Just when you thought your 2009 income statement couldn’t get any more complicated, the September call report changed reporting practices once again. No doubt one of the biggest issues affecting credit union income statements this year has been the NCUSIF Stabilization Expense. This expense is noteworthy not only for the effect it has on the bottom line, but also the difficulties it has created when comparing financial performance across institutions.
The biggest change to the way credit unions are reporting the stabilization expense in the third quarter comes with the addition of a “Stabilization Income” account code. This account code represents the “pass-back and recapitalization of [the] NCUSIF Deposit.” However, this account code has also created some problems of its own based on the ways credit unions previously accounted for the original expense.
Due to a lack of guidance from the NCUA as credit unions first accounted for the NCUSIF stabilization expense, its impact was seen across multiple reporting cycles and a myriad of account codes. Our research shows credit unions reporting this expense on numerous lines: as a non-operating loss, as an investment write-down, and even in the official 5300 account code that was added in March.
Now, with the addition of this Stabilization Income account code, many credit unions are adjusting their 2009 income statements for an expense they took at the end of 2008. Since a number of credit unions already accounted for the expense in 2008, the inclusion of this $3.00 billion NCUSIF pass-back is actually greater than the $2.86 billion expensed thus far in 2009. With the income amount higher than the expense, the “net” stabilization expense becomes negative. As this negative expense is added back into the income statement, we have seen $144 million returned to credit union bottom lines in the third quarter.
While this additional boost to the bottom line is certainly a welcome one for credit unions during this period of economic turmoil, it has also added one more layer to make an “apples to apples” financial comparison more difficult.