Constitution Corp Digs Deeper
When Constitution Corporate Federal Credit Union released its December 2009 financials Feb. 8, reporting an inflated $25.2 million prior undivided earnings deficit, the industry wondered if the $1.3 billion corporate was under conservatorship.
And if it wasn't, why not? After all, the Wallingford, Conn.-based corporate extinguished all member contributed capital back in September 2009.
NCUA Director of Public and Congressional Affairs John McKechnie clarified Constitution Corp's regulatory status, saying the credit union is not under conservatorship nor has it received a capital infusion or any other new financial support.
But like Western Corporate Federal Credit Union, which depleted all member capital in March 2009 and reported a nearly $5 billion PUED as of Dec. 31, Constitution Corporate's $25 million PUED is guaranteed by the NCUSIF.
Constitution Corp reported a $24.4 million other-than-temporary impairment in its December financials, the result of its latest Clayton IPS mortgage-backed securities portfolio review. The corporate said in the release it is working on its internal analysis and may adjust the impairment.
McKechnie said the NCUA is aware of Constitution Corporate's capital status and has been working with its management to pursue a course of action that is least costly to the NCUSIF.
"The credit union remains fully operational and continues to serve its members," he said.
Although most of U.S. Central Federal Credit Union's members have already fully extinguished the wholesale corporate's member capital shares on their own books, U.S. Central reported $139 million worth of member capital shares, and its $1 billion NCUA capital infusion was still intact as of Nov. 30. The Lenexa, Kan.-based corporate has not yet released fourth-quarter financial reports.
The $3.3 billion Southeast Corporate Federal Credit Union also took a big hit in December, reporting a $25 million loss for the month of December, resulting in an unaudited $45.8 million net loss to end 2009.
While losses from U.S. Central and its own investment portfolio extinguished all paid-in capital and reserves in 2009, Southeast Corp reported $64.7 million remaining in member capital shares as of Dec. 31, representing a 24% impairment.
On the bright side, December's OTTIs reduced Southeast Corp's accumulated other comprehensive losses, also known as unrealized losses, from $123 million to $102 million as of Dec. 31. The Tallahassee, Fla.-based corporate has a roughly $300 million nonagency residential mortgage-backed securities portfolio and owns $177 million worth of agency MBS.
Southeast Corporate cut 28 staff positions in 2009, representing nearly 20% of its workforce and resulting in an annualized savings of $2.2 million. None of the positions are member-facing, the corporate said.
The $2.5 billion Systems United Corporate Federal Credit Union recorded an $8.4 million OTTI in December, wiping out its $4.3 million year-to-date net profit as of Nov. 30 and replacing it with a $3.5 million unaudited net loss for 2009.
SunCorp has $60 million plus remaining in member capital accounts but had just extinguished its remaining member paid-in capital and some MCAs in November to reduce its $13 million PUED and impair its remaining U.S. Central member capital.
December's losses bumped SunCorp's PUED back up to nearly $8 million, but unrealized losses decreased to $90 million as of Dec. 31.
The $3.8 billion Mid-Atlantic Corporate Federal Credit Union, which followed a more conservative investment strategy, sticking primarily to agency securities, announced a $6.4 million unaudited 2009 year-end net profit.
Although Mid-Atlantic reported nearly $2 million in unrealized losses as of Dec. 31, the Middletown, Pa.-based corporate has more than $6 million in retained earnings to protect $152 million of member capital accounts from impairment.