NCUA CHARGES TURN NEWLY GAINED BLACK INK TO RED
ALEXANDRIA, Va.-Last month's $1.1-million NCUA assessment, coming after last year's $1.4-billion charge, is foiling a recovery for many credit unions, deepening losses for some and turning net income into losses many others.
"If you're near the edge it could be pushing you over and if you're in good shape it's going to be holding you back," said Marvin Umholtz, a long-time league executive now an industry consultant.
The first-half assessment means that some credit unions that are digging out from their troubles are taking a step back. And many more that are staging turn-arounds are being weighed down.
A $1.2-million charge for the NCUA assessment erased a $450,000 first quarter net for California CU, digging out from last year's $30 million loss, and turned it into a $670,000 loss for the first six months of 2010. At Commonwealth Central CU in San Jose a $360,000 NCUA charge erased a $412,000 first quarter net and created a $262,000 loss for the first half.
"This year's NCUA charge, is expected to be followed with another assessment in the fall, and at least one a year for the next seven or eight, or even ten years, noted Umholtz, referring to NCUA's plans to pay for the corporate credit union bailout.
Other credit unions around the country are reporting similar effects. A $1.8-million charge for the NCUA assessment erased most of a $2.4-million second quarter net for Florida's Fairwinds CU and created a $2.3-million mid-year loss. A $556,000 NCUA charge at Insight Financial CU erased a $336,00 second quarter net. Power Financial CU set aside $594,000 for the NCUA charge in the first half eliminating a marginal $222,000 net and creating a $373,000 first half loss.
At Texans CU a $2-million NCUA assessment pushed mid-year losses from $7.5 million to $9.6 million. At Municipal CU, a $1.9-million charge wiped out a marginal second quarter net of $317,000, pushing the New York credit union giant into the red to the tune of $1.4 million for the first half of the year. Another large New York credit union, USAlliance FCU reported that $900,000 set aside for the NCUA erased all $835,000 of its second quarter income and most of its first quarter net, leaving it with a meager $536 net for the first six months of 2010.
While some credit unions began accruing for this year's NCUA charge in the first quarter, most chose to wait until the assessment was formalized by NCUA, which required them to accrue the charge in the second quarter.
7 MORE BANKS SHUT, MAKING 103 FAILURES SO FAR IN 2010
WASHINGTON-Regulators closed seven banks in seven states last week, pushing the number of banking failures for 2010 over 100.
The FDIC said the failures will cost its insurance fund $431 million.
The most recent closures were: $1-billion Crescent Bank and Trust Company, Jasper, Ga.; $408-million Sterling Bank, Lantana, Fla.; $212-million South Valley Bank & Trust, Klamath Falls, Ore.; $214-million SouthwestUSA Bank, Las Vegas; $108-million Community Security Bank, New Prague, Minn.; $139-million Williamsburg First National Bank, Kingstree, S.C.; and $33-million Thunder Bank, Sylvan Grove, Kan.
That makes a total of 103 bank failures for 201, compared to 140 last year. There have been 18 credit union failures so far this year.
LOOPHOLE EXTENDS COVERAGE TO PREVIOUSLY FAILED BANKS
WASHINGTON-Thousands of depositors in failed banks like IndyMac and Nevada's Silver State Bank who lost millions upon the failure of their banks will reap the benefit of a loophole in the newly passed bank reform bill that will make permanent the temporary increase in federal deposit insurance coverage to $250,000 per account.
That's because the new law will extend the increased coverage limit back ten months from the original effective date of Oct. 3, 2008 all the way to Jan. 1, 2008, meaning almost 10,000 depositors who had excess deposits (over the then-$100,000 insurance limit) in the banks that failed during that period are now eligible for the increased limits, according to the FDIC.
The retroactive increase in deposit insurance coverage will reduce the number of uninsured depositors from more than 10,000 to about 500 in the failed banks IndyMac, Silver State Bank, Hume Bank, ANB Financial, First Priority Bank and the Columbian Bank and Trust Co.
NCUA, which is being sued by members in the 2008 failure New London Security FCU over some $4 million of losses on excess deposits, said the retroactivity loophole does not cover credit unions or the NCUSIF.
There were at least ten other credit union failures during those ten months, including several big ones like Cal State 9 CU, Sterlent CU and Kaiperm FCU, in which there were uninsured losses that exceeded the $100,000 NCUSIF coverage at the time.
The FDIC mailed checks for the retroactive coverage. The FDIC is subtracting any deposit insurance already paid to those depositors under the $100,000 level and any dividends paid out by the FDIC as receiver of the failed banks.
The bank reform bill, signed into law by President Obama, makes the temporary increase to $250,000, due to expire Dec. 31, 2013, permanent. The new limit applies to shares covered by the National CU Share Insurance Fund, as well as the FDIC.