The final 2008 year-end numbers are drastically different than unaudited financial reports first released nearly a year ago, as hindsight determined many of 2009's losses actually occurred in 2008. For example, McGladrey & Pullen required a conservative 100% write-off of U.S. Central capital as of Dec. 31, 2008.
The auditor's report mentioned only two exceptions, both expected and beyond the Warrenton, Ill.-based corporate's control. First, if the NCUA discontinues using November 2008 net worth numbers for compliance purposes, Members United would be severely undercapitalized. Also, McGladrey & Pullen included its standard disclosure that reporting member capital as equity instead of a liability, as all credit unions do, doesn't conform to GAAP accounting standards.
There weren't any surprises in Members United's November 2009 month-end financial reports either, which were posted online Dec. 30. As expected, the corporate followed NCUA guidance, depleting member capital to erase its Oct. 31 $147 million accumulated deficit.
The transaction leaves Members United with $138 million in member capital shares and another $1.6 million retained earnings for a 1.68% capital ratio. Capital could take additional hits if the corporate's year-end investment review, expected in mid-February, produces new losses.
CEO Joseph Herbst included a letter to members with the financial reports. In it, he apologized for losses and announced a "fundamental shift" in direction, including "refocusing on core markets" and an emphasis on capital accumulation over growth.
Though he said the corporate "will need an infusion of fresh capital," Members United serves nearly one-quarter of the nation's credit unions, and Herbst said there is still exceptional value in the franchise.
In fact, despite laying off more than 140 employees last year, Members United surpassed 2008's service and processing numbers, Herbst said. The corporate processed 250 million member checks, 200,000 wire transfers, 80 million ACH items, 80,000 coin and currency orders and took 170,000 member service calls in 2009, all well above 2008's activity statistics. And, despite the bad publicity, Members United signed up 10 new members and implemented 500 new product and service contracts.