Date: August 22, 2012
To: Member/Owner Credit Union
From: Daniel J. Buckley, Interim President/CEO
It has been a little more than a month since I became Interim President/CEO of Corporate America Credit Union, and I want to provide an update on our progress and activities. I also want to inform you of some issues CACU is working to resolve, related to events of the past few years. First, thanks to your membership and support of CACU’s products and services, the Board of Directors and I believe we have a bright future – one in which CACU can contribute to your credit union’s own success and competitiveness.
Also, look for future updates, as I believe regular communication with our member/owner credit unions is vital. I want to make sure members have a clear understanding of the issues we face, our initiatives, and our future plans.
Over the last couple of years, CACU and other corporate credit unions that weathered the financial debacle, have made great strides to recover and redefine how best to serve credit unions going forward. For us, that means making certain we meet three criteria: operate in a safe and fiscally sound manner; meet members’ service needs; and comply with all provisions of NCUA’s corporate regulation (Part 704) and ACUA’s regulations.
Earlier this month, CACU’s Board of Directors and management team held a planning session and made several decisions to ensure we can meet each of these criteria:
− Regulatory relations – Today, all corporates are learning to navigate under intense regulatory oversight. My background at NCUA and experience in credit unions convinces me of the value of open and positive working relations with our regulators. This focus is a top priority at CACU. Your Board and management team believe this is vital to our Corporate’s future. We are committed to achieving and sustaining not only regulatory compliance, but also maintaining open communication with our regulators. We may not always agree with regulatory changes; however, we understand that the changes are needed to ensure a safe and stable system going forward.
− Reduce/retire regulatory waivers – Since the revised Part 704 rules became effective, CACU has been operating under various waivers from the NCUA and the ACUA. These waivers are related to compliance with weighted average life (WAL) limitations, obligor concentration limits, non-liquidity borrowing limits, and one investment action plan (IAP). Along with NCUA and ACUA,
− the Board and I believe that going forward the continued use of waivers is not a sustainable business model. We achieved compliance with the WAL limitations earlier this year and remain in compliance. Now, we are actively reducing exposure to certain obligors to achieve compliance by year end. This will involve the sale of certain securities where CACU has concentrations exceeding the maximum obligor limitations. The fact that these securities may have been permissible prior to the new regulation is irrelevant, as they are no longer allowable at the levels we currently hold. Our one and only remaining IAP will be resolved by year end. The non-liquidity borrowings date back to 2008 and are unfortunately fixed-rate and well above current market rates. In July, we paid off $20 million at maturity and have $170 million with staggered contractual maturities through 2018.
− Balance sheet strength – CACU currently meets regulatory requirements for retained earnings and we fully expect continued compliance as future regulatory thresholds become effective. This will be done by managing the size of the balance sheet and by returning the corporate to profitability following the sale of the securities needed to achieve regulatory compliance absent the use of ongoing waivers.
− Product and Service fees – In the past, CACU was reluctant to raise fees in an effort to maximize user volumes and activity. I believe this is an unsustainable business model, as it reduces already thin margins needed to maintain operations and build capital. CACU has experienced a number of fee increases from its venders without passing through corresponding increases in our fee structure. The Board approved marginal fee increases at its recent planning session, and we will communicate the specifics of these to you in the near future. We remain focused on maintaining a low fee base by ensuring we operate efficiently and manage our risk at appropriate levels going forward.
− Future plans/direction – We know you expect us to be good stewards of your credit unions’ money, and we’re working hard to provide the best value for the funds you entrust with us. In this regard, we are in the process of realigning CACU’s staff – both to ensure good member service and to enhance efficiency. This realignment was needed following the growth we have experienced over the past two years. We also are reviewing our vendors, our marketing efforts, and your future product needs. These efforts will allow us to reduce CACU’s operating expenses by 2.3 percent for the remainder of 2012, as well as to make an 18.2 percent budget reduction in operating expenses in 2013.
Every day, we look for ways to better serve our members – with particular focus on those who regularly use our services and have invested in our mutual future. CACU staff and I are fully committed to helping you meet your own members’ financial service needs, now and in the years to come.
At CACU, our first priority is – and will continue to be – to ensure that we have the strength, capabilities, and staff skill sets to meet your credit union’s need for first-rate, cost-effective financial products and services. I will keep you informed of all of the activities at CACU as we move forward through the next several months. In the meantime, if we may be of service, please don’t hesitate to contact us.
Interim President/Chief Executive Officer