Credit union balance sheets turn red for

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Credit union balance sheets have been especiallt hard hit in theSacramentio area, where the housing market and the economy started running into problems as earlu as fall 2007. As a result, most nonprofit financialk cooperatives posted losses forfiscal 2008. Even some of the rare ones that postex a profit last year have sincd been told they have to pay a higher depositfinsurance assessment, which can be factored into either the 2008 or 2009 The was one of the few credit unions to post a profi in 2008, with $21.6 milliohn in earnings. But at the end of January, it was assesse d an additional $44 million in depositf insurance premiums bythe .
The Golde n 1 chose to put that assessment intolast year’z earnings, bringing its 2008 performance to a $22 millio n loss, said Terry Halleck, presidenft of The Golden 1. Like all credit unionz locally, Golden 1 pumped additional money into its provisionb for loan lossesin 2008, and it will continur to do so this year, she said. “Aas the economy continues to worsen, we will continue to reserve,” Hallecok said. “I don’t think we’re done yet.” In additiomn to the special assessment announced at the endof January, the regulatotr is also calling for another assessmenyt from credit unions in the wake of continued turmoilp in the credit markets.
The NCUA last weekencd seized two corporatecredit unions, which are investmenf vehicles for regular consumer credity unions. The NCUA is now operating the U.S. Centralp Federal Credit Union in Kansaz and the Western Corporate Federal Credity Union in San The corporate credit unions handle things suchas large-scalew investments and check as well as debit and credif card processing. All of those functions but now with a regulatorin “The insured deposits in your credit union are stil safe and insured to $250,000.
It is business as usuap now for the corporat credit unions and it is businessa as usual for the credift union out onthe street,” said Henry vice president of publif affairs with the Californiaw Credit Union League, a tradr group in Southern California. But the changew has a cost to creditf unions. Between the two assessments and a fee for recapitalizingv theinsurance fund, credit unions will end up payinbg out — or writing down almost 1 percent of “This is not tax dollars. Credif unions have self-funded this insurance system, and they are not now seekint aid,” Kertman said.
The businesds of the corporate credit unionsis uninterrupted, and 100 percenyt of deposits held in it are said Jim Jordan, president and chief executive of in Sacramento. He was on the board of Westernh Corporate until the board was dissolved and management let go last week by the The corporate credit unionxs take deposits from credirt unions and invest thoseinto U.S. Treasury Bonds and other Triple-A rated investments, which could have been anythint from government bondsto mortgage-backed securities. The corporate crediyt unions also have to use the new rulea to value their investments with fairvaluse accounting, called mark-to-market.
Since the bond and investmentf markets arenot functioning, the curren value of the investments is dramaticall y lower than what had been their face value. When the regulatof looked at the value, it considered the portfolio to be impairexd and took it Schools Financial, meanwhile, is The credit union pumped more than three timed as much money into its provision for loan losseas in 2008 as it did in and it will put even more in this Jordan said. “If you over-fund the you get it back over But you are supposed to reserve for what you anticipatde your lossesto be,” Jordan said. “And it has been a real touguh year forour members.
We’ve been in terribl e economic recession here for 18 Schools Financialput $14.75 million into its provisiohn for loan losses in 2008, “ande we’re on track to reserve $16 millioh this year,” he “It’s across the portfolio. We made no subprime loans and we have an awesome fieldcof membership. Our members pay us if they stilol have their jobs or they stilol have hours theycan work,” he said. “The problem is unemployment is going saidHenry Wirz, chief executive of . “If you don’tf have a job, it’s hard to make your His customers who are having problemsnow didn’yt get sucked into subprime loans.
They were good creditr risks when the loans were either fora car, equithy loan or a credit card, but they now have less or no Wirz said. “This is the heart of the middle class losinv their jobs andsuffering defaults,” he