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Failed Institution a Viable Entity

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Mortgage Daily

                                                 January 14, 2009

A $34 billion corporate credit union that was seized earlier this year has been classified as a viable entity, according to newly released financial statements.

In March, U.S. Central Federal Credit Union was placed into conservatorship by the National Credit Union Administration Board. The move followed a detailed analysis and stress test in January on asset-backed securities that found an unacceptably high concentration of risk at U.S. Central.

The Lenexa, Kan.-based institution had no individual members; it served and was owned by 26 retail credit unions. Assets stood at $34 billion as of its failure.

On Friday, the NCUA said that an audited financial statement for 2008 had been prepared and issued by Deloitte & Touche.

“We are aware that the circumstances surrounding the preparation of the report were complicated and delayed its release,” NCUA Chairman Debbie Matz said in the statement. Matz was nominated by the Obama administration and sworn in as chairman of the regulator on Aug. 24.

U.S. Central is a viable institution as long as it has NCUA assistance, the statement said. The firm has taken steps to stabilize its balance sheet and improve operating efficiency. It has cut 2009 expenses by one-quarter.

But the company’s members have lost all of their paid-in capital, the NCUA said. In addition, 64 percent of membership capital is gone.

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