The federal government resolved the largest credit union failure in history last week by selling the remnants of Capital Corporate Federal Credit Union to a Pennsylvania institution.
Mid-Atlantic Corporate Federal Credit Union, Harrisburg, purchased Cap Corp's assets, liabilities, and membership base for an undisclosed sum.
No financial assistance from the National Credit Union Administration was needed to facilitate the transfer, said Bob Loftus, agency director of public and congressional affairs.
The acquisition, effective immediately, will take about three weeks to implement, Mr. Loftus said.
The acquisition "gives us the opportunity to increase our economies of scale in payment services area and also in the investment area," said Edward Fox, Mid-Atlantic's chief executive. "It also provided us a unique opportunity to increase membership."
The sale brings to a close a controversial episode in the credit union industry that led to three congressional hearings and will result in tougher regulation of corporates, which act as the industry's liquidity centers.
By acquiring Cap Corp, $983 million-asset Mid-Atlantic gains about $500 million in deposits and new processing equipment, Mr. Loftus said.
Mid-Atlantic also gains a nationwide membership field. Although most of Cap Corp's 438 members were concentrated in Maryland, Washington, and Delaware, it also counted in its ranks members of the National Association of Federal Credit Unions scattered across the country.
Although current Cap Corp members who joined courtesy of their links to NAFCU will be allowed to join Mid-Atlantic, association members that did not belong to the corporate will not be allowed to join Mid-Atlantic, Mr. Loftus said.
Before the merger, Mid-Atlantic served about 900 credit unions based in Pennsylvania.
The agency seized Cap Corp on Jan. 31 after it ran into liquidity problems brought on by losses on mortgage derivatives. Shortly afterward, NCUA sold off the Lanham, Md., institution's entire investment portfolio at a loss of $61 million.
The loss was absorbed by Cap Corp's $37 million in primary capital and wiped out about two-thirds of its "membership capital share deposits" - deposits that were accounted as capital. The 251 depositors will get about $10 million back, the agency said.