NCUA Charges Weigh Down CUs' Q3 Financials
WASHINGTON-Credit unions are reporting that the growing costs of the corporate bailout and National CU Share Insurance Fund assessments are continuing to weigh heavily on their bottom lines, wiping out large portions of net income earned in the first three quarters of the year, and even threatening the recovery of several troubled institutions.
"NCUA's assessments are definitely going to have an impact, there's no way around it," Daniel Penrod, senior financial analyst for the California CU League, told Credit Union Journal. "Some credit unions that may have turned the corner are definitely going to be set back."
He noted that the NCUA charges come as some California credit unions are seeing an improvement in their prospects, as loans losses appear to have stabilized and the decline in the real estate market appears to have stemmed.
Wescom Central CU, a California giant threatened by huge losses the past three years, would have broken into the black for the first three quarters were it not for a $5.4-million charge for the dual NCUA charges, leaving it instead $1.9 million in the red through Sept. 30.
NuVision CU, which is in the process of acquiring troubled Kinecta FCU, reported a $2.4-million charge for the NCUA assessments, which wiped out a $1.2-million net and left it in a $1.3-million hole for the first nine months.
Florida' GTE FCU, which appears on the verge of a rebound from big losses the past three years, reported a $3.6-million charge for the dual assessments, which pushed it into the red to the tune of $2.3 million for the first three quarters. Power Financial CU, based outside Miami, reported a $504,000 loss after accounting for $850,000 in charges for the NCUA assessments.
But it's not just the "sand states" that are feeling the burden. Other credit unions fighting off the recession are reporting the NCUA charges are pushing them deeper into a hole, as well.
Utah's America First CU reported a $17.9-million loss for the first three quarters, more than a third of it, or $6.6 million, related to the NCUA charges.
Still the brunt of the pain is being felt by credit unions in California, Nevada and Florida. California's Kern Schools FCU reported that more than $3.5 million in NCUA charges pushed losses to $17.2 million for the first nine months. Meriwest CU reported losses widened to $7.7 million for the year after it recorded a $2.7-million NCUA charge.
Florida's Tropical Financial CU reported that almost $700,000 in NCUA charges pushed its losses for the first three quarters to $5 million.
The charges come after NCUA assessed a 12.4 basis point, or $933 million, premium in the third quarter to replenish the reserves of the NCUSIF, which followed a 13.4 bps charge to finance the corporate bailout. Similar charges are expected for the next few years.
"The issue when you're explaining to your board, why do I have a negative net income or why do I have a very low net income, is there are externalities that you have no control over," said Tun Wai, chief economist for NAFCU.
"I think it's very crucial that the agency understand that they are causing some of these institutions to go negative and the CEOs have very little control over it," said Wai.