THE CARDS ARE STARTING TO IMPROVE FOR LAS VEGAS CUS
LAS VEGAS-In another sign of a potential economic turnaround, CUs throughout Nevada, one of the worst-hit states in the recession, are starting to report better financials.
Losses are continuing for the biggest credit unions in Nevada, home to several big failures last year, albeit at much smaller rates. Silver State School CU, the one-time $1-billion credit union under a special assistance regime with state regulators, reported mid-year losses of $13.4 million, compared to losses of $50.9 million for 2009. Clark County CU reported a mid-year loss of $4.1 million, compared to a $25.3-million loss last year. Nevada FCU a $2.8-million loss, compared to a $32-million 2009 loss. Greater Nevada FCU a $900,000 loss, after a $10.9-million 2009 loss. Boulder Dam CU reported a first have loss of $538,000, after a $2.3-million 2009 loss.
The numbers would have been better still for all the federal charters were it not for the second quarter NCUA assessment for the corporate bailout. Nevada FCU had a $790,000 operating net for the second quarter but was pushed into the red by an $880,000 NCUA charge. Greater Nevada had a $480,000 second quarter net erased by a $620,000 NCUA charge.
But one analyst cautioned about the precarious condition of the state's economy. "Unfortunately, the global recession and the extent of the domestic financial problems has taken a big toll on conventions and the gaming industry," said Daniel Penrod, economic analyst for the Nevada CU League, asserting that a recovery in Nevada will have to wait for the recovery in California and other western states.
"Nevada is so gaming dependent, so tourism dependent that until the situation picks up in the surrounding states, Nevada is not expected to see a full recovery," said Penrod.
LOSSES ARE MOUNTING ATCONSTITUTION CORPORATE
WALLINGFORD, Conn.-Troubled Constitution Corporate FCU reported another $1.2 million of losses for June, pushing its NCUA-subsidized prior undivided earnings deficit up to $24.5 million at mid-year.
The so-called PUED is an extraordinary guarantee issued by NCUA that enables credit unions to continue operating without any capital. NCUA has issued similar guarantees for U.S. Central FCU and WesCorp FCU.
Like those two failed corporates and several others, Constitution's projected losses are increasingly growing into actual credit losses. Constitution began experiencing actual credit losses of principal on its residential mortgage related securities beginning in March. The credit loss of principal is measured as a reduction of par value of an investment without receiving a corresponding cash payment. Total loss of principal through June has amounted to $3.7 million.
Based on third party projections it is currently estimated that five bonds may incur actual credit losses during 2010 aggregating approximately $14 million.
Budget-cutting and other moves have returned Constitution to an operating profit-$639,000 for the first six months of the year. But huge investment losses, $184.2 million for 2009 and $142.4 million for the first half of 2009, have erased all of its member capital, rendering the $1.2 billion corporate insolvent-despite the NCUA subsidy.
SELF-HELP FUND TAPS INTO FEDERAL HOME LOAN BANK
DURHAM, N.C.-The Center for Community Self-Help, parent of two leading community development credit unions, said yesterday its Self-Help Ventures Fund has been accepted as a member of the Federal Home Loan Bank of Atlanta, the Bank's first CDFI-affiliated organization allowed under the 2008 Housing and Economic Recovery Act.
The FHLB membership will provide access to low-cost funding for the group's secondary mortgage market program. Previously, only banks, CUs or insurance companies were eligible for membership in the 12 FHLBs. Both of the group's CUs, North Carolina's Self-Help CU and California's Self-Help FCU, are already members of the Atlanta Bank.
Self-Help plans to use the FHLB advances to finance the Ventures Fund's affordable housing home loan program and to spur other types of community development lending.
We have worked for more than ten years to make this partnership possible, and together with the Federal Home Loan Bank of Atlanta, we believe we can provide the financing that will enable thousands of well-qualified homeowners to buy their first homes," said Martin Eakes, head of the Self-Help group.
MORE BIG LOSSES AT BOTH FANNIE MAE, FREDDIE MAC
WASHINGTON-Fannie Mae and Freddie Mac continued deep in the red for the second quarter, setting the stage for congressional debate on the future of the two government sponsored enterprises this fall.
Freddie Mac reported a $6-billion loss for the second quarter, prompting it to request another $1.8 billion of government aid, while Fannie Mae had a $3.1-billion second quarter loss and requested an additional $1.5 billion in government aid. The two requests will make almost $150 billion in government aid for the secondary mortgage market giants since they were taken into conservatorship.
The two companies, which own or guarantee about half of all single family mortgages in the country, are critical partners for CUs because they buy more than half of all CU mortgages, providing key liquidity to the market.
Credit unions are especially concerned about the future of the two companies, which traditionally buy the majority of single-family mortgages originated by credit unions.
The absence of a resolution on the two failed mortgage giants prompted Republican lawmakers in the House and Senate to mass against the recently passed financial reform bill. Congress has scheduled hearings on the two companies for the fall.