In an effort to keep members informed, the $9 billion Members United Corporate Federal Credit Union provided members three different loss scenarios yesterday.
Scenario No. 1, assuming no additional OTTI and 23% U.S. Central MCS impairment would lead to a 9% depletion of member capital shares. However, scenario No. 2 would build in full impairment of the remaining $155.5 million investment in U.S. Central MCS, resulting in a 41% capital depletion for Members United. Finally, thought the corporate does not have figures back from its auditing firm yet, it estimated a 62% MCS depletion if a $100 million other-than-temporary-impairment hit was taken; Members United Senior Vice President of Marketing Vic Vrigian emphasized that this figure was purely for illustrative purposes though.
As of May 31, Members United reported a $1.2 million retained deficit, resulting in a core capital ratio of -0.46%. However, $480 million in member capital shares and $79 million in paid-in capital still remain.
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Management cautioned members that many variables exist, including disparities among ratings agencies that further muddle forecasting. To illustrate, Members United released two graphs to represent current securities ratings.
"Using the highest ratings, 14% of the portfolio is below investment grade. Using the lowest ratings, 49% of the portfolio falls below investment grade," the Warrenville, Ill.-based cooperative stated.
U.S. Central's estimated audited financial statement release dated July 10 will likely result in Members United being unable to provide its own statements in time to meet members' June 5300 reporting deadlines. "As a result, it is possible credit unions will wait until the third quarter of 2009 before recording impairment related to capital investments held at Members United," the report said.
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