LAS VEGAS — WesCorp laid it all out on the table–literally–providing stacks of financials, copies of Webcast slides and viewer Q&A transcripts for those who attended the corporate's Sept. 23 open ALCO meeting, which kicked off the second day of its Credit Union Outlook conference.
The corporate also brought heavy management artillery to the potentially explosive event, too. President/CEO Bob Siravo, Executive Vice President/Chief Investment Officer Bob Burrell, Chief Risk Officer Timothy Sidley and what appeared to be the rest of WesCorp's top management team lined up two rows deep, panel-style across the entire stage for the meeting. The group took turns presenting financials and detailed investment numbers and fielded some tough, but not angry, questions from members in the audience.
The hottest topic of the day was the state of the corporate's substantial mortgage-backed security portfolio. Burrell reported that on Sept. 17, ratings agency Standard & Poor's said it expects AAA-rated MBS to continue to pay until maturity. Nearly all of WesCorp's MBS were AAA-rated at origination, he added, though the percentage of AAAs has slipped to currently 93%.
As of Sept. 19, a total of 36 securities have been downgraded, Burrell said, representing 5% of the MBS portfolio. Of those 36, 22 remain at investment grade of BBB or higher, leaving 14 securities, representing $610 million, that have fallen below BBB. However, all are still performing on target, Burrell said.
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Of WesCorp's Alt-A securities, 71% are rated investment grade. Around $10 million are currently rated CAA1, but Burrell assured members that the corporate's $800 million in reserves is more than enough to cover potential losses there.
Another topic that generated post-presentation questions was WesCorp's decision to declare its MBS portfolio held to maturity, from its previous position of available for sale. Chief Financial Officer Jim Hayes said the move, intended as a demonstration of WesCorp's strength, has generated so much flack for WesCorp, his team may have decided otherwise had the controversy been added into the equation.
Hayes also maintained that WesCorp had always intended to hold the securities to maturity, but once a security is taken off the market, it can't return. The availability status was a strategy to keep the corporate's options open and isn't unusual among securities investors.
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