Dedicated to Deposits: Deals, Data, and Discussion

Credit Union News - Closures and Premium Assessments

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There were actually more credit union closures last week than bank closures. The two credit unions that were closed last week included the tiny Comunidades FCU in Los Angeles, California and Clearstar Financial Credit Union in Reno, Nevada. I had missed these before my Friday bank failure post. There was also a credit union which was placed into NCUA conservatorship. This was Keys FCU of Key West, Florida (NCUA press release).

According to the NCUA, Comunidades FCU was closed and the majority of accounts were assumed by Water and Power Community Credit Union. I'm not sure what is meant by the wording in the NCUA press release of "majority of accounts." According to NCUA data, the total of deposits of the tiny credit union was only $686,878. However, this included $400,000 of non-member deposits. Perhaps these non-member deposits were not assumed by Water and Power Community Credit Union.

For Clearstar Financial Credit Union's closure, the NCUA just issued a press release this morning. Clearstar Financial Credit Union was a much more sizable credit union compared to Comunidades. It had $144 million in assets and 16,000 members. The NCUA arranged for United Federal Credit Union to assume Clearstar's assets, loans and shares. This was the 7th federally insured credit union liquidation in 2009. As is typical, NCUA's press release doesn't say much more. According to this Las Vegas Review-Journal article, United will take over all of Clearstar's deposits.

One thing that's not going to help credit unions' financial health will be new NCUA assessments that are needed to bailout the corporate credit unions. As I described in this post, some credit unions are considering switching to private deposit insurance to avoid these additional costs. Last week the amount of the assessment was approved by the NCUA Board. According to this NCUA bulletin:
For the first time nearly 20 years, the NCUA Board approved a credit union premium with the assessment of 0.15 percent of insured shares. This assessment level is consistent with the prior guidance provided to credit unions. The premium has two parts, including a .1027 percent premium assessment to increase the National Credit Union Share Insurance Fund (NCUSIF) equity to .30 percent and an assessment of .0473 percent to repay a portion of the Temporary Corporate Credit Union Stabilization Fund (Stabilization Fund) borrowings plus accrued interest.

Thanks to the reader who mentioned this NCUA action in the Bank Deals Hub post.

Bank and Credit Union Failure References:

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Comments
2 comments.
Comment #1 by Anonymous posted on
Anonymous
I think credit unions are actually more riskier than banks because they have such a small circle of depositers. An overdue loan impacts their operations more than a bank which has a much larger customer base and other financial services to cushion an occurence of a default.

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Comment #2 by Anonymous posted on
Anonymous
It may be true that the average credit union has a smaller depositor base, but that doesn't tell the whole story. For the most part, credit unions make far fewer of the riskiest types of loans - the types that have brought most failed banks to that point (for example: construction loans, commercial real estate loans, high LTV or exotic mortgages).

1