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CU System
Constitution Corporate OTTI charges at 2.8 M
WALLINGFORD, Conn. (8/10/10)--Constitution Corporate FCU recorded other-than-temporary-impairment (OTTI) charges totaling $2.8 million for the first six months of 2010, according to its unaudited financial statements for June 30. Year-to-date net income for the Wallingford, Conn.-based corporate credit union was $639,000, including the OTTI charges. This compares with a net loss of $63.2 million recorded for the first six months of 2009. The corporate attributed the improvement in earnings to a $61.5 million decline in OTTI charges from $64.4 million in 2009. The National Credit Union Administration authorized Constitution Corporate to operate with special regulatory assistance under a "Prior Undivided Earnings Deficit" (PUED), which segregates the retained earnings deficit to capture permissible accumulated deficit position. The PUED is guaranteed by the National Credit Union Share Insurance Fund. Constitution ended 2009 with a PUED of $25.1 million, which was reduced to $24.5 million as of June 30, as a result of the net income recorded for 2010. Its portfolio ended 2009 with realized and unrealized losses totaling $337.3 million. That amount was reduced by 11.6% to $298.3 million as of June 30. The corporate said that market conditions had firmed, resulting in improved market prices from its independent third-party pricing service. Through June 30, OTTI charges on investments of $122 million on 48 investment positions and $33.9 million of depleted U.S. Central capital were recognized in earnings. Beginning in March, Constitution began experiencing actual losses of principal, totaling $3.7 million, on its residential mortgage related securities. These losses were experienced on two bonds deemed impaired by Constitution and on which OTTI already has been recorded. It is estimated that five bonds may incur actual credit losses during 2010, aggregating about $14 million. For the full report, use the link.


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