Corporate Credit Union Update
August 7, 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). Both WesCorp and U.S. Central have
been effective in managing the seasonal liquidity pressures that occur during
this time of the year.
A summary of the liquidity situation is as follows:
- As
noted in NCUA’s July 31, 2009 Media Advisory, the CLF transferred its funds
($1.8 billion) on deposit at U.S. Central to the U.S. Treasury and invested them
in a laddered portfolio of U.S. Treasury securities (see
http://www.ncua.gov/news/press_releases/2009/MR09-0806a.htm).
This action was necessary to preserve the CLF’s borrowing authority, which is a
vital resource in meeting the liquidity needs of the credit union system given
the current economic challenges. NCUA will hold a webinar Monday, August 10,
2009, to provide background information about the CLF’s recent change to its
investment policy and pending transfer of CLF stock ownership from U.S. Central
to other credit unions
(see http://www.ncua.gov/news/press_releases/2009/MR09-0806a.htm).
- Aided by the
Temporary Corporate Credit Union Liquidity Guarantee Program, U.S. Central has
established $8.8 billion in contingent borrowing capability. U.S. Central has
$10.8 billion in borrowings either directly from NCUA ($5 billion) or from
natural person credit unions through the Central Liquidity Facility (CLF) under
the Credit Union System Investment Program ($5.8 billion). U.S. Central is
maintaining $7.8 billion in cash and cash equivalents as available liquidity.
- WesCorp has $7.5 billion in borrowings either directly from NCUA ($5 billion) or
from natural person credit unions through the CLF under the Credit Union System
Investment Program ($2.5 billion). WesCorp is maintaining $5.4 billion in cash
and cash equivalents as available liquidity.
- The goal continues to be to
transition U.S. Central and WesCorp from use of NCUA and CLF borrowings to being
fully funded by member shares or borrowings in the market. The rate of
amortization of each institution’s bond portfolios and the level of liquidity
support provided by member credit unions are the primary factors in how quickly
this goal can be achieved. It remains essential that credit unions continue
supporting the liquidity needs of the corporate credit union system to ensure an
orderly and least cost resolution for the corporate stabilization program, the
costs of which are borne by the Temporary Corporate Credit Union Stabilization
Fund (TCCUSF). All federally-insured credit unions will be assessed premiums
over up to 7 years to repay costs incurred by the TCCUSF.
Guarantee Update
Under
delegated authority, the expiration date of NCUA’s Temporary Corporate Credit
Union Share Guarantee Program is being extended from September 30, 2011 to
December 31, 2011. With this extension, new investments with maturities of two
years or less in participating corporate credit unions made before December 31,
2009 will be fully covered by the guarantee program. This is in addition to the
existing deposits already covered.
Audit Update
Discussions continue between U.S. Central and its external auditors (Deloitte &
Touche) regarding the 2008 financial audit. The delay in the audit involved the
manner of access as part of U.S. Central’s audit to PIMCO’s analysis of U.S.
Central’s bonds, which PIMCO conducted on behalf of NCUA as regulator. NCUA,
PIMCO, and Deloitte & Touche were able to come to an agreement for review of
PIMCO’s analysis under specific control conditions. The auditors are
assimilating PIMCO’s analysis of the bonds and working with U.S. Central’s staff
to finalize the audit assessment. The NCUSIF’s 2008 audit, also conducted by
Deloitte & Touche, will be completed once U.S. Central’s audit and a related
FASB Interpretation No. 46R analysis (i.e., FIN 46R) are finalized.
OTTI Update
The impact on the Temporary Corporate Credit Union Stabilization Fund (TCCUSF)
of the additional Other-Than-Temporary-Impairment (OTTI) charges for the second
quarter of 2009 at U.S. Central and WesCorp is being evaluated. U.S. Central
recorded OTTI charges totaling $537.0 million for the second quarter of 2009,
resulting in a reduction of remaining Member Capital Shares (MCS) to 37% of the
original balances. OTTI charges have fully exhausted Paid-in-Capital (PIC) I and
PIC II balances and depleted MCS by $789.4 million, resulting in an MCS balance
of $452.1 million as of June 30, 2009. WesCorp recorded OTTI charges totaling
$541.1 million for the second quarter of 2009. OTTI charges have fully exhausted
all PIC and MCS balances, and created a retained earnings deficit of $4.3
billion as of June 30, 2009. Both corporate credit unions have communicated this
financial information to members.
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 90 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.