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Ask corporate credit union senior executives what keeps them upat night and for many, it's whether they can grow theirbusiness.

New NCUA ratios designed to manage risk may impose tightcontrols on what corporates do with cash on hand and, in many casesit might just be easier to meet the regulator's requirements whenassets are minimized some have said. That may sound paradoxical tosome but the numbers prove how profoundly corporates haveshriveled.

A quick look at the assets of several corporates in December2007, according to the Government Accounting Offices, offers proof:U.S. Central Bridge at $44.7 billion, WesCorp Credit Union at$32.5 billion, Members United Corporate Credit Union at $14.5billion and Southwest Bridge Corporate Federal Credit Union had$12.7 billion. 

Fast forward to October 2011 and the numbers tallied by Callahan& Associates show a different ranking of the top fivecorporates: Corporate One Federal Credit Union at $3.33 billion,Corporate America Credit Union at $3.26 billion, Mid-AtlanticCorporate Federal Credit Union at $2.98 billion, Catalyst CorporateFederal Credit Union at $2.01 billion and Alloya Corporate FederalCredit Union at $1.81 billion.

“Things are not exactly as they seem,” said David Savoie, CEO ofLouisiana Corporate Federal Credit Union in Metairie. “In order todeal with the capital ratio requirements of the new regulation,many corporates have entered into agreements with their members tosweep balances over a certain amount to the Federal Reserve eachevening. Their funds come back in in the morning and are swept backout in the afternoon.”

Crunching the numbers, today's corporates collectively seemsmaller than they had been a half dozen years ago. So the questionsare will they stay that way and is growth a nonstarter forcorporate credit unions? Opinions are hedged among corporate creditunion executives with some seeing buoyant times ahead while othersare more tempered in their outlook.

At least some anticipate further consolidation among corporatesas the institutions try to remain relevant while forging newbusiness models.

Thomas Bonds, president/CEO of Corporate America in Irondale,Ala., is sober in his forecast.

“The purpose for which natural person credit unions formedcorporate credit unions has been fundamentally changed by the newregulation,” Bonds said. “It will take time for the few survivingcorporates to adjust to the new business model.”

Still, while Bonds sees corporates growing by offering new linesof business such as audit services, brokerage services and websitedevelopment, he believes that the present regulatory regimen maybring challenges for many corporates.

Jay Murray, CEO of Mid-Atlantic Corporate in Middletown, Pa.,said he knows the regulatory limitations by heart yet he is moreoptimistic.

“There is room for a corporate to grow. It is more challengingto live under the new regulations, that is true, but we arereinventing ourselves to better serve our members,” Murray said.“We have to manage our balance sheet differently and we are lookingfor new ways to serve our members.”

One of Murray's prime growth strategies is winning more walletshare of every member, which means getting more of their businesson a continuing basis. That may be a bit easier nowadays, mainlybecause few natural person credit unions maintain multiplecorporate relationships as many did a half dozen years ago, headded.

“Our growth will be organic but you don't know what might comealong,” said Murray, who stressed that Mid-Atlantic is notcurrently seeking merger partners.

At Corporate One in Columbus, Ohio, President/CEO Lee Butkesaid, “We will grow by helping our members. We have to prove ourvalue to our members every day.”

Butke said Corporate One has plenty of capital to support itsbalance sheet but he also indicated that a path to growth at hiscorporate will occur off balance sheet. Part of that growth willcome through an increase in its CUSOs including those picked up inthe recent merger with Southeast Corporate. Because capital is notrequired for Corporate One to use its CUSOs, a natural personcredit union can choose to use Member Business Solutions forinstance, without a capital call.

Butke also rang a warning bell about the future of allcorporates.

“Check volumes are dropping. It's a strategic mistake to spendmoney, time and effort worrying about clearing checks,” he said,adding growth for any corporate will happen in newer lines ofbusiness not by looking for more share of dying lines.

At Volunteer Corporate Credit Union in Nashville, Tenn., whichrecently completed a merger with West Virginia Corporate, growth isnot necessarily the end all there, said Sandy Swofford, chiefoperating officer. 

“We concentrate on member service. We hold their hands and wehelp them,” Swofford pointed out.

A key to VolCorp's growth is its quarterly product councilmeetings where many VolCorp members participate, Swofford said. Theidea is for members to come with needs they want satisfied and alsowith new ideas they may have heard from peers. In the end, VolCorptakes its pick of what new offerings to makeavailable. 

“Listening to our members, really, is how we grow,” Swoffordsaid.

At Alloya in Warrenville, Ill., there are numerous paths togrowth, said Vic Vrigian, a spokesman.

“For instance, we can provide access to affordable technology. Idon't know that it's possible for every credit union to keep upwith the new technology,” he offered. “Corporates can aggregatevolume, which will reduce costs.”

Alloya can also offer access to experts in many areas includingback office capabilities that can give credit unions a competitiveadvantage, Vrigian said.

“Credit unions don't have to build out systems. Why would they,”he asked. “Leverage the resources of a corporate.”

Vrigian said Alloya believes it will grow by signing new membersparticularly in the western United States and the corporate is opento any mergers that might come along.

At Catalyst Corporate in Plano, Texas, now retired President/CEODianne Addington, said, during what turned out to be herpenultimate week in that post, she is a witness to how a corporatecan grow.

“A corporate needs to have a long-term business model and itneeds to be transparent with its member owners,” Addington said.“Member owners are taking more ownership than they everhad.  [They] did not pay that much attention to corporatesbefore. That has changed.”

Addington also spelled out her formula for creating a thrivingcorporate.

“Corporates have to have the self discipline to constantly seekcost reduction. We need to give our members real competitivepricing.”

That means a corporate giving its members access to a full rangeof services and creating tremendous possibilities to help naturalperson credit unions, she added.

Optimism aside, one reality for corporates is that some of themcompete with each other over unaffiliated natural person creditunions, experts have observed.

“Corporates have a shrinking marketplace, except to pilfer fromeach other,” said Stacy Glidden, chief operating officer atFirstCorp Credit Union in Phoenix.

Still, there will always be growth opportunities forcorporates.

“Perhaps the biggest [concern] is to realize we cannot be allthings to all natural person credit unions and to specialize injust doing a couple things very well,” Glidden explained, adding“then form strategic partnerships with other corporates to offerfull service to members.”

Those guidelines tie directly into the cooperative history ofcorporates, can lessen the competition for members, and it justmight light a path to prosperity, she said.

“There is such great opportunity for the corporates that adaptto the new marketplace,” Glidden said.

While that optimism is contagious, the 900-pound gorilla in theroom can cast a huge shadow over any potential growth scenario.Keith Leggett, economist and vice president with the AmericanBankers Association, wrote in his February “Credit Union Watch”blog about the flight of capital out of the corporate system duringthe last five years, mainly because larger credit unions were notcapitalizing corporates.

Leggett defined a universe of large credit unions with more than$100 million in assets. By his count, from 2007 to 2011, 31% ofthose institutions left the corporate system.

According to Leggett, because not only are fewer big creditunions ponying up capital, they are putting in fewer dollars. Hewrote that 1,099 credit unions reported reducing the amount ofcapital they held in corporate credit unions between December 2007and September 2011.

In an interview with Credit Union Times, Leggett saidlarge credit unions are not dependent on the corporate system.

“They can get their needs met elsewhere. [Many] have decided tomaximize value to themselves, not to the movement,” he said. “Thereis a lot of question within the industry as to whether thecorporates can be viable under the new regulations.”

That leaves the question for 2012, which is can corporate creditunions grow if the big natural person credit unions sit on theirwallets?  The jury is still out on that issue.

“We believe some credit unions will come back to corporates. Wehad one yesterday that said, we are back in,” said Butke atCorporate One.

The lure is that Corporate One, like many corporates, is readyto offer liquidity through short term loan, for instance, tomembers on an as needed basis, Butke said.

“The time will return when liquidity needs are again crucial andthere just aren't many places for a credit union to go. We believe the right corporate will be a good choice.”

Butke may be right about that but the other side of the coin isthat at least some experts expect further shrinkage in the ranks ofcorporates. 

“There will be 16 corporates left by year end, predictedAddington at Catalyst. “But there will be a further shakeout. Therewill be a few good corporates left.  In three years, Idon't know if it will be three or seven. But it won't be 16.”