LAS VEGAS — Congress and President Obama OKd the corporate stabilization bill, but CU CFOs say there's still a lot of uncertainty and confusion about how to account for the assessment and impairment — and how to tell how well a credit union is performing.
"There was a survey on [the CUNA CFO Council] listserv and 55% said they booked the impairment and assessment in 2009," Mid-Minnesota FCU CFO Pam Finch told CU Journal at the council's annual meeting last week. "CFOs have been divided as to what to do, and part of it is there is confusion among accounting firms, also. The AICPA [American Institute of Certified Public Accountants] did not come out with a firm guidance because it is regarded as a gray area that could be looked at in different ways."
The newly elected chair of the CUNA CFO Council, Finch said she hopes most of these uncertainties will have been ironed out by the end of the year.
In the meantime, however, it is almost impossible to tell how credit unions really are performing or do any sort of meaningful comparisons just by looking at their balance sheets.
"Completing peer group analysis will be very difficult this quarter because there is no widely accepted way for CUs to account for the NCUSIF Stabilization Expense," explained Callahan & Associate's Dane Coalson. "Some are writing off the entire expense this quarter using the assigned account code 311, some are recognizing the expense as an 'investment loss,' others are writing off a portion of the expense, some are recognizing it retroactively, while others have yet to recognize it in their 5300 report."
Though first quarter reports were turned into NCUA weeks ago, a final, "crunchable" report won't come out of the agency for still more weeks, which is why Callahan's created its "First Look" program, in which credit unions voluntarily send their 5300 reports to the CU consultancy, which then analyzes the data to get a sense of what the eventual final report will show.
"In the First Look group, 41% of credit unions have yet to recognize the expense in account code 311," Coalson said, pointing out that Callahan's is still acquiring First Look data. "Many of them reported a positive net income, but didn't recognize the expense, so we have no way of knowing if this metric remained positive."
Finch agreed that analyzing credit unions' performance right now is difficult, calling it "unfortunate" that right now the nation's credit unions are not all on the same page.
"On top of this, we are in tough economic times. Credit unions have had to put aside money for potential losses, which I think ultimately will be a bigger factor than these assessments," she added. While Finch's Mid-Minnesota FCU has yet to book its corporate impairment, all seven respondents to a random sample of attendees at the CUNA CFO Council's told Credit Union Journal their CUs had, and most of those reported their balance sheets had survived thanks to a strong capital position.
John Meeker, SVP/CFO for Cal Tech Employees FCU, La Canada, Calif., said his $900-million credit union booked a $1.4-million assessment in April. "It had a minimal impact on our balance sheet," he said. "Obviously, it hurts, but we can absorb it. We are watching expenses, and the members are paying for it in the form of lower dividend rates."
Barth Eke, VP of finance, AmeriCU CU, Rome, N.Y., "We experienced a reduction of capital, so we are implementing efficiency initiatives. We are aggressively streamlining processes and asking employees to be as efficient as they can."
Toni Davisson, VP of finance, SC Telco FCU, Greenville, S.C., "It is not something you want to deal with, but we were fairly well capitalized and in a position to handle it. We have not made major ALM changes because of the impairment, but we are reassessing due to the economic environment."
Brad Bailey, CFO, Potlatch 1 FCU, Lewiston, Idaho, "We booked $1.1 million over [Q1 2009]. We were going to book in 2008, then heard Congress was looking into it. We made many changes because we thought we were going to book last year — we dropped bonuses, lowered the dividend and cut expenses. We saved a total of $900,000, so now we are reaping the benefit on our ROA."
Terry Borreson, CFO, Arkansas FCU, Jacksonville, Ark., "We booked Dec. 31. It was more than we'd like, but that's the reason you have capital. With the bills in Congress, we are just waiting for the final decision. I wish they'd make up their minds, but I realize there's politics involved."
Mike Doland, EVP, ABNB FCU, Chesapeake, Va., "We booked as of Dec. 31. We were fortunate to be capitalized over 11%, so we were able to take the assessment all at once. Our board and CEO don't want to sacrifice our strategic plan for budget control, so we remain committed to a plan of branch expansion. These times are an opportunity."
Suzanne Weinstein, CFO, Orlando FCU, "We booked on March 31. We are very fortunate to be a conservative [CU] with lots of capital. We took the stance that we are a family and have to help each other out. We don't like it, it is upsetting, but that is what the credit union movement is all about. We haven't made changes to ALM because we already are conservative."
