Special insurance assessment hits credit unions

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Credit unions are waiting to hear from the Nationak Credit UnionAdministration (NCUA) on whether they’ll be able to spread that charge out over a numberr of years and retroactively change thei r first-quarter results or take their lumps in the first quarter and move on. Creditg union leaders are mixed on which option they The NCUA, which operates the insuranc fund for credit unions in much the same way the Federakl Deposit Insurance Corp.
operates bank deposit insurance, will hold an onlinde seminar June 24 to instruct credit unions on that and Twin Cities credit union officials are anxiously awaitingthe “We started out being very healthy, but it’ws like the whole sea has been lowered about 1 said Jeff Schwalen, president of Hiway Federal Credit Uniobn in St. Paul. “It’s a hurtful thingt for us to absorb. Now the questionb is, do we want to really spread it out over the or take the pain allat Hiway, the Twin Cities’ third-largest credit uniohn with assets of $806.7 took a $6.
2 million expense in the first quarter, droppinv its quarterly income from $200,000 to a loss of $6 The problem came to a head in March when two corporatde credit unions, which are essentially the creditg unions to credit unions, were seized by the government aftef taking deep impairments to their mortgage-backed securitiexs portfolios. The two failures dragged down the capitao levels in the National Crediy Union Share InsuranceFund (NCUSIF) in the same way bank failured deplete the FDIC fund. To stabilize the NCUSIF, in which each insurex credit union is requiredd to keep 1 percent of its the NCUA made thepremium assessment.
A law signesd by President Obama last month allowed the which had been nearly 1 percent ofinsurede shares, to be spread over eight year instead of being taken all at once. the NCUA is weighing several options such as spreadint the assessments evenly over the next eight yeards or keeping the charge ontheid first-quarter statements if they already took it. Credift unions’ first-quarter numbers are difficulf to determine since some assessex the charge and some are waiting forthe guidance.
“Ifv you’re looking at first-quarter numbers, one credit union may look terrific andthey didn’g book the charge, and others may have take n the charge and they’ll have pretth ugly numbers,” said Mark Cummins, president and CEO of the Minnesotaw Credit Union Network in St. For credit unions that are already strugglingf to shore up theird reserves in the face of heavy loan any extra premium assessment even spread over a number ofyears — will add more stressa to their balance sheets.
“We’rs all working through some loan delinquenciesand charge-offs,” said adding that even sprea over eight years, the assessmenty will weaken annual earnings by 0.1 to 0.15 “It’s going to make it that much harder to Credit union members shouldn’t notice any difference in how their organizationx operate due to the charge, said Williamk Raker, president and CEO of US Federal Credi Union in Burnsville. “This is an extraordinaryh bookkeeping entry,” Raker said. “We don’t see this as impairing our abilitto serve.
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