Increase Falling Membership? Changing FOM is 1 Option, Says NAFCU Economist, But It’s Not Answer for All

Kurt Long

ARLINGTON, Va.–What can be done about the lack of growth at more than half of all federally insured credit unions? It’s a challenge for which there is no one clear-cut answer, notes NAFCU.

Newly released data from NCUA show that while overall membership in federally insured credit unions continued to grow during the year ending in the first quarter of 2021, 55% of federally insured credit unions had fewer members at the end of Q1 than a year earlier.

That data is being reported even as overall, federally insured credit unions continued to experience double-digit asset and share-and-deposit growth over the year ending in the first quarter of 2021.

‘Disparity’ is Apparent

“We do see the big disparity between large and small credit unions when it comes to growth especially,” said NAFCU’s chief economist, Curt Long. “That’s true along a number of dimensions. It’s a long-standing trend. If you look at the median, a credit union with $50 million in assets, they are probably not growing nearly as much as a larger CU. Growth is a topic NAFCU tries to focus on. We try to give credit unions all the tools they need to grow.”

FOM & Regs

In particular, said Long, NAFCU has sought to focus on regulations related to field of membership and for opportunities to expand FOM.

“A lot of small credit unions are bound by their field of membership,” said Long. “Opening up may give some credit unions opportunities to grow.”

And in response to a question, Long acknowledged that for some credit unions facing a lack of growth a merger may be the best option.

“We support whatever is in the best interests in the membership,” said Long.

 

CUToday

 

NCUA has announced it will be distributing $865.5 million to the 1,800 membership capital account holders of the former Members United, Southwest Corporate, and U.S. Central corporate credit unions.

ALEXANDRIA, Va.–NCUA has announced it will be distributing $865.5 million to the 1,800 membership capital account holders of the former Members United, Southwest Corporate, and U.S. Central corporate credit unions.

NCUA placed those corporates (plus Constitution Corporate and Wescorp) into conservatorship more than a decade ago as the result of failed investments in mortgage-backed securities that plummeted in value with the housing crisis.

The agency also announced the end of the NCUA Guaranteed Notes program and said it “will continue to effectuate its plan to orderly liquidate the remaining post-securitized assets” and make further distributions when possible.

“This third round of distributions is the largest to date and another milestone in the NCUA’s successful management of the Corporate System Resolution Program,” said NCUA Chairman Todd M. Harper. “As we wind down the remaining corporate credit union asset management estates, the NCUA will continue to conduct an orderly liquidation of the remaining assets and aggressively pursue legal recoveries while optimizing returns.

“Credit unions receiving money from these distributions are encouraged to use the funds to support serving the millions of credit union members experiencing economic hardships because of the COVID-19 pandemic, especially to people of color and those in low-income areas disproportionately affected by the pandemic,” Harper added.

Two Earlier Rounds

As CUToday.info has reported, as liquidating agent of the former corporate credit unions’ asset management estates, NCUA has to date previously made two rounds of distributions. The first distribution was made to the former capital holders of Southwest Corporate in July 2020. The second distribution was made to the former capital holders of Southwest Corporate, Members United, and U.S. Central in April of this year.

According to NCUA, these former capital holders will also receive the latest round of distributions, scheduled to occur before the end of September 2021. With this third distribution, the NCUA said it will have returned more than $1.3 billion to former membership capital account holders.

The agency called its Corporate System Resolution Program a “landmark initiative established by the NCUA Board to stabilize, resolve, and reform the corporate credit union system in the wake of the 2008 financial crisis.”

Additional Coverage

CUToday.info has just completed a five-part series examining the Corporate Resolution Program. Coverage can be found here:
A Decade Later, Series Examines The Decisions Made
Agency Performed, But A Few 'Black Eyes'
NCUA's Fazio Recalls Corporate Crisis Resolution
Former NCUA Chair Reflects on Corporate Resolution
No Clean Hands When it Comes To Failures

Credit union yield on asset ratios hit a record low! Surge in Mergers Forecast in New Trends Report

MADISON, Wis.–Credit union yield on asset ratios hit a record low, and every real estate loan category reported positive growth while every consumer loan category (except used cars) saw negative growth through April, according to the newest CUNA Mutual Trends Report, which is also predicting a “surge” in CU mergers during 2023-26.

The June Trends Report, which is based on CU community data through April of 2021, also predicts loan growth will “accelerate” in 2022 for a number of reasons.

According to the Trends Report, CU yield on asset ratios fell to 3.04% in the first quarter of 2021, the lowest in credit union history. The report notes the ratio has fallen a full one percentage point from the 4.04% set in 2019, right before the COVID-19 pandemic.

Continue at CUToday

 

NCUA - Capitalization of Interest Rule to Assist Financially Distressed Borrowers

Capitalization of Interest Rule to
Assist Financially Distressed Borrowers

NCUA Board Approves CECL Phase-in Final Rule

ALEXANDRIA, Va. (June 24, 2021) – Through a live audio webcast, the National Credit Union Administration Board held its sixth open meeting of 2021 and unanimously approved three items:

• A final rule that removes the prohibition on the capitalization of interest in connection with loan workouts and modifications.
• A final rule that would phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit losses accounting methodology over a three-year period.
• An extension of the federal credit union loan interest rate ceiling until March 10, 2023.

Capitalization of Interest Final Rule to Aid Members in the Coming Months

The Board approved a final rule that removes the prohibition on the capitalization of interest in connection with loan workouts and modifications. This follows a 60-day public comment period that closed on February 2, 2021. Capitalization of Interest is the addition of accrued but unpaid interest to the principal balance of a loan. View the entire press release​

NOFFCU Voted Top Winner

 

NOFFCU Voted Top Winner
New Orleans Firemen's Federal Credit Union | June 18, 2021
Award,Awards,press release 

New Orleans Firemen’s Federal Credit Union (NOFFCU) is proud to be recognized as the Top Winner in the New Orleans CityBusiness 2021 Reader Ranking Awards in the Credit Union category.

The Reader Ranking Awards recognize outstanding businesses across a range of industries in the Metropolitan Orleans area. Results are driven by readers who nominate and vote for their top businesses.

“It is truly an honor to be voted top credit union in our area,” said NOFFCU CEO Judy DeLucca. “This recognition, which was decided by those in our community, reminds us of why we do what we do and the impact we have on people’s lives. We appreciate the trust our members have put in us and will always put them first.” 

New Orleans Firemen’s Federal Credit Union is a full-service financial institution serving over 26,000 members across Louisiana and Mississippi, and the second oldest federally insured credit union.

 

Updates to four sections of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual).

WASHINGTON – The Federal Financial Institutions Examination Council (FFIEC), of which NCUA is a member, has released updates to four sections of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual).

According to the FFIEC, the updates affect the following Manual sections:

• International Transportation of Currency or Monetary Instruments Reporting (PDF)
• Purchase and Sale of Monetary Instruments Recordkeeping (PDF)
• Reports of Foreign Financial Accounts (PDF)
• Special Measures (PDF)

“The updates should not be interpreted as new instructions or increased focus on certain areas; instead, they offer further transparency into the examination process and support risk-focused examination work,” the FFIEC said.

The FFIEC added the Manual provides instructions to examiners for assessing the adequacy of a bank’s or credit union’s BSA/AML compliance program and its compliance with BSA regulatory requirements and reminded the Manual itself does not establish requirements for banks; such requirements are found in statutes and regulations.

In addition to NCUA, the FFIEC includes the Federal Reserve Board, the FDIC the Office of the Comptroller of the Currency, and the State Liaison Committee.

We have had to make a change to our Firefighter Newsroom

 

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The US' booming recovery is fueling inflation: here's where you might be feeling it

Jerome has spoken... and investors didn't clap. Last week, the Fed indicated it expects to raise rates by the end of 2023, sooner than previously projected. The central bank has been pumping $$$ into the economy to keep rates low. Now, investors worry that could end sooner than expected. Higher interest rates can make bonds and savings accounts more attractive compared to riskier assets, like stocks. They also increase borrowing costs (think: credit card interest). Should be an Uber Limo... for the price of that Uber X. The Fed can raise interest rates to slow inflation. ICYMI: things have been pretty #flated recently. Consumer prices jumped 5% in May from last year, the fastest pace since 2008. Here's where you might be feeling the bump: Gas: The pump anxiety is real. Gas prices are up a whopping 56% since last May. Cars: Consider the bus. Used car prices are up 30%, and insurance is up 17%. Flights: Your Miami getaway ticket is looking like a roundtrip to Europe — +24%. Laundry: Grab the quarters. Washing machine and dryer prices = +26%. Ride-hail: When the Uber/Lyft surge pricing seems endless. Transportation services = +11%. Food & Bev: Restaurant food (+4%), alcohol (+1.6%), cereal and baked goods (0.6%). Peanut butter has been a victim of price hikes, too. THE TAKEAWAY The US' recovery has global implications... That's because the US economy accounts for nearly 25% of the world's economic output. America's booming recovery is starting to drive up inflation around the globe. That's pushed some central banks in other countries to raise interest rates early — while many developing economies are still struggling as Covid surges. Looking ahead, continued inflation in the US could slow the global recovery. Investors hope it's just a one-time increase as the economy rebounds. But some worry inflation could last longer and weigh on markets.