ALEXANDRIA, Va. – NCUA’s reversal last year on accounting for the corporate bailout is causing havoc among credit unions as they report their fourth quarter financials and prepare their annual reports.
While many credit unions followed NCUA’s instruction to take a 99 basis point charge for the expected $6 billion corporate bailout earlier in the year, such a charge prevented them from subtracting the charge after passage of the Corporate CU Stabilization Fund, which allowed NCUA move the corporate bailout off the books of the National CU Share Insurance Fund and to trim last year’s premium to 15 bps.
The result is credit unions have adopted a variety of bookkeeping methods on the charge. Some credit unions took the full 99 bp charge in last year’s first quarter, only to reverse out the 84 bps and record it as a one-time charge after passage of the corporate bailout. Others waited until after passage of the bill to take any charge, then took the appropriate 15 bps. Still others chose to record the charge all the way back for the fourth quarter of 2008, as allowed under generally accepted accounting principles, or GAAP, because of when the expenses occurred.
"You have to be careful. That line item is not what it seems," said Tun Wai, chief economist for NAFCU, of the line at the bottom of the financial performance report titled NCUSIF Stabilization Expense.
In one example, BECU, the Seattle credit union giant, originally took a $58.8 million charge for the corporate bailout in the first quarter of 2009. But after passage of the bailout bill, BECU was faced with having taken an overcharge of some $47.3 million, according to Kathy Elser, chief financial officer for the $8.6 billion credit union. Since GAAP doesn’t allow credit unions to reverse the charge, BECU was forced to recapture the difference as a one-time gain in its income statement. As a result, its annual financial performance report shows the $58.8 million charge originally taken under the line NCUSIF Stabilization, but not the actual figure of $11 million.
BECU also took a $9 million charge for the capital it lost in WesCorp FCU. The only bright side to the WesCorp charge, said Elser, was that the exposure was a lot greater, as much as $25 million as recently as two years ago. "But we really were getting nervous, so we took a huge portion out," she told The Credit Union Journal. The WesCorp losses are the only charges BECU will need to take for corporate credit unions, she added.
