The fallout continues from the failure of IndyMac Bancorpâand credit unions are attempting to capitalize on the fallout hitting other banks.
Many CUs across the country are going public with statements declaring themselves to be in good financial condition, with some implying and some outright stating they are a better, safer alternative to banks.
Like a number of other CUs, WestStar CU, here, has posted a message on its website calling itself âSafe. Secure. Strong.â Despite it having reported a $2.2-milllion loss (see related story). The message goes on to explain that funds at the credit union are not only federally insured but that WestStar also has Excess Share Insurance for accounts that are greater than the $100,000 federal insurance cap.
Kate Blanchard, WestStar VP-branch administration, said the CU has received the same basic questions repeatedly since news of IndyMacâs demise became public: How much is WestStar CUâs insurance coverage? How well is the NCUSIF capitalized? What would happen if three credit unions closed at the same time? What can I find out about the 99 banks that are rumored to be closing in the future?
âWe took a proactive step to handling the issue,â Blanchard said.Â âAn internal memorandum was distributed via our intranet. By providing information to the employees, they were prepared to address membersâ concerns. The challenging part of preparing the staff was writing the memorandum at such a level that the employees could educate a member who overheard only a snippet of conversation or media banter about the issue without overwhelming the member with too many legal terms and definitions.â
The four main points of WestStarâs memorandum were: a summary explaining IndyMacâs closure; a description of how the closure impacted WestStarâs members, including the difference in concerns for members with $100,000 or less on deposit versus those with $100,000 or more on deposit; a description of how members can obtain more information on NCUA and ESI; a description of how employees can help the members through this time.
âSituations like this demonstrate the value in using supplemental insurance programs such as the one we have through Excess Share Insurance,â Blanchard offered.
As for how employees can help members, Blanchard said the first key point is for staffers to understand and be able to communicate the difference between the FDIC, NCUSIF and ESI, as well as to differentiate between the insurance companies and their insured financial institutions, with respect to the media coverage surrounding the potential additional bank closures.
âThe second key point was for employees to understand and be able to communicate how insurance coverage is measured,â she said. âIn other words, by account ownership types and not by the number of accounts or the number of people on any given account.â
Dick Holtzclaw, WestStar CFO, released a statement assuring members the credit union is âwell capitalized, has adequate liquidity, and continues to maintain a strong financial condition.â According to Holtzclaw, in the weeks following the IndyMac incident, membersâ concern regarding the security of their funds has increased. He said WestStar staff members âcontinue to provide comfort to members by informing them of our insurance offeringsâboth federal and supplemental. Member funds are federally insured by the NCUA through the National Credit Union Share Insurance Fund (NCUSIF) and Excess Share Insurance (ESI) provided by WestStar Credit Union for additional coverage.â
Paragon FCU, based in Montvale, N.J., last week issued a press release stating: âCredit unions are a safe harbor for consumer savings.â
The release covered a number of bullet points, including: savings at credit unions so far this year have grown nearly 7%; more people seeking to put their money in a stable source offering good rates are turning to credit unions; as not for profit cooperatives, credit unions typically offer higher savings rates than banks; for a daily rate comparison, go to this link: www.creditunion.coop/ratedex.php; consumers saved $10.9 billion last year by using credit unions rather than banks. The savings come in the form of lower fees, higher savings rates and lower loan rates. That works out to about $126 per credit union member or $239 per household
Paragon, a $400-million CU that serves 62,000 members at its nine branches, explained that âAs the FDIC does for banks, the National Credit Union Share Insurance Fund (NCUSIF) insures a personâs savings up to at least $100,000.â Paragon also informed its members: âThe NCUA recently reported that the NCUSIF at mid-year remained strong, with an equity-to-insured deposits ratio estimated at 1.24% as of June 30 and projected to rise to 1.28% by year end.â
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