Deposit insurance fund sees profit

Local credit union executives learned a bit of good news last week.

The National Credit Union Share Insurance Fund — which provides deposit insurance to members when their credit union fails — turned a year-to-date profit of nearly $23 million in the first quarter, according to a preliminary report released by the National Credit Union Administration last week.

It was earlier expecting a $163 million year-to-date loss.

For area credit unions, it could mean that they'll have to pay less in assessments to replenish a fund that was hit hard last year by the failure of two big corporate credit unions, including U.S. Central in Lenexa.

But credit union executives said they aren't banking on maybe.

"We're waiting for NCUA to project... what's going to happen," said Bob Corwin, CEO of Meritrust Credit Union, the largest credit union chartered in Kansas.

Corwin said there are still too many variables in play for his credit union to budget 2010 as a year in which the $659 million credit union could pay as much as 40 cents on the dollar in assessments, based on their assets.

Those variables include whether the recession is truly over, if housing values will improve and if delinquencies continue to fall.

"We're all trying to make educated guesses," Corwin said.

Jim Holt, president of Mid American Credit Union, said his $152 million credit union is having a good year so far. But like Corwin, he said there are still a lot of uncertainties regarding continuing credit union failures and macroeconomic concerns such as terrorism and Greece's debt situation and their effects on the broader economy.

"If my board asked me today, I'd say we're going to be conservative and continue to set money aside," Holt said. "There's just so many things going on out there.

"It's better to say we've got more money than we need."

Corwin said seeing some relief in assessments is particularly important to credit unions. That's because as nonprofits, earnings are the only way they can increase their capital.

Holt said Mid American has been aggressive in budgeting for high assessments this year. The news about the gain in the insurance fund is positive, he said.

But he will wait until the end of the year gets closer before he will relax the credit union's posture toward assessments.

"I don't think you know until you get there," Holt said.