DALLAS – Heavy investment losses and exposure to losses at U.S. Central FCU is forcing Southwest Corporate FCU to deplete approximately 40% of its member capital shares according to the 2008 audited financial statement the $9 billion corporate credit union released Friday.
Southwest is the third corporate, following Members United Corporate FCU and Constitution Corporate FCU, to announce the depletion of member capital accounts since U.S. Central issued its belated 2008 financials last month.
Southwest said it posted a $692 million net loss for 2008, mostly due to $561 million of losses on investments. That included losses of $522 million on mortgage backed securities and $40 million on Lehman Brothers debt, and a $194 million loss on its U.S. Central capital.
The bleeding has not stopped in 2009 as Southwest posted a $92 million loss through Aug. 31, bumping its retained deficit up to $159 million.
Officials at Southwest said they have been expecting the depletion of capital once U.S. Central issued its 2008 financials.
"For the past several months, Southwest Corporate has been communicating to its members about the possible need to deplete capital from their Southwest Corporate member capital accounts," Melissa Wardell, chief financial officer for Southwest, told the Credit Union Journal Friday. "Now that U.S. Central’s and Southwest Corporate’s 2008 financial audits are complete, that action will take place."
"With this action, credit unions can move past a long period of uncertainty and use this information to adjust their accounts," said added. "Going forward, Southwest Corporate will be working closely with its members to continue its tradition of developing and providing products and services that deliver value to credit unions."
