PLANO, Texas – Southwest Corporate FCU told its members yesterday it expects to take a charge of as much as $194 million to capital as a result of the loss of its shares in U.S. Central FCU.
Southwest reported it has $257 million in capital invested in U.S. Central, including $87.8 million of paid-in-capital and $169.2 million of membership capital shares. NCUA directed Friday that all paid-in-capital and 63% of membership shares in U.S. Central will be exhausted as a result of the failure of the central bank for credit unions.
Southwest told its 1,500 members it is still reviewing the impact of the U.S. Central failure, but member credit unions are expected to have to take a charge based on their capital in Southwest.
Officials with the $11 billion corporate did not return a phone call seeking comment.
Southwest’s report came an hour after Members United Corporate FCU reported it expects to book a $511 million loss due to its U.S. Central exposure and write-downs on its mortgage-backed securities. The losses will deplete the capital of the $9 billion corporate from $866 million to $355 million.
The charges are expected to reduce the capital of both corporates below NCUA minimum capital limits.
Southwest also reported that its mortgage securities continued to deteriorate in March, with unrealized losses on the portfolio growing from $1.2 billion to $1.4 billion. Net income for the first quarter fell by 63% from last year, to $6.1 million.
