Credit Unions Are Safe & Strong

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Mississippi Credit Unions Are Safe & Strong

You may have seen news about two “corporate” credit unions that were taken over by the National Credit Union Administration (NCUA) in March. Here are some points we want you to know:

Summary:

What you read about in the paper relates to wholesale credit unions in Kansas and California that don’t serve individual consumers. Corporate credit unions do not serve consumers. They provide products and services to regular or “natural person” credit unions.
Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union (Kansas) and Western Corporate Federal Credit Union (California), the two credit unions involved in the announcement.
The National Credit Union Administration action involves no taxpayer dollars.
There is no direct impact by National Credit Union Administration’s actions on Mississippi credit union members or the 90 million other credit union members nationwide.
In addition, the action taken by the federal agency has no impact on the ability of credit unions to continue serving their members. Throughout the financial crisis facing the nation, credit unions have continued lending to and serving their members through no-or-low cost financial services.
Credit unions that serve consumers remain very strong, with a national net worth exceeding 10 percent of assets, healthy growth in assets, membership, and loan portfolios despite the difficult economy. Mississippi credit unions are no exception and have an average net worth (capital) ratio of 12.98%.
Credit unions continue to be a safe place for deposits. All deposit accounts in Mississippi credit unions are federally insured up to $250,000.
Credit unions have been serving members in the U.S. for 100 years, through good times and bad. We are well positioned to remain strong.

Detailed Explanation of Events:

These two credit unions (U.S. Central Federal Credit Union, Kansas and WesCorp Federal Credit Union, California) are not regular credit unions that serve consumers. There are a small number (28) of wholesale institutions that do not serve consumers; they provide liquidity, investment and payments services to regular credit unions. It was two of these “corporate” credit unions that were placed into conservatorship, which means they are still operating normally but are now being managed by NCUA.
Because of the nature of what they do, these corporate credit unions operate in the capital markets and invest in the highest-rated, investment grade securities. But as with so many others, accounting rules have required them to recognize the decline in the market value of their investments. In the case of these two corporate credit unions, the “unrealized” losses were significant enough that NCUA considered it necessary to install conservatorship.
What does all this mean for credit union members? It’s business as usual. The same level of quality service you receive from credit unions will continue. Service to members is not affected by these government actions.
And of course your own funds are perfectly safe. Mississippi credit unions are federally insured up to $250,000 by the National Credit Union Share Insurance Fund and backed by the full faith and credit of the U.S. Government, just as the FDIC does for bank deposits. No credit union member has ever lost a penny of federally insured funds.
Also on the point of safety: Credit unions are very well capitalized. Our capital cushion is stronger than you would find at most banks. As an industry, our average capital-to-assets ratio is more than 10%. In Mississippi, its near 13%. That’s considerably higher than the 7% industry standard for being “well capitalized” and higher than the banking industry’s average of about 9%. This 10% capital means credit unions are well positioned to absorb the costs of this action by the agency (which intends to charge higher deposit insurance premiums) with minimal outward impact on our members.
Similarly, Congressman Barney Frank, the chairman of the House Financial Services Committee, said recently that “If credit unions made all of the mortgage loans, then there would have been no subprime crisis, and therefore no economic crisis.” And the Wall Street Journal recently published a big feature pointing out that while some of these “corporate” credit unions have had problems, in today’s economy regular credit unions that serve consumers continue to be a safe haven and offer great value.