Insurance

Date: May 5, 2023

From:  Nick Meyer, CEO, and your Board of Directors & Supervisory Committee

Hello:

We’ve all been reading, hearing and seeing new stories of the recent failures here in 2023 of three large banks:

March 10:  $209 billion in assets Silicon Valley Bank out of California

March 12:  $110 billion in assets Signature Bank out of New York

May 1:  $229 billion in assets First Republic Bank out of California

Historically the largest bank failure was $307 billion in assets Washington Mutual (WaMu) out of Nevada back in 2008 (excess low-rate long term mortgages and mortgage back securities that both lost excessive value).

Silicon failed primarily because they were over concentrated in the high-tech sector and venture capitalists.

Signature failed primarily because they were over concentrated in the cryptocurrency industry.

First Republic failed primarily because they focused mainly on wealthy clients.

What the three from 2023 had in common was a high percentage of uninsured deposits so when their customers panicked upon hearing perceived bad news, some via just social media, they withdrew billions within hours and days using online banking transfers in droves.

Minnesota Valley Federal Credit Union is very, very different.  Of our $258 million in member deposits spread over nearly 18,000 members only $8 million is above the National Credit Union Share Insurance Fund (NCUSIF is just like the FDIC) insured limit of $250,000 per account. 

Though in actuality it would be less than $8 million because there is $250,000 for a single account, another $250,000 for a joint account, another $250,000 for an IRA, another $250,000 for a trust account and then add POA (payable on death) beneficiaries and there’s $250,000 for each of those if they are members.

On top of that protection at 3/31/23 we have over $29 million in capital (equity members own:  assets minus liabilities minus member savings equals capital) which is 10% of our $287 million in assets.  We have liquid assets of $63 million and another $82 million in investments that evenly mature every month. The average loan balance here is $18,037 and average savings balance $14,571 per member. Our net long-term assets as a percent of assets is only 21% which is well below the national average.  Even our annualized loan charge off ratio of 0.01% is close to zero today.  Only 0.17% of outstanding loans are behind in payments over 60 days.  Our borrowed funds have virtually always been zero as well. 

MVFCU is very solid and safe.  We have a great history too going back to 1934.  Plus, over the years we’ve combined with other area credit unions including Tracy Schools, Kato Engineering, Northern Energy, which included St. James Schools and Mico Employees.  Thanks to great members and a great community. 

We’ll keep working hard and smart every day for you our member owners along with looking forward into the future so we will always be your most valued and trusted financial…. It does pay to bank where you’re part owner!  As always let us know if you any questions whatsoever.

3/15/2023

Hello Minnesota Valley Federal Credit Union Members,

Please don’t worry for a minute about your credit union that has served the community since 1934. Relative to the FDIC takeover of Silicon Valley Bank in California and Signature Bank last week, there is no comparison with Minnesota Valley Federal Credit Union (MVFCU).

Silicon Valley Bank had a vast majority of uninsured deposits belonging to relatively few depositors and Signature Bank was heavy into cryptocurrency. Shocking in the sense that these were the 2nd and 3rd largest bank failures with the largest being Washington Mutual (WaMu) back in 2008.

 There are about 4,900 credit unions in the USA and about 4,800 banks in the USA. Credit Union deposits are insured by the NCUSIF (National Credit Union Share Insurance Fund) which operates exactly as the FDIC. Today there is over $20 billion in the NCUSIF. Never has one penny of taxpayer money ever been needed by the NCUSIF as we credit unions self-fund it.  

MVFCU has over 10% capital to assets totaling over $28 million. Last year 2022 capital grew by over 10%, loans grew by over 20%, deposits grew by over 9% and memberships grew by over 7%. We’re very highly rated by NCUA, CPAs, and independent rating agencies such as Bauer and Weiss. We have almost 18,000 members and the vast majority of our loans are consumer or residential first and second-mortgage real estate. 

MVFCU’s investment portfolio of $143 million is conservative as well with CDs (certificate of deposit), Agencies, and Treasuries, all laddered out up to 5 years with maturities every month. As I type today we have $10.5M in overnight savings, $2.1M in checking, and $800K of outstanding checks so a net $11.8 million liquid and immediately available. On 12/31/22, we had member deposits totaling $253 million. Of those deposits, $7 million were above the $250K NCUSIF deposit insurance limit. So just 2.77% of our deposits “possibly” exceeded the $250K per account insurance. Possibly because it is very likely through beneficiaries, POD (payable on death which is a revocable trust arrangement), and joint account arrangements, more of that $7 million was fully insured. Also, IRAs (Individual Retirement Account) are separately insured for up to another $250K. You add up each account owner’s total deposits across various non-IRA accounts - savings, checking, money market, and CDs. 

Each account owner has $250K in deposit insurance. If the account has two joint owners, each owner had $250K of deposit insurance, for a total of $500K of insurance coverage. If you had $1 million in a joint account and had 2 POD beneficiaries who were also members of the credit union, you’d have $1 million of deposit insurance.

As always if you have any questions whatsoever never hesitate to stop in, call, or email.

Share Insurance Account Ownership Types Video

NCUA Share Information Coverage

MyCreditUnion.Gov Website 

Your Protected Funds

Your deposits with Minnesota Valley federal Credit Union are insured up to at least $250,000 per account per member by the National Credit Union Administration (NCUA).  NCUA is an agency of the U.S. Government.  Use the NCUA INSURANCE CALCULATOR to structure your accounts for maximum insurance coverage.

To learn more about how your account is insured: CLICK HERE

The NCUSIF

The NCUA's deposit insurance is backed by the National Credit Union Share Insurance Fund (NCUSIF).   The NCUSIF is the federal fund used to insure member deposits in federal insured credit unions such as MVFCU.  On July 22, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act permanently established NCUA's standard maximum share insurance amount at $250,000.  The NCUSIF is administrated by the National Credit Union Administration (NCUA) and is backed by the full faith and credit of the U.S. Government.

How is NCUSIF Financed?
The NCUSIF maintains at or near 1.30 percent of federal insured credit union deposits.  By Law, federal insured credit unions maintain one percent of their deposits in the NCUSIF and the NCUA Board can levy a premium if necessary.  Credit Unions voluntarily capitalized the fund in 1985 by depositing one percent of their deposits into the fund.  No federal tax dollars have ever been placed in the Fund, and no member has ever lost any money insured by the NCUSIF. 

For more information on the NCUSIF visit the NCUA WEBSITE.