WASHINGTON – Just when they thought it was safe to wade back in to the water, credit unions are due to fork over their 25 basis points – $2 billion – corporate credit union assessment to NCUA over the next few days.
Most credit unions have budgeted for the corporate payment but the money is coming from where they live – member services and dividends.
“We should have let the corporates all fail, instead of bailing them out,” Paul St. John, a longtime director of New York’s SEFCU, said during NAFCU’s annual Congressional Caucus. The estimated $5 million NCUA assessment will slow down the fast-growing, $2.7-billion credit union, he laments. “We’ve cut back on a few things; instead of four new branches, we’ll open two.”
For other credit unions still struggling with a tough economy, it could move their goal of profitability farther into the future. Brad Beal, president of Nevada FCU which lost $2.8 million for the first six months of the year, said he set aside $1 million in planning for the NCUA charge, but still needs another $500,000 to pay the bill, due Sept. 27. “Ultimately, the members pick up the tab,” Beal told Credit Union Journal, of his cutting expenses and dividend rates to the bone to cope with his state’s depressed economy.
Cutler Dawson, president of Navy FCU, said the assessment for his $46-billion credit union, which is in the midst of another banner year, amounts to $77 million. That much money could have paid for 30 new branches for Navy Federal, which has added 120 branches over the past five years, according to Dawson.
“It’s not going to knock us into the red,” said Bhodan Watral, president of Chicago’s Selfreliance Ukrainian American FCU, which will pay NCUA $800,000 for its share of the corporate assessment. “We’re still going to make a profit [for the year], but a smaller one.” As was the case at most credit unions, the $420-million credit union planned for the NCUA assessment and even put aside more than the 25 bps worth, $1 million. “We figured NCUA was high-balling the estimate [when it projected 25 bps].”
NAFCU Chief Economist Tun Wai noted that credit unions grew their ROA to 77 basis points at mid-year, from 51 bps for year-end 2010, but he estimated 25 of the additional bps came from lower cost of funds – dividend rates paid to members. “Out of the pockets of members,” said the NAFCU economist. With rates at all-time lows, he wondered where this quarter’s 25 bps payment to NCUA is going to come from. “The real pain is coming later,” when there little more to cut rates, he said.
