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Indiana CUs FOM expansion request OKd

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Click to view larger image From left: NCUA Board Vice Chair Rodney Hood, Chairman JoAnn Johnson and Board Member Gigi Hyland prepare to consider the field of membership request for Horizon One FCU in Indianpolis, Indiana. (Photor provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) Board unanimously approved an application from Horizon One FCU, Indianapolis, Indiana, for a community charter to serve persons who live, work, worship, attend school in, and businesses and other legal entities located in Marion or Johnson Counties, Indiana. Horizon One has $68 million in assets and nearly 12,000 members. It had a multiple group membership, primarily involving transportation equipment. NCUA said data demonstrates the two counties are “a single, well-defined local community where residents have common interests or interact.” The total population of the proposed service areas based on 2006 Census Data is 998,820.

NCUA seeks executive approval for new seal

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ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) Board gave provisional approval for a new seal that the agency says will better convey the NCUA’s connection with the federal government. The goal of the new proposed seal, which closely resembles other federal agency seals, is to ensure that NCUA is more clearly recognized by members of Congress, other agencies and the general public as an entity of the United States government. The change would not impact the blue rectangular federal insurance sign federally insured credit unions’ must display. NCUA moved to ask President George W. Bush for an executive order approving the new seal, an action which NCUA staff said was likely necessary since President Richard Nixon had issued an executive order establishing the current seal in 1971. Chairman Johnson noted that the current seal had lead to some confusion regarding whether or not NCUA was a government agency. A new seal for NCUA is a conscious effort to make clear NCUA’s status as a federal regulator and insurer, according to NCUA Chairman JoAnn Johnson. “I believe that heightening this awareness with lawmakers, the media and, perhaps most importantly, the American consumer will act to promote confidence in federally insured credit unions,” she said. “This has become especially critical during these times of difficulty in other segments of the financial services marketplace.” The agency is expected to incur a relatively small cost in making this change, around $37,000 for use on NCUA publications, agency signs, flags and similar indicia. Credit Union National Association Deputy General Counsel Mary Dunn said the association generally agreed with the agency’s assessment for a new seal.

NCUA says it will try to avoid insurance premiums

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Click to view larger image NCUA Chief Financial Officer Mary Ann Woodson readies an overhead presentation to the NCUA Board yesterday. (Photo provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--During National Credit Union Administration (NCUA) Chairman JoAnn Johnson’s final open board meeting yesterday, staff told the board the agency was trying to avoid the need for share insurance premiums this year, but that staff would reevaluate the situation by the end of the year. Dave Marquis, NCUA director of the Office of Examination and Insurance, and Mary Ann Woodson, NCUA chief financial officer, presented the report on the National Credit Union Share Insurance Fund (NCUSIF). There currently are 245 CAMEL 4 and 5 credit unions, up from 211 at the end of 2007. These credit unions account for only 1.37% of total insured shares. The NCUSIF’s equity level currently stands at 1.24% and is expected to be at 1.28% at the end of this year, said Marquis.
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While a dividend is not anticipated, Marquis noted that the economy is currently “unfavorable” and that avoiding a premium is therefore their goal. He explained to the board that credit unions had increased average net worth up to 11.4%. This means--even though the NCUSIF remains in the “zone” where a discretionary insurance premium is possible--NCUA staff is optimistic about the overall health of the credit union system. Agency staff did note, however, that there are currently 15 large “problem” credit unions--those rated CAMEL 4 or 5. That number is up from 12 in 2007.
Click to view larger image During yesterday's monthly board meeting, NCUA director of the Office of Examination and Insurance Dave Marquis, left, and CFO Mary Ann Woodson address the possibility of insurance premiums this year. (Photo provided by CUNA)
Johnson asked NCUA staff to explain why NCUSIF losses so far this year had been higher than originally projected. Woodson explained that this year’s losses so far this year had been more than two standard deviations higher than the ten-year average and that the higher than projected loss expense level primarily resulted from a single credit union. Use the links below to access the NCUSIF reports from NCUA.

Amended post-merger net worth definition proposed

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Click to view larger imageDuring her last NCUA Board meeting, Chairman JoAnn Johnson listens to agency staff explain proposed changes to the definition of net worth following a credit union merger. (Photo provided by CUNA)
ALEXANDRIA, Va. (7/25/08)--The National Credit Union Administration (NCUA) board yesterday voted unanimously to propose changes to the prompt corrective action (PCA) definition of a natural person credit union’s “net worth” to include as capital the retained earnings of a credit union that is merging into it. The changes would be consistent for corporate credit unions as well. The agency will accept comments on the proposal for 60 days after publication in the Federal Register. At the time PCA requirements were mandated in 1998 by the Credit Union Membership Access Act, the “pooling method” was used for the financial reporting of a credit union merger. This allowed the acquiring credit union to combine its own retained earnings with that of the merged credit union for determining the post-merger net worth ratio for purposes of complying with PCA requirements. In 2001, Financial Accounting Statement (FAS) No. 141 replaced the “pooling method” with the “purchase method” for business combinations, with the effect that an acquirer’s net worth would not increase as a result of the merger. This potentially reduces the post-merger net worth. This was applied to mutual combinations, such as credit union mergers, in 2007, and is to be effective in fiscal years beginning after December 15, 2008. The Financial Services Relief Act of 2006 essentially reverses this policy by expanding the PCA definition of “net worth” to incorporate the retained earnings of the merged credit union. This would also apply to other combinations, such as purchase and assumption transactions. These changes will only apply to measuring capital under PCA and will not apply for other financial reporting purposes. NCUA staff members told the board that credit unions have a more limited statutory definition of “net worth” than banks and thrifts do and that--had credit union net worth been defined in a manner similar to the definition applicable to banks and thrifts--the “congressional fix” for the “merger accounting problem” would not have been necessary.
Click to view larger imageFrom left: Federal Housing Finance Board Director and former NCUA board member Geoff Bacino, CUNA Deputy General Counsel Mary Dunn and NCUA Vice Chairman Rodney Hood before Thursday's monthly agency board meeting. (Photo provided by CUNA)
NCUA staff also noted that the new regime for net worth calculation in mergers would not reinstate the “pooling method” but would have a similar practical effect. Also during yesterday’s meeting, the NCUA Board approved guidance for the provisions in the Federal Credit Union Act that prohibit persons convicted of certain criminal offenses from participating in the affairs of the credit union.

Inside Washington (07/24/2008)

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* WASHINGTON (7/25/08)--Independent presidential candidate Ralph Nader wrote letters to Sen. Christopher Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), suggesting that they hold hearings on the Federal Deposit Insurance Corp.’s (FDIC) ability to deal with potential bank failures. While 99% of insured institutions meet the “well capitalized” criteria, the possibility remains that the fund could suffer insurance losses that are significantly higher than anticipated, Nader wrote. He also included 10 questions in the letter that should be posed to FDIC officials. “The FDIC is not likely to address its own inability to clearly assess the current risks posed to depositors and taxpayers by the high-rolling banking industry,” he said ...