When U.S. Central's $1.2 billion January losses prompted an NCUA bailout, Eastern Corporate Credit Union tabulated a worst-case, total loss scenario at U.S. Central and quickly realized it needed more capital.
EasCorp successfully raised $17.7 million in Perpetual Paid-In Capital II, but according to Director John Young, a PIC subscription wasn't originally on elected officials' radars.
"Understanding the state of the financial industry, it was not a consideration that was talked about much or honestly even considered in the context of capital accumulation," he said.
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The idea came up during a meeting with key EasCorp members that occurred soon after the stress test. Young said he was struck by how many members expressed an obligation to support EasCorp in its time of need.
The $1.3 billion corporate eventually asked members to convert their existing member capital shares to GAAP-approved PIC to shore up key capital ratios; members did that, but also contributed nearly $6 million in new money.
"As a director who attended several subsequent meetings, I will tell you that I was never more convinced of the importance of EasCorp to its members," he said. "EasCorp's business strategy of being focused on the members was a competitive advantage not easily replicated, [and that] was confirmed to me at these meetings."
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