ALEXANDRIA, Va. – At least four corporate credit unions appear to have decided against participating in NCUA’s new expanded guarantee program that requires corporates sign a supervisory agreement with NCUA, a Letter of Understanding, in exchange for coverage of all deposits by the National CU Share Insurance Fund.
The four corporates, EasCorp FCU, First Carolina Corporate CU, Midwest Corporate FCU and Iowa Corporate Central CU, all have negligible losses on their securities portfolios and apparently believe they do not need the extra NCUSIF guarantee on deposits in order to encourage member credit unions to retain their deposits.
In a letter to members last Friday, Jane Melchionda, president of Woburn, Mass.-based EasCorp, said there were a number of factors that convinced them to opt-out of the NCUA program. They include the condition of EasCorp’s portfolio; the "inability of NCUA to make reasonable modifications" to the LUA; and protecting members’ capital from being used in an "industry-wide reorganization by NCUA to offset losses that other corporates have or will suffer."
At the end of November, EasCorp reported $7.6 million of unrealized losses on its investments.
Separately, NCUA said yesterday that Mark Treichel, who has been director of the region’s northeast Region 1 since 2003, has been appointed interim director of the agency’s office of Corporate CU Supervision. He replaces Scott Hunt, who has been serving as interim director of the office, the chief corporate examiner, in effect, since September.
In order to participate in the extra NCUSIF guarantee the other 25 corporates are required to sign an LUA that stipulates they will develop a capital restoration plan within 30 days; that no new loans to CUSOs will be allowed, except those already agreed upon under existing lines of credit; no bonus dividends will be paid; and that executive bonuses will be limited to only those already set out.
In rejecting the NCUA guarantee, EasCorp’s Melchionda told members the $1.5 billion corporate will adhere to some of the same conditions on its own that are required under the LUAs, including restrictions on executive compensation; the bans on new CUSO loans and on paying bonus dividends to members; and the development of a capital plan to reflect the "new business environment and contingencies."
