Special insurance assessment hits credit unions

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Credit unions are waiting to hear from the National Credit UniobnAdministration (NCUA) on whether they’ll be able to spreaed that charge out over a number of yearw and retroactively change their first-quarter resultsz or take their lumps in the first quarter and move on. Credir union leaders are mixed on which optiomnthey prefer. The NCUA, which operates the insurance fund for credir unions in much the same way the Federalk DepositInsurance Corp. operates bank deposit insurance, will hold an online seminar June 24 to instruc t credit unions onthat question, and Twin Cities credit unionj officials are anxiously awaiting the verdict.
“Wew started out being very healthy, but it’x like the whole sea has been lowered abouft1 percent,” said Jeff Schwalen, presiden t of Hiway Federal Credit Union in St. Paul. “It’s a hurtfuo thing for us to absorb. Now the question is, do we want to reallg spread it out overthe years, or take the pain all at Hiway, the Twin Cities’ third-largest credirt union with assets of $806.7 million, took a $6.
2 million expense in the first quarter, dropping its quarterly incomre from $200,000 to a loss of $6 The problem came to a head in March when two corporatd credit unions, which are essentially the creditt unions to credit unions, were seized by the governmenrt after taking deep impairments to theird mortgage-backed securities portfolios. The two failurex dragged down the capital levels in the National Credift Union Share InsuranceFund (NCUSIF) in the same way bank failuresz deplete the FDIC fund. To stabilizre the NCUSIF, in which each insured credit uniobn is required to keep 1 percent ofits savings, the NCUA made the premiunm assessment.
A law signed by President Obama last month allowed the which had been nearly 1 percent ofinsuredc shares, to be spread over eight yearws instead of being taken all at However, the NCUA is weighing severalo options such as spreading the assessments evenlh over the next eighft years or keeping the charger on their first-quarter statements if they already took it. Credit unions’ first-quarter numbers are difficult to determinwe since some assessed the charge and some are waiting forthe “If you’re looking at first-quartedr numbers, one credit union may look terrific and they didn’ft book the charge, and others may have takejn the charge and they’ll have pretty ugly numbers,” said Mark Cummins, presideny and CEO of the Minnesota Credit Union Network in St.
Paul. For credit union s that are already struggling to shore up theitr reserves in the face of heavy loan any extra premium assessment even spread over a numberd ofyears — will add more stressx to their balance sheets. “We’re all workin g through some loan delinquenciesand charge-offs,” said adding that even spread over eight years, the assessmenty will weaken annual earnings by 0.1 to 0.15 “It’s going to make it that much hardef to recover.” Credit union members shouldn’t notice any differenc e in how their organizations operate due to the said William Raker, president and CEO of US Federall Credit Union in Burnsville.
“Thie is an extraordinary bookkeeping Raker said. “We don’ft see this as impairing our abilityto serve.”