SAN DIMAS, Calif. – The annual report issued by WesCorp FCU last week shows losses so steep that the 1,020 credit union members have virtually no chance of recovering anything on their $2 billion of capital in the failed corporate credit union.
The audited financials show a vast $7.6 billion loss for 2008, three months before NCUA took the one-time $32 billion corporate under conservatorship, making it almost certain the credit unions’ capital accounts are gone for good. The losses have created a retained earnings hole of negative $6.9 billion, according to the annual report, as audited by BDO Seidman LLP.
The release of the annual report comes as credit unions are lobbying NCUA and Congress for a commitment that members of both WesCorp and U.S. Central FCU, also taken over by NCUA, will share in any recoveries from the sale of securities or other actions with respect to the two failed corporates.
But in its annual report, WesCorp said it has derecognized both member capital share accounts worth $929.9 million and paid-in-capital of $213.1 million, as a result of the losses. "MCA and PIC accounts," reported WesCorp, "have been depleted to cover losses that exceeded earnings as of December 31, 2008 and March 31, 2009."
The report paints an ugly picture of WesCorp, the one-time flagship of the corporate network. It shows $7.6 billion of so-called other-than-temporary impairment charges at Dec. 31, which included $5.6 billion of credit losses.
The hole is so deep that NCUA has enacted an emergency prior undivided earning deficit guarantee so that WesCorp won’t be barred from tapping into the public credit markets.
In addition, the failure of U.S. Central trickled-down heavily onto WesCorp, as it did U.S. Central’s 26 other member corporates, with WesCorp writing off $114.8 million of its capital in U.S. Central.
As was expected, WesCorp’s planned acquisition of SunCorp FCU has expired because it was not consummated by April 1. WesCorp spent $1.2 million on the failed merger and SunCorp spent $482,000.
