National Credit Union Administration (NCUA) Corporate Credit Union Conservatorship Update

The last several months have brought unprecedented turbulence and turmoil to the financial services marketplace. Most recently, in late March, two corporate credit unions, U.S. Central Federal Credit Union and Western Corporate (WesCorp) Federal credit union were placed in conservatorship by government regulators. I want to explain what this means and reassure you that Provident remains 100% sound and that your deposits remain insured at the highest levels ever.

• Corporate credit unions do not serve the general public. They provide products and services to retail credit unions such as investments and loans and check clearing. While the federal government now oversees these two corporate credit unions, they are still operating and offering the same services.
• The Wall Street Journal (March 15 online edition) while acknowledging some issues with corporate credit unions, ranked US retail credit unions like Provident as one of the safest and most conservative places to borrow and invest.
• The conservatorship and financial losses of the corporate credit unions is costing all credit unions. In the case of Provident, the cost is $21.5 million (taken as of December 2008) to cover losses on our capital investments and to cover the corporate credit unions’ losses exceeding their member capital. Despite this loss, Provident’s continued high levels of capital are proof of its financial strength and it’s ability to weather any financial storm. The National Credit Union Administration considers a credit union with 7% in capital as “well capitalized”. Provident far exceeds this number with over 11% in capital reserves (this is equal to almost $177 million in capital reserves).
• Provident is backed by the strongest federal deposit insurance in the industry through the NCUA (National Credit Union Administration). This insurance — the NCUSIF (National Credit Union Share Insurance Fund) — fully insures all member deposits to at least $250,000 (an amount identical to the coverage level available to banks through FDIC and up from the $100,000 amount covered by both banks and credit unions previously), with an additional $250,000 insurance for Individual Retirement Accounts. For more information, click here to watch the informative video “Understanding Your NCUA Insurance Coverage”.
• Provident did not participate in risky subprime lending — the type of lending that is the source of the economic downturn. We are also continuing to lend to our members, as in the past, using our traditional and conservative products and practices.

Despite the challenges caused by today’s economy, it’s business as usual at Provident. Rest assured that your money is safe and sound and insured with us. Provident continues to operate with the same common sense, conservative approach we have followed throughout our 59 year history. Please be sure to contact us if we can answer any questions or concerns for you.

Regards,

Wayne Bunker
President & CEO

National Credit Union Administration (NCUA)