Southwest Corporate announces March 2010 financials

DALLAS (5/7/10)--The $9.9 billion asset Southwest Corporate FCU has released its unaudited financials as of March 31.

Net income for first quarter totaled $6.69 million, an increase of $525,000 over first quarter 2009. Actual year-to-date net operating expense for the quarter was nearly $1.14 million, under budget by $48,000. Total net loss on investments for first quarter was $697,000.

The Dallas-based Southwest Corporate's exposure to monoline insurers, which have been impacted by the same events that caused loss projections on the corporate's mortgage-based securities, totals nearly $474.6 million (par value) or $456.5 million (amortized cost) or a fair value of nearly $243.2 million, according to the financial report.

The corporate's largest monoline insurer is Ambac Financial Group, which is undergoing a rehabilitation plan. The corporate had placed a reliance on Ambac to pay future principal or interest shortfalls at 90%. However, because detailed financial information about Ambac's rehabilitation plan and collateralized debt obligation (CDO) exposures are limited and ongoing, the corporate has not yet determined if it needs to make any revision to its expectation on Ambac's ability to pay claims, the report said.

It cited court filings in which Wisconsin Insurance Commissioner Sean Dilweg states that "full payment to policyholders remains possible even in spite of Ambac's presently troubled financial condition."

"Southwest Corporate will be better able to assess the overall impact of the various Ambac developments as additional information becomes available in the coming months. At March 31, 2020, assuming no further payments from Ambac are received for principal and interest shortfalls, the possible additional other-than-temporary impairment could be $43,869,000," said the financial report.

Southwest Corporate's capital ratio at March 31 is 1.36%, while its retained earnings ratio (retained earnings over net average assets) is 0.08%.

In accordance with NCUA guidance letter 09-CU-10, the corporate depleted members' capital accounts in January by $134.6 million to cover the retained deficit that existed at Dec. 31, 2009. After the depletion actions taken in October 2009 and January 2010, membership capital shares have been depleted by nearly $293.4 million or 72.68%.

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Southwest Corporate Financial Statement March 2010


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