CINCINNATI-The NCUA assessment later this year to replenish the NCUSIF due to ongoing costs related to corporate credit unions and CU failures should land at about 40 basis points this year, according to Lee Butke.
The president of Corporate One FCU made the prediction during a breakout session at the Ohio CU League's annual meeting here. "That's my personal assessment," Butke told the crowd, suggesting a good portion of the cost will come from propping up CUs in the sand states.
During the rest of his session, Butke did his best to prop up CEO confidence in the Columbus, Ohio-based Corporate One. Following a year in which COFCU lost $42.3 million, Butke described a "steady state" for the $3.3-billion corporate in 2010. He noted that problems with bond insurer Financial Guarantee Insurance Corp "are already behind us," saying that 100% of those losses have been recognized.
Corporate One has a large position in asset-backed securities supported by student loans, but Butke stated that the loans are of high quality and that he does not expect the CU will realize any credit losses on the securities.
Butke said Corporate One is producing about $1 million per month in earnings, picked up 19 new members from across the country, ended 2009 with $24 million of positive RUDE, along with $170 million in capital. "The first quarter is our first profitable quarter in a while," Butke said. "We had a very modest amount of bond losses ($1.5 million), and we still earned about $3.4 million."
Butke cited Corporate One's ability to cover 85% of its operating expenses through fee income as a lynchpin in its ability to weather the current crisis and become a vital part of the new corporate system when the new structure is announced this summer. Butke pointed to COFCU's diversification-such as Check 21 and debit and credit card programs-that separate it from many other corporates that offer fewer services and many only on a pass-though basis.
"Think of Corporate One as a CUSO," Butke said to those in attendance. "If you were investing in a CUSO called Corporate One, what would you own? You own a national business that touches 750 credit unions directly. And nationally we do business with 1,500 credit unions on many different levels. We have a history of earning 30 to 40 basis points when other corporates are earning 10 to 20. That is the difference."
Butke also hoped to sway investor confidence by pointing out that member capital has not been depleted. "We are not starting form zero here. And we don't like the term recapitalization, because that is not what is happening. If you are already at 100%, we like to think of your support as recommitment."
