Ask Alloya is the corporate’s answer board that addresses all questions from our active membership, as well as interested credit unions looking for more information on Alloya. Answers to questions will be reviewed and posted periodically. Please check back often.

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What is the deadline date to submit the forms for the excess balance account?

Credit unions that participate in our excess balance account (EBA) product through Pacific Coast Banker’s Bank (PCBB) as agent should complete the forms to convert to the Alloya EBA Fed program as soon as possible, as the deadline for submission has already passed. The original deadline was December 31, 2011.

The EBA program utilizing PCBB as agent was intended as a temporary solution while Alloya worked with the Fed to develop its own program. Now that Alloya’s program is approved and functioning, we would like to finalize all PCBB conversions by March 31, 2012. To accomplish that, we must have the proper paperwork in hand several weeks in advance.

If a credit union hasn’t participated in an EBA program with us yet, then there is no deadline for submission of the forms. They are welcome to submit paperwork to participate in the Alloya EBA Fed program at any time.

Where do I find a list of what fees or what the cost will be for services with Alloya?

At this time, fees are not scheduled to increase appreciably for members who capitalize Alloya. For fee guidance, please see the 2011 Fee Schedule distributed for you from Members United Bridge. If you need another copy, please contact your senior business consultant.

When the transition from Members United Bridge to Alloya takes place, can we keep our same routing and transit number?

Yes. Upon merger, Alloya will assume the routing and transit number of Members United Bridge, so there will be no change in the routing and transit number for the corporate and no changes to credit union routing and transit numbers.

Can our credit union put in more than the minimum capital required? And does that amount count toward the needed goal?

Yes, credit unions can contribute more than the amount requested of them in the Private Placement Memorandum. The additional capital could either be perpetually contributed capital, non-perpetual capital, or a combination of the two. The additional capital will increase the credit union’s deposit cap and line of credit caps. All contributed capital will count toward the corporate’s goal. 

Can you explain the advantages or disadvantages to investing in non perpetual capital for an additional line of credit?

Members seeking a larger line of credit or a higher deposit limit may invest in non perpetual capital (NCA) once they have satisfied their requirement for perpetual capital (PPC) – please see the Private Placement Memorandum for details. The primary advantage is that NCA is redeemable with a five year notice while PCC cannot be redeemed. The primary disadvantage is that if your credit union purchases NCA during this capital offering period, in the year 2013 your credit union will need to make a decision concerning NCA capital that will have an impact on your line of credit at Alloya. Because NCA will not be counted as capital beginning two years after it is issued (by direction of the new corporate regulation), Alloya will require the NCA be converted to PCC to maintain the line of credit at the same level after October 2013.

In the past, under Reg 704 we were allowed to have excess (non-insured) funds in corporate CUs. With the planned EBA accounts, these funds will be with the Fed and not Alloya. Is there authorization from NCUA to have excess funds held at the FED and are CUs amending their Investment policies to accommodate this?

The Federal Reserve Bank is an authorized investment under Regulation 703 and deposits in the credit union’s name in an EBA account would qualify. NCUA issued letter number 11-CU-10, Federal Reserve Bank Excess Balance Accounts Fact Sheet (July 2011) to help clarify how EBAs work and credit union participation in the program. Click here to view the letter. Regarding investment policies, individual credit unions should update their policies, and if necessary, to accommodate any changes in the investment strategies which are consistent with their intended risk profile and allowed under applicable regulations.

What happens to perpetual capital when credit unions merge and both credit unions have perpetual capital with Alloya?

In the case of a merger between two member credit unions, the perpetually contributed capital is combined into the account of the surviving member. Assuming that settlement activity remains the same for the merged entity as in the past, no additional capital would be required. If settlement activity were to decrease, the credit union could attempt to sell the excess to another credit union that needs to purchase additional capital. In any event, since the capital contribution is perpetual, any excess could not be returned to the credit union by Alloya.

What happens to my line of credit if we do not recapitalize with Alloya?

If you do not capitalize Alloya then your line of credit will no longer be available. The timing of elimination of availability depends on several factors and situations:

If you have no other services with us except the line of credit, the availability will be $0.00 as of October 24, 2011

If you have services that you are in the process of moving that require a line of credit, then your line will be reduced to the minimum amount required for the services during the transition and will only be available for settlement loans.  As with other services, your line of credit will be subject to a higher rate of interest.  All lines to members who have not capitalized Alloya will reduce to $0.00 on October 20, 2012

Will the LOC that my Credit Union receives from Alloya Corporate be a "Committed" line or simply an "Advised" line? Can we have the option of one or the other, and if so, what are the differences?

At this time the corporate is anticipating providing only advised lines of credit under similar terms and conditions to the lines of credit currently provided. The difference between committed lines of credit and advised lines of credit is that committed lines provide guaranteed funding as long as the member is not in default and also require the issuer to maintain reserves, charge significant fees and maintain strict lending covenants and events of default. Advised lines, while they do not provide guaranteed funding are much more flexible. While the funding is not guaranteed, throughout its history the corporate has never failed to provide a liquidity advance under an advised line of credit.

Which three days were selected for the calculation of average daily debit settlement and why were those days selected.  Can we pick three different days?

The calculation is based on average daily debit settlement for the first quarter of 2011, which was then multiplied by 3 and then multiplied by 5%. That period was chosen because it represents the most recent full quarter's data for debit settlement and is therefore most reflective of how credit unions are individually using the corporate.

Do I understand this correctly, that if I deposit $100,000 in capital I can have $3,000,000 in deposits, a $3,000,000 LOC and $3,000,000 in 3 day average daily settlements?

No, based on average daily settlement of $666,667, the three day calculation would be $2,000,000. The capital calculation would be $2,000,000 times 5% or $100,000. A capital contribution of $100,000 yields a deposit cap of $2,000,000 (20 x $100,000) and a line of credit cap of $3,000,000 (30 x $100,000) if capital is purchased during this initial offering period.

How much capital is required for the long term line of credit?

Alloya Corporate will offer advised lines of credit used primarily for overnight loans, not long-term lines of credit. We will offer term lending with shorter term durations on a first come, first served basis to the extent possible based on the corporate’s balance sheet.  Any such short-term loans to your credit union will reduce the amount of your advised line of credit accordingly.

The unaudited financials posted on your website include “year-to-date” data including results from Members United Bridge. If they are two separate entities, then why are they combined in your financials?

On October 24, 2011, Members United Bridge Corporate FCU was merged into Alloya Corporate FCU. From a legal perspective, Alloya Corporate is considered the acquirer and assumed 100% of the operations, contracts, staffing and processes of Members United Bridge. From an accounting perspective, Members United Bridge was considered the acquirer as it provided the governance, ownership, operations, and management resources. As a result, the transaction was considered a reverse acquisition for accounting purposes whereby the historical financial results for Members United Bridge became Alloya Corporate’s financial results. 

Members United Bridge Corporate posted an operating loss of $423,000 for the month of September, 2011. Is this a cause for concern?

The loss in September was not unexpected, and is related to the operation of Members United Bridge Corporate (Bridge), not the go forward financials of Alloya Corporate.  Alloya is expected to be profitable beginning with its first full month of operations in November 2011. As reported previously, Members United Bridge expected to operate at a loss for September and October as it completes its transition activities, positions its balance sheet, expenses organizational costs and completes the launch of Alloya. It should be noted that on a year to date basis, Bridge’s net income totals $9.3million. Retained earnings of $20.3 million as of September 30, 2011 represents the cumulative net income earned while in Bridge status through that date. 

The Bridge was established by the regulator to provide uninterrupted service to the members of Members United Corporate while they determined the course of action for those services in the future. At the same time, the Estate was formed to hold and dispose of the legacy assts of Members United Corporate. In summary, Bridge provided financing for Estate until it completed its issuance of NCUA Guaranteed Notes (NGNs) in the form of bonds payable to the Bridge. Those bonds benefited the Bridge during the first nine months of operation (November 2010 – July 2011) because they paid a yield that is not available today, allowing the corporate to maintain a positive spread to member certificates. The NGN process was concluded on August 1; the bonds have been completely paid resulting in the Bridge holding a substantial amount of cash as a percentage of total assets.    

Transition costs and substantial cash positions have pressured the corporate’s earnings during its last few months of Bridge operations. Alloya plans to generate positive net income beginning with the month of November 2011 as the transition costs conclude and Alloya is able to reinvest the cash balances.  

Isn't perpetual capital another name for a prepaid asset and would it not have to be amortized over some useful life? This deposit is presumably not refundable.

Perpetual capital is not another name for a prepaid asset; it is another name for an investment. As an investment, it needs to be periodically reviewed for impairment (instead of being amortized). As long as capital has not been depleted, is paying a dividend and the credit union is benefiting from the corporate services, accountants would likely have a difficult time making a case for impairment. However, check with your independent auditors regarding accounting treatment. 

What benefit will the perpetual capital be to Alloya after the RUDE becomes the primary PCA component?

The new regulation caps how much PCC can be counted towards capital ratios over time. The PCC cap on the calculation is designed to protect member-contributed capital by ensuring that the organization builds RUDE. PCC is still a component of capital, though at a lower level, and therefore is important to the organization going forward.  This feature of the regulation is why Alloya is seeking to keep the initial PCC contribution as low as possible, since we plan to generate sufficient earnings and grow RUDE to become the primary form of regulatory capital in the future.

What sort of training will Alloya board members receive to make sure they know what they are doing?

The Alloya Board will have an on-going training calendar that presents quarterly training sessions of 30-60 minutes on various subjects such as ALM, risk management and business continuity planning. This schedule will be established each year in advance for the coming year and the training will be provided by webinar, in-person or both.  Alloya plans to use both internal staff expertise, as well as outside experts to perform the training and volunteer attendance at such training will be tracked and reviewed by the full Board. Further, the Nominating Committee will take into account training attendance as part of its process in determining who to nominate as board candidates.

Would the Board consider hiring former Members United Management?

The Board of Alloya plans to retain Mr. Furbee as the interim CEO until a search for a permanent CEO can be successfully completed, which is expected to take until about July 2012.  At that time the new CEO, with input from the Board, will select a permanent management team.  As is the case for all hires, candidates will be evaluated on the job needs and the specific skills, experience and knowledge they bring to Alloya.

Please explain what kind of commitments Alloya Corporate will look for from their board if a credit union CEO is considering it. Where will the board meet and how much time in a month will the board member typically commit?

The draft bylaws of Alloya state that “A regular meeting of the board must be held each month at the time and place fixed by resolution of the board.  One regular meeting each calendar year must be conducted in person.”  The bylaws are currently considered draft because they must be adopted by the inaugural board of Alloya after the capital raise has concluded, a charter is granted, and the inaugural board is seated.  The actual number of in-person board meetings and their location(s) will be determined by the board.  The likely board meetings schedule will be in-person quarterly with conference calls held in the intervening months.  Preparation and meeting time will vary based on the information presented and the business to be considered, but as a guide one to two days for preparation and four hours for conference calls and eight hours for in-person meetings (not counting any travel time) would be reasonable.  Additional information will be available after Alloya begins operation. 

Will there be term limits for the board members of Alloya to ensure an ongoing fresh perspective and provide confidence in the ongoing oversight of this entity?

Term limits have not been established in the bylaws, but could be considered by the board in the future.

With the issuance of the Advance Notice for Proposed Rulemaking regarding CU liquidity and access to the CLF, I’m unsure of how to answer a question on the 5300 year-end report. Does my credit union still have access to the CLF through Alloya?

Yes. Until US Central redeems their CLF stock, Alloya members will still be able to access the CLF through us as an agent.

Is Alloya Corporate Federal Credit Union regulated by the NCUA?

Yes, Alloya is regulated by the NCUA. Please see the NCUA Regulations Part 704 - Regulating Corporate Credit Unions.

What are your holidays?

Alloya's Holiday Schedule corresponds to the official Federal Reserve Legal Holiday Schedule. Click here to see our holiday schedule.

When reporting the balance in the FED EBA account at month end on the member credit union books, is it acceptable to include the amount in the balance for Members United/Alloya?

Deposits in the Federal Reserve Bank EBA are not maintained at Members United/Alloya. If the credit union’s month-end report specifically states balances at MU/Alloya, it is not correct to include EBA balances in that total. A more generic heading of “cash on deposit at Financial Institutions” would be more appropriate, or the balances held at the Fed and the corporate could be listed separately on the report.

Please consult your accountant for specific accounting and reporting guidance and advice concerning your credit union.

The NCUA is insuring deposits at Corporates through 2012. What is a reasonable expectation for insurance coverage after that date?

For a definitive answer to this question, credit unions should consult NCUA. Alloya believes that once the Temporary Corporate Credit Union Share Guarantee Program expires on December 31, 2012, the insurance coverage through the NCUSIF of $250,000 would apply.

How will the new corporate assets be reduced to achieve the $2B mark outlined in the plan? What is the time frame anticipated to reach that goal?

Some of the reduction will occur as certificates roll off the balance sheet at maturity.  Balance Sheet Solutions (our wholly owned broker dealer subsidiary) is available to assist in placing those investments. In addition, the corporate is working to establish an excess balance account program for member credit unions with the Federal Reserve. In this arrangement, excess overnight balances are automatically swept to a fully guaranteed interest bearing account in the credit union’s name at the Fed near the close of business.  The following morning, those funds will be automatically returned to your account at the corporate and available for your use. Additional information will be available shortly.