CEOs, CFOs Continue To Map Strategies For Dealing With Assessments

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EL SEGUNDO, Calif.-CU execs continue to map strategies for dealing with the ongoing special assessments from NCUA.

As reported July 12 by Credit Union Journal, CUNA is projecting that the latter-2010 assessment will be in the six to 10 basis point range. But most CEOs and CFOs are budgeting for more than that.

In the case of Xceed Financial FCU here, CEO Teresa Y. Freeborn said the credit union had anticipated a sizeable assessment from NCUA, but "we were surprised by the splitting of the assessment into its two components."

"It is too early to predict exactly how the second NCUA assessment in the fall may affect our numbers," said Freeborn, whose CU is well-capitalized at 9%. "The road ahead certainly looks bumpy, however, our solid capital level allows us to feel confident in handling whatever this economy and our industry throws at us. Unfortunately, our growth and expansion plans have been put on hold-right when our marketplace is ripe for the picking."

In San Jose, Calif., Victoria Earle, VP of finance and risk management with Technology CU, called the decision to assess natural-person CUs two assessments during 2010 "unfortunate. The industry is struggling with low levels of loan demand, high unemployment and increasing margin pressures caused by a very slow economic recovery," noted Earle.

Earle said Technology CU is fortunate to be highly capitalized. "But we sympathize with others in the industry that will be severely affected by these levies, which have the potential to cause dozens of credit union to fall below minimum net worth ratios."

Earle added she is hopeful NCUA will act with great prudence moving forward.

According to Laida Garcia, CEO of the $282-million Florida Central CU in Tampa, dividing the assessment is a good decision.

"It was smart of the NCUA to split the assessments into two, with the final assessment coming late in the year. This strategy gives the NCUA a better opportunity to evaluate the degree of improvement in the financial performance of credit unions and assess their levy accordingly," said Garcia. I would think that the last thing NCUA wants to do is to contribute to the demise of a struggling credit union by piling an added heavy burden on their shoulders."

'Those Were The Days'

Garcia acknowledged the industry-wide dissatisfaction with having to pay an assessment to shore up the corporates, but stated that allowing corporate credit unions to fail "is unacceptable."

In Harrisburg, Penn., Greg Smith, president of the $3.7-billion Pennsylvania State Employees CU, is among those who sees additional assessments ahead.

While the $3.7-billion PSECU had a record year and is able to afford a bill from NCUA in the $12-million to $13-million range, Smith said, "My expectation is that we're going to see another leg down in housing, which will put even more pressure on the mortgage backed securities that NCUA is holding for the corporates. And I was in Boston a year ago and heard NCUA's David Marquis describe problems at natural-person credit unions as a 'growing tsunami' in terms of threats to the share insurance fund."

For Smith, it's difficult not to reminisce about the time when credit unions used to try to estimate their share of the share insurance fund dividend.

"Those were the days," he noted.

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