From the CEO
Lee Butke, President/ CEO, Corporate One Federal Credit Union
September 30, 2010

Re: NCUA Releases New Reg. 704 Rule for Corporate Credit Unions

Dear Member:

The National Credit Union Association on Friday, September 24, released revisions to NCUA Rules and Regulations, part 704 – the rule governing corporate credit unions. These rules were made available to the general public, as well as to the corporate credit unions themselves during a special NCUA Board meeting. As the final regulation has many similarities to the proposed regulations, we have been preparing and are moving forward with the new requirements. The good news is that the new regulation appears to be a path back for corporates, and not a path away from corporates. And the outlook for Corporate One is extremely positive.

This final version of Reg. 704 appears to be very similar to the regulation that was proposed by the NCUA back in early 2009. The NCUA made changes judiciously based on comments from an array of individuals, including credit unions, corporates, trade associations and other regulatory bodies as well as outside independent opinions. The changes based on these comments should only strengthen the corporate system and the entire credit union movement. I want to thank the NCUA for its thorough process of developing and vetting this new regulation and for their commitment to maintaining a cooperative business model that remains in the best interest of ALL credit unions.

Also, on September 24, the NCUA took into conservatorship three more corporate credit unions, Members United, Southwest and Constitution. The NCUA has stated that they believe these institutions cannot survive future losses on toxic “legacy” assets. More on the conservatorships of these corporates can be found on the NCUA website. The conservatorships were part of a larger plan to deal with legacy assets throughout the corporate system, and I want you to know that assets held at Corporate One were NOT part of the NCUA’s legacy asset plan.

One of most pressing questions for credit unions regarding the new Reg. relates to the type and amount of capital needed to fund the remaining corporates. Now that we have that information, we expect to be in contact you in the coming weeks and months with our revised capital plan. Of course, as we’ve communicated to you previously, we will not need to ask for “recapitalization” as most all other corporates will need to do, as 100% of our members’ capital investment with us remains intact. We’ll only be asking those members with capital already with us to “recommit” their existing capital. We are very proud of the fact that we won’t be asking for a single dime of additional capital from these existing capitalized members. We also see a clear opportunity to build our membership and capital as many credit unions around the country are looking for another corporate to join.

One of the factors that keeps me so extremely optimistic about Corporate One’s future is our current financial condition. We continue to report strong earnings, which exceed our budgeted predictions and are positively contributing to steadily growing reserves and undivided earnings. Our capital position and earnings also continue to grow. I invite you to review our current unaudited financials for August.

Should you have any questions in the coming weeks or months about Corporate One or Reg. 704, please don’t hesitate to contact me at 866/692-6771, ext. 9300 or lbutke@corporateone.coop. I will also be available in October at several of the Ohio Credit Union League town hall meetings and I look forward to seeing you at one of these meetings.

Thank you again for your continued support of Corporate One.

Respectfully,

Lee C. Butke
President/CEO