DALLAS – Southwest Corporate FCU became the latest corporate credit union to restate its 2008 financials to show a big loss, this one of $624.3 million.
The losses effectively eliminated all of the $10 billion corporate’s $317 million of retained earnings previously reported at year-end 2008, but new accounting rules allowed Southwest to reverse some of the losses on mortgage-backed securities, creating retained earnings of $10 million at April 31.
The large loss was attributed to additional charges of $479.9 million on distressed MBS and an additional $9.9 million charge on corporate bonds issued by the failed Lehman Brothers brokerage, making total charges of $40 million on Southwest’s $49.5 million of Lehman senior debt.
In an additional sign of trouble, Southwest noted that two entities that insure its bonds, Syncora Guarantee and FGIC, are likely to have difficulty paying claims in the event some of the bonds default.
Southwest also recorded an impairment of $127.2 million related to its shares in U.S. Central FCU.
The adjustments pushed a $7.9 million loss for 2008 all the way to a $624.3 million loss after restatement of financials.
The losses have depleted Southwest’s capital to 4.08%, below the NCUA minimum of 5%. However, because of regulatory forbearance allowed by NCUA, all corporates are being allowed to use their November 30, 2008 capital for regulatory purposes, when Southwest’s was at 6.08%.
At the end of April Southwest said unrealized losses on its investments had grown to $1.3 billion.
Officials at Southwest did not respond to requests for comment.
