COLUMBUS, Ohio – Corporate One Federal Credit Union released its month-end financials today for November, and the numbers read very well for the corporate. Corporate One, with one month left to report, has already posted record-breaking earnings, after taking all anticipated “other than temporary impairment” (OTTI) charges on two bonds. Total earnings year-to-date, as of November 30, 2008 were $19.7 million, an increase of $6.1 million over last year. This makes 2008 the most profitable year on record for Corporate One.
“We are very confident going into 2009,” said Lee Butke, Corporate One’s president and CEO. “2008 was a challenging year, but during the year we were able to welcome 47 new members, added more than $36 million in new capital – achieving a current month capital ratio of 7% – and we added $19 million to reserves and undivided earnings (RUDE). Most encouraging is that after careful examination of our securities portfolio, using two independent valuation firms, we expect that the write-down on two bonds that we took in November, totaling $5.1 million, will be our last OTTI charges, and we can begin the year with all that behind us,” Butke added.
OTTI write-downs occur when it becomes likely that investors will be unable to collect 100% of the value of a bond. For example, an issuer of a bond collateralized by mortgages is unable to make full principal and interest payments to investors due to homeowners defaulting on their mortgages. Corporate One analyzed all their securities and with the help of two independent, third-party consulting firms (Clayton Holdings and RiskSpan), determined that two bonds have a higher probability of not paying 100% of their principal at some time in the future – likely several years. Nonetheless, in following generally accepted accounting principles (GAAP), Corporate One was required to write down the bonds based on their fair value if traded on the open market today. However, the market value is not indicative of the value of the bonds, as the credit markets remain frozen. The actual loss anticipated on these two bonds by our two independent consulting firms is actually less than one third of the $5.1 million amount that GAAP requires Corporate One to write down.
“A lot goes into the analysis of bonds to determine potential losses that may occur some time in the distant future,” said Melissa Ashley, Corporate One VP, chief financial officer. “Our analysis used the current, very stressed credit environment, and we are confident it represents a conservative and reliable estimate of the future payments streams of these bonds. The fact that we’re able to absorb these charges yet still post a record year of earnings is a testament to the continued support Corporate One continues to receive from its members,” she added.
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About Corporate One
Corporate One Federal Credit Union is a leading wholesale financial services provider to more than 800 of America’s credit unions. With more than $5.2 billion in assets under management, Corporate One offers correspondent services including ATM/debit cards, share draft imaging, and depository and electronic payment services to credit unions in Ohio, Indiana, Kentucky, Illinois and West Virginia, as well as investment solutions to credit unions across the United States. Corporate One also developed and manages Alliance One, one of the nation’s largest non-network-specific ATM selective-surcharging groups. For more information, visit www.corporateone.coop.
Contact: Paul Hixon, 800/282-2560 ext. 9313