Corporate America Liquidates Toxic Assets
The $3 billion Corporate America Credit Union isn't waiting for the NCUA to seize its legacy assets: it's selling them.
"Earlier this year we instituted an internal legacy assets plan, with the objective to liquidate 100% of our non-governmental mortgage-based bonds," President/CEO Thomas Bonds told Credit Union Times.
Corporate America's toxic asset portfolio has shrunk from $140 million late last year to only $21 million as of July 31, and will zero-out within 90 days. Bonds took losses on the private label MBS, but said he also sold performing bonds to offset the red ink. In particular, he said government-backed Federal Family Education Loan Program student loans purchased when the options market was down have sold at a profit.
Bonds credited his ability to liquidate toxic assets to a 1999 decision that reduced portfolio credit risk. Back then, 85% of Corporate America's investment portfolio would be considered toxic. That was reduced to 10% by the time the financial crisis hit, he said.
Director Jim Phillips was on the board in 1999, and said the group didn't "have a crystal ball" that revealed a mounting financial crisis. Rather, the risk reduction was part of a philosophy of doing "whatever it takes" to protect members.
"In this particular case, whatever it takes meant giving up earnings to achieve stability," he said. "And, reducing exposure in U.S. Central, which was tough to do because we genuinely believed in the system, until it failed us," he said.