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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 17, 2009

April 17, 2009, Alexandria, Va. – The National Credit Union Administration (NCUA) today issued a summary of the Pacific Investment Management Company LLC (PIMCO) analysis of residential mortgage backed securities held by corporate credit unions.  The summary is available online at http://www.ncua.gov/CorporateStabilizationProgram.html.

Chairman Fryzel stated, “Though NCUA cannot divulge PIMCO’s proprietary techniques and valuations of specific bonds, the summary released today addresses the depth and scope of their analysis.  PIMCO’s expert understanding of the complex bond structures, robust modeling techniques, and knowledge of market and economic conditions enabled development of high quality assumptions.  As a result, NCUA is able to have a high degree of confidence for the range of expected credit losses on the distressed securities.

“NCUA continues its review of the almost 500 comments received for the Advanced Notice of Proposed Rulemaking on corporate credit union regulatory reform.  I have made a commitment to the Administration, to Congress and to the credit union system that NCUA will undertake a broad and comprehensive reform of the corporate system.  We have initiated a rulemaking process that will yield results.”

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 review of all private label mortgage backed securities by Clayton Fixed Income Services, Inc., is underway at both U.S. Central and WesCorp.  These reviews were important 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.  Though NCUA used PIMCO to supplement NCUA’s own analysis, receipt of Clayton’s review of expected credit losses will have the added benefit of helping to more fully inform NCUA of projected loss exposure for the share insurance fund.  The goal remains to have Clayton’s analysis for each corporate credit union by late April or early May for posting March 31, 2009 financial statements.
  • Liquidity remains stable.  Credit unions have demonstrated substantial support for corporate credit union liquidity to date.  As a result of this support corporate credit unions have replaced essentially all external borrowings with more stable in-system funding sources, decreasing the reliance on external funding by $22 billion since December 2008.  Seasonal outflows of funds typically occur in April and May, and again later in the year, so it is important credit unions continue to support the corporate stabilization initiatives designed to increase and safeguard natural person share deposits in the corporate system.
  • Extensive reviews of all contracts and third-party relationships continue.  To date since the corporate credit unions were placed into conservatorship, 15 contracts for a total of $5.8 million were canceled at U.S. Central and 7 contracts for a total of $0.8 million were canceled at WesCorp.
  • Comprehensive reviews of the operations of each corporate credit union are ongoing.  The conservatorship management teams continue to make adjustments to staffing and business lines to ensure operational efficiency.  Corporate fleet vehicles for the former CEOs were sold.  Any political fundraising and lobbying efforts the corporate credit unions were involved in have been discontinued.
  • Member communication and outreach efforts continue.  The following is a summary of communications efforts for each corporate credit union:
    • U.S. Central - Periodic member teleconferences continue.  Teleconferences were held on March 21, 24, and 31 and on April 14.  The next scheduled in-person member meeting is on April 29, 2009. 
    • WesCorp - Member teleconferences scheduled for Tuesday, Wednesday, and Thursday each week began on April 15 and will continue through May 15.  Webinars and teleconferences were held on March, 24 and April 7.  Town hall meetings at member credit union locations are in process of being scheduled.  The annual meeting is scheduled for May 19, 2009.

OTTI Charges
NCUA will be issuing guidance on any extinguishment of paid-in-capital and membership capital accounts at corporate credit unions when the March 31, 2009, financial statements for WesCorp and U.S. Central are released.  These financial statements will reflect the Other-Than-Temporary-Impairment (OTTI) charges that will be necessary to comply with generally accepted accounting principles and satisfy audit requirements.

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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