BISMARCK, N.D. — Two of the four corporates that initially balked at signing onto NCUA's corporate share guarantee program have now signed on after revisions were made to the plan. The two remaining corporates had not yet made a decision at press time.
Opting in were Eastern Corporate FCU (EasCorp), Woburn, Mass., and Midwest Corporate FCU here. Still undecided are Des Moines, Iowa-based Iowa Corporate Central CU, which informed Credit Union Journal at press time that it had not made a decision regarding the updated guarantee program, and First Carolina Corporate CU.
Agreement Allows Flexibility
"The main thing is that the agreement, as it is written now, allows some flexibility for the future that makes us a lot more comfortable with it," Midwest Corporate FCU President Doug Wolf told Credit Union Journal. "In the last couple months we have done some things here to position ourselves for the future that would have been a little difficult under the old agreement. Now that we are in a better position to set our destiny going forward, and given that the stipulations in NCUA's latest agreement have potential for flexibility, we are much more comfortable signing on."
Declining to disclose specific changes in the updated guarantee due to a confidentially agreement, Wolf said there were restrictions in the original program that remain. However, the new agreement allows corporates to "approach the NCUA to get permission," Wolf said. "Where before it was pretty much cut and dried whether you could do something or not."
Wolf said the ability to control his credit union's fate in the event of a corporate restructuring had not been as great of a deal breaker as concerns about services the $238-million Midwest could provide. "A lot of our concerns had to do with services we were trying to build and whether we would have the ability to position those services for growth," he said. "We have taken steps to take care of that-we formed a CUSO to put some of the services in so we can be where need to be."
The Woburn, Mass.-based EasCorp feels that participating in NCUA's guarantee presents less risk to its ability to control its own future following the recent changes to the program.
EasCorp's board of directors voted unanimously to participate in the revised guarantee. Alan Bernstein, SVP with EasCorp, shared that the company's ability to control its future in the event of a corporate restructuring weighed into it is initial decision to not participate. "As we stated to our members, we have been able to resolve those concerns to our satisfaction," Bernstein said.
The NCUA's recent action included revisions to the guarantee to eliminate "ambiguities and provide greater flexibility," EasCorp reported.
Bernstein said that originally EasCorp's decision to opt out was based upon "weighing the benefits and what we would have to do in return for the benefits. It's a matter of public record that we thought the latter outweighed the former the first time, and based upon the new circumstances we reversed our decision," he said.
The Original Decision to Opt Out
In a Feb. 27 letter to members, Jane Melchionda, president of 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."
Bernstein added the decision to participate was not based on pressure by members. The affects of the elimination of the $1.5-billion corporate's capital-membership capital shares and paid-in-capital held by U.S. Central, have prompted Fitch to cut its individual rating for the corporate to "E," its second-lowest rating. S&P also withdrew its ratings for EasCorp at the corporate's request, stating EasCorp is one of two corporate CUs that shows the biggest effect from the elimination of their U.S. Central capital.
The $1.75-billion First Carolina Corporate CU, located in Greensboro, N.C., could not be reached for comment by press time.
