Onsite Coverage: Corporate Assessment Will Send 335 CUs Into the Red
ALEXANDRIA, Va. — The 2012 Temporary Corporate Credit Union Stabilization Fund assessment of 9.5 basis points of insured shares will reduce annualized return on average assets an estimated 8 basis points industry wide, the NCUA said during its monthly board meeting Tuesday.
The assessment will also cause 335 federally insured credit unions to experience negative core income solely due to the assessment, the agency said.
The federal regulator anticipated annualized ROA will fall from 0.89% to 0.81% after the corporate assessment is paid by federally insured credit unions.
All numbers are based upon March 31 call report numbers, said Director of Examination and Insurance Larry Fazio, because June’s call report figures aren’t yet finalized.
Credit unions with less than $10 million in assets will be affected the most, with aggregate ROA falling from 0.07% to -0.01%. Credit unions with $10 million to $100 million in assets will fall to 0.36% ROA, and the $100 million and up peer group will see their annualized ROA fall to 0.88%, the NCUA said.
Additionally, 46 credit unions are expected drop below 7% net worth, subjecting them to the earnings retention requirement of Prompt Corrective Action. Fifteen credit unions would drop below 6% net worth, which would require them to prepare a net worth restoration plan, and one credit union’s net worth would fall below 2%.
The 2012 assessment close the door on medium-term NCUA Guaranteed Notes that re-securitized corporate legacy assets; the two remaining notes mature in October and November 2012 and will require approximately $3.5 billion in payments to investors.
In addition to the $790.5 million 2012 assessment, the TCCUSF will have to borrow $1.87 billion from the Treasury.
Fazio said the cash flow requirements for legacy assets will “reach a high point” in 2012, and future assessments will be used primarily to pay off Treasury borrowings and any losses that exceed estimates on remaining NGNs. After the NGNs mature this fall, the TCCUSF will owe the U.S. Treasury $5.1 billion.
The estimated 2013 corporate assessment will be announced in November, Fazio said.