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Western Corporate FCU members got their first peek at NCUA-led financials since the institution’s March 20 conservatorship in the form of an early morning May 1 e-mail. It provided them with official confirmation that WesCorp’s paid-in capital and membership capital accounts have been depleted and must be written off.“By application of the terms of account, your MCAs and PIC have been depleted to cover losses that exceed retained earnings, as mandated by Part 704.2,” the e-mail stated. “As a result, member capital accounts and paid-in capital accounts have been reduced to zero balances as of April 30, 2009, and will be reflected as such on the WAVE view of the Member Center and on your April statement.”The result is a prior undivided earnings deficit of $3.7 billion, which is guaranteed by the NCUSIF. WesCorp signed the NCUA’s original Jan. 29 corporate share guarantee agreement, before the conservatorship.The capital depletion was the result of an other-than-temporary impairment as of March 31, 2009, of $5.7 billion, following a $5.6 billion credit loss in its securities portfolio. WesCorp’s March 31 financials already account for its U.S. Central PIC I and II write-down and said it will likely record its U.S. Central MCS write-down in April.Much of the $5.6 billion credit loss was from alt-A and pay-option ARMs, which are often supported by negative amortization. WesCorp also posted a $390 million credit loss on its CDOs, rendering its $420 million CDO portfolio virtually worthless.The financial reports, available on WesCorp’s Web site (www.wescorp.org), include detailed information about the corporate’s securities portfolio, including current ratings and credit losses, broken down by portfolio type.Despite the OTTIs, unrealized losses related to the securities portfolio also soared, up to a total of $6.8 billion as of March 31.Assets have decreased to $20.4 billion, down from almost $30 billion as of March 31, 2008. Key ratios were deeply affected by the regime change, knocking regulatory capital down from WesCorp’s pre-conservatorship calculation of 7.02% as of February month-end to negative 13.71% as of March 31.The San Dimas-based corporate cautioned members that numbers will probably change, because the Dec. 31, 2008 financial statements used to produce the March financials still represent unaudited numbers.The majority of the March OTTI was attributable to the period ending Dec. 31, 2008, WesCorp said in its notes to the March financial statement. As a result, March financial statements are not presented in accordance with generally accepted accounting principles, as those losses should have been recorded as of Dec. 31, and will be included in the audited numbers.Once the Dec. 31, 2008, audited financials have been completed and issued, WesCorp said it will restate January, February and March 2009 financial statements.The credit losses were produced by comparing WesCorp’s estimates with third-party Clayton Holdings’ Independent Pricing Services unit and choosing the more conservative of the two. Almost all OTTI figures were taken from the Clayton estimates, WesCorp said.WesCorp elected to early-adopt provisions of FASB Staff Positions FAS 115-2 and FAS 124-2, effective March 31, 2009. The new guidance separates impairments into the amount of the total impairment related to the credit loss and the amount of the impairment related to all other factors.WesCorp calculated credit loss by using Clayton’s estimated cash flows, which were based upon the current yield for fixed rate securities and used forward yield curve assumptions for adjustable rate securities. WesCorp then discounted those expected cash flows based upon the same forward yield curve discount assumptions that were used to generate the expected cash flows.WesCorp management and NCUA officials scheduled a May 6 conference call to discuss the numbers further with members and take questions.–[email protected]

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