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For Details, Contact NCUA Public & Congressional Affairs
E-mail: pacamail@ncua.gov
Phone: 703.518.6330

National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Fax: 703.518.6409


Media Advisory

FOR IMMEDIATE RELEASE

Weekly Corporate Credit Union Update -
April 3, 2009

April 3, 2009, Alexandria, Va. – Normal operations continue without interruption at U.S. Central Federal Credit Union (U.S. Central) and Western Corporate Federal Credit Union (WesCorp).  The following items specific to U.S. Central and WesCorp are of note:

  • The conservatorship management teams of both U.S. Central and WesCorp will be releasing information to members regarding the distressed securities each institution holds.  This information will include the CUSIP number and par value for each of the securities.
  • Call volume remains very light, primarily due to upfront communications with members of the action taken.
  • Steps have been taken to ensure ongoing surety bond coverage.  Discussions continued with counterparties to assure them of ongoing operations and to establish future contingent sources of liquidity.
  • Liquidity remains stable.  Seasonal outflows of funds typically occur in April and May, so it is important credit unions continue to support liquidity in corporate credit unions to prevent the selling of distressed assets into the dysfunctional market.
  • Share and certificate dividends remain unaffected, though dividends on Member Capital Accounts (MCA) and Paid-in Capital (PIC) will not be paid.
  • Letters were sent to all members to clarify that the requirement for member credit unions to replenish MCAs has been indefinitely suspended.  Member credit unions will not be required to provide MCA retroactively or based on any retroactive financial measurement.  Further, for credit unions that increase deposits to assist the liquidity position and hold to maturity strategy, those additional deposits will not lead to a future requirement to provide or increase MCA.
  • The conservatorship management teams of both U.S. Central and WesCorp are in the process of finalizing agreements with their external vendors to review all private label mortgage backed securities, to be updated quarterly.  These comprehensive, in-depth, and unfettered reviews will estimate expected credit losses, and on a basis that will allow comparison to the results of NCUA’s assessment of expected credit losses on corporate credit union securities.  The goal is to have the analysis by late April in time for posting March 31, 2009 financial statements.  This analysis will aid in determining the level of Other-Than-Temporary-Impairment (OTTI) charges both corporate credit unions will record, as well as finalizing the outstanding CPA audits.
  • Ongoing communications with member credit unions continue.  In particular:
    • U.S. Central:  Conference calls were held with all retail corporate credit unions.  The next call is scheduled for April 14, and conference calls are slated to occur at least biweekly at the present time.  CEO Nance will hold a town hall meeting for members in place of the annual meeting on April 29, 2009.  The meeting will be held at the Doubletree Overland Park in Overland Park, Kansas.
    • WesCorp:  The annual meeting (with the combined Future Forum) was originally scheduled for May 18-21 at Disneyland.  This will be changed to a one-day town hall meeting to be held at either WesCorp’s headquarters or a nearby hotel depending on expected attendance.  In the interim, a webinar or town hall meeting will be scheduled to discuss the March 2009 financial statements and related impact on member credit unions.  Other events hosted by WesCorp scheduled for later in the year are being re-evaluated.

Chairman Fryzel stated “I have heard and understand the call for additional information on NCUA’s actions to stabilize the corporate credit union system.  NCUA is committed to providing as much information as appropriate and legal, and in the proper manner.  NCUA is providing the respective state supervisory authority with a copy of PIMCO’s loss assessment for bonds held by a state-charted corporate credit union in their jurisdiction.

I am pleased to see that the conservatorship management teams will be proactively releasing information on the securities the institutions hold, which members could have rightfully petitioned to obtain.  I am also looking forward to the results of the independent, third-party assessment each corporate credit union is obtaining on expected credit losses for all distressed securities held by these two corporate credit unions.  As we have already seen with the subset of securities WesCorp allowed their vendor to assess, there is a high degree of convergence with NCUA’s own analysis, supplemented by PIMCO’s analysis, on expected credit losses.  This additional analysis will help NCUA further refine NCUA’s reserve calculations for expected losses to the NCUSIF.

I have instructed staff to prepare for public release a summary of NCUA’s analysis of the securities and of the various third-party estimates on credit losses.  The goal is to have this ready for release in the near future.  The summary will address the current credit ratings of the securities, the internal and external loss analysis conducted by the corporate credit unions, and the source of portfolio risk that corresponds to the expected losses.

Finally, I anticipate having the NCUA Board consider at its April meeting a modification to the corporate credit union share guarantee program.  Based on feedback from the conservatorship management teams, credit unions have been restructuring term deposits to mature by December 31, 2010, the expiration of the current guarantee program.  To facilitate prudent asset-liability management, the NCUA Board is looking into adjusting how term deposits are guaranteed.”

The National Credit Union Administration charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the accounts of nearly 89 million account holders in all federal credit unions and the majority of state-chartered credit unions. NCUA is funded by credit unions, not federal tax dollars.


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