The NCUA's corporate stabilization Webinar presenters provided insight today regarding the agency's analysis of corporate investment portfolio values.
The NCUA's conservatorships of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union last Friday were prompted in part by a report produced by account management firm PIMCO, which was hired by the NCUA to conduct an independent valuation of the investment portfolios of each corporate.
That report and the agency's own analysis revealed that the two corporates had "credit losses that far exceeded their capital," said NCUA Executive Director David Marquis.
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However, both corporates had filed financial reports in 2009 that stated otherwise.
The difference? Due diligence.
"The reason why we revised the loss-reserve estimate was because we stepped up our due diligence over the issue," said Melinda Love, director of the NCUA's Office of Examination and Insurance.
"We completed a detailed review of all corporate-owned mortgage-backed and asset- backed securities, applied stress testing in various scenarios, analyzed market trends and actions by ratings agencies, and factored in a comprehensive review from PIMCO," Love said. "That increased due diligence allowed us to refine our estimates."
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