WARRENVILLE, Ill. – Even as credit unions are digesting the new legislation that will allow them to stretch the costs of the corporate credit union bailout over seven years, new charges appear to be heading their way in the form of their own corporate’s diminished capital.
At least three corporates; Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU, expect to have their members take write-downs of their capital, and as many as half a dozen other corporates are nearing a similar decision, the corporates reported last month.
That comes as hundreds of credit unions have already written down or are preparing to write down for the second quarter their capital in WesCorp FCU, which will erase $2 billion in capital at 1,022 credit unions before the end of the year.
NCUA also said last week it expects losses at natural person credit unions and the depletion of the reserves at the National CU Share Insurance Fund will have to be replenished by a premium of as much as $1 billion later this year.
The final cost of corporate write-offs won’t be known until U.S. Central reports its financials for 2008, expected some time next month. But most experts expect the majority of U.S. Central’s $1.4 billion in membership capital shares to be exhausted, which will trickle down first to U.S. Central’s 27 corporate members, then to the thousands of credit union members of those corporates.
Members United, for example, told its members it expects to charge between 10% and 42% of its membership capital shares against losses. That means the 2,030 member credit unions will have to charge off as much as $202.3 million of their capital in the regional corporate.
Southwest Corporate FCU told its members it restated its 2008 financial to show a $616.5 million loss, which created a $299.4 million deficit in retained earnings, against just $394 million in membership capital shares. Counting a $1.3 billion accumulated other comprehensive losses, the Dallas corporate has a total members deficit of $891.5 million.
Constitution Corporate FCU reported it will have take a charge of as much as 50% of its $67 million of member capital share deposits after figuring in the losses on its U.S. Central capital and mortgage securities.
The expected charges will temper last week’s good news from NCUA that credit unions will only be charged 15 basis points (0.15% of assets), or $1 billion, this year as the first of seven installments on the $6 billion corporate credit union bailout.
