The three, along with the $30 billion U.S. Central FCU and the $19.3 billion Western Corporate FCU, own all of the securities that make up the NCUA's $50 billion legacy assets plan. However, the NCUA said the three were not seized merely to implement the plan.

Rather, Deputy Executive Director Larry Fazio said the NCUA conducted a comprehensive analysis of the entire corporate system with the assistance of the Federal Reserve, U.S. Treasury and “lots of bonds experts.” The analysis revealed the five corporates were not viable.

Further, Fazio told credit unions during a Sept. 27 virtual town hall meeting that the five shared four characteristics: book capital close to or less than zero; NEV ratios less than negative 9%; potential for further impairments of capital; and no prospects to become adequately capitalized without NCUA intervention or assistance.

Fazio also revealed that Members United and Southwest will probably lose their remaining member contributed capital in September financial reports because the NCUA's intervention will trigger a conversion of investments from “held to maturity” status to “available for sale,” prompting new OTTI charges.

According to 5310 reports, Southwest Corporate reported $86 million in capital as of June 30, which consisted of $107 million in membership capital accounts less a $20 million retained deficit. Members United reported $23 million in total capital in June, which included $13.6 million in membership capital plus nearly $10 million in retained earnings. According to the Warrenton, Ill.-based corporate's own August financial reports, it had replenished member capital accounts to $14.5 million and retained earnings to $15 million for nearly $30 million in total capital.

The $1.2 billion Constitution Corporate FCU reported a $24.5 million capital deficit as of June 30, according to 5310 reports.

Business will continue as usual in the three newly seized institutions to enable them to continue to provide products and services to members who depend upon them, Fazio said.

Four of the five seized corporates received bridge charters, where nonlegacy assets will reside for two years while members decide whether to remain with the bridge corporate and recapitalize it, join another corporate or use processing services from outside the credit union industry. After two years, members must recapitalize or NCUA will resolve assets through liquidation or purchase and assumption.

Constitution Corp did not receive a bridge charter. NCUA Chairman Debbie Matz said in a Sept. 24 press conference that Constitution Corp “only really has one big member” and would make a good merger candidate once legacy assets are removed. NCUA will seek a merger candidate and resolve Constitution Corp by purchase and assumption.

Credit Union League of Connecticut President/CEO Tony Emerson didn't have much to say about the NCUA's decision to not grant Constitution Corporate FCU a bridge charter. The lack of bridge charter eliminated the possibility members could recapitalize their cooperative.

When meeting with league members this year, Emerson said he “didn't hear one single person volunteering to recapitalize Constitution.”

“Here in the Northeast there are a lot of corporate credit unions-we have Eastern, TriCorp and Mid-Atlantic in the area, plus we have the FHLB Boston nearby, so there are a lot of options,” he said. “We're good to go. Nobody will suffer.”

The other four seized corporates have had the word “bridge” added to their names. For example, WesCorp is now referred to as WesBridge.

WesBridge CEO Philip Perkins began using the term Sept. 24 in an e-mail communication to members regarding the NCUA's actions. He said the transformation to WesBridge would be seamless and would not “require any action or steps on your part.” Perkins also encouraged members to keep their funding and certificates with WesBridge.

“Until these 'legacy assets' are successfully re-packed or securitized and permanently funded, as expected later this fall, a stampede of funding withdrawal from you could still precipitate selling of way underwater bonds and locking in of losses, with attendant costs hitting the system via the insurance fund,” Perkins wrote. “Not forced selling has avoided additional billions of assessable losses since March 2009, thanks to our members.”

Fazio did reveal one change in bridge corporate operations during the town hall meeting. While bridge corporates will continue to provide liquidity funding, only terms to six months will be made available to member credit unions. If credit unions require additional funding, Fazio said the Central Liquidity Fund is still available, and NCUA will work with liquidity-strapped credit unions to access other funding sources like regional Federal Home Loan Banks. Members with existing loans will retain their terms, unless those terms exceed the 24-month window granted to bridge corporates by the NCUA.

NCUA spokesman John McKechnie confirmed that only seized corporate CEOs and volunteers were shown the door by the agency. Dismissed CEOs include Members United's Joseph Herbst, Southwest Corporate's John Cassidy and Constitution Corp's Robert Nealon.

Charles Furbee, who retired from the Federal Reserve Bank of Chicago in March 2004, has been named CEO of the new Members United Bridge Corporate. According to the central bank's 2003 annual report, Furbee's last position was senior vice president of the Chicago Fed's financial services group.

Retired Genisys Credit Union President/CEO Dianne Addington was named CEO at the seized Southwest Bridge Corporate. Addington, who retired earlier this year, put in 22 years as CEO of the $1.3 billion Genisys, headquartered in Auburn Hills, Mich.

Constitution Corp Vice President Bill White has been named interim CEO of his corporate until a merger partner is found, NCUA said at the town hall.

–[email protected]