Last week the score on deposit insurance coverage was even. One for the NCUA and one for American Share Insurance.
In a policy reversal, the $481 million Velocity Credit Union of Austin, Texas, said that although its members had approved a coverage switch, management had second thoughts about signing on with Ohio-based ASI and instead would remain with the NCUA.
In a statement, Velocity said its board decided to opt for federally backed insurance based on ASI's year-end announcement that it was forced for the first time to start assessing member credit unions following losses in 2009 with possibly more to come in 2010.
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"One of our primary reasons for considering a conversion to ASI was because they had not charged a premium in their 35-year history," said Velocity President/CEO Debbie Mitchell. "However, on the final day of Velocity's member vote to convert, ASI announced an assessment of its credit unions for the exact amount of the NCUA assessment: 0.15% of each credit union's deposits."
In 2009, due to estimated losses in the NCUSIF, Velocity, Mitchell said, was assessed a $675,000 premium or 0.15% of total shares.
Following ASI's announcement of the assessment, Velocity's board "reviewed this new information and decided not to convert" and has now notified its members, the Texas Credit Union Department, the NCUA and ASI of its decision. Officials at the NCUA and ASI were not available for comment by press time.
"Our credit union is strong, and we stand by our decision to explore our options in the face of assessments from NCUA," Mitchell said. "But now, with new information available to us, we believe NCUA remains the best option for insuring our members' deposits."
The Velocity move came a day after the $300 million SafeAmerica Credit Union of Pleasanton, Calif., disclosed it had decided last December to switch from the NCUA to ASI.
Wanting no part of future NCUA assessments, the president/CEO of the $300 million SafeAmerica CU, Richard Jordan, said his CU opted for private insurance based on prospects for higher NCUA assessments.
"We transitioned into ASI Dec. 28, and we feel this is the right move for us to take the long view," Jordan said.
He said he could not forecast whether other credit unions, also alarmed about costly assessments, would join ASI. It is apparent, Jordan said, that the "NCUA is following the line" of the FDIC in borrowing heavily from the Treasury, which would mean credit unions would share that future debt burden.
Jordan said his credit union lost $2 million in the failure of WesCorp FCU, and now he is worried about the growing loss estimates for NCUA's corporate bailout. Jordan said a September NCUA Board meeting, when decisions were made on the 15 basis point spread, was convincing evidence of where the NCUA was headed in hitting on CUs.
Like Velocity, SafeAmerica has been a longtime user of ASI services, having purchased excess deposit insurance in recent years.
Jordan said he is forecasting that the assessments ASI charges will be much less than what the NCUA charges for NCUSIF.
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