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Fitch Affirms Mid-Atlantic Corporate FCU's IDR at 'A+'; Upgrades Viability Rating to 'bb-'

January 31, 2014

NEW YORK --(BUSINESS WIRE)-- Fitch Ratings has affirmed Mid-Atlantic Corporate Federal Credit Union's (Mid-Atlantic) Long-term Issuer Default Rating (IDR) and Short-term IDR ratings at 'A+'/'F1+', respectively. In addition, Fitch has upgraded Mid-Atlantic's Viability rating (VR) to 'bb-' from 'b+'. Mid-Atlantic's Rating Outlook remains Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS -- IDRs The affirmation of Mid-Atlantic's IDRs and Stable Outlook reflects Fitch's view that the company will continue to benefit from the government support provided to Corporate Credit Unions (CCUs) through the National Credit Union Association (NCUA). Fitch attributes an extremely high probability of support to CCUs from regulatory authorities, as reflected in its high support rating and support rating floor. This view is underpinned by the NCUA's past actions and the U.S. Treasury's additional assistance to credit unions by extending the operation of the Temporary Corporate Credit Union Stabilization Fund through 2021. The affirmation of Mid-Atlantic's 'F1+' Short-term IDR denotes the company's exceptionally high capacity for timely payment of short-term financial commitments, given government support will be provided if needed. Under Fitch's rating criteria, when a company's long-term IDR maps to more than one short-term rating, the higher short-term rating may be assigned. In this case, Mid-Atlantic's short-term IDR is 'F1+', reflecting government support. Mid-Atlantic's IDR is currently at its Support Rating floor. KEY RATING DRIVERS -- VRs The VR , which embodies the standalone assessment of Mid-Atlantic, was upgraded to 'bb-' from 'b+', reflecting the overall improvement of the company's financial profile. Mid-Atlantic's capital levels continued to improve since last review, exceeding 'well capitalized' standards set by the NCUA. Fitch's current ratings incorporate the company's relatively sufficient levels of capital and liquidity, adequate sources of contingent funding, and conservatively managed investment portfolio. The company's VR is constrained by certain risk concentrations and operational limitations inherent with the CCU industry. CCUs generally operate with higher levels of leverage than more highly rated financial institutions. They are also high interconnected with credit unions and rely on short term funding and excess liquidity within the industry. Mid-Atlantic is highly dependent on the value of its investment securities portfolio for earnings and liquidity which can fluctuate with movements in interest rates. RATING SENSITIVITIES -- IDRs As previously noted, Mid-Atlantic's IDR is currently at its Support Rating Floor. As such, Mid-Atlantic's IDR is sensitive to Fitch's view of the expected level of support the CCU would receive during a period of distress. Fitch's view toward support for the CCUs was substantiated by the NCUA's past actions to entire CCU system and the US Treasury's continued support. That said, as the CCU system continues to recover and systemic issues are addressed, Fitch will re-evaluate its view toward support. Should Fitch's view toward the probability of support lessen without a fundamental improvement in the financial condition of Mid-Atlantic, the current IDR will likely be downgraded. RATING SENSITIVITIES -- VRs Mid-Atlantic's VR is constrained by risks inherent with the CCU industry. As a service and liquidity provider to credit unions, Mid-Atlantic's VR is vulnerable to the credit union industry and any deterioration in liquidity of member institutions. Additionally, a material devaluation of Mid-Atlantic's securities may adversely affect capital levels and liquidity, which would result in a review of the credit. However, should Mid-Atlantic continue to improve capital levels and funding profile while maintaining a conservative investment strategy, positive rating action may ensue. KEY RATING DRIVERS -- SUPPORT RATING AND SUPPORT FLOOR RATING Mid-Atlantic's Support Rating of '1' reflects Fitch's view that the likelihood the company would receive extraordinary support should such support be needed is extremely likely. Mid-Atlantic's Support Rating Floor of 'A+' reflects Fitch's view that there is an extremely high probability of support to CCUs and Mid-Atlantic from regulatory authorities. KEY RATING SENSITIVITIES -- SUPPORT RATING AND SUPPORT FLOOR RATING Mid-Atlantic's Support Rating is sensitive to Fitch's assumption around the ability and willingness of the NCUA or U.S. government to offer extraordinary support in case of need. As discussed, Fitch will continue to re-evaluate its view on the probability of support from the NCUA and US Government . Should the NCUA or US Government explicitly or implicitly contradict Fitch's view through regulatory action or guidance, a downgrade of Mid-Atlantic's Support Rating and Support Floor Rating may be likely. Fitch has taken the following rating actions: Mid-Atlantic Corporate Federal Credit Union --Long-term IDR affirmed at 'A+'; --Short-term IDR affirmed at 'F1+', --Support affirmed at '1'; --Support Floor affirmed at 'A+'; --Viability upgraded to 'bb-' from 'b+' Additional information is available at ' www.fitchratings.com '. Applicable Criteria and Related Research : --'Fitch Global Corporate Rating Activity -- Third Quarter 2013' ( Dec 5, 2013 ); --'Global Financial Institutions Rating Criteria' ( Aug 15, 2012 ). Applicable Criteria and Related Research : Fitch Global Corporate Rating Activity -- Third-Quarter 2013 http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720480 Global Financial Institutions Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=818790 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' 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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Ratings, Inc. Primary Analyst Ryan Doyle , +1-212-908-9162 Director Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 or Secondary Analyst Jaymin Berg , +1-212-908-0368 Director or Committee Chairperson Julie Solar , +1-312-368-5472 Senior Director or Media Relations Brian Bertsch , +1-212-908-0549 brian.bertsch@fitchratings.com Source: Fitch Ratings


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