More Losses Recorded, Higher Assessment Likely
ALEXANDRIA, Va.-NCUA had more bad news for credit unions last week, announcing it has added eight more credit unions to its troubled list and set aside an additional $170-million to cover losses at natural-person credit unions. The additional reserves cut the reserve ratio for the National CU Share Insurance Fund and, with two other negative indicators, point to a higher premium assessment later this year, agency officials said during the NCUA Board's monthly meeting. The other negative indicators are significantly lower interest earnings on the NCUSIF's $9.4 billion in Treasury securities, and high share growth of 11% for the first quarter of the year, which would cause to greater dilution of reserves later in the year. NCUA had originally budgeted $750 million for losses in natural-person credit unions, but the additional reserves increased that pot to $896-million. Melinda Love, chief examiner for NCUA, warned of increasing losses as the condition of some of the deteriorating, large credit unions becomes clearer. "There is an increasing potential that $750 million will not be sufficient to cover the potential losses (of those troubled, large credit unions)," said Love. "We'll know more about losses at the big credit unions later in the summer. The losses by natural-person credit unions are one of the two components that will figure into a special assessment credit unions will be charged this year, with a separate payment assessed to fund the ongoing corporate credit union bailout. NCUA officials said last week they continue to hold to an earlier projection of $6.5 billion of losses from U.S. Central FCU and WesCorp FCU, but also said that defaults on bonds for the two failed corporates are now projected at $7.6 billion over the next two years. In addition, NCUA is expected to accumulate toxic assets from other troubled corporates and combine them with those at U.S. Central and WesCorp for a huge securitization later this year. Additional losses for those securities have not been projected yet. The NCUA officials said they still expect the combined assessments to cost credit unions between $1.1 billion, about 15 basis points, and as much as $4-billion, or about 40 BPs. A specific number will not be available until later in the summer, they said.
CDCU Opens In Michigan
BATTLE CREEK, Mich.-Inspire Community Development CU, which serves the city's 50,000 residents, opened last week, the second CDCU to open its doors this year. On the first day 13 new accounts were opened. The credit union will hold a grand opening June 14. The CDCU is sponsored by Guardian Finance and Advocacy Services, a community organization providing financial guidance and advocacy services to 11 counties in southwestern Michigan. Earlier this year East River Development Alliance FCU, which will serve several public housing projects, opened in Queens, N.Y.
CUNA Mutual Aids Flood Victims
MADISON, Wis.-CUNA Mutual announced that in response to widespread flooding in Tennessee, it had implemented a moratorium for policyholders there on company-initiated cancellations and non-renewals of any in-force insurance policies due to non-payment of premium. The moratorium is in place for a minimum of 90 days and applies to all policyholders of in-force policies underwritten by CUNA Mutual in Tennessee. Policyholders statewide are covered by the moratorium, not just those located within the federally declared disaster areas.
Big Retirement Plans In Wis.
PEWAUKEE, Wis.-Wisconsin's CUs have set a goal of assisting as many as 5,000 low-income and underserved residents in the first year of a program that aims to boost saving for retirement. Since the Fall of 2009 employees of Wisconsin CUs have received more than 30,000 hours of online investor education and are now moving into advanced levels of that same program. The league reported July plans call for up to 25 CU staff to apply for additional training this fall, who will then earn Certified Financial Educator designation. Those grades will then train at least 100 financially underserved or low-wealth individuals, the league said.
