Now Available: A “Real-Time” Look at Legacy Asset Losses of Constitution Corporate; Reviews of Other Conserved Corporates Coming Soon

WASHINGTON, DC (July 9, 2013) — A new analysis offering insights into the now-liquidated Constitutional Corporate Credit Union and its investment securities/losses is available at Constitution Corporate on the Co-Ops for Change website. It is the first of five analyses to be posted and follows in real time the actual losses on legacy assets of the NCUA-seized corporate credit unions.

“By comparing actual losses versus the other-than-temporary-impaired expenses that were taken out of membership capital and retained earnings, credit unions will be able to make informed judgments about regulatory actions,” said Chip Filson, Founder of Co-Ops for Change and Chairman of Callahan & Associates.

In the case of Constitution Corporate, the analysis shows $598 million in investments with a principal balance of $383 million remaining as of June 30, 2013. The book-value reduction is due to principal pay downs of $215 million, including $55 million in actual/implied losses. This leaves over $100 million in OTTI reserves. An important note is that when Constitution Corporate was conserved in November 2011, all negative equity was due to the OTTI loss reserve.

One interpretation might be that had the Corporate only written off the losses as incurred, it would still have positive equity of $75 million to $100 million, as well as the benefit of the cash flow and earnings from the securities, according to Kevin Heal, Vice President of Sales and Business Development at Trust for Credit Unions.

“In examining the Constitution Portfolio we found that out of the $1.46 billion of securities originally purchased between 2002 and 2007, there has been $55 million in realized losses,” Heal said. “While more losses are expected in the future, it seems that a number of these securities will eventually recover most of their value.”

Filson says pulling the information drawn from the spread sheets allows credit unions to judge whether corporate losses will exceed the reserves that were set up and if collective losses would require premiums above the $4 billion already assessed.

“Constitution’s spreadsheet and analysis offer a starting point for evaluating past actions and future projections,” he said. “The final outcome may be much better than estimated, suggesting the need for a judicious approach in future cases that includes reforming the process.”

About Co-Ops for Change
Co-Ops for Change is a grassroots movement to increase awareness both within the credit union community and among elected policymakers that our regulatory leadership should understand and support the seven cooperative principles. The regulatory process should consider credit unions’ cooperative character, as well as the shared economic value they create for people and communities. Credit union members, volunteers, professionals and industry supporters can learn more about the campaign at

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