Volume 29, Number 6 April 15, 2009
Volume 29, Number 6 April 15, 2009
HEADLINE NEWS
NCUA Provides Deeper Info on Corporate Analysis
On April 10, National Credit Union Administration (NCUA) Chairman Michael Fryzel released a summary of the agency’s analysis of the distressed securities held by U.S. Central FCU (U.S. Central) and Western Corporate FCU (WesCorp).
In what was the NCUA’s third weekly update on corporate credit unions, the chairman noted that the “incomplete or insufficient nature” of available information on the agency’s action addressing corporate credit union stabilization has “led some to question the necessity of the NCUA’s actions and level of expected credit losses being projected.”
In fact, the Credit Union National Association (CUNA) has repeatedly requested more information regarding NCUA’s corporate stabilization actions and filed a formal Freedom of Information Act (FOIA) request in March. The agency has 20 days from the March 30 request date to respond, but extensions to that deadline are possible.
Fryzel said the portfolio outlines released on April 10 and the NCUA’s associated summary analysis provide a “concise synopsis of the respective portfolios and enable informed parties to appreciate the scope and severity of the stress on these investments.”
“Though virtually all of the securities purchased by these two corporate credit unions were AAA- or AA-rated at the time of purchase, the summary clearly demonstrates how the nature of the securities and the deterioration in the economy have resulted in significant expected credit losses. In the near future NCUA will also be releasing a summary of the PIMCO report,” Fryzel said.
The summary is available online at http://www.ncua.gov/CorporateStabilizationProgram.html.
More Details on U.S. Central and WesCorp
According to NCUA Chairman Fryzel’s analysis, normal operations continue without interruption at U.S. Central and WesCorp. The following items specific to U.S. Central and WesCorp are of note:
■ U.S. Central and WesCorp have established a process for members to request the CUSIP numbers and par values for the securities held respectively by each corporate credit union. Recipients of this information are subject to the terms of a non-disclosure agreement.
■ Liquidity remains stable. Seasonal outflows of funds typically occur in April and May, so it is important credit unions continue to support liquidity in corporate credit unions to prevent the selling of distressed assets into the current dysfunctional market.
■ As part of the conservatorship management teams’ fiduciary responsibility, the review of all private label mortgage backed securities by one of U.S. Central’s and WesCorp’s external vendors respectively is underway. The goal remains to have each analysis by late April or early May for posting March 31, 2009, financial statements. These reviews will aid in determining the level of Other-Than-Temporary-Impairment (OTTI) charges both corporate credit unions will record, as well as finalizing the outstanding CPA audits. This is part of an ongoing process to improve the management of these portfolios.
■ Extensive reviews of all contracts, third-party relationships, and operational efficiencies are ongoing at both corporate credit unions.
NCUA NEWS
More Accounting Guidance Sent to NCUA Examiners
National Credit Union Administration (NCUA) examiners received additional clarification on April 10 regarding credit unions’ flexibility in booking the National Credit Union Share Insurance Fund (NCUSIF) deposit impairment, according to NCUA.
The agency wants to ensure that its field staff is consistent with advice to credit unions that they have some flexibility in deciding whether to book the impairment of the NCUSIF deposit on their March 31 statements.
The newest guidance addresses the recently released Accounting Bulletin (AB 09-02) and subsequent memo to field staff on accounting for the insurance costs associated with NCUA’s Corporate Stabilization Plan.
According to Mary Dunn, Credit Union National Association (CUNA) deputy general counsel, the newest communication clarifies that, for any credit union using the accrual basis of accounting, examiners should not take exception with either of the following decisions:
■ If the credit union records the deposit impairment and premium expense consistent with the guidance in AB 09-02; or
■ If the credit union accounts for the deposit impairment and premium expense (including not recording them at all) in accordance with written guidance from a licensed practitioner that states the guidance is consistent with generally accepted accounting principles – or GAAP.
Even if a credit union delays booking the impairment of the NCUSIF deposit without guidance from a licensed practitioner, Dunn said, the NCUA has indicated that examiners are directed not to take harsh action.
They should instead note such action as an exception under “Informal Discussion Item” or at most an “Examiner’s Finding” on the credit union’s examination report.
For a copy of Accounting Bulletin 09-02, go to
http://www.ncua.gov/CoporateStabilizationProgram/ACCTBUL09-2(2).pdf.
COMPLIANCE RECAP
When a federal credit union has been offering home equity line of credit (HELOC) loans to members for years, can it modify the terms of existing loans to reflect a newly adopted policy, asks the Credit Union National Association’s (CUNA's) Compliance Challenge (CCC). Say, for instance, the credit union wants to set an interest-rate floor for all its adjustable-rate HELOCs.
Simple enough, of course, for new loans: The credit union just has to change the language in its HELOC loan agreement. But can it effectively make this change for existing loans while maintaining compliance with the Truth in Lending Act and Regulation Z?
Well, it might be tough, says the CCC. The credit union must obtain the member’s agreement in writing to add a floor interest rate to his or her existing HELOC loan.
Regulation Z states that a creditor may only change the terms of a home equity plan when the change is insignificant or when the change benefits the consumer throughout the remainder of the plan. This just isn’t the case in the credit unions’ plan to set a rate floor.
CUNA warns that it would be very unlikely that the credit union would receive written approval from all members to change terms on existing HELOC loans. And this would bring with it its own challenge: Since terms would remain unchanged on loans without written approval, the credit union’s data processing system would have to be capable of tracking multiple HELOC plans – those with no change in terms and those with a change in terms.
For more CUNA compliance tips and more Regulation Z information go to http://www.cuna.org/compliance/member/eguide/eguide_regz.html.
Credit Union System News
CUNA Mutual Annual Report Available Online
CUNA Mutual Group’s 2008 Annual Report is available online. The report contains information about CUNA Mutual’s financial strength and how the company is navigating challenging economic times.
This is the second consecutive year the report is available exclusively online, saving money and environmental resources. Interactivity is part of the report design, as videos and audio clips allow readers to hear directly from company leaders and customers.
CUNA Mutual said it recorded strong revenue growth – 68% – and overall operating results – a gain of about $151 million – in 2008. For example:
■ The company recorded revenue growth of nearly 7% last year and an operating revenue gain of more than $150 million;
■ Investment losses offset operating earnings as the company recorded a net income loss in 2008;
■ However, even with investment losses, the company policyholder surplus remains at more than $1.2 billion.
The company’s total asset size was $13.2 billion in 2008.
CUNA Mutual’s 2008 operating results remained strong during the current economic downturn, the company said. For example:
■ Retention of credit union customers on CUNA Mutual’s core products was 98.2%;
■ Crop insurance – a new product – delivered $246 million in revenue;
■ Underwriting was strong across products, including mortgage insurance; and
■ Product diversification created product resilience.
To access the 2008 Annual Report, use the resource link. Readers also can access a printable PDF online. http://www.cunamutual.com/cmg/freeFormDetail/0%2C1248%2C338%2C00.html
The League office will be closed on Thursday, April 30, and Friday, May 1, for the Annual Meeting & Trade Show in Ocean City, Maryland. |
NBC Affiliate Discusses Using Credit Unions vs. Banks
Reporter Tracy Davidson of WCAU Channel 10 in Philadelphia asked the question, “Should you use a bank or a credit union?” and credit unions received several positive comments. The segment aired on the 11 o’clock news on April 14.
The story quoted Todd Mark with the Consumer Credit Counseling Service, who noted that it’s a fundamental financial decision. He pointed out that banks are for profit and credit unions are owned by their members. “They’re not looking to turn that profit for shareholders. It’s going back to you as a member,” he said.
The station also interviewed credit union members Chastity Crawley, who used her credit union to buy a car because it had a cheaper interest rate, and Birdie Reyes, who said she earns more on her savings accounts.
The report indicated that the recent average rate on a bank savings account was 0.36%, while it was 0.54% at credit unions. The differences add up, especially with big purchases, Mark said.
The only positive thing mentioned about banks was convenience in number of branches and ATMs, but the segment also pointed out that credit unions are joining ATM networks.
GM Extends Invest In America
General Motors (GM) has expanded its participation in Invest in America until December 31. Previously, GM planned for the promotion to run through the end of March. Invest in America is a credit union auto loan discount program offered by GM and Chrysler. Under the extension, consumers will receive discounts on any eligible new vehicle through the end of the year.
“As over 1,200 credit unions continue to promote the Invest in America credit union member discounts, the automakers are seeing great results with first-time and returning buyers,” said David Adams, CUCorp CEO. “This is causing them to take this program seriously. The contract extension reflects GM’s satisfaction with the program, and we continue to hope for a long-term, mutually beneficial partnership between GM and credit unions.”
Chrysler is offering a Credit Union Member Cash Discount through June 30. Invest in America launched in December. More than 73,000 vehicles have been sold through the Invest in America program, according to the Invest in America website, www.lovemycreditunion.org.
DELAWARE NOTES
DELAWARE ALLIANCE FCU recently gave an award to vice president Savannah Jarrell for her 20 years of service to the credit union. She joined the CU as a collector in 1989 and has served in almost every staff capacity since that time.
John Kotzun, financial advisor at DOVER FCU, recently served as an expert on a panel discussion regarding 401(k) solutions for businesses in helping Middle America through retirement. The panel event was part of the national “Retirement Destinations” conference hosted by CUNA Mutual Group in Dallas, Texas.
Dover FCU financial advisor John Kotzun leads CUNA Mutual session
Thanks to Duke Strosser, DEL-ONE (Delaware FCU) CEO, for following up with Amy Overton, Senator Carper’s legislative aide, regarding legislation that would increase NCUA’s borrowing authority. As a result of Duke’s request, the League was able to get CUNA lobbyist Phil Drager to contact Senator Carper’s office with requested information. Mr. Strosser and DOVER FCU CEO David Clendaniel also stepped up to the plate by submitting comments on the Advanced Notice of Proposed Rulemaking (ANPR) on corporate credit unions.
League communications director Alice Smith visited two credit unions on her recent trip to New South Wales, Australia. In fact, the branch manager of Holiday Hills Credit Union hosted Alice and her husband for two days. While there, the newspaper announced that “Mr. Credit Union,” Tom Kelly, had died after serving in Australian CUs for 63 years.
POSITIONS SOUGHT |
■ Individual with credit union experience is offering consulting services to CUs. As a member of the DC Bar, he has strong compliance skills. Call Susan Fallon and ask for resume #04-03-09.
■ Individual with over 25 years in lending and collections seeks a CU position. Resume #03-31-09.
EDUCATIONAL OPPORTUNITIES
April/May QuickBites Teleconferences
One-hour sessions run from 11 a.m.-noon:
4/30 FACT Act
5/13 If You Find Them, They Will Pay
5/19 Using Your Website to Drive Growth
5/28 Kids’ Stuff: Youth Accounts
The two-hour sessions run from 11 a.m.-1 p.m.
4/28 Competitive Lending Trends
5/21 Motivating and Managing the Teller Line
The fee for the one-hour sessions is $99; the two-hour session is $169. The deadline to register with Bernadette Hines is one week prior to the session.
Free NCUA Workshop for Small Credit Unions. NCUA has scheduled a free seminar for small CUs in Philadelphia on April 24 from 8:15 a.m.-3:30 p.m. at the Renaissance Philadelphia Hotel Airport. To register, go to NCUA’s website: http://ncua.gov/CreditUnionDevelopment/Events/Index.htm.
Mortgage Council Meeting – Wednesday, May 13, from 10 a.m.-noon at the League office. Topic: What’s happening in the mortgage market and new programs. No fee for mortgage council members: $100 all others. Registration deadline: May 8.
Supervisory Committee Training: Duties and Responsibilities – Tuesday, May 19, from 5-7:30 p.m. Topics: auditing duties, board monitoring, internal/external controls, and more. Presenter: Kirk Fox. Fee: $65, including handouts and a light meal. Registration deadline: May 6.
Bank Secrecy Act (BSA): Extended Session – Wednesday, May 20, from 9 a.m.-3 p.m. at the League office. This session will cover your credit union’s requirement to hold annual BSA training. Fee: $90, includes exam, certificate of completion, lunch, and breaks. Registration deadline: May 6.
Bank Secrecy Act (BSA): Basic Overview – Wednesday, May 20, from 5-7:30 p.m. at the League office. Many of the same items offered in the morning session above, but in less detail. Fee: $65, includes exam, certificate of completion, and a light meal. Registration deadline: May 6.
TOGETHER is published on the 15th and 30th of each month by the Delaware Credit Union League, 4 Quigley Boulevard, New Castle, DE19720. Information to be published should be sent or phoned into the League no later than the Monday of the week preceding the publication date. Telephone: (302) 322-9341 or (800) 292-7875. This newsletter can also be found on the League website: www.dcul.org. Hard copies of the newsletter will be mailed to each credit union CEO/manager for distribution to those without computer access. Readers can receive a reminder when the newest edition is posted to the Web by emailing susan@dcul.org. Editor: Alice Smith (alice@dcul.org).