We are handling the economy just fine. We are as financially sound as an institution could be and we fully expect to remain that way far into the future.
With so many banking institutions having financial difficulties during this troubled time in the economy, some of our members are probably wondering how Verity is doing. One of our members recently asked this question after reviewing our financial statements for the first quarter of 2009:
“I have been a member for over 20 years and am very concerned that Verity may under.
If you only had $486,000 at risk at Westcorp why was the loss over $2 million for the quarter? Please explain where the other losses came from.
If the Westcorp loss has been written off should Verity expect a profit next quarter?
I would rather receive less interest than have Verity invest in high risk stuff in the future.”
I thought that I would take a few paragraphs and explain what is going on with credit unions, in general, and Verity, in particular.
In January of this year, the National Credit Union Share Insurance Find (NCUSIF), the fund that insures member deposits in federally-insured credit unions, took two large corporate credit unions into conservatorship, which means that two institutions financial problems were so great that they could no longer operate on their own. A corporate credit union is one that serves the needs of natural person credit unions, such as Verity. The total cost to the NCUSIF of these conservatorships was $5.9 billion. The cost had to be borne by the rest of the insured credit unions, including Verity. Our share was $2.8 million. So, although we did not have anything to do with causing the loss, we have to record our share on our books.
We recorded our cost in March of 2009. Our Income Statement for the first quarter shows a loss of $2.1 million. Before recording our share of the cost of the conservatorships, we actually had a profit of $685,000. Even after recording the loss of $2.1 million, our reserve ratio, the primary measure of our financial soundness, is in a very good position. We are considered a well-capitalized credit union even after this one time event.
This economy is tough and we have certainly being impacted by it. We have experienced loan losses greater than ever before and we believe that loan losses will be high for the next several quarters. However, we are taking whatever steps we have to take to minimize these loan losses and to offset them with greater profitability in other areas of our operations.
In summary, we are handling the economy just fine. We are as financially sound as an institution could be and we fully expect to remain that way far into the future.
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