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Saturday, March 21, 2009

Camlot No More

Priority One and the Acquistion of WesCorp by Federal Regulators

On January 1, 2007, the date Charles R. Wiggington, Sr. began his appointment as President of Priority One Credit Union, he inherited a credit union that was in the process of growing and whose Net Income exceeded $172 million. For all intents and purposes, the credit union was financially stable and the future looked promising. 

This past Saturday, an article appeared in the Los Angeles Times, describing the seizure by Federal regulators of Western Corporate Federal Credit Union of San Dimas ["Wescorp"] and the U.S. Central Federal Credit Union of Lenexa, Kansas. The take-over is going to have an impact on all credit unions, including negative ramifications on those credit unions that are struggling financially. 

But what will this mean to Priority One whose business is in decline as a result of poor management and the erratic and failed and business decisions of its incompetent President and ignorant, Board of Directors. 

He started his appointment on January 1, 2007, inheriting a thriving credit union free of internal conflict and few external adversities. So what will he do, not that Westcorp seized? 


March 14, 2009

Regulators seize top two U.S. 'wholesale' credit unions Western Corporate Federal Credit Union of San Dimas and U.S. Central Federal Credit Union of Lenexa, Kansas, are placed under conservatorship to stem mounting losses caused by mortgage-related bonds.

By David Pierson and William Heisel
March 21, 2009

Federal regulators seized control Friday of the nation's two largest "wholesale" credit unions -- with combined assets of $57 billion -- in an emergency move to stabilize the nonprofit banking system used by 90 million Americans.

The National Credit Union Administration abruptly placed Western Corporate Federal Credit Union of San Dimas and U.S. Central Federal Credit Union of Lenexa, Kan., under conservatorship to stem mounting losses caused by mortgage-related bonds.

The so-called wholesale, or corporate, credit unions serve the broader industry and not individual consumers.

Western Corporate is one of 27 wholesale credit unions that serve the nation's 8,000 retail credit unions.

U.S. Central is even larger, serving Western Corporate and the other wholesalers.

Despite the seizures, the NCUA said service would not be interrupted for either institution. U.S. Central holds $34 billion in assets and Western Corporate has $23 billion in assets and 1,100 retail credit union members.

Though it has not experienced the same financial pain as banks, the traditionally conservative credit union industry has suffered significant losses in recent months after venturing into new areas such as commercial loans.

Both U.S. Central and Western Corporate have seen a dramatic drop in their capital positions because of the rapid loss in value of their mortgage-backed securities holdings.

Friday's action was taken after the federal government completed an analysis of mortgage- and asset-backed securities at the nation's corporate credit unions and determined "an unexpectedly high concentration of risk resided only in the two conserved corporate credit unions," the NCUA said.

In January, the government announced that it would guarantee uninsured shares at the corporate credit unions and infuse U.S. Central with $1 billion in capital in response to diminishing liquidity and asset values.

The cost to the newly established insurance fund as a result of the two conserved credit unions' devalued assets is estimated at $1.2 billion apiece, said John McKechnie, a spokesman for the credit union agency.

"All the insured institutions will ultimately have to replenish the funds," McKechnie said. A formula to do so has yet to be determined, he added.

An important measure of credit union health is the ratio of the fair value of investments against the fair value of liabilities. The NCUA wants to see credit unions stay above 3%. Western Corporate was at 3.32% in December 2007.

By December 2008 it had dropped to negative 8.2%. U.S. Central had an even steeper drop, from 1.6% to negative 27.58%.

The credit union agency's rules require it to run financial performance tests on a credit union that drops below 3% every month until it climbs back above that threshold.

Central had $46 billion in assets in March 2008 and was down to $34 billion before the seizure. Western Corporate had dropped from $29.8 billion in assets to $23 billion.

"I think they're trying to stabilize them now before their credit union members start pulling their deposits out," said Bert Ely, a Virginia banking consultant. "This is something that has been building for a long time and the NCUA has had a pretty good handle on it. Obviously they decided that they needed to take more serious measures than they have taken in the past."

Unlike in last year's seizure of IndyMac Bank, none of the credit unions' customers are likely to lose any money with this takeover because of the guaranteed insurance measures.

There has been a lot of consolidation in the industry over the last two years, and at least one of the two credit unions could end up merged with another, Ely said.

The move came unexpectedly to Western Corporate employees late Friday afternoon.

"I was taken by surprise by this just like everyone else," said spokesman Walter Laskos, speaking from his car after he had to turn around on the freeway and head back to his office. "There's a number of [federal regulators] at our corporate headquarters right now."

Another spokesman for the credit union, Kevin Lytle, said the regulators at the headquarters announced that they had already installed a new chief operating officer.

"We're just trying to figure out what's next," Lytle said.

A spokesperson for U.S. Central could not be reached.

Currently, Priority One Credit Union is juggling several problems, all which have simultaneously undermining the credit union's ability to develop new business. Inexplicably, t he credit union's members and potential members, don't seem as interested in what Priority One has to offer as they were in the years before Charles. R. Wiggington, Sr. was appointed President. Another problem is that account closures have increased and are offsetting the number of new accounts opened each month. 

In 2007, he declared he would take Priority One to heights never achieved under his predecessor and last year, he selected without assistance and purchased a $600,000 phone system that has been marred by continual technical problems. What's more, the credit union is having to pay out hundreds of dollars per month, needed to hire technicians to respond to the ongoing issues affecting President Wiggington's phone system. 

Last year, the credit union spend immense amounts on legal fees, primarily to protect the President when he was accused of sexually harassing a former employee. The credit union also paid out a large sum to the investigator who conducted inquiries which in time proved the President had in fact violated federal law. 

Recently and out of desperation, he asked the staffs of all branches to please submit suggestions on how to reduce spending and increase new business. 

The problems he's introduced have not only serve to deplete the credit union but have caused it to lose its competitive edge. What's more, his illegal acts and business failures have all been sanctioned and subsequently, covered-up by the ignorant Board of Directors. 

Last year in an effort to create the appearance of success, the President borrowed $20 million from Priority One's line-of-credit, something no prior President had ever done. The reasoning behind his decision to immerse the credit union in added debt was to apply the loan to the credit union's net income and thus create the appearance that net income had increased as a result of new business. Nothing could be further from the truth. What's more, the credit union has been forced to pay $30,000 to $33,000 each month, in interest alone while the principle remains unpaid, to date. 

So what will President President Wiggington do to ensure Priority One is able to pay its fair share to the NCUA and needed to stabilize the losses which impacted Wescorp?

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Anonymous said...

Here's the formula to calculate the hit POCU will take from the NCUA to recapitalize the NCUSIF.

Total shares (deposits) x 1% x 69%

On top of that the NCUA has told all federally insured CUS to expect another assessment in September:

Total shares (deposits) x 1% x 0.30%

And, if POCU had Membership Capital and Paid in Capital at WesCorp, all of that money is now lost.

Anonymous said...

Here's the formula to calculate the hit POCU will take from the NCUA to recapitalize the NCUSIF.

Total shares (deposits) x 1% x 69%

On top of that the NCUA has told all federally insured CUS to expect another assessment in September:

Total shares (deposits) x 1% x 0.30%

And, if POCU had Membership Capital and Paid in Capital at WesCorp, all of that money is now lost.

Anonymous said...

Behind the financial problems affecting Priority One are internal problems, including problems with morale, service and dishonest employees.

I have for years seen so many good employees at Priority One get ignored for promotions and recogntion and I have seen bad employees get ahead.

I noticed some people wrote about Georgina Duenas. That woman is so corrupt and should have been fired a long time ago. She violates all company rules but Charles protects her. She has double standards and she commits fraud each time she orders her staff to clock her in when she's going to be late from lunch. She takes more than 2 breaks a day and they are a minimum of 30 minutes. The problem has been reported time and time again to HR and even to Wiggington, but they ignore it and allow her to continue committing fraud.

She and Wiggington and even HR are the reason why the credit union has problems. They are the root and should be pulled out.

Anonymous said...

Being a different Anonymous, I took a look at Priority One's financial report, filed with the federal regulators, for December 31, 2008. It showed that Priority One had about $1.6 million in Membership and Paid In Capital at corporate credit unions which I assuem is Wescorp since both institutions are California based.

According the Generally Accepted Accounting Principles [GAAP], the credit union should recognize a loss of the $1.6 million this month. This is in addiiton to the special assessments blog's commenters have discussed previously.

If you are looking for a nautical analogy like the ones President Obama used at his press conference this week, I guess one could say that Priority One faces a tsunami of red ink.

In the interets of fair and balaned commenting, Priority One will not be alone in writing off its capital at or in Wescorp.

Anonymous said...

Wiggy is Wigging out.

I wonder what March's financials will show. Even if they are 50% of what they were in Feb, it is still high and RED still means no profit.

Lately he's like a rat on a sinking ship. The ship might stop sinking if he jumped of.

He is blaming some of his employees for the things he has done alone.

Like always he's still making excuses saying people are trying to sabotage him. No one made him take the member's car. No one told him to do creative accounting. No one told him to plot against employees. No one told him to talk to everyone about confidential information. He did it all by himself with no help from anyone.

Rather than acting like a 50+ year old man, he is acting like a spoiled little bitch. Maybe he'll start saying "the devil made him do it."

Anonymous said...

Yes, i am in agreement with the person who posted a comment about "shrek" gina duenas. she is a "hipocrit", she doesn't like when her co-workers are late from break,lunch,or even when they are away from their desk talking to co-workers.But when she does it, she is so sick that she believes it's OK.She might be thinking nothing will happen to her for "kiting" but she is "WRONG", both her and her lover "MONA"will get their share when they are charged for the crime they commited. This will be wonderful when it happens. She is WORTHLESS to that C.U.

Bystander said...

Mr. Wiggington's choices are as awful as he is. They are first of all unqualified for the positions he places them in. They are all dishonest like him. They are all insecure like him and believe that a title gives them the right to violate policy. They are all as pathetic as he is. And yet they are all overpaid and the type of employees no other credit union or bank would ever want to hire.

Frustrated said...

I called the South Pasadena branch earlier today to ask questions about their 2.99% auto rate.

A representative explained that to qualify I need to put 10% downpaymnt, have direct deposit, and open a checking PLUS have a credit score of 680or more. No problem as the auto dealer I visited ran my credit which showed I have a 750 credit score.

Everything seemed fine until I asked what my monthly payment would be. The amount I was given was a lot higher than what I calculated.

When I asked why, I was told that the though I qualify for the 2.99% rate, my payments are calculated at 3.99%!

I was told that the credit union deducts .50% if you pay the loan through automatic payments or payroll deduction and that they deduct another .50% if you have a checking account. That gives you the lower rate but the payment they calculate is at 3.99% and not at 2.99%. I was told that this reduces the amount of your financing over whatever term you agree to.

I was also told that by calculating the payments at 3.99%, I would pay off the loan faster than if they calculate the payments at 2.99%. Maybe, but isn't the credit union advertising a 2.99% rate and shouldn't the monthly payments be calculated this rate and not at 3.99%?

I visited Priority One's website to see if I could find what I was told, written somewhere on their site. I looked and looked but I did not find anything which said that monthly payments are calculated at 3.99% even though you qualify for the 2.99% rate and I did not read anything which said that by agreeing to calculate your payments at 3.99%, you will pay off the loan sooner.

Believing the person I spoke to did not understand what I had asked, I called another branch.

This time a representative explained to me that I do qualify for the 2.99% rate but they calculate payments at 3.99% just in case I cancel direct deposit or automatic payroll payment of the loan.

This, by the way, is also not stated on the credit union's website.

I decided to call yet another branch and this time was told by a rep that she did not know why the credit union calculated my loan at 3.99% even though I qualify for the 2.99% rate and I was told to call the South Pasadena branch, instead.
Since the loan was to refinance the balance due on my daughter's automobile, I called another credit union. They offered to match the rate advertised by Priority One. I have now visited them, obtained the loan and opened a checking account. And my monthly payments have been calculated at 2.99%!

Calling Priority One was frustrating. Three branches provided three different answers. The branches I called were Burbank, Van Nuys, and Valencia.

As I wrote previously, nowhere in their ad or on their website does it say they will calculate payments at 3.99% in case you cancel automatic payment of the loan or because you will pay the loan off quicker.

From my experience it is obvious that the staff is poorly trained, ignorant about how loans are calculated, and unable to answer what should be simple questions.

Lexington Steele said...

The tale Frustrated said is a subtle form of bait and switch. Something Sir Charles Wiggy is known for thoughout the entire Priority One offices. He pulls the same crap with employees all the time.

Looking for full and fair disclosure on the website is futile when dealing with Sir Charles Piggly Wiggly. The guy is deceptive as all get out.

I wish the members good luck in voting out the Board of Directors so a new Board slate could then release Mr. Charles Liar Wiggington. Let's give him the boot.

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