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NCUA Newsletter Covers Secondary Capital Accounting Issues
ALEXANDRIA, Va. (8/20/13)--In the second part of its three-piece series on secondary capital benefits for small credit unions, the National Credit Union Administration's Office of Small Credit Union Initiatives (OSCUI) outlined rules and regulations governing secondary capital accounting treatments and the net worth valuation of such accounts.

Once the remaining maturity of the account is less than five years, a low income-designated credit union must reflect its net worth value in the financial statement according to the following schedule, the National Credit Union Administration said. (NCUA Graphic)
In the latest installment of OSCUI's monthly FOCUS eNewsletter, the agency notes that once the remaining maturity of a secondary capital account is less than five years, a low-income credit union (LICU) must reflect the net worth of that account in the financial statement in line with a set valuation schedule.

The article provides a standard net worth determination schedule and range for credit unions holding secondary capital (see photo), and discusses interest rates on secondary capital loans, and how those rates can impact net worth. What happens in the final year of the term of a secondary capital loan, and what credit unions should do with the funds during the final year of the term, is also addressed in the OSCUI article.

The first article in the series outlined general secondary capital information. The third article will address prompt corrective action considerations, OSCUI said.

For the full article and more from this month's FOCUS eNewsletter, use the resource link.

The NCUA last August notified 1,003 credit unions of their eligibility for LICU status, and many accepted the NCUA designation.

Access to secondary capital is one benefit of this status.
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