Capturing the Impact of NCUA Loss Reserve Action

According to the NCUA webinar held on March 23, 2009, the revised NCUSIF loss reserve estimate increased from $4.7 billion to $5.9 billion. What does the revised estimate mean for Federally Insured Credit Unions?

 
 

According to the NCUA webinar held on March 23, 2009, the revised NCUSIF loss reserve estimate increased from $4.7 billion to $5.9 billion. What does the revised estimate mean for Federally Insured Credit Unions?

  • Estimated 69% impairment to Share Insurance Fund Deposit, up from 51%
  • Premium assessment of 0.30% of insured shares, unchanged
  • Average reduction in net worth increased 9 basis points to 65 basis points and return on assets increased 10 basis points to 73 basis points

Accounting for the impairment and premium expense is as follows:

  • Revised impairment expense = insured shares as of 12/31/2008 x 1% X 69%
  • Premium assessment = insured shares as of 12/31/2008 x 0.30%

The chart below shows the impact of these expenses by asset-size range from 7% to almost 8.5% for larger credit unions.

Source: Callahan & Associates' Peer-to-Peer 2.0 Software

In addition to credit unions having to write-off their entire 1% share insurance deposit in the NCUSIF, US Central and WesCorp shareholders are asked to write-off their entire Membership Capital Shares (MCS) and Paid-In Capital (PIC) holdings. The full expense on all credit unions is projected to almost $10 billion, including a $5.9 billion write-off in the NCUSIF deposit and another $4 billion in capital and US Central.

Assuming their MCS and PIC shares are all invested in WesCorp, the chart below details the additional impact of the corporate stabilization program for credit unions in California, Hawaii and Nevada:

* Assumes their MCS and PIC shares are all invested in WesCorp
Source: Callahan & Associates' Peer-to-Peer 2.0 Software

If you subscribe to Callahan & Associates' Peer-to-Peer 2.0 software, you can immediately identify the affects of the NCUA's decision on your credit union. Import a custom report into the program detailing the credit union's total expense projections due to the corporate stabilization program. Analyze the affects of the impairment and assessment expense and potential MCS and PIC loss using the program. Use these detailed instructions to import the Corporate Stabilization Program.zip file.

To learn more about how Peer-to-Peer 2.0 can help you understand the costs associated with the corporate stabilization program, contact Callahan’s Software Team at 800.446.7453 or software@creditunions.com.

 


 

 

 

April 6, 2009


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