TALLAHASSEE, Fla. – Southeast Corporate FCU said it will pass on about $6.1 million in charges from the loss of its capital in U.S. Central FCU to its 430 credit union members.
The $3.4 billion corporate, one of a handful struggling with losses on mortgage-backed securities, said Friday’s announcement by U.S. Central that a six-month loss of $1.1 billion that will wipe out another $500 million of corporate capital will force it to report a $24 million charge on the U.S. Central membership capital shares it holds. The charge will wipe out all of the remaining $18 million of Southeast’s retaining earnings and 30% of its members paid-in-capital, or $6.1 million.
Southeast said the losses will not affect the value of its member capital shares, yet. Through the first six months of the year, Southeast reported a $79.1 million loss.
"However, until U.S. Central releases its 2008 audited financials, these numbers are subject to change," said Rob Schleiter, executive vice president of Southeast Corporate, in a message to members on Friday, hours after the U.S. Central announcement. "A change may impact either or both our 2008 and 2009 financial statements, and may ultimately have a downstream effect on your financial statements."
And Constitution Corporate FCU, another corporate holding large amounts of underwater mortgage securities, told its members yesterday the losses at U.S. Central will force it to charge off 72% of the member capital shares its members own, a total of $48.4 million.
Officials at the $2 billion Wallingford, Conn., corporate, told members they have apprised NCUA of the situation and its effects on its capital.
The news came as Members United Corporate FCU was telling its 2,000 members the U.S. Central action will cause it to deplete $81 million of member capital, as charges to the MCSs they hold in Members United.
Several other corporates are reportedly notifying members of the trickle down of the U.S. Central losses.
U.S. Central reported Friday that an additional $537 million of losses on mortgage securities will trickle down to its corporate members with the elimination of $500 million worth of their MCSs, thereby causing the losses to trickle down further to natural person members of U.S. Central’s 27 corporate member/owners.
