Glossary of Terms

Below you will find definitions of terms you may hear frequently when visiting the credit union or looking at your statement.

Automatic Clearing House (ACH)

A nationwide electronic funds transfer network which enables credit unions to distribute electronic credit and debit entries to accounts and to settle such entries.

Bylaws

A codification of the form of organization that the credit union takes and the governance of its day-to-day operations; federal credit unions are required to adopt a basic code approved by the National Credit Union Administration.

Capital

A measure of a credit union’s ability to withstand troubled times. A credit union’s base capital represents the total of regular (statutory) reserves, other reserve accounts and undivided earnings. Regulatory capital includes all the above plus allowances for loan and investment losses.

Common bond

The commonality of interest (such as employer, association or community) that the members or groups of members of a credit union share.

Corporate credit union

A federal or state-chartered credit union that serves other credit unions, providing investment, short-term (liquidity) loans and other services to its member credit unions.

Credit committee

Optional internal committee of a credit union that considers applications for loans and lines of credit. In the event the credit union has delegated that authority to a loan officer, the credit committee ratifies the applications approved by the loan officer.

Credit union

A not-for-profit financial cooperative chartered by the state or federal government and, in most cases, insured by the federal government. It is owned by the members of the credit union.

Credit union national association (CUNA)

Based in Madison, Wisconsin, CUNA represents over 12,000 American credit unions in its role as the main trade association providing a host of services specifically for credit unions.

Credit union service organization (CUSO)

An organization owned wholly or in part by one or more credit unions to provide service to the credit unions, their members, or both.

Dividend

Funds paid to members based on account size and rates declared regularly (monthly, quarterly or annually) by the board of directors for various types of accounts. A dividend represents the payment by the credit union to the member for use of the member’s funds.

Field of membership

Definition of the type of membership generally served by the credit union, e.g.: “defense” credit unions primarily serve members of the armed forces; “education” credit unions primarily serve educators.

National Credit Union Share Insurance Fund (NCUSIF)

The federal share insurance fund for credit unions. The fund protects credit union members’ shares (up to $100,000) in federal and federally insured, state-chartered credit unions. NCUSIF is backed by the full faith and credit of the United States.

Natural-person credit union

Chartered by the federal or state government and includes real persons, i.e. non-corporate entities, as its members. More than 99 percent of all federally insured credit unions are natural persons cooperatives.

Par Value

The dollar equivalent of a share required to join a credit union. Par value is determined by the board and typically ranges from $5 to $25.

Reserves

A special account in the credit union’s ledger, which sets aside funds as a protection against losses. Regular reserves are required for federally insured credit unions by law and protect against loan losses or other losses as prescribed by federal regulation.

Select employee group (SEG)

An employee group that is eligible to form a credit union but has not due to the group's size or location and is given full membership rights by an established credit union.

Share account

Refers to a regular share savings account and any other account that isn’t a share certificate account. A regular share account doesn’t require a holder to maintain a balance greater than the par value and doesn't require notice of intent to withdraw (as except may be in accordance with official bylaws). Shares are legally defined as equity and represent ownership.

Share certificate account

Account that earns dividends at a specified rate for a specified period of time, if held to maturity; and upon which a penalty may be assessed for premature withdrawal prior to maturity.

Share draft (checking) account

A dividend-earning account from which the holder is authorized to withdraw shares by means of a negotiable or transferable instrument or other order (similar to a NOW account).

Sponsor

An organization (such as a corporation, religious congregation or association) that promotes the establishment or continuation of a credit union for its employees or members.

Supervisory committee

Internal committee required for all federal credit unions and most state credit unions. Oversees the credit union’s financial operations, conducts internal audits, may arrange for external audits, reports to board of directors and may suspend board members for malfeasance.

Undivided earnings

Accumulated net income after distribution to members and provision for reserves required by law, plus or minus increases or decreases in other reserves (such as a special reserve for losses), plus or minus other authorized direct credits or charges for ad justments affecting prior period operations.