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CU FAILURES ARE ON PACE TO TOP LAST YEAR'S TOTALS

ALEXANDRIA, VA.-NCUA said three more credit unions failed last week, making a total of 21 for the year and putting 2010 on pace to top last year's total of 28 failures.

The most recent failures were of Family First FCU, a one-time $173-million CU in Orem, Utah, that was taken under conservatorship by NCUA with negative net worth of almost $8 million; Certified Community FCU, a one-time $52 million Commerce, Calif., CU that was assigned to Vons Employees FCU in a purchase and assumption agreement; and Kappa Alpha Psi FCU, a tiny six-year-old CU in Henderson, Texas that never reached $1 million in assets.

NCUA also made public a rare supervisory agreement with Veritas FCU, a one-time $50-million credit union in Franklin, Tenn., that has been losing money and "may be in serious jeopardy." The Letter of Understanding and Agreement will require the CU, which has seen its assets fall to just $33.7 million, to start repossession or foreclosure proceedings on members within 90 days after a loan has become delinquent; hold monthly meetings of its asset liability committee; delineate mortgage that exceed 100% loan-to-value, and increased funding for allowance for loan losses, among other things.

"We are concerned that your credit union may be in serious jeopardy," said NCUA in the LUA. "For this reason, we are asking you to join with us to formally recognize the seriousness of Veritas' situation."

The directed actions, stated NCUA, are for the benefit of the National CU Share Insurance Fund, Veritas, "and, more importantly, your credit union's members."

 

NCUA IS STILL KEEPING NCUSIF JUST ABOVE WATER

ALEXANDRIA, Va.-NCUA said the reserve ratio for the National CU Share Insurance Fund slipped below 1.2% (dollar reserved per $100 of insured deposits) but the agency was only saved from having to report the deterioration in reserves to Congress because it is expecting tens of millions of dollars in funds over the next three months based on projections of first half growth for credit unions.

The projections of new funds means that instead of the 1.18% of reserves calculated under generally accepted accounting principals, NCUA is projecting a reserve level of 1.21%, Mary Ann Woodson, the agency's chief operating officer reported last week.

The higher figure saves NCUA from having to return to Congress a little more than a year after lawmakers agreed to create a special $6-billion corporate bailout fund that transferred the liabilities for the corporate problems from the NCUSIF. The Federal CU Act requires NCUA to provide a fund restoration plan to Congress with 90 days if the reserve ratio falls below 1.2% or is projected to fall below 1.2% at the end of any month.

The additional funds expected to be added to NCUSIF reserves represent the amount needed to bring up the NCUSIF deposit for fast-growing credit unions to 1%. Those payments are projected for September or October, according to Woodson.

NCUA is reviewing a restoration plan which will include another premium assessment on all federally insured CUs that would replenish the NCUSIF reserves. The agency assessed a $658-million premium last year to replenish reserves, separate from the $1.4 billion assessed CUs to pay for the corporate fund.

 

FDIC SECURITIZATION COULD BE MODEL FOR CORPORATES

WASHINGTON-The FDIC said last week it sold securities backed by $471.3 million of performing single-family mortgages originated by 16 failed banks, in a program that NCUA is watching closely as it plans a disposition of some $50 billion of toxic assets held by corporate credit unions.

The FDIC pilot program, coming amid the growing number of bank failures, marks the first time the agency has securitized assets during the current financial crisis.

The pilot program consisted of three tranches of securities. Approximately $400 million senior certificates, which were sold today, represented 85% of the capital structure and are guaranteed by the FDIC. The fixed-rate, senior note sold at a coupon of 2.184% and is expected to have an average life of 3.66 years.

Meantime, the banking regulator shut another five banks, making a total of 108 for the year. Last week's failures include: $768 million LibertyBank, Eugene, Ore. ; $529 million The Cowlitz Bank, Longview, Wash.; $373 million Coastal Community Bank, Panama City, Fla.; $66 million Bayside Savings Bank, Port St. Joe, Fla. and $167 million Northwest Bank and Trust, Acworth, Ga.

 

WHITE HOUSE INTERVENTION SOUGHT IN MBL CAP EFFORT

WASHINGTON-Frustrated with congressional inaction, NAFCU asked the White House to intervene with lawmakers last week to get the long-sought increase on member business loans added to the pending jobs bill.

In a letter to President Obama, NAFCU's Fred Becker said an increase in the MBL cap would make new capital available for small business and help stimulate the economy. "Raising the arbitrary credit union member business lending cap would help take an important step in the recovery of the small business community and the overall economy," Becker said. The Obama Administration, by way of an endorsement of the Treasury Department, has already agreed to the MBL boost, as has NCUA, the industry's regulator, noted Becker.

TheCU lobby has been working for an increase in the MBL cap since the current ceiling of 12.25% of assets was set in 1998 as part of HR 1151, failing to get it through Congress in at least four previous bills. The latest effort that would raise the limit to 27.5% of assets is stalled in the Senate, where one senator has unsuccessfully proposed adding it to the pending jobs bill. A final vote on that bill has been postponed until Congress returns for its fall session.

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