When retail corporates officially told members how badly U.S. Central’s second-quarter losses had damaged their own capital coffers, they received little response.The $1.4 billion First Corporate Credit Union officially shared the news of its 63% PIC impairment with members on Aug. 4. President/CEO Pete Pritts reported at the end of the following business day none of his 56 members had called or e-mailed him to discuss it.Pritts said each time U.S. Central updates its loss estimates, FirstCorp relays the information to its own members and includes the impact the figures will have on the Phoenix-based corporate’s member capital.“The first time, we had to notify members all of our member capital at U.S. Central had eroded, but each time thereafter, the losses were smaller,” Pritts said. “Members were making positive comments that the numbers were getting better with each call, but unfortunately, this time they got worse.”He said even though the news was bad, members didn’t contact him to express concern because “they know the portfolio is impaired and know we all have to work through it.”Additionally, Pritts said because FirstCorp members are located in the hard-hit sand states, they know firsthand how job losses and home values are affecting mortgage-backed securities.Georgia Central Credit Union President/CEO Greg Moore told his members on July 31 that U.S. Central’s losses will trickle all the way down into their own member capital investments. Georgia Central owned $23 million worth of U.S. Central paid-in capital, which has been completely wiped out, and $55 million in member capital shares, now 63% impaired.The cumulative $58 million loss consumes $42.5 million in reserves and undivided earnings, $13.5 million in paid-in capital and $1.9 million worth of member capital shares at Georgia Central. Moore said his members have been very supportive, despite the news.Communication is also a cornerstone of member relations at Georgia Central. Moore said he’s written e-mails, hosted town hall meetings across the Peach State, presented a due diligence Webinar for depositors and has taken the stage at other meetings whenever possible, including league chapter meetings and local councils, to discuss topics like corporate stabilization and U.S. Central exposure.“Most valuable, though, is one-on-one interaction, whether through telephone contact or in person,” Moore said. “In general, we maintain a strong presence in the credit union community, and the face-to-face communication that takes place in thesesettings is vital.”Corporate One Federal Credit Union President/CEO Lee Butke’s message, delivered to members in a letter dated July 31, was among the easiest to deliver in the corporate network: his corporate’s U.S. Central exposure was entirely covered by retained earnings.Despite the additional $16.2 million bite, Butke reminded members their reserves and undivided earnings can absorb a 100% U.S. Central capital write-off with $50 million in RUDE to spare.Lynchburg, Va.-based VACORP Federal Credit Union President/CEO Jim Hansen told his members their MCS will “likely be depleted by 28%” as a result of U.S. Central’s second-quarter losses. However, Hansen said he doesn’t anticipate recording the capital impairment until U.S. Central completes its audit and the NCUA confirms the accounting methodology.Pritts said he’s eagerly anticipating U.S. Central’s audited 2008 numbers, saying the numbers will “remove some of the uncertainty” regarding FirstCorp’s capital restoration plans.“I’m not in the position to ask my members for more capital,” Pritts said. “There’s just too much uncertainty, and the new regulations will define capital requirements.”Pritts said he has confidence the unaudited 2008 numbers communicated so far by U.S. Central will be “pretty close” to what the final audited statements will show. However, he said the pending figures still present an unknown.Moore echoed Pritts, saying he wants to have U.S. Central’s audited statements “in hand” and review new NCUA regulations before replacing capital.“I can say with confidence that there is a future ahead for Georgia Central to meet the needs of its members, even if we don’t know exactly what it will look like today,” Moore said.–[email protected]

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