SACRAMENTO, Calif. – The retroactive assessment of some of its share of the corporate bailout costs back to the fourth quarter of 2008 wiped out a healthy $21 million net for The Golden 1 CU and pushed the credit union into the red for last year.
"It took our $21 million in profit and turned it into a $23 million loss. It was sickening," said Teresa Halleck, president of the $7.5 billion credit union, of the $44 million charge.
The decision to apply the brunt of the corporate bailout costs retroactively, made with the advice of The Golden 1's auditors KPMG, was based on an accounting ruling that allowed credit unions to apply the NCUA charges in whatever period they believe the incidents occurred, namely the $5.9 billion costs related to the corporate bailout. "If management believed it was a 2008 event they could report it as a 2008 expense," Halleck told The Credit Union Journal yesterday.
But the huge $44 million charge was not the end of it, she noted. That’s because it only represented the initial 51 basis point impairment of the credit union giant’s 1% National CU Share Insurance Fund deposit. The other 18 bps which NCUA announced after last month’s failures of U.S. Central FCU and WesCorp FCU, representing $8.7 million, was charged by The Golden 1's in its first quarter report.
In addition, The Golden 1 has yet to take a charge for the 30 bp premium NCUA is expected to charge later this year to recapitalize the NCUSIF–which will amount to almost $14.5 million.
Almost as costly for The Golden 1 was a charge of $41.4 million it took for the extinguishment of its capital in WesCorp, the largest hit by any credit union for the WesCorp failure.
The first quarter charges took a small $4.8 million operating loss at California’s largest credit union and turned it into a $54.9 million loss for the first quarter.
Total cost for the combination of the corporate bailout and the WesCorp failure: $94 million.
While Halleck hopes to be able to recover some of the charges, either by stretching them out over several years as is proposed in legislation, she also acknowledged the possibility of other charges related to The Golden 1's stock in the Federal Home Loan Banks. The FHLBs are experiencing many of the same problems as corporate credit unions and may be forced to have their credit union and bank members take an impairment charge later on.
