CDCU Pilots SecondaryCapital

WINTHROP, Mass. - (08/24/04) -- Winthrop FCU, a low income creditunion bumping up against NCUA's net capital standards, has becomethe first credit union to test pilot CUNA Mutual Group's newsecondary capital product, called Capital Notes. The $33 millioncredit union, which has been searching for additional capital toexpand into the nearby low income communities of Chelsea, Revereand East Boston, will use the $300,000 in secondary capital andanother $300,000 from the National Federation of CDCUs to build itsnet worth ratio to 8.1% from the current 6.3%, close to NCUA'sminimum 6% level. Because Winthrop FCU is a low-income designatedcredit union it may count the secondary capital as net worth underNCUA's minimum capital, or prompt corrective action, rules. "Ourgoal is to expand in Revere and East Boston," Joseph Clark,president of the credit union, told The Credit Union Journal. Moreimmediately, the credit union is looking at building a new branchin nearby Chelsea. Under the terms of the deal, the credit unionwill begin repaying the 7% notes midway through their 10-yearterms.