LENEXA, Kan. – U.S. Central FCU on Friday reported additional losses of $308.5 million for the third quarter, wiping out another$320.1 million in member capital, which will trickle down to natural person credit unions in the coming weeks and months.
Within hours of the U.S. Central report, Members United Corporate FCU announced it will be forced to deplete its own members’ capital by $51.7 million later this month.
U.S. Central, the one-time $52 billion corporate run under NCUA conservatorship since March 20, reported that $1.1 billion of its member capital shares, or 88.7%, were depleted as of Sept. 30. Over the past 18 months, more than $6 billion of losses accrued by U.S. Central on mortgage-backed securities has wiped out more than $4 billion of capital held by its 27 corporate members, many of which have passed on those losses to their natural person credit union members.
The losses have erased almost $3 billion in U.S. Central capital over the past year and jeopardized a $1 billion emergency loan provided bu NCUA.
The losses on their U.S. Central capital has rendered almost every corporate credit union under capitalized under NCUA’s regulations. The other corporates have only been spared a regulatory takeover because of an extraordinary forbearance order issued by NCUA freezing all corporate capital levels at last Nov. 30, before the losses at U.S. Central began to materialize.
Despite the losses, rendering U.S. Central insolvent, NCUA said it will continue to support the troubled corporate, which provides liquidity for the credit union system. “NCUA stands by its existing commitment to facilitate continued service to its member credit unions,” John McKechnie, chief spokesman for the agency, told The Credit Union Journal Friday. “It also is
providing financial support in the form of the $1 billion capital note that has been in place since January.”
