COLUMBUS, Ohio Last year’s merger of Southeast Corporate FCU into Corporate One FCU, creating one of four major surviving national corporate credit unions, was accomplished with up to $15 million of financial assistance from NCUA to help make up for potential shortfalls due to troubled Southeast investments.
The NCUA assistance was in the form of cash and a conditional indemnification agreement to cover losses on certain assets acquired by Corporate One, including underwater private label mortgage-backed securities, Corporate One reported this morning.
The report illustrates that several other corporates were also harmed by the same investment policies, namely investments in private label MBSs, that sunk five corporates, U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
Facing losses on its investments, the $1.5 billion Florida-based Southeast Corporate tried to recapitalize last year but failed to raise enough commitments from members, forcing it to merge into Corporate One. The combination created a $4.2 billion corporate serving 1,100 credit unions across the country.
The fair market value of available-for-sale securities acquired from Southeast was $479.4 million, less than the $543.8 million par value of the securities. Included in these are private-label MBSs with a fair value at the merger date of $175.6 million, compared to a par value of $247.4 million. Corporate One estimates $26.2 million of this is uncollectible.
The merger allowed Corporate One to book a $4.6 million net for 2012, up from $3.1 million in 2011. The merger also added $6.4 million of operating expenses to Corporate One’s balance sheet, which includes one-time restructuring costs and amortization of intangible assets acquired in the merger.
The Southeast merger added $68.6 million of new perpetual contributed capital to Corporate One’s books, giving it $216 million in PCC and a total of $374.2 million regulatory capital. Both figures exceed the minimum requirements to be considered "well-capitalized" under NCUA new corporate regulations.
