A Message to Westerra Members:
As our nation continues to weather challenging economic times, I wanted to provide an important update regarding actions taken recently to ensure the financial health of the credit union system nationwide. You can rest assured that Westerra's financial condition is strong and our capital reserves provide solid protection against potential future economic challenges.
You may have read or heard news reports about the National Credit Union Administration (NCUA), the federal agency that regulates and insures credit unions, placing two corporate credit unions in conservatorship in March 2009. Corporate credit unions provide wholesale services, such as settlement and liquidity services, for credit unions that serve consumers. As wholesale credit unions, corporate credit unions function much like the Federal Reserve.
President Obama signed a bill on May 20, 2009, that creates a stabilization fund for corporate credit unions that would be paid back over seven years. The bill also gave the NCUA eight years to replenish the National Credit Union Share Insurance Fund (NCUSIF) if its equity ratio falls below 1.2%. This federal credit union insurance is funded and replenished by natural person credit unions, not by taxpayer dollars. This means that credit unions nationwide, including Westerra, are required to proportionately pay assessments to the NCUSIF to replenish the insurance fund. This helps maintain a strong federal deposit insurance fund for all credit union members.
Westerra expensed a 2009 net assessment of $1.2 million to the insurance fund in the first half of 2009. In April 2009, we were also required to write off $3.1 million for membership capital shares in one of the corporate credit unions. The net effect of these items as of June 2009 was expense to Westerra of $4.3 million.
These actions will have no effect on the NCUA share insurance covering your deposits—each member remains insured up to $250,000. As always, your deposits at Westerra remain safe.
The US Government assessments were not related to Westerra’s operating results. As we reported at our annual meeting, Westerra had an excellent year in 2008 and our first quarter 2009 results were positive with strong earnings and a solid net worth in excess of $100 million that positions us well for the future. Additional information can be found in the 2008 Annual Report.
In 2009, we continue to produce solid earnings, although our financial statements for the first and second quarters of 2009 will show negative earnings due to these two large adjustments.
Westerra remains a very healthy and well-capitalized credit union, with a net worth ratio (assets/equity) of over 10% - more than $100 million in capital—after these adjustments. Westerra Credit Union continues to be awarded the top rating for financial institutions, five stars, by Bauer Financial, Inc.
Because our business model is focused on safety and soundness, you can rest assured your funds are secure at Westerra. If you have questions or need individual help, please stop in any Westerra location, email us at email@westerracu.com, or call us at (303) 321-4209 or 1-800-858-7212.
Sincerely,
C. Alan Peppers
President/CEO
