STRONGSVILLE, Ohio-Three credit unions that in recent years moved to American Share Insurance (ASI) for deposit insurance said they have no regrets, despite the recent 15-basis point premium assessment ASI has made.
"The assessment ASI has just given us is a little disheartening," said Julia Gee, CEO of the $14-million Community United CU here, which finalized its move to ASI in November. "But the upside of that is that I have full confidence that as soon as ASI becomes profitable they may return part of that assessment."
The 15-basis-point premium charged by ASI, the first premium in the history of the company, is the same as that NCUA is currently assessing federally insured CUs as part of its efforts to replenish the diminished reserves of the National CU Share Insurance Fund. ASI CEO Dennis Adams could not be reached for comment.
Community United didn't switch to ASI to avoid NCUA's recent premium assessment, as some credit unions were apparently considering in late summer when ASI's Adams told Credit Union Journal that NCUA's charge had led to a significant increase in interest in ASI (Credit Union Journal, Aug. 17). Gee explained that it was a decision the credit union made back in 2008 over concerns that CU failures could be right behind the banks' problems that had just begun surfacing, and that credit unions would have to support a natural-person CU "bailout."
Another reason Community United made the change, Gee said, was the lack of attention her credit union received from NCUA. When Gee spoke with NCUA before CUCU's conversion to ASI was finalized, a representative of the agency asked Gee why she switched. "I told them that in the two years I had been at Community, I had never had a call from my regulator, and never spoken with them."
Gee said that NCUA's response was, "'We see that you are a good credit union on your 5300 Report and according to the state.'" For the CEO, that was insufficient. "You are not coming into my office and seeing what goes on here," she said about NCUA's oversight.
Gee also pointed out that her past experience with ASI, when she ran the former AC Credit Union in Bath, Ohio, for four years and helped with the books at Wiremen's CU in Cleveland, influenced her decision. "American Share Insurance closely monitors the inner workings of a credit union by auditing in tandem with state regulators. I have full confidence in them."
ASI backstops 155 credit unions in nine states, including eight in Nevada that combine for $2.4 billion in assets. Problems ASI faces with the Nevada credit unions it insures-particularly the $883-million Silver State Schools CU in Las Vegas (Credit Union Journal, Nov. 6)-have not slipped past Gee, who shared that she is monitoring matters there. "As a CEO it is my fiduciary responsibility to be concerned about that. ASI is giving me full disclosure about what is going on there."
In Pleasanton, Calif., Richard Jordan, CEO of the $300-million SafeAmerica CU, which converted to ASI deposit insurance in late December, has his attention focused on Silver State, as well. The CEO is "concerned" but confident ASI will correct the problems there.
Jordan, who said his credit union switched to ASI coverage to avoid NCUA premiums, said the ASI assessment is a "sign of the times" and that SafeAmerica is not reconsidering its choice. "We are still very confident in our decision. In the long run we believe the billions of dollars that have been lost in the corporate network, and all the problems NCUA is having with natural-person credit unions at large, far exceed, in relative terms, the types of challenges ASI is facing now."
While the risk at Silver State Schools Credit Union is clear: $500 million of its $770 million loan portfolio is in real estate in a part of the country where two-thirds of mortgages are underwater, Thad Angelle, CEO of the $180-millon MTC Credit Union in Port Neches, Texas, concurred that ASI's challenges are not as great as NCUA's. MTC moved over to ASI in 2008 to get a "competitive advantage with regard to deposit insurance," citing ASI's higher primary deposit insurance at the time and the fact ASI insures up to $250,000 per account, not per depositor.
"At the time NCUA announced its decision to assess the premium, our credit union friends asked us if we knew something was coming from NCUA," Angelle said. "We told them it was just one of those lucky decisions and we still think it's the right choice."
