SAN DIMAS, Calif. (12/5/08)--WesCorp FCU has changed its benchmark pricing model on its assets to improve reductions on its balance sheet in light of the turmoil in the economic marketplace, according to its October 2008 Financials Summary. WesCorp’s net income for the first 10 months of 2008 totaled $48.6 million, said the summary. During October, it experienced a $7.4 million increase to retained earnings, comprised of $13.4 million in net interest income and $2.8 million in other operating income offset by $8.4 million in operating expenses and $0.4 million of PIC dividends. That’s $3.2 million above budgeted levels, WesCorp said. Third-party adjustments to the benchmark pricing model resulted in a modest improvement—to $1.7 billion from $1.8 billion in September--of WesCorp’s aggregate unrealized losses in its securities portfolio and hedge positions—a reflection of the markets remaining in turmoil. “We believe the depressed fair values of these investments are largely attributable to the dislocation in the securities market caused by the current illiquidity and credit conditions, and do not accurately reflect the underlying credit quality and likely performance of our holdings,” said the report. The majority of WesCorp’s portfolio continues performing well and retaining high ratings. “Since WesCorp has the ability and intent to hold those investments most impacted until a price recovery occurs or until maturity, those investments are not considered by management to be other-than-temporarily impaired,” said the summary. In March, WesCorp redesignated $9.7 billion in “available for sale” securities to a “held to maturity” classification. As of Oct. 31, these securities amounted to $9.3 billion. Of the $1.7 billion in unrealized losses, $653 million was related to held-to-maturity securities. The reclassification reflects WesCorp’s intent and ability to hold the securities to maturity, as well as the lack of an active market in the specific securities, the corporate said. WesCorp said it is continuing to conduct monthly cash flow analysis on its holdings and performing impairment testing quarterly, and is being proactive in seeking external validation of its due diligence. It noted that collateralized debt obligations (CDOs) still are returning principal and interest in full, but credit support has eroded. “As a result, we may record other-than-temporary-impairment related to certain of our CDO holdings at some point in the future, given the continuing deterioration and the stressed market environment.” WesCorp owns 10 CDO securities totaling $550 million--slightly more than 2% of its portfolio. WesCorp also moved to Level 3 pricing on some portfolio sectors at the end of March, in accordance with SFAS 157, and those conditions still persist, the corporate said.