ALEXANDRIA, Va. – Last week’s disclosure of the elimination of all capital at U.S. Central FCU means more losses are going to start trickling down to corporate credit unions and to their natural person credit union members in the coming days.
The depletion of the corporates’ capital began in 2008, continued through 2009 and is expected to continue through this year, as illustrated in the more than 500 comment letters received by NCUA on its corporate rule proposal. This comes as NCUA is preparing to charge another assessment for the corporate credit union bailout.
For 2009 a stunning 3,817 credit unions, or just under half of the total, reported losses. That compares with 1,644, or 21% for 2008.
In California, where the failure of WesCorp FCU wiped out $2 billion of credit union capital, credit union giant LBS Financial FCU said it lost $8 million on the WesCorp failure. The $1.6 billion credit union also paid NCUA $1.4 million for its share of the corporate bailout. Redwood CU, which paid a $1.7 million assessment for the corporate bailout, told NCUA it lost $9.7 million on WesCorp. Orange County’s CU, which paid a $3 million NCUA assessment, reported it lost $10.7 million on its WesCorp capital.
Altura CU lost $2.6 million of its WesCorp capital. "This was a severe blow," wrote Mark Hawkins, president of the Riverside credit union, which has been struggling with the region’s battered economy as it is.
In many cases the corporate charges are pushing profitable credit unions into the red.
"The flow down from the US Central and WesCorp failures have devastated our income over the past year and a half," wrote Robert Harris, president of Health Facilities FCU in Florence, S.C., where charges for the NCUA assessment and the write-off of its capital in First Carolina Corporate FCU pushed the $20 million into a $338,000 loss for 2009.
Kemba Louisville (Ky.) CU, which paid an NCUA assessment of $50,000, said it wrote off $264,000 of capital it held in Kentucky Corporate CU and expects to write off more. Calcasieu Teachers & Employees CU in Lake Charles, La., wrote off $265,000 in Louisiana Corporate CU. Whitewater Regional FCU in Connersville, Ind., wrote off $37,000 of its capital in Members United Corporate FCU and expects to write off its remaining $53,000.
Southwest Michigan FCU in Kalamazoo said it is writing off $300,000 of capital it holds in CenCorp CU. Security One FCU in Arlington, Texas, wrote off $465,000 of capital in Southwest Corporate FCU.
Members CU, a $50 million credit union in Cleburne, Texas, told NCUA it would have had a return-on-assets of almost 1% if it weren’t for the corporate charges, which pushed its net down to just $33,180 for 2009. "However, the actions taken by NCUA to place [US Central] and [WesCorp] into Conservatorship due to deteriorating values experienced within ‘their investment’ portfolios, have ultimately made ‘their investment’ losses, trickle down and materially impact Members Credit Union’s bottom line," Paul Elkins, Members’ president wrote in his comment letter.
Maine credit unions were forced to write off capital in their corporate, TriCorp FCU, after the tiny corporate wrote off its U.S. Central capital. Hannaford Associates FCU, a $31 million credit union in Portland wrote off $78,000, and $33 million Casco FCU wrote off $100,000 of TriCorp capital.
The shield of private deposit insurance didn’t insulate Staley CU from the corporate bailout being funded by federally insured credit unions. The $110 million Decatur, Ill., credit union told NCUA it had to write off $840,000 of its capital in Members United and expects to write off the remaining $175,000.
Elsewhere: Oregon Employees CU in Salem, Ore., said it wrote off $1 million of corporate capital; First Class American CU in Fort Worth, Texas, wrote of $345,000 of Southwest Corporate capital; Tri-Cities Community FCU in Kennewick, Wash. wrote off $100,000 of Southwest Corporate capital.
