NEW YORK-Faith-Based credit unions are being told that NCUA's corporate stabilization program will affect them "in a substantial way," including lower net income.
The analysis was offered during a webinar hosted by the National Federation of Community Development CU and was led by Brian Gately, the Federation's director of technical assistance, and Nick Sanimarco, an economic development specialist for NCUA.
Gately said NCUA's move in January to assist corporates "worked" in that it stopped the liquidity crunch.
But how will the corporate stabilization program affect faith-based credit unions? "In a substantial way," Gately said, answering his own question. "There will be a charge to increase the NCUSIF deposit back up to the required minimum, and there will be a premium surcharge of 30%. As a result, faith-based credit unions' solvency and net income will decrease."
The assessment, Gately said, has resulted in a doubling of the number of CUs downgraded at least one CAMEL number. He also noted paid-in share capital at corporates may be wiped out or reduced. Fow members of WesCorp, their paid-in capital has been eliminated.
Part of the problem, he said, is NCUA lacks authority to spread out replenishing the NCUSIF over multiple years. The agency was meeting on that issue as Credit Union Journal was going to press.
'Least Costly Method'
NCUA's Sanimarco acknowledged the $1-billion infusion into the corporates is "impacting" CUs by a 56 basis point reduction in their net worth, and that the latest conservatorships "will cost every credit union money."
"But in NCUA's estimation, this is the least costly method, especially compared to closure of one or more corporates," he declared.
According to Sanimarco, NCUA examiners have been told if the write down moves a CU below 4% capital, and it would not have been in such a position otherwise, it should not be downgraded as if, for example, its expenses were too high.
