Mid-Atlantic to acquire troubled Cap Corp


WASHINGTON -- Mid-Atlantic Corporate Federal Credit Union will acquire the assets and liabilities of Capital Corporate Federal Credit Union, according to the federal agency that oversees the nation's 7,700 federal credit unions.

The National Credit Union Administration said yesterday that Mid-Atlantic won't need financial assistance from the National Credit Union Share Insurance Fund insurance to complete the transaction.

Lanham-based Cap Corp's $61 million in losses will be absorbed by all its primary capital and about two-thirds of its secondary, or MCSD, capital. About $10 million in MCSD capital is targeted for return to credit union investors, although future recoveries may be possible, NCUA said.

Cap Corp is a corporate credit union that serves 483 credit

unions in Washington, Maryland, Delaware and New York. Corporate credit unions serve as credit unions' banks. Local credit unions deposit money with them when they have excess reserves and borrow money from them when loan demand is high.

Troubled Cap Corp has been operating under NCUA conservatorship since Jan. 31, when federal regulators took over the day-to-day operations of the $1.6 billion-asset credit union.

In December, Cap Corp froze non-transaction member accounts because of liquidity problems.

Most of the credit union's $61 million in portfolio losses came from its investments in collateralized mortgage obligations, or CMOs. The credit union had more than 60 percent of its assets -- more than $1 billion -- in CMOs. The value of some CMOs the company held plummeted as interest rates rose last year, causing Cap Corp to rack up about $102 million in paper losses at the end of November.

Depositors at Cap Corp's member credit unions include employees of the White House, Treasury and Defense Department.

Cap Corp member credit unions will experience no break in service as a result of the Mid-Atlantic acquisition, said Norman E. D'Amours, NCUA chairman.

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