Bank Cites GSE Impairment's Effect on Capital

Cooperative Bankshares Inc., Wilmington, N.C., has announced that the federal takeover of Fannie Mae and Freddie Mac has significantly impaired the value of the company's holdings of Fannie and Freddie preferred stock and could affect the capitalization status of Cooperative Bank. The company said it holds 286,000 shares of Fannie's series S preferred stock and 100,000 shares of Freddie's series Z preferred stock. The total market value of the stock, which had a carrying value of $9 million at June 30, had declined to $1.1 million as of the market close on Sept. 10, the company said. If it were required to record a loss based on the securities' value as of Sept. 10 (and unable to record a tax benefit for the loss), the company said the bank would be considered "adequately capitalized" under federal guidelines, but not "well capitalized." Cooperative Bankshares said it is "evaluating its options" to address the capital reduction.