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Valley Credit Union Placed into NCUA Conservatorship - Impact to Members?


The NCUA released this press release yesterday:
The California Division of Financial Institutions appointed NCUA as conservator after placing Valley Credit Union into state conservatorship. NCUA will operate the credit union with a goal of continuing credit union service to the members and to ensure safe and sound credit union operations.

Valley Credit Union is based in San Jose. It's a moderate sized credit union with $257 million in assets. I've posted on a couple of good deals at Valley CU over the past year.

When a credit union is placed into a NCUA conservatorship, the members don't lose their uninsured deposits. I'm not sure if this has always been the case, but for this one and several in the last couple of years, it has been true. For some reason, the NCUA doesn't make a point of stating this. However, the credit union does allude to this in its press release:
We are working with any individual members whose deposit accounts may exceed insured amounts to maximize coverage and minimize risk.

It would be foolish for any credit union members to maintain deposits over the NCUA limits when a credit union is placed into conservatorship. The most common outcome has been for the credit union to be liquidated with its assets assumed by another credit union. A recent example of this is what happened to Cal State 9 Credit Union (see post).

Not all credit unions are placed into conservatorship when there are problems. There have been several immediate credit union closures this year. However, I believe they all have been very small credit unions, some with assets of under $1 million. I wouldn't assume this trend will always be the case. So I still recommend staying below the NCUA limits in any credit union. For more info on NCUA coverage, please see my FDIC/NCUA facts post and my post on extending FDIC/NCUA coverage.

When the FDIC takes over as conservator, as in the case of IndyMac, the bank is first closed and uninsured deposits may be partially or completely lost. I'm not sure why there is this difference between the NCUA and FDIC. If you have more knowledge of this, please leave a comment.

Other Credit Union Financial Health Related News

This Bloomberg article provides a summary of the bank and credit union closures in the last year. Several of the credit unions that have closed have been tiny credit unions with less than a $1 million in assets.

This recent Bankrate article reports on why credit unions are in better shape than many banks.

Thanks to the reader who mentioned this news in the finding deals post.
Related Pages: Valley Federal Credit Union, Harlingen

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Anonymous   |     |   Comment #1
The pdf doc says "Excess insurance protection is currently provided
by private insurer American Share Insurance of Dublin, Ohio."