The $4.2 billion Corporate One Federal Credit Union is one of only seven retail corporates still reporting positive reserves and undivided earnings after accounting for U.S. Central's half-billion dollar plus second quarter net loss.
It started back in 1999, when new CEO Lee Butke contemplated U.S. Central's PIC I issuance. Butke recalled that the wholesale corporate was offering LIBOR plus 100 basis points, an excellent rate at the time.
"To me, that was the big defining moment," Butke said. "We had a big debate over it, but we took our time, really considered the risk involved, and eventually settled on our minimum, $1.9 million."
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Also key was a decision in early 2007 to limit concentration risk. After hearing the first rumblings that foreclosures were on the rise, Corporate One limited investments so no one asset class represented more than 25% of the total portfolio. That included U.S. Central, along with mortgage and asset backed securities.
In 2007, as funds flowed in per usual seasonal patterns, rather than invest in U.S. Central, Corporate One purchased new investments to diversify its portfolio. By early 2008, when U.S. Central recalculated capital share contributions, Corporate One received a $30 million MCS payback.
Butke stressed the decision was entirely risk-driven, and said Corporate One is "fully supportive" of U.S. Central and the corporate network.
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