From The Desk of the CEO

MCCU Audit Nearing Completion

I would like to take this opportunity to address two key topics: 1. The audits of both U.S. Central and Missouri Corporate, and 2. the proposed corporate credit union regulation by NCUA.

First, the audit situation… U.S. Central Federal Credit Union’s 2008 audit was released on September 11, and revealed additional losses of $9.2 million. Early press reports had indicated that the losses were much higher, but the reports were inaccurate because they did not take into account the revised accounting rules which allowed a reversal of a good portion of the 2008 losses in 2009.

Missouri Corporate Credit Union’s auditor, Cummings, Ristau & Associates, P.C., is now preparing our 2008 audit. We hope to receive the final audit very soon. As soon as it has been completed, we will
notify all member credit unions and place our 2008 audited financials right here on our Web site – along with our 2009 third quarter Credit Worthiness Report, which will include updated numbers for the previous three quarters.

Regarding the proposed corporate credit union regulation… We listened to NCUA personnel describe the new regulation in the NCUA Town Hall meeting held in St. Louis on September 15. Most of the proposed revisions will have little effect on Missouri Corporate, but the timeline for achieving the new capital ratios presents a major problem.

According to the NCUA, the new regulation will require a corporate credit union to achieve a one percent retained earnings ratio within five years. That is a very aggressive time frame. Corporates typically earn very little net income, and it takes a long time to build retained earnings. Most corporates are starting with zero retained earnings, so reaching a one percent level in five years is a big hurdle to overcome. Plus, the options available to us to increase net income punish natural person credit unions with low rates, and exacerbate the liquidity problem at U.S. Central as funds are withdrawn at corporate credit unions.

The final version of the proposed regulation should be published by year-end and will contain a comment period. Once the proposed regulation is published, we will also publish a letter to members describing our thoughts on the regulation.

In the meantime, we appreciate your patience and support during this unprecedented period in the history of the credit union movement.

Regards,

Dennis J. DeGroodt, CCUE, CUDE
President/CEO
Missouri Corporate Credit Union