Credit union deposit insurance still taking a beating
In performing our quarterly checkup of the financials of OnPoint Community Credit Union -- a Portland institution that we watch as a gauge of the local economy -- we picked up on some news that shows the disturbing state of money institutions nationwide: On OnPoint's third quarter profit and loss statement, it took a $3,557,068 hit for an "NCUSIF Stabilization Expense." This charge appears to be of a similar nature to the much larger loss that OnPoint took in the last quarter of 2008, all attributable to the shaky condition of the national credit union deposit insurance system. Since that system has had to bail out a few large "commercial" credit unions that got into serious trouble about a year ago, all members of the insurance pool have had to show losses on their books, and this time around, pay special premiums announced in late September.
And that's not the end of it -- the insurance folks have warned:
Further credit losses are expected for the corporates, and insurance losses will rise, but NCUA is not giving specific estimates for 2010 and beyond, largely because such information may lead to credit unions having to recognize them when they are stated.Boy, doesn't that just say it all about our nation's financial house of cards? "We aren't going to say how bad things are, because then the credit unions would have to tell the truth in their financial statements." The same thing is going on with the banks; they're carrying commercial real estate loans on their books as "performing" even though the underlying properties are under water, with no sign of ever resurfacing. Balance sheets have never been more misleading.
OnPoint currently shows an asset with a book value of $20,093,864 called its "NCUSIF Deposit." This past spring, the book value of that class of asset was suddenly slashed by nearly 67 percent to account for the "commercial" credit union failures up to that point. The big profit that the OnPoint brass had bragged about on their shiny annual report was turned into a loss overnight. One has to wonder whether something bad like that may happen again, not just locally, but throughout the credit union system.
Aside from that alarming news, at least on paper, OnPoint appears to have muddled through the quarter without too much further slippage from where it's been left after the freefall of a year ago. Still, the picture on delinquent debt isn't pretty:
|Item||9/30/08||6/30/09||9/30/09||Quarterly increase (decrease)||12-month increase (decrease)|
|Federal agency securities||$140,786,482||$274,981,426||$267,096,828||(2.87%)||89.72%|
|Total reportable delinquency - total delinquent loans||$14,302,884||$26,526,766||$25,324,131||(4.53%)||77.06%|
|Total reportable delinquency - indirect lending||$977,090||$5,096,962||$5,360,245||5.17%||448.59%|
|Total outstanding loan balances subject to bankruptcies||$9,979,220||$13,911,518||$17,031,887||22.43%||70.67%|
|Ratio of delinquent loans to total loans (percent)||0.63||1.23||1.16|
|Ratio of total delinquent loans to net worth (percent)||5.74||10.67||10.05|
Delinquent loans are those delinquent for two months or more.
Over on the profit and loss side, after taking the special deposit insurance hit into account, OnPoint's year-to-date net income through the quarter ended September 30 was $21,965,019, up 34.51% from the year-to-date figures in the same quarter last year ($16,329,466). For the third quarter alone, however, net income was $3,378,247, down 45.42% from last year's $6,189,580. In the third quarter of 2009, deposits fell from $2,411,602,745 to $2,373,916,394 -- a 1.56% decrease -- after two straight quarters of increases. Deposits a year earlier were $2,221,206,727, however, and thus for the 12-month period ended September 30, deposits were up 6.88%.