ALEXANDRIA, Va. – Every federally insured credit union will be paying a share of Friday’s takeover of U.S. Central FCU and WesCorp FCU, which will add at least $1.2 billion to the $4.7 billion corporate credit union bailout, NCUA said.
The additional $1.2 billion, which will be assessed credit unions through a premium charged by the National CU Share Insurance Fund, will translate into an additional charge of 10 basis points of earnings and 9 basis points of net worth on average, NCUA said.
That’s on top of the 81 bps being charged for the $1 billion capital infusion into U.S. Central and the $3.7 billion guarantee of all corporate deposits–making a total of 100 basis points to be borne by every credit union.
In addition, NCUA estimates there is another $16.8 billion of potential credit losses on all the corporate credit unions, including U.S. Central and WesCorp, with a most reasonable estimate of $10.8 billion of losses. That means more costs may accrue be added to the corporate bailout.
These estimates were provided by bond experts Pimco Investors, who were hired by NCUA to conduct a thorough review of the investments of U.S. Central and its 26 corporate members. The Pimco report, which reviewed every bond held by the corporates, came out to a staggering 4,500 pages.
Meantime, U.S. Central is expected to open for business this morning with a new management team headed by James Nance, who served as vice president for asset liability management for U.S. Central from 1993 to 1996. Most recently, he's been chief administrative officer at Icap Capital Markets Llc in New Jersey.
Upon taking over U.S. Central, NCUA removed its CEO Francis Lee, the board and supervisory committee.
WesCorp is also expected to open for business this morning with its new president and CEO, Philip Perkins, who NCUA chose to replace Robert Siravo, who was also removed with his board and supervisory committee.
Services offered by the two corporate giants will continue uninterrupted, according to NCUA.
