Corporates Release Year-End Numbers
At least five corporate credit unions had posted their unaudited December month-end financial statements online as of press time: the $21 billion Western Corporate Federal Credit Union, the $8.5 billion Southwest Corporate Federal Credit Union, the $3.3 billion Corporate One Federal Credit Union, the $2.2 billion Corporate America Credit Union and the $1.9 billion Corporate Central Credit Union.
The first three reported net losses, the second two net profits. However, all reported better bottom lines than in 2008 audited statements.
The extent of U.S. Central's losses wasn't apparent until after its March 2009 conservatorship, but accounting standards led most retail corporates to record some or all of U.S. Central's capital losses in 2008, reducing their 2009 loss burden.
And though corporates are predicting foreclosures will sink housing prices further in 2010 and communicated new concerns about monoline insurers, housing markets had stabilized by late 2009.
WesCorp, Southwest Corporate and Corporate One reported losses as a result of recent investment portfolio reviews. But all three are reporting half to significantly less than half of 2008's red ink.
Corporate America is reporting a nearly $10 million net profit for 2009, after taking a $22 million net loss in 2008. Corporate Central also claimed a nearly $10 million net profit for 2009, after a $63 million net loss in audited 2008 income statements.
As bad as WesCorp's 2009 $1.19 billion net loss sounds, it pales in comparison to the $7.74 billion lost in 2008. December's financial statements included a new $328.5 million net loss as a result of new other-than-temporary impairments on WesCorp's securities portfolio.
Of the new $335 million OTTI, $205.7 million was attributed to already impaired securities that had worsened, and $106 million were securities impaired for the first time. Another $23.5 million was lost to bad collateralized debt obligations investments. Also of note in December's portfolio review was WesCorp's first OTTI on a commercial mortgage-backed security.
Southwest Corporate reported a $226 million net loss for year-end 2009, the result of writing off its remaining $19 million at U.S. Central and taking new $84 million impairments against its MBS portfolio.
The losses resulted in a $134.6 million retained deficit as of Dec. 31, which Chief Financial Officer Melissa Wardell said will be eliminated in January. The accounting entry will increase Southwest Corporate's cumulative capital depletion to nearly 73%, leaving just $106 million in member capital accounts.
The new MBS losses are the result of mortgage modification efforts, which the corporate said are expected to be largely unsuccessful, and will only draw out and increase the cost of inevitable liquidations.
Southwest Corp said those same factors should have a similar effect on U.S. Central's investments, leading the Dallas-based corporate to believe U.S. Central will eventually write off all member-contributed capital. That was the reason behind the decision to write off 100% of U.S. Central capital before the Kansas City-based corporate releases its own financial statements.
Struggling monoline insurers became a larger concern after Ambac Financial Group, which represents the largest Southwest exposure, reported in November it may seek bankruptcy protection. As a result, Southwest reduced its degree of reliance on Ambac to 90%. The corporate had previously recorded OTTIs due to decreased reliance upon monoline insurers Syncora and FGIC. The two insurers together represent only half as much exposure as Ambac does at Southwest Corp.
Corporate One recorded an additional $3.5 million in OTTIs for the month of December, after impairing nearly $30 million the previous month, saying Clayton Holdings identified some new securities that would likely suffer additional losses.
"Corporate One decided to write down these OTTI charges in December to expedite our ability to provide our members our audited financials quickly and to transition reporting our OTTI on a biannual basis, to a quarterly one," said Lee Butke, president/CEO.
Despite the new losses, the Columbus, Ohio-based corporate stuck by its previous statements that it will not have to impair member capital to cover losses. Corporate One reported $23.6 million in RUDE as of Dec. 31.
U.S. Central litigants Corporate America and Corporate Central are among the privileged few in a better capital position than before U.S. Central's conservatorship. Corporate America raised more than $40 million in paid-in capital during 2009 and reported more than $67 million in Tier 1 capital as of Dec. 31.
Corporate Central completed a successful "PIC 50" campaign in 2009, as members converted half of their member capital share deposits to Tier 1 PIC to the tune of $47 million. Nearly $88 million in MCS and another $12.5 in retained earnings put Corporate Central in a good position to meet the NCUA's proposed capital requirements.
Members United Corporate Federal Credit Union released some preliminary 2009 year-end financials but did not include the all-important results of its most recent securities portfolio valuation. The corporate said it probably won't release year-end figures until April 30, 2010.