2008-06-13 23:10:23 -

- Fitch Ratings has placed the ratings of Southwest Corporate Federal Credit Union (Southwest) on Rating Watch Negative as follows:

Southwest Corporate Federal Credit Union

--Long-term Issuer Default Rating (IDR) 'AA-';

--Short-term IDR 'F1+';

--Short-term debt 'F1+';

--Individual 'A/B'.

Fitch affirmed the following ratings:

--Support '4';

--Support Rating Floor 'B'.

Placing

Southwest's ratings on Negative Watch reflects Fitch's concern of an increasing possibility that the company could realize losses in its investment book. Southwest's investment portfolio contains some exposure to subprime and Alt-A mortgage products, and the market value of these securities have been impacted by the dislocation in the credit markets. In addition, some of the securities nearing sub-investment grade are wrapped by monoline insurers currently under stress. To date, impairment charges taken by Southwest have been limited. However, further erosion and continued illiquidity in the mortgage market may continue to pressure valuations, and could likely produce additional losses, either through write-downs on investment securities or other than temporary impairment charges that would impact earnings. Corporate credit unions (CCUs) generate lean earnings by their not-for-profit nature, though Fitch notes that Southwest's earnings performance compares well with other CCUs. That said, Southwest's capital ratios are lower than most CCUs. Should any future losses incurred remain manageable and the company's other fundamental strengths remain intact, particularly its considerable liquidity, Fitch would likely remove the company's ratings from Rating Watch Negative.

Fitch recognizes Southwest's ample liquidity, low reliance on borrowings, robust risk management practices and solid franchise. Southwest has the intention and, importantly, the ability to hold its investment securities until recovery or maturity. The management team closely monitors the performance of the underlying collateral for mortgage- and asset-backed securities. Southwest ranks as the third largest corporate credit union in the country with total assets of $12.3 billion and serves more than 1,500 member credit unions.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, Chicago
Rosalie Chua, 312-368-2051
Doris Hoffmann, 312-368-2057
Ken Ritz, 212-908-0368, New York
or
Media Relations:
Kenneth Reed, 212-908-0540, New York