Corporate CEOs Ready To Move Forward Under New Rules

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PHOENIX – Leaders at corporate credit unions were still digesting mountains of information received from NCUA Friday and Monday, but three expressed optimism as to their own viability.

Pete Pritts, president and CEO of First Corporate CU, based here, was pragmatic. “Action was taken and I don’t think this action will be reversed, so we have to comply,” he said. “There are still more questions to be answered, not only about the bridge corporates but all corporates, but some uncertainty has been eliminated. We will be able to present our business propositions to credit unions and they can make their decisions. I am glad the NCUA reconsidered six-year term limits on directors. Operations at a corporate are somewhat complicated and it is good to have experienced people on the board.”

First Corporate’s capital ratio as of the end of August was 3.82%. Pritts noted that figure has to be at 4% by approximately October 2011, but said the corporate does not plan to ask for more capital from its current members. “The capital that provides that number is not considered capital under the new regulations. For the capital to apply it must be converted from a three-year notice of withdrawal to perpetual contributing capital, or PCC, as defined in the new regulation. We will have to look for other ways to build capital, and we are looking at other options.”

Trudy Wise, who took over as president of Bismarck, N.D.-based Midwest Corporate FCU in May, said Monday’s NCUA webinar was helpful, but its board and consultants had not yet had a chance to review all 255 pages of the new corporate rules. Her first impression was, “A lot of what happened is not going to impact us immediately. We already have a transition plan in place, and the new rules are not going to change anything going forward. We had very few securities, even government securities. Our investment portfolio is pretty plain with very little long-term investments.”

Wise said she is “pretty comfortable” with Midwest Corporate’s financials, as it has “plenty” of liquidity. “We have credit unions that are still comfortable doing business with us. In fact, after Friday not one credit union called to ask about us.”

Missouri Corporate FCU President and CEO Dennis DeGroodt said he was “not surprised” by the new rules. “I was pleased with some of the changes that were made; I thought they were the right changes. From a quick read it seems workable for us. We have always been essentially what is described today as a settlement corporate. We’ve typically always had short durations because we have matched dollar-for-dollar what our members have invested in us. We are used to operating in that short environment so the changes will not be insurmountable for us.”

Wise, DeGroodt and Pritts agreed the move by NCUA to take three additional corporates into conservatorship Friday was not unexpected. Wise noted there are 4,600 credit unions that are relying on the conserved corporates, “so I hope [the bridge plan] is the option that will continue to serve those credit unions.” Wise predicted there probably will have to be more consolidation of corporates, and natural person credit unions, also. “There is a need for a higher level of expertise. There were 42 corporates when I started, and there has been a constant evolution.”

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