WASHINGTON-New analysis by Co-Ops for Change has found that U.S. Central FCU's losses are likely to be far less than projected, and that the NCUA guaranteed notes balance is currently over-reserved by $10 billion.
According to a statement released by Co-Ops for Change, if NCUA assesses credit unions another $1 billion, it would increase collateralization of the NGNs to 154%, from the current 149%. Today there are $27.3 billion in investments plus $4.1 billion of prior TCCSF premiums available to cover the last published NGN balance of $21.1 billion-more than $10 billion in excess coverage.
Co-Ops For Change said its latest analysis of the spreadsheets of the five corporates that failed and were placed into conservatorship shows more than $5 billion in unused loss write-downs, saying it is feasible that natural-person credit unions could recover some funds.
The affected securities have continued to pay principal and interest, and just from interest alone, the release pointed out, the income from the securities adds up to nearly $50 million per year-even if losses ultimately are very close to the final numbers, the earnings in the interim will help offset original projections.
In an earlier statement, Co-Ops for Change indicated that the June 30 update of U.S. Central's securities shows that of the total $3.5 billion other-than-temporary-impairment (OTTI) future loss estimates, more than $2.3 billion is still unused. The $3.5 billion is from the June 2010 balance sheet, which also showed positive capital of $310 million, after these losses were expensed.
The released analysis said it found that the investments taken for NCUA Guaranteed Notes (NGN) collateral in October 2010 was $19.4 billion, and as of the June 2013 updates, this principal had been reduced by $7.5 billion. "Of this amount, $6.3 billion is from principal pay-downs and $1.2 billion from incurred losses, which are covered by the OTTI reserves," Co-ops for Change said.
'Assumed The Worst'
Co-Ops for Change alleges NCUA "assumed the worst" and loss estimates were projected during the depths of the financial crisis, and that the OTTI losses have yet to be realized.
"The findings in this analysis should magnify the importance and critical need of having NCUA leadership that places cooperative principals and capabilities at the foundation of its decisions," said Chip Filson, chairman of Callahan and Associates. "This is an opportunity for all to learn from the past and strengthen our industry as we plan for our future."
Co-Ops for Change is a website created by Filson, with a stated goal of re-orienting credit unions, including NCUA and the political process of board appointments, back toward the Seven Cooperative Principles.
