From the CEO
Lee Butke, President/ CEO, Corporate One Federal Credit Union
October 29, 2010

Dear Member:

As I discussed last month, the new regulations for corporate credit unions (NCUA Rules and Regulations, Part 704) were released in September, and have now been officially entered into the Federal Register. While the final product was largely what was expected, we were very pleased with the response from the NCUA to the many comment letters, and discussions with, credit unions and corporates as they crafted a long-term map for the future. The great news, which is worth repeating, is that we won’t be requiring our existing capitalized members to give us a single penny of new capital. To meet the new capital requirements, we only need to ask our members to “recommit” their existing capital, and commit it to a form of capital that meets the new regulatory requirements.

In the next two months, Corporate One will be presenting our new re-committal plan to members, and we’ll be announcing town-hall style meetings for January 2011 where we’ll be out discussing the plan in detail and answering any questions and listening to any concerns you may have. Until then, I want to give you some updated information about our current financials, highlighting specific information that every credit union should know about the corporate where they hold capital.

For example, for the first nine months of 2010, even after taking OTTI charges and recording the NCUSIF premium assessment, Corporate One recognized $10.9 million in net income. This boosted our reserves and undivided earnings (RUDE) to $34.3 million. As you know, RUDE is important for our members as it is the cushion that protects our members’ capital from absorbing losses. Corporate One remains rather unique in that our members’ capital accounts have not been depleted, thanks to our positive RUDE position. Additionally, this level of RUDE resulted in a .98 percent ratio of RUDE to daily average net assets (DANA) as of September 30, 2010, which already exceeds the National Credit Union Association’s new regulatory requirement of achieving a .45 percent ratio three years after the new regulation is issued. Other positive developments during the first nine months of 2010 include:

• Corporate One continues to have strong core earnings (i.e., earnings exclusive of write-downs on our securities), earning $10.9 million for the nine months ended September 30, 2010.
• Corporate One continues to receive strong support from our members, with almost $4.5 billion in assets under management (including on-balance sheet investments, SimpliCD sales and security sales).
• Corporate One continues to add new members, with 32 new members from around the nation joining us in the first nine months of 2010, adding to our top line revenue.
• Corporate One’s Accumulated Other Comprehensive Loss has been reduced significantly from $504.2 million at Dec. 31, 2008, to $255.7 million at Dec. 31, 2009, to $174.6 million at September 30, 2010. This represents a 65 percent reduction since 2008 and a 32 percent reduction just this year.
• During the first nine months of 2010, we’ve continued to focus on expense control, which is evident in reduced expense levels compared to 2009. One ratio that we monitor closely is the percentage of expenses (excluding the NCUSIF premium assessment) we can cover with fee income. This ratio was 82.3 percent for the first nine months of 2010. That ratio is important to our members, as it indicates that we continue to operate one of the most efficient corporates in the nation, and that we’re working diligently to remain good stewards of our members’ ownership investment with us.

As you can see, Corporate One has positioned our members well from a capital and earnings perspective. And I know you will be pleased with our capitalization plan when we roll that out in December. Look for information in the mail and on our Web site.

Finally, I want to thank the Ohio Credit Union League and the Indiana Credit Union League for hosting a series of regional town hall meetings in the last month where I was able to meet with many of you and discuss Corporate One’s future and our plans for growth. I was humbled by the many in attendance who continue to express their support of Corporate One and desire to be a part of our organization and who continue to see value in working collaboratively. I look forward to providing excellent products, services and value to our existing members as well as all the new members who are looking to join our family.

Respectfully,

Lee C. Butke
President/CEO