LENEXA, Kan. – U.S. Central FCU reported yesterday it has increased the expected charges on its investment portfolio for 2008 from $1.2 billion reported in January to a whopping $3.8 billion.
At the same time, the central bank for credit unions, which was taken over by NCUA March 20, reported that so-called accumulated other comprehensive income, or unrealized losses, surged from $10.8 billion at year-end, to $12.8 billion at the end of the first quarter.
Because of the expected charges for 2008 and for the first quarter of 2009, known as other-than-temporary impairment, all retained earnings and paid-in-capital at U.S. Central have been exhausted, and membership capital shares have been depleted by 23%.
This, however, may be some good news for corporate credit unions, which were told by NCUA on May 1 that 63% of MCS were to be exhausted.
"U.S. Central’s financial results for the first quarter of 2009 picked up where 2008 left off," said U.S. Central in its report. "with additional other-than-temporary impairment charges on non-agency residential mortgage-backed securities."
In an effort to deflect some of the charges, though, U.S. Central said it is opting in early to new mark-to-market accounting measurements adopted by the Financial Accounting Standards Board, which will allow it to add $2.7 billion of the expected charges back to retained earnings, until more of losses are realized.
For the first quarter, U.S. Central has recorded an OTTI charge of $687 million. This represents the projected loss of $918 million of principal, discounted to reflect the net present value.
Through March 31, U.S. Central projects principal shortfalls of $2.3 billion from 229 securities.
U.S. Central recorded a $691.8 million net loss on financial instruments for the first quarter.
A more comprehensive accounting for the corporate’s fiscal 2008 will not be completed until mid-June.
