LENEXA, Kan. – The continuing fallout of the mortgage crisis is increasingly weighing down the holdings of U.S. Central FCU, which this week reported that its vast portfolio of mortgage backed securities is now underwater to the tune of $2.4 billion, compared to $1.1 billion at year end, and $1.96 billion at the end of March.
But, in its monthly report to members and other business partners, the Central Bank for credit unions insists it will be able to recoup the losses on the securities as the market recovers. “We continue to believe that the net unrealized losses recorded in (accumulated other comprehensive income) represent temporary mark-to-market adjustments related to the current illiquid market for these securities,” Kathryn Brick, chief financial officer for U.S. Central, said in the letter.
The losses represent the market value of non-agency residential mortgage backed securities, versus the book value. But if U.S. Central is able to hold the securities to maturity it would realize the book value and not have to record the losses. At the end of April, U.S. Central held more than $22 billion of mortgage backed securities.
U.S. Central reported net losses of $5.1 million on financial instruments for the month of April.
Net income for the month was $648,000, compared to $7.1 million for April 2007. As a result, U.S. Central reported net income of $8.7 million for the first four months of the year, down from $29.3 million for the same period in 2007.
