SAN DIMAS, Calif. – Credit union executives are expressing shock at last Friday’s NCUA takeover of WesCorp FCU, saying the credit union agency may have acted precipitously in conserving the $23 billion institution and wiping out as much as $2 billion of their capital.
"It stinks, the whole thing," said Rick Heldebrant, president of Star One CU, which will lose $20 million of its WesCorp membership capital shares and paid-in-capital as a result of the NCUA action. "I’m like everyone else; I’m just shocked at this point."
Heldebrant, whose credit union already planned a $24 million charge for NCUA’s corporate bailout, said he was surprised that NCUA said it couldn’t trust the financial data WesCorp was providing.
"We’re paying a terrible price. An excessive amount of capital is being erased," said Henry Wirz, president of SAFE CU and a former chairman of the WesCorp board, of the $13.6 million in WesCorp MCS and PIC that will disappear.
Wirz criticized NCUA for its public questioning of the WesCorp financials and worried the weekend’s takeovers of WesCorp and U.S. Central may kill the entire corporate credit union system. "I think NCUA may have extinguished the corporate system once and for all," said Wirz. "There will be few credit unions that will want to recapitalize the corporate system after this."
The NCUA takeover was criticized by California CU League President Bill Cheney, also a director of U.S. Central, in a teleconference Tuesday. Cheney told the WesCorp members that WesCorp was preparing financial statements that showed realized losses of $740 million for 2008, wiping out most, but not all of its $850 million of retained earnings.
"I don’t know if the WesCorp seizure was fair and reasonable or not," said Charles Bruen, president of First Entertainment FCU, who projects a loss of $7 million of WesCorp capital. "There are a lot of reasons to be frustrated including the lack of transparency by the NCUA and variances between their evaluation model and WesCorp’s."
"Here is my main concern," said Bruen. "Our credit union has to have the option of opting-out of the corporate network if we so choose. I don’t want to be around to recapitalize WesCorp and that could very well happen. Somebody is going to pay for the corporate insurance in order to extend coverage beyond 2010. Maybe getting out of the corporate system is a dumb idea but we should have that option and ability to make our own decision about the amount of risk that we are willing to take. A recent NCUA press release had this quote, "While we understand it is frustrating for member credit unions to recognize these risks, it is how the system works." Well, I don’t like how the system works."
"What it means," said Darren Williams, president of Wescom Central CU, which will loss about $4 million of WesCorp capital, "is we will be depleting our capital. Ultimately, members will pay because we will be less able to make loans.
Patelco CU expects to accrue a charge of $18 million from the loss of its WesCorp capital, including $16.5 million of MCS and $2.5 million of PIC, according to Scott Waite, chief financial officer for the $4 billion credit union. That’s on top of the $33 million charge already brewing from NCUA’s corporate bailout–a total of $51 million.
