U.S. Central's Ratings Downgraded Again
WALL STREET-Fitch Ratings downgraded U.S. Central FCU again last week, amid growing losses on the books of the corporate credit union for corporate credit unions.
Fitch said it downgraded U.S. Central's long-term Issuer Default Ratings a notch to AA and cut its Individual Rating from "A" all the way to "D," as a result of growing unrealized losses on the corporate's books-now almost $10 billion.
"These losses threaten to impair USC's already highly leveraged capital base and limit the company's future capital generation capability," said Fitch. "Further, USC's funding and liquidity positions, traditional strengths of the company, have eroded due to the illiquidity of significant portions of its investment portfolio and meeting the liquidity demands of its membership, its primary function for the credit union system."
Fitch did remove U.S. Central's Issuer Default Rating from its Rating Watch Negative because of some of the industry support being introduced recently, specifically NCUA's CU System Investment Program, which will provide billions of dollars in low-cost liquidity for U.S. Central and other corporates.
Fitch said it does view favorably U.S. Central's recent conversion of $450 million in membership capital shares to a more permanent type of Tier One capital, known as Paid-In-Capital, or PIC II.
Fitch said while the huge amount of unrealized losses is due to the diminished market for U.S. Central's securities, U.S. Central does hold securities for which the prospects of recovery are limited, specifically portions of its non-prime residential mortgage backed securities. "Thus," said Fitch, "there is heightened risk of USC recognizing significant 'other-than-temporary impairment' charges." U.S. Central, which has also been downgraded in recent months by the other Wall Street agencies, Moody's and Standard & Poors, acknowledged last week's action, stating, "Such actions by rating agencies are no longer unusual events, especially within the financial services sector amid the current challenging credit market environment."
CU Manager Killed In Accident
EXPORT, Penn.-Barbara-Ann Horning, treasurer/manager of tiny Springdale PPG FCU, here, was killed in a weather-related, three-vehicle accident on the Pennsylvania Turnpike, according to the Pennsylvania Credit Union Association. Horning, 51, a passenger in a pickup truck driven Saturday by her husband, Jan, 53, was pronounced dead at the scene. Jan Horning was taken to UPMC Presbyterian hospital in Pittsburgh with a head injury.
Exec Charged With $530,000 Fraud
EAST BOSTON, Mass.-A former loan officer with First Priority CU was charged last week with approving $530,000 worth of loans she credited to accounts she controlled.
Kelly Curley, who served as director of lending and operations for the credit union-turned-bank from 2002 to 2008, created five phony loans and credited them to family members, then transferred the funds to her own accounts.
Curly told authorities her family members had no idea she was using their names to obtain the loans. The day the scheme was discovered at the credit union, Curly confessed to the credit union president.
But then she went to TD Banknorth, where some $35,000 of the funds were deposited and secured the funds, rather than returning them.
Wounded Vet Won't Receive House
BRANSON, Mo.-Homes For Our Troops, which has included a number of credit union sponsors, has nixed building a house for a wounded veteran here after the intended recipient was convicted of possession of a controlled substance with intent to sell.
Sgt. Scott West, who was severely injured in Iraq, pleaded guilty to a felony crime, rendering him ineligible to receive a house from Homes For Our Troops.
Missouri Credit Union Association and its affiliated credit unions had been raising money for the planned house for months. Those funds will be used to build a home for a different wounded veteran once a new recipient has been selected.
