NCP Financial Soundness & Share Insurance
With the current negative publicity in regard to foreclosures on mortgage loans and, in some cases, causing failed mortgage lending institutions and banks, you may have a few questions regarding NCP’s financial status.
These Frequently Asked Questions (and Answers) are tools to assist you in answering these types of concerns.
Q. What is NCP’s current financial condition?
A. NCP has a very sound financially: NCP’s Net worth is > 10% - highly capitalized; Statutory 7% to qualify as highly capitalized NCP is experiencing solid earnings and our investment portfolio is diversified with short-term certificates NCP’s has less than 20% of total assets are in long-term mortgages NCP has never engaged in any sub-prime lending Direct members to the current financial income statement in the branches.
Q. Is my money safe at this credit union?
A. Yes, your money is always safe at NCP. The National Credit Union Administration (NCUA) is an independent agency of the United States Government. NCUA regulates, charters, and insures the nation’s federal credit unions. NCP is a federally chartered, insured, credit union. The National Credit Union Share Insurance Fund (NCUSIF) insures share accounts in the credit union up to $250,000. NCUSIF is managed by NCUA under the direction of three-person NCUA Board similar to the bank’s Federal Deposit Insurance Corporation (FDIC).
Q. What if I have more than $250,000 at NCP? Do I need to move my funds in excess of $250,000 to another insured financial institution?
A. For members with > $250,000 in deposits there are many different ways share accounts can be structured so that you do not have to transfer any funds to another financial institution. We also have NCP Financial where members can invest their funds.
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To assist members’ questions regarding credit union share insurance, please review the following examples:
1. All single/individual ownership accounts owned by the same member are added together and insured up to $250,000.
EX: Mrs. A has two accounts in her name only. One has $150,000 and the other has $175,000. Her total insurance is $250,000 and $75,000 is uninsured.
2. Joint accounts are insured separately from individual accounts up to $250,000.
EX: Mr. A - $250,000 Mrs. A - $250,000 Mr. and Mrs. A - $250,000
3. When a member has an interest in more than one joint account: All joint accounts owned by the same combination of people each account is insured up to $250,000.
EX: Mr. A and Mrs. A have an account for $70,000 Mrs. A and Mr. A have another account for $40,000 $110,000 is insured Interest of joint owners in an account is deemed equal.
EX: Mr. B and Wife have $30,000 ($15,000 each) Mr. B and Daughter have $50,000 ($25,000 each) Mr. B and Son #1 have $70,000 ($35,000 each) Mr. B and Son #2 have $80,000 ($40,000 each) An individual’s total insured interest in all joint accounts is $250,000.
EX: Mr. B and Wife have an account with $30,000 Mr. B and Daughter have an account with $50,000 Mr. B and Son #1 have an account with $70,000 Mr. B and Son #2 have an account with $80,000 Mr. B’s interest in these accounts is $115,000, BUT only $250,000 is insured for him.
4. Revocable Trust Accounts: a. “revocable” trust accounts include testamentary accounts, tentative or “totten” trust accounts, “payable-on-death” (POD) accounts, living trusts, or similar accounts and have two basic features:
| • Evidence the member’s intention that on his/her death the funds will pass to the named beneficiary (ies). • Can be revoked by the member at any time before his/her death. |
b. Testamentary intent must be clearly stated on the account.
c. Beneficiary(ies) must be clearly named on the member’s account card.
d. NCUSIF insurance is based on the relation between the trustee (who is the member/owner of the funds) and the beneficiary(ies).
• Effective April 1, 2004, if a credit union fails, NCUA will provide coverage of up to $250,000 for each “qualifying” beneficiary entitled to a living trust accounts’ assets upon the death of an account owner. A qualifying beneficiary is defined as the account owner’s spouse, children, grandchildren, parents and/or siblings. • Accounts with the same member/owner/trustee and beneficiary(ies) are added together and separately insured under the revocable trust coverage. • Also effective April 1, 2004, NCUA will not limit insurance coverage if there are “defeating contingencies” in the trust agreement. A defeating contingency is when the trust specifies that the assets pass to specified beneficiaries only when certain conditions are met, such as when the person reaches a certain age. For example: if an account for a living trust has only one trustee and has listed three children as beneficiaries, they would be eligible for $300,000 of NCUA insurance coverage even if the trust document contains conditions on when the children could get the money. • If a beneficiary is anyone other than the family members listed in the previous statement (a nephew/niece for instance), the interests held for “non-qualifying beneficiaries” are added to any other individual accounts of the member/owner/trustee and insured up to $250,000. The account can be set up with the niece/nephew as a beneficiary, however, it affects the calculation of the maximum NCUSIF that will be paid out in case the credit union were to close. • Beneficiaries do not have to be members of the credit union. |
5. Irrevocable Trust Accounts:
a. An irrevocable trust account is one in which the “grantor” – who contributes the funds – relinquishes all powers to revoke the trust.
b. The trust agreement must be valid under state law. (It is not the credit union’s problem to determine validity.)
c. Either the grantor (also called the “settler”) OR the beneficiary of the trust must be a member of the credit union. If there is more than one grantor or more than one beneficiary, either ALL the grantors or ALL the beneficiaries must be members of the credit union.
d. The membership card must list the names of both the grantor and the trustee, and they must complete an account signature card. The beneficiary’s interest can be ascertainable either from the credit union’s records or from the trustee’s records, and is contingent on the death of the grantor(s).
e. All irrevocable trust accounts established for the same beneficiary by the same grantor are added together and insured up to $250,000 separately from other accounts of the grantor, beneficiary or trustee.
6. Custodian Accounts - Uniform Gifts to Minors Act (VCUL 875) – Funds for the benefit of a minor under the Uniform Gifts to Minors Act are added to any individual deposit account of the minor.
EX: Custodian Account + Minor’s Individual Account = Coverage to $250,000
7. Retirement Accounts:
a. All individual retirement accounts (IRAs), Roth IRAs, and Simplified Employee Plans (SEPs) owned by the same individual at the credit union are insured up to $250,000.
8. Business and Association Accounts:
a. Accounts owned by corporations, partnerships and associations held by the credit union are separately insured. Each account must be legitimate separate enterprises.
b. Funds in separate account for the same business are added together and insured up to $250,000.
For more information on share insurance coverage see NCUA’s web site, www.ncua.gov, specifically “share insurance estimator” or NCUA’s booklet Your Insured Funds, Rev. 12/04. The booklet is arranged in a question/answer format with very specific examples.
