Your Credit Union – Safe, Strong, Secure, & GROWING!
As 2010 begins, the U of I Employees Credit Union is proud to be a safe, strong, secure – and growing – financial service institution. Thanks to our members, and their families, we have navigated through these challenging economic times and have reached out to serve more of our members, continuing to add new members along the way. We are excited to be a viable financial alternative for our existing and new members.
As a not-for-profit, financial service institution, one of our key goals is to invest in our members. This means lending money to our members so that they can manage their financial lives and well-being. We have truly embraced this goal during the past two years, helping our members by providing over $200 million in loans.
Key to our ability to lend to our members has been our success at building and maintaining a strong financial operation and foundation. It is this principle that has allowed us to remain in the position to offer competitive rates for loans and deposits, helping to protect the financial integrity of our members. While many financial institutions have slowed their lending, lowered dividends, raised loan rates, and increased fees and charges … your credit union continues to provide quality financial solutions in the same manner it did at the beginning of the recession. We have not had to adjust our business model, because it is designed around helping our members first.
Over the next several months, the credit union should continue to see successful growth. With over $250 million in assets, we now serve close to 40,000 members – numbers that continue to climb. We are firm in our focus and dedication to serving our members and their families. Over the upcoming years we plan to focus our efforts in key areas that will add to the financial success and growth of our members. These include:
Strengthen our relationship with the University of Illinois and supporting communities
Seek and act upon member feedback on how we can improve serviceand offerings
Expand accessibility and portability, ensuring our members can take us with them
Continue financial growth in tandem with strengthening safety and soundness
Provide employees with the skills that enhance service and build their careers
Working with our Board of Directors and staff, the credit union’s vision is defined as:
“Celebrating Campus & Community Through Quality Financial Service.”
Throughout the coming year, we intend to focus on our vision and how it helps our members, more than ever before. We believe that our not-for-profit status empowers us to reinvest in campus and community in ways that other financial institutions cannot, have not, and will not. We are distinct in our ability to serve.
Again, thank you – our members – for choosing the U of I Employees Credit Union and for the trust you continue to place in us. It is our hope that during these troubling times, we will continue to secure that trust through the provision of consistent and meaningful services.
The National Credit Union Administration (NCUA) has taken steps to support the corporate credit union network which has faced extraordinary market disruptions in the economic environment of the past 18 months. Corporate credit unions provide liquidity, investment, and payment processing services to consumer-owned natural person credit unions, like the U of I Employees Credit Union (UIECU). While corporate credit unions face these economic challenges, UIECU is building on a strong financial position and continues to increase deposit and loan balances, as well as overall membership in the credit union.
By regulation, corporate credit unions are only allowed to invest in highly rated securities, with limited exposure to interest rate risk. Historically, the securities held by the corporate credit unions could be readily sold in the market with security values having experienced little or no loss. However, in the past 18 months, national credit markets have been disrupted, resulting in depressed prices and inactive trading worldwide. This has impacted the financial services market, including credit unions.
These market disruptions paired with the current economic climate left the corporate credit union system facing unprecedented strains on its liquidity and capital. On January 28, 2009, NCUA began offering National Credit Union Share Insurance Fund (NCUSIF) guarantee of member shares in corporate credit unions as part of the corporate stabilization program. In addition, NCUA injected $1 billion in cash from NCUSIF into US Central Federal Credit Union (US Central) in the form of capital.
On March 19, 2009, the NCUA Board placed US Central and WesCorp Federal Credit Union (WesCorp) into conservatorship and began managing daily operations. The investment security valuations at US Central and WesCorp had declined to the point that NCUA felt regulatory action was necessary. Services provided by both organizations were not interrupted and credit union members have not been impacted. NCUA is committed to protecting member funds in federally insured credit unions, and will continue to take all steps necessary to preserve a safe and sound credit union industry.
UIECU is committed to supporting the credit union industry through the actions of the NCUA Board. Credit unions nationwide are participating in these efforts to stabilize these corporate credit unions.
Credit Unions’ Support of Insurance Fund
The guarantee of corporate credit union deposits requires the establishment of a $5.9 billion liability that will impact the NCUSIF. In December 2008, UIECU recognized a $1.5 million charge as its share of the impairment to the insurance fund based on our level of insured shares. Subsequent legislation has established a Temporary Corporate Credit Union Stabilization Fund to mitigate the financial impact to credit unions like UIECU. NCUA is able to borrow from this fund, with interest due back to the US Treasury. In June, 2009, UIECU and other credit unions recognized a recovery of the $1.5 million charge mentioned above as directed by the NCUA. Rather than this being a one time charge it will be due over the next seven years to re-pay the US Treasury. In addition, NCUA reported that natural person credit unions would be assessed an insurance premium to bring the NCUSIF back to its maximum level of 1.3 percent of insured shares. In early 2009 this assessment to UIECU was projected to be approximately $278,000. This will be the first insurance assessment for the credit union industry since 1992 and may be assessed over 8 years in order to manageably re-build the NCUSIF. It is important to note that the corporate stabilization measures involved no Troubled Asset Relief Program (TARP) funds or other taxpayer “bailouts”.
Credit Union Impact from Investment Markets
On September 11, 2009, US Central released their financial statements for 2008, reporting a $4.9 billion loss on its investments related to mortgage-backed securities. This impacted the financial condition of Members United Corporate Federal Credit Union because of Members United’s investments in US Central. Members United realized a loss of $152.7 million as a result. Subsequently, because of UIECU’s membership and investment in Members United, UIECU had to recognize a negative impact to assets and capital of almost $1.25 million on September 17, 2009.
Subsequent impacts from investment markets caused Members United to realize an additional loss which depleted more of UIECU’s capital with Members United. This loss of $142,000 in Members United was recognized on November 30.
NCUA Assessment Finalized
On September 24, 2009,the NCUA announced the amount of the premium assessment needed to maintain the NCUSIF at normal operating levels and also cover a portion of the Temporary Corporate Credit Union Stabilization Fund as described above. Federally insured credit unions will be charged .15% of insured shares as projected earlier in the year. For UIECU this amount is $278,000 and will be reflected in 2009 financial statements.
The industry standard for a “well capitalized” credit union is a capital ratio of 7 percent or more. Nationally, credit unions are very well-capitalized. UIECU’s current capital ratio of 8.14% leaves us well positioned in this time of unprecedented economic uncertainty. UIECU’s earnings for 2009 through November 30 remains positive at .61% Return on Assets, well above peer levels thus far this year. UIECU continues to serve members and grow in accordance with our strategic and operational plans.
Again, let us reassure you that UIECU remains financially secure and your deposits and investments with the credit union remain safe and sound. The NCUA’s actions will not affect your deposits or loans at the credit union, and each account remains insured up to at least $250,000 by the full faith and credit of the U.S. Government. This level of share insurance was recently extended through 2013, at which time insurance is scheduled to revert to $100,000. The credit union has received the highest regulatory ratings from State of Illinois Examiners for the past 4 years along with 68 consecutive quarters of Excellent and Superior ratings from Bauer Financial.
We are well-positioned to continue successful operating results and growth. In fact, UIECU has experienced record asset growth in 2009, along with consistent loan growth and now serves more members than ever before.
Thank you for choosing UIECU and for the trust you continue to place in us. It is through this trust and support that we will continue to be financially sound and well positioned to serve you now and in the future. Should you have any questions please contact me at 217-278-7700, or ganderson@uiecu.org.
