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March 23, 2009 UpdateOn Friday, March 20th, the National Credit Union Administration (NCUA) placed into conservatorship two corporate credit unions, US Central Federal Credit Union and Western Corporate Credit Union. We want to assure you that these actions do not impact you as a member of TDECU. Our credit union remains safe, sound and strong. The two institutions that were placed into conservatorship are corporate credit unions. Corporate credit unions do not serve consumers. They are chartered to provide products and services only to the credit union system. These products and services will continue uninterrupted. There is no impact to any of the 90 million credit union members nationwide or to TDECU members. Every TDECU depositor is insured by the full faith and credit of the US Government through the NCUA insurance fund to a maximum of $250,000. Our commitment is first and foremost to you – our members. It is because of our member commitment that we always strive to give you the best in member service and the safest of credit unions. Regardless of difficulties some other institutions may have, TDECU is safe, sound, strong and well positioned to meet you and your family’s financial needs today, tomorrow and well into the future. Original SummaryTDECU will be absorbing a $6.7 million non-recurring expense that will be assessed by the National Credit Union Association (NCUA) and will reduce earnings for 2009. This assessment is NOT a result of decisions made by TDECU leadership or our Board of Directors, but rather is a result of our affiliation with the corporate credit unions. All credit unions will be financially impacted by this recent NCUA decision. Because we are financially sound and well-capitalized, we are well-positioned to absorb this unexpected hit. Although our earnings will be impacted, we have the capital and return on assets to continue supporting our current business and fund our future growth. TDECU will remain financially sound and well-capitalized. BackgroundThe US Central Corporate Credit Union (the credit union for corporate credit unions) made investments that resulted in substantial losses for the corporate credit unions with which we do business. Our regulatory agency, the NCUA, made the decision to recover these losses by using the National Credit Union Share Insurance Fund. The NCUSIF insures deposits from natural person credit unions like TDECU. The fund will in turn have to be replenished through an assessment of a premium that will impact TDECU’s balance sheet by an estimated $6.7 million. This amount is, in effect, a tax imposed on all credit unions. Questions and AnswersWhat is a corporate credit union?
What is a Natural Person Credit Union?
What is the NCUSIF?
Are we required to do business with corporate credit unions – especially the ones that suffered the losses?
What will keep this assessment from occurring again?
Will safeguards be put into place to protect the natural person credit unions that do business with the corporate credit unions?
What types of TDECU strategic goals might be affected by this?
Is the impact to TDECU greater because of our size?
Will the money be recovered to TDECU?
Will this be a recurring expense?
What kind of investments caused this to happen?
Do we have any control over this assessment?
How will this impact our Members?
How will this affect personal accounts? What about Members who have a substantial savings balance at TDECU?
Will this affect the interest rates or services TDECU offers?
How will this impact our Employees?
What can we do to help? 
What is a corporate credit union? Corporate Credit Unions do business solely with other credit unions. They make investments in and get liquidity from the US Central Corporate Credit Union. The US Central Corporate Credit Union is the credit union for corporate credit unions – similar to the Federal Reserve Board for banks.What is a Natural Person Credit Union? A “Natural Person Credit Union” is a member-facing credit union, such as TDECU.What is the NCUSIF? The National Credit Union Share Insurance Fund insures member deposits similar to FDIC deposit insurance.Are we required to do business with corporate credit unions – especially the ones that suffered the losses? Yes. The corporate system provides important investment, liquidity and payment system services to credit unions. Natural person credit unions like TDECU have benefited from the system and need access to the services corporate credit unions provide.What will keep this assessment from occurring again? A Corporate Credit Union Stabilization Partnership (CCUSP), comprised of representatives from some of the largest and most profitable credit unions in the United States along with an independent consulting group, has been formed to develop short- and long term plans to stabilize and reform the Corporate Credit Union system. In addition, TDECU is joining forces with other credit unions to challenge both NCUA and the Federal Government in what is an unacceptable and unwarranted tax that places an extreme financial burden on the entire Credit Union movement.Will safeguards be put into place to protect the natural person credit unions that do business with the corporate credit unions? CCUSP will develop and take action on plans that will focus on ensuring liquidity, restoring transparency and rebuilding confidence in the Corporate Credit Union Network (CCN), and centralizing operations to reduce risk within the system.What types of TDECU strategic goals might be affected by this? We are constantly evaluating projects and initiatives to use our Members’ money wisely to support our ongoing business and future growth. For example, we have a number of projects and initiatives in our 2009 Business Plan, such as new branches in Victoria, Bay City, and Wharton and improving our online banking. We have aggressive timelines associated with these and other major objectives. Going forward, we will continue our efforts to enhance our existing services and to expand into new areas. However, we will have to proceed with more caution. We will continue to carefully monitor the economy, and our own business performance, and be prepared to adjust accordingly.Is the impact to TDECU greater because of our size? No, all credit unions are being assessed (taxed) at the same rate based on insured deposits. While we are a $1.4 billion credit union, the assessment will be based on our insured deposits of $800 million.Will the money be recovered to TDECU? No – think of it as a tax. But, we will continue to challenge this at all levels of government.Will this be a recurring expense? This is difficult to answer as it will depend upon a number of factors including the global economic climate, the success of the stabilization efforts for the economy and financial institutions, regional business climate, and other factors.What kind of investments caused this to happen? The CCN invests in highly rated securities and historically the securities could be easily sold in the market or used as collateral for borrowing. These investments included mortgage and asset backed securities which have suffered tremendous losses. Accounting rules require these losses to be recognized when it is determined that the losses are not temporary.Do we have any control over this assessment? No, but as we have already stated, will continue in our efforts to challenge it. Regardless of the outcome, TDECU remains committed to focusing our efforts on the things we can control - our business and working in partnership with other credit unions to influence the stabilization and reform efforts needed in the Corporate Credit Union Network.How will this impact our Members? There will NOT be a financial impact to our Members. It is important to remember that TDECU is financially sound, our Member’s money is safe, and we will continue to deliver quality products and service.How will this affect personal accounts? What about Members who have a substantial savings balance at TDECU? Our Member accounts are not impacted by this action and remain insured by the NCUSIF (National Credit Union Share Insurance Fund) up to $250,000. TDECU is financially sound and will be able to absorb the impact of this assessment.Will this affect the interest rates or services TDECU offers? No, our Members will continue to enjoy the same level of competitive rates, service and access to products that they do today.How will this impact our Employees? Our Employees will not be impacted by this. In fact, we currently have open positions, and we are actively working to fill them. We continue to be optimistic for 2009, and our 2009 Business Plan reflects that. We still project this to be a strong year for TDECU, which includes growth and employment opportunities. But as a result of this NCUA Assessment and the overall economy, we need to be a little more cautious.What can we do to help? Stay informed and allow us to answer further questions by e-mailing us at NCUAassessment@tdecu.org. We also ask that you join us in demanding that this decision be overturned so that we can put your money to better use than paying penalties for a situation TDECU had no fault in. Postcards and sample e-mails will be available in the lobby of every branch the week of March 9th. Simply sign the postcard and we will be happy to mail it to your elected officials for you. Or you can write your congressman and tell them how upset you are about the tax the NCUA is imposing on Your Credit Union. Here are the contacts for the US legislators that represent much of our field of membership:
Sen. John Cornyn
Sen. Kay Bailey Hutchison
Congressman Ron Paul
Congressman John Culberson
Congressman Al Green
Congressman Pete Olson
Congressman Ted Poe
Congressman Gene Green
Congressman Ruben Hinojosa
Congressman Lloyd Doggett
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