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U.S. Central 1Q financials reflect more OTTI charges
LENEXA, Kan. (5/3/10)--U.S. Central FCU's latest financial report indicates its projection of losses in existing investments has moderated during first quarter 2010, with total projected losses largely flat with fourth quarter 2009 levels. However, other-than-temporary-impairment (OTTI) charges increased for certain bonds. U.S. Central recorded a $45.4 million net loss for the quarter, compared with $507.3 million of losses in first quarter 2009. In both instances, U.S. Central's net losses were driven primarily by OTTI charges, which totaled $57.7 million and $519.5 million in first quarters 2010 and 2009, respectively. First quarter 2010 OTTI charges of $57.7 million were caused by further deterioration of certain non-agency residential mortgage backed securities. Excluding the OTTI charges, U.S. Central recorded net gains on financial instruments of $3.8 million, compared with $4.7 million for first quarter 2009. "As a result of cumulative OTTI charges recorded through the first quarter of 2010, U.S. Central's retained earnings have been fully exhausted, and all [Paid- in Capital] and [Membership Capital Shares] have been fully depleted. In addition, the Capital Note has been depleted by $650.3 million," the financial report said. The capital note refers to a $1 billion capital note U.S. Central received on Jan. 28, 2009, from the National Credit Union Share Insurance Fund. U.S. Central's regulatory capital ratio and retained earnings ratio, as of March 31, equaled 6.9% and 1.8%, respectively, the same as in March 31, 2009. Using actual capital balances, the capital ratio and retained earnings ratio were 0.9% and 0.0% for first quarter 2010, compared with 5% and 0% as of March 31, 2009. Net interest income for the Lenexa, Kan.-based U.S. Central totaled $14.3 million. That compares with $24.3 million for first quarter 2009--a 41.1% or $10 million decrease. Fee income totaled $6.1 million, compared with $5.4 million in first quarter last year. That marks an increase of $700,000 or 13.4%. Operating expenses were $11.7 million--a decrease of $1.1 million or 8.8% from first quarter 2009. Assets dropped $2.7 billion or 7.7% to $32.4 billion from $35.1 billion as of Dec. 31, 2009. The assets reflect primarily a $2.3 billion decrease in cash held at the Federal Reserve Bank of Kansas City. As of March 31, total funding--excluding capital accounts--was $38 billion, compared with $41.5 billion on Dec. 31, 2009. That is a decrease of 8.4% or $3.5 billion. Within this category, borrowed funds dropped by $5.8 billion, reflecting the repayment of U.S. Central's borrowings under NCUA's Credit Union System Investment Program (CU SIP). Members' share and certificate accounts rose by $2.3 billion. Member accounts remain U.S. Central's primary source of funding, totaling $28.8 billion at March 31. Its borrowings of $164.3 million under NCUA's Credit Union Homeowners Affordability Relief Program (CU HARP) will mature in fourth quarter. U.S. Central owns certain investments securities guaranteed by monoline insurers, including Financial Guaranty Insurance Co. (FGIC) and Ambac Assurance Corp. In fourth quarter 2008, U.S. Central concluded that FGIC had insufficient funds to pay claims. In fourth quarter 2009, it concluded the same for Ambac. OTTI charges have been recorded on securities insured by the two companies. Ambac is expected to pay 25% of required claims but nothing is expected from FGIC. For the full first quarter financial report, use the resource link.


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