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FINANCIAL STRENGTH: SAFE, SOUND & SECURE
PPL GOLD Credit Union is a safe, sound and solid financial institution. Our 72 years of service--guided by a conservative operating philosophy and skillful management team--continue to produce a time-tested loan policy and a strong track record of making sound and conservative investments. Our strong financial stability is also due in large part to you. Our members make good, sound financial decisions. Each time you open a new account, use a credit union service or refer a potential new member, you contribute to the success and future stability of your credit union. We thank you for your continued support and for allowing us to keep your best INTEREST at heart.
Here are some things you should know regarding the safety of your money and the financial security of your credit union:
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The $250,000 federal share insurance protection became permanent in July. A temporary increase from $100,000 to $250,000 was effective from October 2008 to December 2013. Due to the latest legislation changes, your member accounts at PPL GOLD are now permanently insured to at least $250,000 by the NCUSIF.
FINANCIAL STRENGTH: SAFE, SOUND & SECURE
September 29, 2010
You may have read the recent article in the Wall Street Journal with the headline “Credit Unions Bailed Out.” We found this article to be misleading in that it implies the credit union industry is in crisis. We wanted to take this opportunity to clear up any misconceptions or concerns you may have about this recent piece of news.
The National Credit Union Administration (NCUA) recently took over three corporate credit unions. Corporate credit unions provide wholesale financial services such as investments, liquidity, payment processing services and other services to retail credit unions like PPL GOLD. While retail credit unions are restricted by law from purchasing riskier investments, corporate credit unions were able to purchase private label mortgage-backed securities. Some of these purchases have resulted in other than temporary losses. These losses have consumed all the capital of a handful of corporate credit unions. The NCUA has stepped in and taken action so these corporate credit unions can continue to support retail credit unions.
Headlines are implying that taxpayers are providing a bailout to the corporate credit unions affected by these risky investments, in an effort to replenish lost capital. In reality, the retail credit unions are providing the funds to replenish lost capital. The NCUA has the authority to borrow from the Central Liquidity Fund, an agent of the Federal Reserve, and they have exercised their legal right to borrow funds. These borrowed funds are being paid back by all credit unions in the United States. No taxpayer dollars are being used.
PPL GOLD will be participating in the repayment program, as corporate credit unions provide valuable services that assist in our everyday operations. This means that we will be making a financial payment into this program. We want to assure you that our assistance in this program will in no way have a negative impact on the financial strength of your credit union or on you accounts here at PPL GOLD.
For more information, please read our Frequently Asked Questions.
Frequently Asked Questions
What do the “Credit Unions Bailed Out” headlines mean?
News states that five “wholesale credit unions” have been taken over by the government. What does this mean to PPL GOLD and our corporate credit union?
Why does a retail credit union like PPL GOLD need a corporate credit union?
How much is PPL GOLD Credit Union’s financial assistance going to be?
Can PPL GOLD Credit Union afford to give this financial assistance?
How will this affect my accounts at PPL GOLD Credit Union?
Are there any other resources from which members can get information?
What do the “Credit Unions Bailed Out” headlines mean?
The credit union system has not been "bailed out," as the banking system was. The National Credit Union Administration (NCUA) oversees all credit unions including corporate credit unions and natural person or retail credit unions. While there are thousands of retail credit unions in this country, there are around 30 corporate credit unions. Corporate credit unions provide services to retail credit unions. While retail credit unions are restricted by law from purchasing riskier investments, corporate credit unions were able to purchase private label mortgage-backed securities. Some of these purchases have resulted in other than temporary losses. These losses have consumed all the capital of a handful of corporate credit unions. Without capital to operate, NCUA needs to take action to shore up these corporate credit unions which support retail credit unions. The entire credit union industry provides the “bailout”, not taxpayer dollars. NCUA has the authority to borrow from the Central Liquidity Fund, an agent of the Federal Reserve. This Central Liquidity Fund is similar to the Fed Discount Window used by financial institutions. NCUA has exercised the legal right to borrow funds. These borrowed funds are being paid back by all credit unions in the United States. To repay these borrowings and cover losses incurred, NCUA will assess credit unions their proportionate share of the debt. Credit unions will make payments from their retained earnings to repay the loan.
News states that five “wholesale credit unions” have been taken over by the government. What does this mean to PPL GOLD and our corporate credit union?
Retail credit unions, such as PPL GOLD Credit Union, utilize many services provided by wholesale, or corporate, credit unions. In light of the economic climate, some corporate credit unions who invested in more risky products have experienced investment losses that have depleted their capital. These investments included private label mortgage backed securities. NCUA has taken over these five corporate credit unions. PPL GOLD Credit Union utilizes Mid-Atlantic Corporate Federal Credit Union, which is financially viable and not one of the corporate credit unions taken over by the NCUA. We will continue to operate as usual, utilizing Mid-Atlantic’s services.
Why does a retail credit union like PPL GOLD need a corporate credit union?
Corporate credit unions provide wholesale financial services such as investments, liquidity, payment processing services and other services to retail credit unions like PPL GOLD. While some corporate credit unions are suffering from the effects of the economic crisis, heightened by riskier investments that incurred financial losses, Mid-Atlantic Corporate remains stable and fiscally sound. PPL GOLD will continue to use the financial services provided by Mid-Atlantic Corporate.
How much is PPL GOLD Credit Union’s financial assistance going to be?
Because the economic climate is not stable, the final resolution for the crisis can not be determined yet. We expect to financially support this stabilization program through assessments spread out over the next 10 years. No final “cost” has been determined by lawmakers.
Can PPL GOLD Credit Union afford to give this financial assistance?
Yes. Even though we do not have a final “cost”, PPL GOLD Credit Union is a well capitalized credit union. All regulator estimates are well within our means. PPL GOLD Credit Union is required to have at least a 7% capital ratio. Currently, PPL GOLD Credit Union has slightly over 15% capital ratio.
How will this affect my accounts at PPL GOLD Credit Union?
The financial position of PPL GOLD Credit Union is strong enough that this will not affect our ability to give our members the benefit of higher than average dividend rates and lower than average loan rates. Also, member deposits are federally insured by the NCUA to at least $250,000.
Are there any other resources from which members can get information?
Yes. Members can obtain the most recent information regarding how credit unions are being impacted by going to www.ncua.gov. This is a public website with excellent resource information for our members.
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