Capital Dominates Corporate Meetings
This year, corporate credit union annual meetings included more than just the usual financial reporting and refreshments. Many corporate members were discussing their cooperative's fate in a changing landscape.
The $1 billion Tricorp FCU met June 16 for its annual meeting, but President/CEO Steve Roy said his Maine-based cooperative isn't yet asking for capital contributions. However, Roy said Tricorp is actively searching for replacements for U.S. Central products and services, and he shared progress toward a U.S. Central-free life at the event.
"It's a little tough without the legacy assets plan or final proposed rule," Roy said about planning for the future. "But, at the same time, we're not just sitting here waiting for the answer."
Once NCUA releases final Part 704 rules, Tricorp will put a capital restoration plan into high gear. According to March 5310 reports posted on the NCUA's website, Tricorp only has a 1.46% total capital ratio.
"Before we ask for capital, we want to demonstrate we can build retained earnings," Roy said, adding that the more retained earnings Tricorp can earn now, the less members will have to contribute toward new capital.
The $4 billion Mid-Atlantic Corporate FCU is further along in its capital restoration plans, announcing in early June that members have already pledged more than $75 million in capital, the result of a new membership agreement effort that began in January.
Approximately $71.6 million of the capital qualifies as Tier 1, perpetual contributed capital, and will count toward the NCUA's proposed risk-based capital requirements for corporate credit unions.
At 4.26% total capital as of March 31, Mid-Atlantic members need only to convert remaining capital to Tier 1 to meet proposed NCUA requirements within the proposed time frame.
Of the 427 members who have pledged to convert capital so far, Mid-Atlantic reported that 409 qualify as "platinum level" members, who will receive the highest dividends and pay the lowest prices for products and services. Mid-Atlantic spokesperson Leigh Philobosian said the corporate has been pleased with the level of support shown by members.
Mid-Atlantic members must state their intended membership level, including capital, by July 1. The Middletown, Pa.-based corporate's annual meeting, in which members were updated on capital restoration and other plans, was June 18.
First Carolina Corporate CU Board Chairman Jack Braswell and President/CEO David Brehmer presented the usual financial updates during their annual meeting June 14, but they also discussed challenges in the corporate system and First Carolina's plans, according to the organization's website.
April 2010 financial reports revealed 2.03% total capital at the $3.2 billion First Carolina, thanks primarily to a nearly $100 million U.S. Central write-down over the past year that wiped out 100% of reserves, undivided earnings and member paid-in capital, and 23% of membership capital shares.
However, Brehmer reminded members the NCUA is allowing corporates a one-year phase-in period to meet new capital regulations requiring 4% of Tier 1 risk-based capital.
"Our plan is to execute our capital restoration plan within 90-120 days of the new regulation, well within this time frame," Brehmer wrote in April's financial reports.