiduciary duties of federal credit union directors. This section responds to the need to provide federal credit union directors with uniform standards.

 

Revisions to Part 708a address credit union conversions to mutual savings banks and credit union mergers into banks. Proposed Part 708a would better protect the secrecy and integrity of the voting process during conversion to a mutual savings bank by providing members with additional information about how the conversion could affect them, and it requires converting credit unions to provide copies of correspondence with other agencies related to the conversion.

 

The proposed rule would define and standardize procedures for credit union mergers into banks. Based on NCUA’s right and responsibility to regulate both the procedures and basic aspects of a credit union’s merger into a bank, the regulation would establish the procedures and requirements for obtaining approval of the NCUA Board and credit union members.

 

Proposed Part 708b revisions address credit union mergers with other credit unions and termination or conversion of NCUA federal deposit insurance status. The proposal adds balloting and procedure requirements to protect the integrity of the vote and ensure full and accurate disclosure to the members and to NCUA.

 

2011-2016 Strategic Plan presented to public

 

The NCUA Board heard a briefing on the NCUA Strategic Plan 2011–2016. The plan focuses on ensuring and maintaining confidence in a dynamic, safe and sound credit union system.

The plan was developed around four main objectives that include:

• Provide a broad, general, transparent roadmap of program and support operations;
• Encourage an innovative, flexible regulatory environment that increases access to financial services for all those eligible for credit union service;
• Increase alignment between essential mission functions and long-term strategic goals; and
• Align well-trained staff with existing resources and emerging issues.

The NCUA Strategic Plan 2011–2016 was issued with a 60-day public comment period.

 

Safety & soundness revisions proposed for RegFlex

 

The NCUA Board approved, by a 2 to 1 vote, proposed rule revisions to NCUA’s Regulatory Flexibility Program to enhance safety and soundness for credit unions and adjust to the decline in the economy.

 

Amending Parts 701, 723 and 742, the proposal would revise RegFlex provisions affecting fixed assets, member business loans (MBLs), stress testing of investments, and discretionary control of investments. Some of these revisions will require conforming amendments to NCUA’s fixed assets and MBL rules. The proposal was issued with a 60-day comment period.

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

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 Cal State 9 Credit Union.

The NCUA Board unanimously approved placing Tracy Federal Credit Union into conservatorship under Section 206(h)(1) of the Federal Credit Union Act.

The NCUA Board considered a supervisory matter that remains confidential at this time.

The NCUA Board considered a 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.

Connecticut Department of Banking Appoints NCUA Liquidating Agent; Member Funds Are Insured

ALEXANDRIA, Va. (April 8, 2010) — The National Credit Union Administration (NCUA) today accepted appointment as receiver/liquidator of South End Mutual Benefit Association, Inc., a state chartered credit union in Bloomfield, Connecticut, following the State of Connecticut Department of Banking decision to close the credit union.

 

The Connecticut Department of Banking assumed control of South End Mutual Benefit Association, Inc. operations and appointed NCUA receiver after determining the credit union was experiencing problems with its earnings, delinquency, and management.

 

At the time of liquidation, the credit union had $2.4 million in assets and served 385 members. The credit union began operations in 1945 and served the residents of Hartford, County and nearby communities in Connecticut. This is the 5th federally insured credit union liquidated in 2010.

 

The NCUA Asset Management and Assistance Center will issue checks to members holding share accounts in the credit union within one week. Member accounts are insured up to at least $250,000 by the National Credit Union Share Insurance Fund (NCUSIF), a federal fund managed by NCUA and backed by the full faith and credit of the U.S. Government.

Board Action Bulletin

The NCUA Board unanimously approved placing St. Paul Croatian Federal Credit Union into conservatorship under Section 206(h)(1) of the Federal Credit Union Act.

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.

Member Accounts are Safe and Federally Insured

Valley First Credit Union purchased and assumed Tracy FCU’s assets, loans and shares, enabling Tracy FCU’s members to receive uninterrupted credit union service. Tracy FCU’s declining financial condition led to its closure and subsequent purchase and assumption. At closure, Tracy FCU had $25.4 million in assets and served 5,973 members.

Valley First Credit Union is a full service credit union and its members have access to a broad array of financial services. With assets of $317.1 million, its seven branch locations serve approximately 47,273 members who either live, work, worship, or attend school in Fresno, Madera, Mariposa, Marced, San Joaquin, Stanislaus, Tuolumne Counties, California, or work for one of the companies in its field of membership.

Member accounts are insured to at least $250,000 by the National Credit Union Share Insurance Fund, a federal insurance fund backed by the full faith and credit of the U.S. Government. This is the 6th federally insured credit union liquidation in 2010.

Board Action Bulletin

The NCUA Board considered a personnel matter and 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

National Credit Union Share Insurance Fund report

 

NCUA’s Chief Financial Officer reported the Fund’s reserve balance totaled $726.7 million March 31, 2010, with $7.1 million charged to insurance loss expense thus far in 2010.

 

March 2010 ended with an NCUSIF equity ratio of 1.26 percent based on the amount of shares held by the nation’s federally insured credit unions at year-end 2009. Credit unions are submitting $267 million in a 1 percent capitalization deposit adjustment, which was due April 15, 2010.

 

Eight federally insured credit unions have failed thus far in 2010 at a cost to the Fund of $12 million.

 

There were 349 CAMEL code 4&5 credit unions at March 31, 2010, representing 5.68 percent of total insured shares as of December 31, 2009. This is 12 more CAMEL code 4&5 credit unions than were reported last month.

 

The current distribution of federally insured credit union assets by CAMEL code follows:

• 81.49 percent of assets are held in CAMEL code 1&2 credit unions;
• 13.16 percent of assets are in CAMEL code 3 credit unions; and
• 5.35 percent of assets are held in CAMEL code 4&5 credit unions.  

Through March, NCUSIF’s annual revenue and expenses included total income of $65.9 million and total expenses of $43.1 million, resulting in net income of $22.8 million.

 

During March, the reserves for the Temporary Corporate Credit Union Stabilization Fund were increased by just over $1 billion. This increase was based on analysis that showed a significant decline in the level of cash flows for mortgage-backed securities at the corporate credit unions. This reduced level of cash flows resulted in a significant increase to the Stabilization Fund’s exposure to losses, which necessitated the increase to the reserves.

 

Board extends waiver on corporate capital

The NCUA Board extended a waiver permitting corporate credit unions to (1) continue using their November 30, 2008, capital level to determine regulatory compliance with capital-based requirements and limitations in the corporate rule, (2) establish a new termination date for the waiver one-year after final amendments to Part 704 are published in the Federal Register, and (3) delegate authority to the corporate credit union office director to modify or restrict the waiver.

 

NCUA’s corporate rule has several provisions setting regulatory limits and requirements based on corporate credit union capital. 2007 and 2008 losses associated with mortgage-backed security investments severely impacted corporate credit union’s capital. And many corporates experienced a loss with U.S. Central’s write down of paid-in capital and membership capital investments.

 

To ensure uninterrupted service to natural person credit unions, in April 2009 the NCUA Board approved a waiver and issued an Order permitting corporate credit unions to use the capital level reported on November 30, 2008, call reports when determining certain capital-based requirements and limitations in the corporate rule. Terms of the 2009 Order terminates the waiver on the effective date of final amendments to Part 704 of NCUA’s Rules and Regulations.

 

Proposed amendments to Part 704 provide corporate credit unions with a 1-year period after publication of the final rule before the new capital requirements become effective. To ensure continued access to services for natural person credit unions during this 1-year time frame, the Board is permitting corporates to continue to use November 30, 2008, capital levels out to the 1-year anniversary of publication in the Federal Register of final Part 704 amendments.

 

Extending use of past capital levels is strictly an interim measure. As proposed amendments indicate, NCUA intends to strengthen corporate capital standards to align them with international Basel standards. This extension period gives corporate credit unions a fair chance to consider and implement new capital standards and also to address the resolution of legacy assets. During the waiver extension period, corporates must continue to build capital through expeditious capital solicitation and retained earnings growth.

 

Proposal would enable short-term, small-dollar loans

The NCUA Board issued proposed rule §701.21, with a 60-day comment period, to provide federal credit unions with the ability to offer a viable alternative to onerous payday loans by proposing closed-end, short term, small (STS) loans charging a maximum 28 percent APR.

 

Following research and thoroughly reviewing FDIC’s small dollar loan pilot program, specifics of NCUA’s proposed STS loan program include:

1. STS loans are between $200 and $1000;
2. Minimum loan term is 1 month and maximum term is 6 months;
3. FCUs make only one STS loan at a time to a borrower and make no more than three STS loans in any rolling 6-month period to one borrower;
4. FCUs cannot roll-over an STS loan;
5. FCUs charge an application fee to all members applying for a new STS loan that reflects actual costs associated with processing the application, provided the application fee does not exceed $20; and
6. FCUs implement appropriate underwriting guidelines to minimize risk and include in their written lending policies a cap on the aggregate number and aggregate dollar amount of STS loans made.  

While the FCU Act stipulates a 15 percent lending ceiling, the NCUA Board has authority to adjust the loan ceiling. This proposal would amend NCUA’s general lending rule by permitting FCUs to charge an APR for STS loans that is 1000 basis points above the general interest rate ceiling.

 

Additional information in the proposal includes STS loan program guidance and best practices that address program features, minimum underwriting standard requirements, and risk avoidance strategies. The proposal also requests specific comment on using an all inclusive 36 percent APR, minimum membership requirements, and requiring members to participate in direct deposit or payroll deduction as a condition of receiving credit under this rule.

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.

Member Accounts are Safe and Federally Insured

Alexandria, Va. (May 1, 2010) – The National Credit Union Administration (NCUA) last night liquidated St. Paul’s Croatian Federal Credit Union of Eastlake, Ohio. The credit union had been placed into conservatorship by NCUA on April 23, 2010.

The NCUA Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in St. Paul’s Croatian Federal Credit Union. A letter with more information has been sent to all members of the credit union.

Member accounts are insured up to $250,000 coverage provided by the National Credit Union Share Insurance Fund, a federal fund backed by the full faith and credit of the U.S. Government. Members with questions about their insurance coverage can contact NCUA’s Share Insurance Call center at 1-800-755-1030, Press 1, Monday through Friday during normal business hours.

NCUA made the decision to liquidate St. Paul’s Croatian Federal Credit Union and discontinue its independent operations after determining that the credit union is insolvent. It has no prospects for restoring viable operations. At the time of liquidation, the credit union served 5400 members and had assets of approximately $238.8 million.

Member Accounts are Safe and Federally Insured

Alexandria, Va. (May, 17, 2010) — The National Credit Union Administration (NCUA) today placed Convent Federal Credit Union, located in New York, N.Y., into liquidation.

NCUA made the decision to close Convent Federal Credit Union and discontinue its operation after determining the credit union is insolvent and has no prospects for restoring viable operations. At the time of the liquidation, the $173,000 credit union, chartered in 1960, served 213 members of the Convent Avenue Baptist Church in New York City. This is the 8th federally insured credit union liquidation in 2010.

NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in Convent Federal Credit Union within one week.

Member accounts are insured up to $250,000, with coverage provided by the National Credit Union Share Insurance Fund, a federal fund backed by the full faith and credit of the U.S. Government. Members with questions about their insurance coverage can contact NCUA’s Share Insurance Call center at 1-800-755-1030, Press 1, Monday through Friday during normal business hours.

Board Action Bulletin

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.