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U.S. Central depletes capital
LENEXA, Kan. (3/2/10)--U.S. Central FCU's fourth quarter 2009 financials indicate the corporate's other-than-temporary impairment (OTTI) charges totaled $479.9 million for the quarter, bringing OTTI charges for the year to $1.8 billion--and depleting U.S. Central's capital. In addition to depleting U.S. Central's capital, the losses have a $331 million impact on the $1 billion infusion from the National Credit Union Share Insurance Fund (NCUSIF). That means U.S. Central has $669 million left from the capital fusion. "As a result of OTTI charges recorded in 2008 and 2009, U.S. Central's retained earnings have been fully exhausted, and all the PIC (Paid in Capital) and MCS (Membership Capital Shares) have been fully depleted," said U.S. Central's financial statement. "In addition, the NCUSIF capital note has been depleted by $331 million." The loss compares with a net loss of $4.9 billion in OTTI charges for fourth quarter 2008. However the 2008 charges reflect the full difference between amortized cost and fair value. The $497.9 million fourth quarter losses "were caused by further deterioration in many of U.S. Central's consumer-based investment securities, particularly non-agency residential mortgage-backed securities. Included in this amount are OTTI charges of $142.1 million on securities insured by Ambac--one of several insurers of securities in U.S. Central's portfolio." Management, after a review of Ambac, estimates that 80% of projected payments required of the insurer will be received and said it believes that U.S. Central will incur a credit loss on securities where, absent the effects of insurance, a loss of principal or interest is projected. Excluding the OTTI charges, U.S. Central recorded net gains on financial instruments of $16.2 million during the quarter, compared with losses of $27.1 million for fourth quarter 2008. Net interest income totaled $12.7 million for fourth quarter 2009, compared with $95 million for the same period in 2008, a decrease of $82.3 million or 86.7%. Fee income totaled $5.4 million, compared with $4.7 million for fourth quarter 2008. Operating expenses were $13.1 million, a decrease of $4.3 million or 24.5% from the same period in 2008. Assets as of Dec. 31, 2009, increased $8 billion or 29.3% to $35.1 billion. The increase primarily reflects an increase of $12.4 billion in cash held at the Federal Reserve Bank of Kansas City offset by a $1.7 billion decline in investment securities (carried at fair value) and a $2.7 billion decrease in loans.
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