As you may have heard, on September 24, 2010, the National Credit Union Administration (NCUA) placed into conservatorship three corporate credit unions due to the fact that they were undercapitalized. Here are some points we want you to know:
Different from everyday credit unions
These credit unions (Members United Corporate Federal Credit Union in Warrenville, IL; Southwest Corporate Federal Credit Union of Plano, TX; and Constitution Corporate Federal Credit Union of Wallingford, CT) are not regular, or “retail,” credit unions like Quorum that serve consumers. There are a small number of wholesale institutions that do not serve consumers, but rather provide liquidity, investment and payments services to retail credit unions. It was three of these “corporate” credit unions that were placed into conservatorship, which means they are still operating normally but the U.S. government has taken them over.
Real estate collapse takes its toll
Because of the nature of what they do, corporate credit unions operate in the capital markets and hold highly-rated, investment grade securities. But like so many others in those markets, they have seen the value of their investments decline as the current economic downturn has dragged on, resulting in some actual losses. In the case of the corporate credit unions that were written about in the press, the losses were significant enough that the government had to step in.
It is important to note that this is not a “bailout”—credit unions are handling the costs of stabilizing the corporate credit unions, not the US taxpayer.
Deposits covered by federal insurance
The deposits that regular credit unions have in corporate credit unions are federally insured up to $250,000 and backed by the full faith and credit of the U.S. government. The U.S. government has also guaranteed deposits beyond $250,000 in these institutions. So as you can see, the excess funds we have invested in these corporate credit unions are fully protected.
Business as usual for us
What does all this mean for our members? It’s business as usual. The level of quality service you receive from Quorum will continue and will not be affected by these government actions.
Members’ savings insured up to $250,000
Your funds at Quorum are perfectly safe and federally insured up to $250,000 by the National Credit Union Share Insurance Fund and backed by the full faith and credit of the U.S. Government, just as the FDIC does for bank deposits. No credit union member has ever lost a dime of federally insured funds.
Credit unions solid, healthy
In fact, the credit union sector overall is solid and healthy. Overall earnings are on the rise. Average delinquency and charge-off rates are falling as the economy has strengthened, and are still much better than those of banks. And far fewer regular credit unions have failed than banks (43 credit unions since the beginning of 2009 compared with 222 banks).
Not the root of the problem
It’s also important to remember that while credit unions have experienced some collateral damage during this recession (from member job losses, declining home values), we did not cause the problem.
Congressman Barney Frank, the chairman of the House Financial Services Committee, has said more than once that “If credit unions made all of the mortgage loans, then there would have been no subprime crisis, and therefore no economic crisis.” In today’s economy regular credit unions like ours that serve consumers continue to be a safe haven and offer great value.
We are well capitalized
Also on the point of safety: Credit unions like ours are very well capitalized. Our capital cushion is stronger than you would find at most banks. As an industry, our average capital-to-assets ratio is nearly 10%. That’s considerably higher than the 7% industry standard for being “well capitalized.” This 10% capital means credit unions are well positioned to absorb the costs of this action by the agency with minimal outward impact on our members.
Serving members like you for 100 years
Credit unions have been serving members in the U.S. for 100 years, through good times and bad. We are well positioned to remain strong. Rest assured that the Board and management of Quorum holds sacred its duty to manage your funds in a prudent manner. This has not, and will not change.
FREQUENTLY ASKED QUESTIONS
Q: Are my funds insured?
Your accounts are federally insured to at least $250,000 and backed by the full faith and credit of the United States Government by the National Credit Union Share Insurance Fund (NCUSIF), which is administered by the National Credit Union Administration (NCUA), a U.S. government agency. Not one penny of insured savings has ever been lost by a member of a federally insured credit union.
Q: What is the basic NCUSIF share insurance coverage?
The basic insured amount for a credit union member under current law is at least $250,000. IRA accounts (Traditional, Roth and SEP) are insured separately to $250,000. Deposit accounts maintained in different rights or capacities, or forms of ownership, may each be separately insured up to $250,000. Thus, a member may hold or have an interest in more than one separately insured savings account in the same insured credit union.
Q: How do I get more information about Share Insurance?
For your reference, please refer to the NCUA’s official publications and website regarding share insurance:
– NCUA official website:
– NCUA Share Insurance Estimator:
– “Your Insured Funds”
– How Your Accounts Are Insured”
Q: What types of accounts are insured?
All types of member share accounts and deposits received by the Credit Union in its usual course of business, including basic savings, term accounts, IRAs, and checking accounts are insured.
Q: Is the NCUSIF share insurance coverage increased by placing funds in two or more of the same kind of share accounts in the same credit union?
No. NCUSIF share insurance is not increased merely by dividing funds owned by the same person or persons into one or more of the different kinds of deposit accounts available. For example, a basic savings, a checking account and a term account owned by the same member are added together and insured up to $250,000. Insurance can be increased by opening a different type of account—one that is held in a different right and capacity. For example, insurance on a single ownership account is separate from insurance on a joint account.
Q: If a member has accounts in several different insured credit unions, will the accounts be added together for the purpose of insurance coverage?
No. The maximum insurance of $250,000 is applicable to share accounts in each insured credit union. A member who has share accounts in two or more different insured credit unions would have at least $250,000 insurance in each credit union. In the case of a credit union having one or more branches, the main office and all branch offices are considered as one credit union.