NCUA Takeover of Two Corporate Credit Unions

A Message from President & CEO, Larry Wilson

Dear Members:

Over the past weekend, you may have heard news about the government taking over two large credit unions. Friday evening, the National Credit Union Administration (NCUA) placed two corporate credit unions - credit unions that serve other credit unions - into conservatorship, which means they are still operating normally but the U.S. government has taken them over.

This action does not directly impact Coastal, our members or your deposits. Nor is it a reflection on the stability of Coastal or any other individual credit union.

Here are some points we want you to know:

  • The two credit unions involved (U.S. Central Federal Credit Union of Lenexa, KS and Western Corporate (WesCorp) Federal Credit Union of San Dimas, CA) are not regular credit unions like Coastal. There are a small number (28) of wholesale institutions that do not serve consumers; they provide liquidity, investment and payments services to other credit unions.
  • Because of the nature of what they do, these corporate credit unions operate in the capital markets and hold highly rated investment grade securities. But, like so many others, they have seen the value of their investments decline in the current economic downturn, resulting in some actual losses. In the case of these two corporate credit unions, the losses were significant enough so that the government had to step in.
    • It is important to note that Coastal does not hold those types of investments.
  • The deposits that regular credit unions have in these corporates are federally insured and backed by the full faith and credit of the U.S. government.
  • What does all this mean for members of our credit union? It's business as usual. The same level of quality service you receive from Coastal will continue. Our service to you is not affected by these government actions.
  • Also on the point of safety: Coastal remains very well capitalized. Our capital-to-assets ratio is more than 9.5%, considerably higher than the 7% industry standard for being "well capitalized" and higher than the banking industry's average of about 9%.
  • Your own funds at Coastal are perfectly safe. Our credit union is also 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.
  • The credit union sector overall is solid and healthy. The industry's federal regulator, Michael Fryzel, said as much on Friday when addressing the corporate situation: "Credit unions that serve consumers remain very strong."

It's also important for you to remember that the board and staff of Coastal have continued to meet the needs of all our members, even as other institutions have cut back on lending and other key services.

Lastly, I want to thank you for putting your trust in Coastal. As a member-owned cooperative, it is our privilege as a staff to serve you and help you reach your financial goals. Though times are uncertain for many families right now, I remain confident that by working together, we can weather this economic storm.

Please let us know if you have any questions, or if we can assist you in any way.

Coastal Federal Credit Union — Simply Brighter.