PLANO, Texas – Southwest Corporate FCU reported yesterday it realized more losses in December, creating a $7.9 million loss for 2008.
The red ink, which compares to net income of $30.8 million for 2007, was caused by $78.5 million of losses on the $9 billion corporate’s investments.
Southwest said the investment losses include $71.8 million of so-called other-than-temporary impairments and a $7.8 million loss on mutual fund holdings, which were offset by a $1 million gain on the sale of the corporate’s shares in Visa Inc., and early redemption of U.S. Central share certificates.
December’s results include other-than-temporary impairment of $21.8 million on seven residential mortgage-backed securities and an additional charge of $5 million on previously disclosed unsecured debt issued by Lehman Brothers Holdings. Melissa Wardell, Southwest Corporate’s chief financial officer, said December’s losses represent an additional 10% write-down of its Lehman holdings, which have now been discounted by 60%. For the year, Southwest realized $29.7 million of losses on its Lehman holdings.
After the charges, Southwest is still sitting on $1.2 billion of unrealized losses on its investments. Wardell said they hope to recoup some of the losses in fair value. "We believe that they will recover over time as they mature and pay down," she told The Credit Union Journal yesterday.
Member share accounts at year-end 2008 were $9.4 billion, down 23% from the $12.3 billion of deposits held at the end of 2007. At the end of 2008 Southwest reported members’ equity of negative $512.6 million.
Southwest’s Wardell emphasized that both the corporate’s regulatory capital and retained earnings ratios increased at year-end 2008, to 6.47% and 2.88%, respectively, from 5.57% and 2.50% for 2007. "Both are in excess of regulatory requirements and increased from the previous year," she said.
