Southeast Corp Reveals Business and Capital Plans
The $4 billion Southeast Corporate Federal Credit Union joined a number of its peer corporates last week in laying out its final business and capital plans to be submitted to the NCUA in time for the March 31 deadline.
The Tallahassee, Fla. corporate maintained that it continues to receive support from its 400 member credit unions, as evident on a webcast and in town hall meetings during the month.
Southeast President/CEO Brad Miller said its members are being asked "to indicate their support via a nonbinding letter of intent."
"Through ongoing member communication, webinars and town hall meetings, we’ve laid out our strategy and have asked credit unions for feedback and with that input, we’re ready to put forward our final plans."
Miller said member comments "generally have been positive, with many credit unions indicating they want to go forward."
After the NCUA’s review and approval of its business plan, Southeast Corporate will begin "confirming capital commitments, a process that is expected to occur within the May-July timeframe."
"Credit unions rely on Southeast for key services, such as payment systems, liquidity and settlement, so preserving service continuity for them is vital," Miller argued.
"Automated settlement occurs so seamlessly that most don’t even think about it; but for many, it would be difficult to cost-effectively replace any of these programs," he said.
Miller’s comments came as CUs continue to weigh re-upping capital commitments to their corporates or switching to other providers.
Michael Castellana, president/CEO of the $2.1 billion SEFCU of Albany, N.Y. which is a member of Members United Bridge Corporate, confirmed it has moved its wire transfer processing, settlement services and security safekeeping to the Federal Reserve Bank of New York and is "in the process of moving our check processing and ACH services."
"Given our size, complexity and business model, our decision to move is not typical of all credit unions," explained Castellana. "Each credit union is unique and their choice of payments partner will be unique to them. As for my view of the corporate credit union system, I believe it to be critical for our industry, and I am hopeful that when the transition to the new world of credit union system intermediary is complete that we can be a more active participant."
One member of Southeast is James Woodward, president/CEO of the $262 million Sunstate FCU of Gainesville, Fla. who participated in the Southeast town hall meetings. He said capital costs figure in a pending Sunstate FCU move to the Federal Reserve Bank of Atlanta for processing services.
"We’ve given our 90-day notice and it is something we feel needs to be done for our credit union," said Woodward.
The comments of both Castellana and Woodward came in connection with their participation in meetings this month of the newly formed Community Depository Institutions Advisory Councils of the Fed district banks.
The corporate dilemma did not come up in a CDIAC session of the Atlanta Fed held two weeks ago, said Woodward.
In its prepared statement on recapitalization, Miller of Southeast stressed the ongoing viability of the corporate system even as it reorganizes.
"Although credit unions are awash in liquidity today, the cycle will turn and having a reliable way to obtain affordable liquidity, including lines of credit, will be critical," he said, adding, "the priority behind our business and capital plans is to ensure Southeast’s ability to continue providing credit unions the economies of scale inherent in our cooperative structure."
For weeks, Southeast and other corporates have conducted meetings to bolster financial support from CUs in the face of cost concerns.
Mark E. Rosa, CEO of the $240 million Jefferson Financial CU, Metairie, said that at one time his CU board considered switching from Louisiana Corporate CU to the Fed, but now the CU feels more comfortable following a merger under way with Corporate America CU. Rosa, like Woodward is one of two CEOs on a banker-dominated 13-member CDIAC panel of the Atlanta Fed and who took part in its most recent meeting.
While Woodward of Sunstate said he was switching to the Fed, there were other Southeast CUs in Florida which are remaining loyal.
"I believe Southeast Corporate has the best plan for the future and will be advising my board to proceed with recapitalizing," said Arthur J. Wood III, president/CEO of Railroad & Industrial FCU of Tampa. "We conducted a lengthy review, which included site visits and considered other providers, but in the final analysis, the current savings, mostly in opportunity cost which probably won’t hold up over time, were not sufficient to offset the uncertainty of service from a new corporate or other provider and the perils of a conversion."