MIDDLETOWN, Penn.-Members of Mid-Atlantic Corporate FCU here will have to make a long-term commitment to the institution or potentially face higher costs for products and services when its new structure goes into effect.
In response to the proposed changes to Regulation 704, as well as the corporate's need to create a net worth restoration plan, Mid-Atlantic has created a new tiered system that will price its services and rates based on the percentage of member capital that credit unions convert to permanently contributed capital.
Mid-Atlantic SVP-Marketing Leigh E. Philibosia noted that if the corporate converts all of its existing total capital - which sits at 4.62% - into Tier I capital, the corporate will be sitting in a much stronger position, especially after the new regulation goes into effect possibly sometime this summer. The new system, which will not be effective until NCUA gives the final OK to the proposed rule, would require member CUs either to convert 100% of their current MCA/CMA balance to PCC or purchase $5 million PCC to achieve platinum membership status, which entitles a CU to the lowest available loan rates, the lowest fees and no fee increases for two years.
"We're not asking for new capital," Philibosia noted. "We're asking them to convert what is remaining here; that is a lot easier for a lot of credit unions to tell their boards that [the capital] is already here, and we're not asking for anything new."
Asking For A Lot Of Trust
She conceded that the new plan asks for a lot of trust at a time when major corporate failures have shaken faith in the system, adding that "we need their help, but we also know we provide services they need as well."
And it seems many Mid-Atlantic Corporate member credit unions are willing to make that vote of confidence: more than 30 CUs have committed to the platinum level since the plan was laid out in a Jan. 11 mailing. "We didn't expect to see anything before March, so we're highly encouraged," Philobosia said.
Open Lines Of Communication
Pennsylvania Credit Union Association Spokesperson Mike Wishnow pointed out that the corporate has hosted a number of public town halls at which officials spoke about the new membership structure.
And while some credit unions have announced reservations, most appear to be at ease with the way the corporate has gone about disseminating its plans for the future, he suggested, adding, "credit unions seem to be appreciative of Mid-Atlantic's forthrightness with respect to putting financial information out when they can and answering questions."
The corporate is also placing a cap on deposits that differs from the cap in the proposed regulation. Massive fluctuations in deposits, especially during the boom times, made it difficult to manage a corporate, Philobosia pointed out, so Mid-Atlantic Corporate plans to limit deposits and place additional balances off-balance sheet. Member credit unions that want to place more funds with the corporate would still be able to purchase more PCC.
"By doing that we're basically saying that the membership is going to be self-capitalizing," said Philobosia. "If our asset size remains stable, the capital ratio remains stable so... we should remain well to adequately capitalized."
