Members United Corporate Announces $150 Million Loss for October

In a members-only Webcast the morning of Nov. 20, Members United Corporate Federal Credit Union announced a $150 million net loss for October 2009. The losses were split almost evenly between U.S. Central Federal Credit Union capital losses and other-than-temporary impairments resulting from its own third-quarter Clayton Holdings investment review.An unspecified number of employees also spent their last day as Members United employees Nov. 20, but officials confirmed they were let go as part of a staff reduction move made earlier this year.The Warrenville, Ill.-based corporate wrote off all of its remaining U.S. Central capital in October, amounting to a $74.6 million charge. An additional OTTI of $77 million was recorded from the corporate’s securities portfolio per Clayton’s review.However, the $8.5 million corporate did go against Clayton’s advice in one area. Members United elected to not take an additional $37.5 million OTTI that resulted from Clayton’s determination that cash flow projections fully discount monoline insurer Ambac’s support after Dec. 31, 2010.“While Clayton bases its assumptions on market-driven data, they also recommend their clients make their own determinations, in consultation with their auditors, regarding questions of impairment for securities where principal and interest payments are insured,” management wrote in the notes that accompanied financial statements.Members United, which operates under an NCUA-approved capital restoration plan, said it is in the process of reviewing Clayton’s position and will also complete its own review of regulatory reports released Nov. 18.If the corporate decides to take the OTTI, it may occur at year-end, when Members United said it will finalize its decision on the Ambac-supported securities.Members United also announced it will abide by the NCUA’s guidance to eliminate its Oct. 31 retained deficit as of Nov. 30. The $146.8 million transaction will result in a 50.2% depletion of member capital share balances.Since Nov. 30, 2008, Members United has recorded $308 million in U.S. Central capital impairments and $424.3 million in cumulative OTTI from its investments.–[email protected]