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SAN DIEGO — The complexity of collateralized debt obligation values and the effect of U.S. Central’s losses is causing some retail corporates to delay December 2008 financials or release them with an asterisk that indicates future adjustments.The $24 billion Western Corporate FCU’s December unaudited financial statements reported $57.8 million in year-end net income but also $2.5 billion in unrealized losses. WesCorp’s December numbers do not include any other than temporary impairments because it does not yet know if it should take OTTIs, and if so, how large.Chief Financial Officer Jim Hayes said he’s waiting on data to accurately value CDOs, and is also awaiting the results of a portfolio-wide audit.“Each CDO contains approximately 100 underlying RMBS/ABS bonds, which in turn, each have 8,000 to 12,000 individual loans in them,” Hayes said of the process.The $8.8 billion Members United Corporate FCU isn’t releasing its December unaudited financials until late February. Senior Vice President of Marketing Victor Vrigian said his shop is also in the process of determining OTTIs and is also knee deep in an annual audit.“I wouldn’t characterize it as a hold up, but it is an involved process and it does take time,” Vrigian said.Vrigian said Members United will likely take an OTTI for December, although it might be limited to the corporate’s Lehman Brothers exposure.The $9 billion Southwest Corporate FCU went ahead with its year-end financials, announcing nearly $72 million in other-than-temporary impairment charges for the year and a $7.9 million net loss.Lehman Brothers’ unsecured corporate debt accounted for nearly $30 million of the OTTIs. Lehman Bros. hit Southwest twice, forcing it to record an initial loss of about $25 million in September and another $5 million in December. Those numbers reflect an estimated 40% recovery of Southwest’s $49.5 million Lehman Bros. exposure, which is backed up by Fitch Ratings estimates, according to comments released by Southwest that accompany its financials.Additionally, Southwest recorded nearly $42 million in OTTIs from 12 residential mortgage-backed securities, though the corporate anticipates recovering almost half of that amount. Southwest officials were not available for comment at deadline.All three corporates expressed concern during interviews or in officially released comments that U.S. Central’s $1.1 billion net loss and subsequent $1 billion NCUSIF bailout had decreased the value of paid-in-capital and member capital investments.However, NCUA Chairman Michael Fryzel told Credit Union Times that shouldn’t be the case because the NCUSIF replaced it.“Corporates that have capital invested in U.S. Central, that’s still there,” Fryzel said.When asked to confirm that investments (such as share deposits) at U.S. Central are still worth 100 cents on the dollar, Fryzel said they are.The $2.8 billion Southeast Corporate FCU, which was downgraded by rating agency Standard & Poor’s along with six other corporates last month, recorded a nearly $8.5 million net profit for 2008. While Southeast does have exposure to subprime mortgage-backed securities, it does not have any CDO or structured investment vehicle exposure. While earnings from investments were down across the board, the corporate didn’t report any net investment losses or OTTIs.The $1.9 billion Corporate Central CU was downgraded by S&P late last year but nonetheless recorded a $10.5 million net profit for 2008. Corporate Central’s numbers include a $30 million unrealized loss on ABS securities, but the corporate paid out $600,000 in patronage dividends to members for 2008.Corporate One FCU and Constitution Corporate FCU, also downgraded in S&P’s January corporate sweep, have not yet released December 2008 financials.–[email protected]

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