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CU System
U.S. Central posts 537M net OTTI losses
LENEXA, Kan. (8/3/09)--U.S. Central FCU Friday posted $537 million net Other-Than-Temporary-Impairment (OTTI) losses for the second quarter of the year. U.S. Central said that $38 million of the loss is applied to retained earnings and that action reduces net earnings to zero. The remaining $499 million OTTI loss is applied to membership capital share balances. Combined with membership capital share depletions resulting from first quarter of 2009 OTTI charges, that represents a cumulative 63.3% depletion of membership capital shares. At U.S. Central, two of the three available sources of capital--retained earnings and paid-in-capital--have been reduced to zero. U.S. Central also has a $1 billion capital note issued under the NCUA's Corporate Credit Union Capital Stabilization Plan. Excluding OTTI charges of $537.0 million, U.S. Central recorded net gains on financial instruments of $3.8 million in the second quarter of 2009, compared with losses of $4.3 million for the same period in 2008. Fee income totaled $5.3 million for that period, which was nearly the same as a year earlier. Among expenditure savings, U.S. Central reported that operating expenses were $12.4 million, a 21.4%, or $3.4 million, reduction compared to the same period in 2008. Expenses for salaries and benefits decreased from $7.4 million to $5.9 million, primarily as a result of staff reductions and the elimination of incentive compensation, the corporate credit union said in its report. U.S. Central also noted it placed restrictions on marketing, public relations, travel and incidental spending, which resulted in nearly $1.2 million of expense reductions. Not surprising, U.S. Central identified the primary risk currently facing its investment portfolio as credit risk--the risk that assets owned by the corporate, including investment securities, loans and short-term investments, may not pay all principal and interest according to their contractual terms due to the current economic downturn. Use the resource link below to access the full report.
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