Auditors Express Doubts On Corporate CUs As ‘Going Concerns’

Credit Union Journal Daily Briefing  |  Thursday, May 20, 2010

WARRENVILLE, Ill. – Losses for corporate credit unions continue to pile up at an accelerated pace, raising doubts about the corporates’ ability to continue as “going concerns” and new questions about whether NCUA will be forced to go back to Congress and seek additional assistance for the corporate bailout.

Growing losses at Members United Corporate FCU have eliminated almost all of the $9.5 billion corporate’s member capital and “raise substantial doubt about Member United’s ability to continue as a going concern,” the corporate’s auditors McGladrey & Pullen LLP, stated in the newly released audit for 2009.

Auditors have already raised “going concern” doubts about U.S. Central FCU and WesCorp FCU, which have been under NCUA conservatorship since March 2009.

Similar going concern doubts were expressed in recent days by auditors for Constitution Corporate FCU, Southwest Corporate FCU and several other corporates as losses in the system continue to expand. Southwest Corporate reported that its growing losses and diminishing capital raise substantial doubt about Southwest Corporate’s ability to continue as a going concern.

Auditors for First Carolina Corporate CU, which has reported diminishing capital, said “there is uncertainty about whether the Credit Union will be able to restore capital to a level necessary to meet the requirements of the new regulation.”

“These letters by the auditors are saying the situation is likely to get worse,” said Charles Felker, vice president at credit union bond house First Empire Securities and a former chief investments officer at NCUA, who urged the agency to seek additional assistance from Congress. “I’m wondering when NCUA will go to Congress and say ‘we need a bailout.'"