NCUA to Distribute $569 Million

NCUA to Distribute $569 Million Under Corporate System Resolution Program

ALEXANDRIA, Va. (Feb. 28, 2022) – The National Credit Union Administration, in its role as liquidating agent, announced a $359.2 million distribution to more than 1,000 membership capital shareholders of the former Members United, Constitution, and U.S. Central corporate credit unions. NCUA will also distribute $209.8 million in dividends to more than 1,100 shareholders of Southwest Corporate. NCUA completed capital distributions to Southwest Corporate capital holders last year.

“This latest distribution is another important milestone in the successful Corporate System Resolution Program,” Chairman Todd M. Harper said. “As we wind down the remaining asset management estates, we will continue to minimize costs and maximize returns. In doing so, we will fulfill our fiduciary responsibilities as both the conservator and liquidator of the failed corporate credit unions and return additional funds to capital holders.” View the entire press release​

NCUA Phasing Out ‘Streamlined’ Process For Becoming CDFI

ALEXANDRIA, Va.–NCUA said its “streamlined” application process is being phased out for credit unions eligible to become certified as a community development financial institution (CDFI).



Instead, the agency said CDFI applications will be consolidated under one process under the Treasury Department’s Community Development Financial Institutions Fund.

“The NCUA encourages eligible credit unions to explore CDFI certification, which makes them eligible for CDFI Fund training and competitive award programs to enhance their capacity to provide underserved communities with access to insured, affordable financial services,” the agency said in released statement.

According to NCUA, 461 federally insured credit unions are now certified as CDFIs.

Announced in 2021

NCUA announced in August of 2021 its streamlined qualification process for obtaining CDFI application, under which low-income-designated credit unions registered in the NCUA’s CyberGrants system and completed an online participation form. The agency’s Office of Credit Union Resources and Expansion (CURE) then reviewed each credit union’s products, services, and other indicators to determine whether the CU qualified for the streamlined certification application.

NCUA said qualified credit unions were given the information needed to complete and submit the streamlined certification application to the CDFI Fund, which made the final certification decisions.

Citigroup is saying goodbye to overdraft fees.

Following the move by Bank of America and others to eliminate or reduce OD charges, Citigroup says it is following suit, making it the biggest U.S. bank make the change.

By this summer, Citi plans to get rid of overdraft fees, non-sufficient funds fees and overdraft protection fees.

The changes mean Citi will be the only one among the top five U.S. retail banks by assets to abolish the fees that have come under fire from consumer groups.

In a statement announcing its move, Citibank said it is also offering two services, Safety Check and Checking Plus, to help cover negative balance transactions, including an Access Account Package, a checkless account package with “low or avoidable monthly charges that provides customers with a simple, transparent way to manage their finances.”

The nation’s fourth-largest bank said it will also offer the Common Sense Protection Measures, where it will not authorize ATM or point-of-sale debit transactions in cases when funds are not available, and Low Balance Alerts where customers can enroll through their mobile devices or online.

‘More Equitable’

According to Gonzalo Luchetti, the chief executive of U.S. personal banking at Citi, the move is designed “to make the financial system easier and more equitable for communities who have little or no financial buffer.”

Following a move by ELGA Credit Union, Citi joins a growing list of banks and credit unions making changes or outright eliminating overdraft fees amid pressure from lawmakers in Congress and growing competition from online rivals, CNN noted.

According to the CFPB, the U.S. banking industry’s revenue from overdraft and insufficient funds was $15.47 billion in 2019, according to an estimate.

Current Geopolitical Events Increase Likelihood of Imminent Cyberattacks on Financial Institutions

Current Geopolitical Events Increase Likelihood of Imminent Cyberattacks on Financial Institutions Financial Institutions, Large and Small, Included in Potential Targets to U.S. Critical Infrastructure The U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) has recently issued two alerts addressing risks from Russian State-Sponsored cyber threats and highlighting recent malicious cyber incidents suffered by public and private entities in Ukraine. Given current geopolitical events, the NCUA, along with CISA, the Federal Bureau of Investigation, and the National Security Agency encourage credit unions of all sizes and their cybersecurity teams nationwide to adopt a heightened state of awareness and to conduct proactive threat hunting. In addition, COVID-related supply chain disruptions may require management to reevaluate previously held assumptions for business continuity and disaster recovery plans. Credit union leadership should be aware of critical cyber risks and take urgent steps to reduce the likelihood and impact of a potentially damaging compromise. All credit unions, regardless of size, are potentially vulnerable to cyberattacks. We highly encourage you to review the two CISA issuances and act on the applicable recommendations. It is crucial that your organization does its part to improve its resilience, reducing the risk of compromise or severe business degradation. The NCUA recently created the Automated Cybersecurity Evaluation Toolbox (ACET) for federally insured credit unions to evaluate their cybersecurity posture. For more information, please visit the NCUA’s cybersecurity resources website. Should your credit union experience a cyber incident, please contact FBI’s 24/7 Cyber Watch (CyWatch) at 855.292.3937 or by e-mail at CyWatch@fbi.gov. When available, please include the following information regarding the incident: date, time, and location of the incident; type of activity; number of people affected; type of equipment used for the activity; the name of the submitting company or organization; and a designated point of contact. To request incident response resources or technical assistance related to these threats, contact CISA at CISAServiceDesk@cisa.dhs.gov or 888.282.0870. We also encourage credit unions to report identified cybersecurity incidents to their district examiner and EIMAIL@NCUA.GOV as soon as practicable.

Florida - Virtual currency is a medium of exchange, it is not currency!

TALLAHASSEE, Fla.—The Florida Senate Appropriations Committee has given approval to a bill that defines how Bitcoin and other cryptocurrencies could be sold or traded by money services companies in this state.

The committee unanimously sent Republican Sen. Jason Brodeur’s legislative attempt (SB 486) to define the rapidly-growing cryptocurrencies to the Senate floor.

The bill sets out to create legal distinctions differentiating how two people trading or selling cryptocurrencies with each other would be considered and treated differently from someone or a company acting as a broker or bank, Florida Politics reported.

Those conducting third-party transfers would be regulated as money services businesses governed by Florida’s Office of Financial Regulation, like other financial institutions.

Other Provisions

The bill would require the cryptocurrency money services businesses to meet various thresholds for holding real currency liquidity, having corporate surety bonds, and maintaining certain market values.

“The cryptocurrencies themselves would not count toward those thresholds. The bill defines them not as actual currency, but rather as something that has a measure of stored value that could be converted to currency. In other words, crypto assets would not count toward minimum balances of money that a money services business would have to have on hand,” Florida Politics explained.

“One of the things the bill does — importantly — it says that virtual currency is a medium of exchange; it is not currency,” Brodeur stated after the committee had unanimously approved his bill. “Things can have monetary value and not be a currency. We needed to say that in statute.”

Auto lease payments increased noticeably in the fourth quarter of 2021, according to a new report.

CINCINNATI—Auto lease payments punched the gas noticeably in the fourth quarter of 2021, according to a new report.




According to Swapalease.com’s latest national auto lease trends report, Americans are paying an average of $523.68 per month on their leases according to listings made during the fourth quarter, up from $513.28 in the third quarter. However, in a nationwide survey of approximately 2,500 drivers, the majority of people now say they want their payments below $500 monthly.

The survey data also show drivers are strongly against longer lease terms, which could be a reflection of American’s exhaustion of extremely long loan terms of more than seven years now. Fifty-three percent of drivers surveyed said they want lease terms no longer than 36 months, the highest percentage recorded in Swapalease’s quarterly driver survey over the last five years.

New Inquiries

Swapalease.com reported that more drivers have been inquiring about taking over existing leases under contract to accomplish a handful of benefits: Incoming lessees are not required to pay traditional down payments since it was covered by the initial person under contract, and the incoming lessee also benefits by taking over the existing payment as opposed to signing a contract today at higher payment levels at retail.

For additional info: Q4 lease trends report.

TCT is presenting a free webinar on March 15 on How to Conduct Effective Risk Assessments

Over the past two decades, regulatory expectations have increased steadily. One area regulators are emphasizing includes OFAC, BSA, and AML. Compliance in these areas can be challenging especially for smaller credit unions.

In this webinar, Dolores Pico will provide sources and explanations of the source requirements for BSA/AML and demonstrate an effective process to comply with these requirements. She will review the application of simple to apply Risk Assessment tool that addresses the key requirements of these areas and provide guidance to better understand what your examiners expect from you.
About the Presenter

Date: March 15, 2022

Time: 1-2 pm EST
Registration link: https://us02web.zoom.us/webinar/register/WN_md1798fRSc2WKjDfogypYw

Dolores Pico, CUCE has worked with credit unions for over 30 years. She is a certified compliance professional with certifications from NAFCU and CUNA. She provides compliance support and consultation for multiple credit unions in the western United States.

Take-Aways

• What are the foundations of OFAC/BSA/AML compliance?
• How can risk assessments be employed to fulfill regulatory requirements?
• How can I effectively communicate with my examiners regarding these regulations?

Who Will Benefit from Attendance?

• CEO
• CFO
• Accounting Staff
• Operations Manager
• Compliance Staff

Donna Jensen
Business Development | TCT Risk Solutions
p (208)939-8366 • m (208)412-7616
Booking Calendar: https://go.oncehub.com/ScheduleTCT

How do we as credit unions marry ATM technology growth with enhanced member service?

ITM Technology

By Joe Woods, CUDE

SVP, Marketing & Partnerships

Technology continues to grow and expand across all markets and industries including the financial sector. In line with this technology growth, financial markets are also seeing a continued shift in service strategy. So, how do we as credit unions marry this technology growth with enhanced member service? One approach that continues to gain traction is the use of the ITM.

ITM technology can improve self-service and increase remote access while sacrificing very little in the way of member contact. Furthermore, the new technology can yield benefits such as helping to shrink costs by reducing branch size and staff needs, extending member service hours and improving self-service all while boosting operational efficiency.

Still a bit unsure of what an ITM does or how it compares to an ATM? You’re not alone. The lines are a bit gray, but understanding the differences is crucial for building an effective ATM-ITM fleet strategy, particularly in a financial services environment that continues to shift towards digital delivery and self-service. While typical ATMs can give your member’s cash and even take cash and check deposits, the ITM takes it a step further. In general, think of an ITM as an ATM with mobile banking access. It’s a fully self-contained self-service unit that enables a credit union to provide powerful account and resource access to its members without the need for a branch. The ITM can provide additional functionality outside your typical branch operating hours and even serve as a replacement for a branch in certain scenarios. Looking to expand into new markets? You can start with a well-placed, well branded ITM to gain traction, prior to a branch deployment.

How, where and why you should consider ITMs is a longer discussion that involves your mid-to-long term road map and branch strategy as well as an ATM-ITM organization that you trust as a true consultative partner. While it is important for your credit union to decide on a strategy and path, it is just as critical to have a partner provide consultation as part of a discovery to help design a plan that fits your growth strategy, member base and budget.

Whether you are considering ITMs for your next move, wanting to provide members with functional upgrades or in need of ATM replacements due to upcoming ATM models being sunset, Dolphin Debit can provide the expertise to ensure the technology you deploy best fits your plan. We outsource over 2,500 ATMs across the country for credit unions just like yours. Our parent company, Euronet Worldwide (Nasdaq: EEFT) brings a depth to the U.S. payment space that no other organization has. In addition to outsourcing 50,000 ATMs globally, our client base is led by names such as Amazon, Apple, Microsoft & Paypal. Working with Dolphin & Euronet dramatically improves your payment and technology capabilities. The NCOFCU can connect you today for scheduling a discovery call.  Time well spent will translate into money saved.  

Home loans in the U.S. have topped 4%.

WASHINGTON–For the first time since 2019, rates on the most popular type of home loan in the U.S. have topped 4%.

Analysts said the rate increase is coming as markets anticipate the Federal Reserve will respond to the highest inflation in a generation with an aggressive run of rate hikes.

The Mortgage Bankers Association reported its weekly measure of the average contract rate on a 30-year, fixed-rate mortgage climbed to 4.05% in the week ended Feb. 11 from 3.83% a week earlier. That was the highest since October 2019 and the largest weekly increase since March 2020 when the onset of the coronavirus pandemic was roiling financial markets, according to the MBA.

The strongly rebounding economy has also reset and driven up the yields on the Treasury securities that influence mortgage rates, and home financing costs have followed suit: the MBA's 30-year contract rate has climbed roughly a full percentage point in about five months.

As a result, the rate rise is crimping application volumes for mortgage refinancings in particular, with the Mortgage Bankers Association reporting its refinancing index dropping to a two-year low and the refinancing share of all loan applications at the lowest level since July 2019.

Overall loan application volumes fell 5.4% last week and purchase applications dropped 1.2%.

CUTODAY

What percentage of your members consider you their primary financial institution (PFI)?

To determine your definition of PFI, think about what product usage matters most to your credit union’s success: products that generate income or technology that reduces expenses and engages ongoing activity.

• Loans: Generate interest income and offer opportunities for non-interest income with GAP, warranty and other upsell options
  
  
• Checking: Ties members to the CU on a day-to-day basis, as well as produces interchange income (and potentially other fee income)
  
  
• E-services: Indicates high propensity toward PFI because the member has incorporated your CU into their daily life (direct deposit, mobile banking, bill payment). ‍
  
  
• Deposits: Large deposit accounts (other than checking) can be “hot money” that will leave your credit union the moment rates go up. Deposit-only members do not consider you their PFI.

How to Get Started

To get started, determine a baseline of members who solidly consider you their PFI.

Here’s a formula: Find the number of members who meet the following criteria: Checking account + Mobile enrollment + 10 debit/ACH transactions per month + 1 or more loans. Then divide that total number by your membership to get your PFI %.

This number may be very low right now, but it’s a baseline. Track it over the next six-12 months. Is the percentage going up or down? A down trend could be a warning sign and should set off alarm bells. A growing trend upwards means your members are very satisfied with your offerings. No matter what your score is currently, the good news is that the members in this category are likely to stick with you. Value this group and leverage their loyalty and insights.

Get a Handle

In summary, before you make major decisions about rebranding or expanding to new markets, get a handle on your current loyalists. Figure out how to convert additional current members into that group and attract more from your market.

Samantha “Sam” Strickland knows credit unions. After leading marketing for 12 years at First Commerce CU, Sam started The Pod, a creative services firm with expertise in the credit union industry, in 2011. Sam’s Emmy- Award-winning team provides services like branding, website development, video production, and more for credit unions of all sizes.

CUToday

When the Fed does move to raise rates the increase will be smaller than many have been predicting.

WASHINGTON–Officials with the Federal Reserve have begun pushing back on the prediction by some that it will raise interest rates prior to its March meeting, and further making it clear that when the Fed does move to raise rates the increase will be smaller than many have been predicting.




“Markets began to bet on a double-size rate increase — half a percentage point — after January inflation data came in surprisingly high last week,” noted the New York Times. “Those expectations grew after the Federal Reserve Bank of St. Louis president, James Bullard, suggested that the Fed might need to respond decisively with a large increase or even an inter-meeting move, something the central bank typically reserves for emergencies.”

But Bullard has since walked back those comments a bit, telling CNBC he is just one policy official and that Fed chair Jerome H. Powell will lead on deciding how quickly to pull back support. Bullard did reiterate that he would like to see a rapid pace of increases, taking rates to about 1% by July — but he did not repeat that an increase in between meetings might be a good idea, saying instead said the Fed needs to react to data in an “organized” way, the Times stated.

From the West Coast, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said that the Fed needed to get moving, but that its approach ought to be “measured.”

“I see that it is obvious that we need to pull some of the accommodation out of the economy,” Daly told Face the Nation. “But history tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve.”

“Steady” Increases

Thomas Barkin, president of the Federal Reserve Bank of Richmond, similarly said in a SiriusXM interview that he favored raising rates “steadily.”

I think it’s timely to get started, and steadily move back toward prepandemic levels,” Barkin was quoted as saying.

He noted that while the Fed carried out its rate moves, it would get a better handle on whether inflation was beginning to settle down and could adjust the timing and pace of its moves accordingly, the Times added.

Turnkey Financial Planning & Wealth Management Solutions

2022 Conference Sponsor

Turnkey Financial Planning & Wealth Management Solutions

Money Concepts was established in 1979 to assist credit unions across the country by offering comprehensive and integrated solutions for the delivery of full-service financial planning, wealth management, insurance, and investment advisory services to members.

In today's market environment, your real competitive advantage is in the 'MemberCentric' relationships you develop with your members. No longer can you be satisfied with a transaction-based investment program or no program at all. Take your credit union to the next level and enhance your relationships while increasing your profitability by offering a unique financial experience.

Money Concepts has provided consistent, effective, MemberCentric broker-dealer solutions for decades. There are a wealth of opportunities inherent through a relationship with Money Concepts.

Do you, your credit union, and most importantly, your members a favor and take this opportunity to contact Kenny Parker at Money Concepts to explore the possibilities. You and your members will be glad you did!

Kenny Parker Sr.
National Director, Financial Institutions Division
Money Concepts International
636.720.1400
kparker@moneyconcepts.com

Yield on 10-Year Treasury Touches 2% For First Time Since Mid-2019

WASHINGTON–The yield on the 10-year U.S. Treasury note touched 2% on Thursday, doing so for the first time since mid-2019, following a new report showing sustained inflation (see separate CUToday.info report).




The report caused investors to further increase their expectations for tighter monetary policies, noted the Wall Street Journal in its analysis.

Yields, which rise when bond prices fall, had hovered in a tight range in the overnight session but jumped after the Labor Department released data showing that U.S. inflation accelerated 7.5% in January, the highest level in four decades.

The 10-year yield climbed as high as 2.001%, breaching the 2% threshold for the first time since August 2019. It was recently 1.994%, according to Tradeweb, compared with 1.928% Wednesday.

Yields on shorter-term Treasurys, which are especially sensitive to the outlook for near-term monetary policy, led to gains. The two-year yield recently stood at 1.479%, compared with 1.346% Wednesday, the Journal added.

Yields Climb Sharply

Treasury yields have climbed sharply this year based on expectations that the Federal Reserve will soon start raising interest rates to control inflation. Last week’s very strong jobs report also suggests inflation might not subside as quickly as many investors have hoped, the report observed.

CUs Should Be on 'Heightened' Alert for Cybersecurity Attacks, NCUA Warns

In a recent post on its website, the NCUA issued an alert to credit unions concerning a potential or pending Russian state-sponsored cybersecurity threat due recent “malicious cyber incidents” reported in Ukraine.

According to the post, the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) initially issued the alert. In its post, the NCUA added an extra warning to credit unions.

“Given current geopolitical events, the NCUA, along with CISA, the Federal Bureau of Investigation, and the National Security Agency encourage credit unions and their cybersecurity teams nationwide to adopt a heightened state of awareness and to conduct proactive threat hunting. In addition, COVID-related supply chain disruptions may require management to reevaluate previously held assumptions for business continuity and disaster recovery plans,” the statement read.

The NCUA’s statement asked credit union executives to “be aware of critical cyber risks and take urgent steps to reduce the likelihood and impact of a potentially damaging compromise.”

The CISA recently posted two issuances surrounding the possibility of a cybersecurity incident revolving around the growing political and military tensions in Ukraine. According to the CISA’s statement, “Most recently, public and private entities in Ukraine have suffered a series of malicious cyber incidents, including website defacement and private sector reports of potentially destructive malware on their systems that could result in severe harm to critical functions. The identification of destructive malware is particularly alarming given that similar malware has been deployed in the past — e.g., NotPetya and WannaCry ransomware — to cause significant, widespread damage to critical infrastructure.”

The NCUA asked all credit union leaders to review the CISA statements and “act on the applicable recommendations.” The statement from the NCUA concluded, “It is crucial that your organization does its part to improve its resilience, reducing the risk of compromise or severe business degradation.”

Read More: Joint statement from CISA, National Security Agency and the FBI.
Read More: CISA’s issuance, “Implement Cybersecurity Measures Now to Protect Against Potential Critical Threats.”

Offer Financial Advising to Members?

NEW YORK—Credit unions that offer financial advising services to members will want to pay attention to one new forecast, which calls for the number of financial advisors in the United States that currently counsel their clients on crypto holdings to double in 2022.




According to Arizent Research’s 2022 Prediction survey, which surveyed wealth management experts based in the U.S., the predicted rise in the number of advisors to 44% is in tandem with their expectation that more clients (about 33%) will likely become holders of crypto by the end of 2022.

As shown by the data that was obtained from the 153 respondents that participated in the survey, about 60% of financial advisors expect to see the number of crypto holding clients increase,” Bitcoin.com stated in its analysis. “And with only 4% of the respondents expecting to see this number drop, the study findings suggest clients’ demand for cryptocurrencies is not waning.”

‘A Big Theme’

Rather, the findings show that cryptocurrencies, which are now widely covered by the financial press, “are a big theme in investing circles,” according to the report. The study found, however, that this growth in cryptocurrency’s popularity has added to banks’ list of worries, which already includes the threat posed fintech and payments firms as well as the mooted U.S. digital currency.

The study predicts that only four in 10 banks will see an increase in their investment in traditional credit cards with loyalty and rewards features within the next three years. That may be a reflection of other competitive threats to credit cards, such as digital payment alternatives like PayPal and Venmo and initiatives by the Federal Reserve, Bitcoin.com said.

Other Competitive Threats

“This is in addition to one in four banks that see a real possibility of a competitive threat posed by consumers banking in the U.S. Federal Reserve initiatives, such as FedNow real-time payments,” Bitcoin.com added. “The potential creation of a digital dollar is also seen as another possible competitive threat.”

Meanwhile, the study also found the possibility of big tech firms muscling their way into the financial services industry to be a key worry for banks and insurers. As shown in the data, about “six in ten digital insurers worry that those forays are a competitive threat.”

On the other hand, almost half of all banks, or 47%, expect big tech to become a major competitor within three years. The findings also show regional banks to be the most worried at 64%.

Is Loan Growth Keeping Pace With Deposit Growth At Your Credit Union?

Tim Kelly of AFG is a featured speaker at NCOFCU"s New Orleans Annual Conference October 5-8,2022

Record-Setting Deposit Levels Since 2020

Since the start of the pandemic, deposits at credit unions have risen at unprecedented levels. According to data from NCUA, credit union account balances have risen nearly 60% in the past five years. With loan demand lagging, credit unions have had to pivot to lower yielding investments, which may ultimately strain capitalization requirements.

The pandemic created an odd combination for credit unions. On the one hand, many members found themselves with more savings since travel and other restrictions kept them from spending money on services and leisure and therefore their deposits increased.

On the other hand, with vehicle prices being at all-time highs due to shortages, some borrowers may have pulled back from the market, causing auto loan portfolios, which have traditionally helped credit unions serve their members and grow, to shrink.

State Of The Vehicle Market

Discounts and incentives that were common in pre-pandemic times have all but disappeared in the current market. Dealers can add $2,000 to $3,000 to the list price given the continuing high demand for vehicles, especially as consumers continue to look for private forms of transportation in the midst of another wave of a more contagious variant of the coronavirus.

Many manufacturers are looking at ways to increase chip production domestically. Ford, for example, announced an agreement with a U.S.-based semiconductor supplier in November of 2021 to help increase its control over both supply and design of chips. This, however, will be a longer-term endeavor, and it will take time to see the impact on vehicle production.

Used vehicles, which were once a more affordable option for consumers who couldn’t manage the price tag of a new vehicle, have also been impacted by the chip shortage and seen unprecedented increases in value.

According to Cox Automotive, used car vehicle prices will remain high well into 2022. High prices will be driven not only by vehicle shortages, but also by high demand due to an expected record level of tax refunds this year.

In addition to the shortages, amid rising inflation, the Federal Reserve is expected to raise rates at least four times in 2022, which will impact auto lending and increase monthly payments for most borrowers, potentially leading auto lending at credit unions to grind to a halt and causing them to continue to “drown in deposits.”

Implications For Auto Lending

Offering residual-based financing can help financial institutions stay competitive and offer borrowers the affordability and flexibility they need in light of rebounding demand for vehicles coupled with shortages in inventory and high prices.

Lenders should offer all affordable payment options to their borrowers. With residual-based financing, credit unions can provide a low monthly payment alternative for their members while earning higher yields than with a conventional loan.

Auto Financial Group’s Residual Based Financing programs can help navigate the current challenges in auto lending. With lease and balloon loan programs on new vehicles and vehicles up to five years old, shorter lease/loan terms and, lower monthly payments compared to the conventional long-term loans, this is a consumer win.

Would you like to learn more about auto lending trends and how you can position your credit union for success be sure to stop by AFG's booth at our New Orleans conference, October 5-8, 2022 

Tim S. Kelly
President/COO
tkelly@autofinancialgroup.com
5555 San Felipe St. Suite 2100 Houston, TX 77056
Cell: 713-817-5858
www.autofinancialgroup.com

Get Your Board Comfortable With Taking Calculated Risks

In this article:

 
Many boards try to play it safe, but there is no risk-free path in today’s world. With the pandemic and economy in flux, decisions won’t be easy, so CEOs must encourage their boards to risk failure, create a decision-making process, and be adaptable.

Because of their fiduciary responsibilities to their associations, board members can often be overly cautious. But in the current environment, experts say, boards must be willing to take calculated risks to help their organizations thrive.

“What our associations are operating in now is what I refer to as the ‘discontinuous next,’ which is an ongoing period of uncertainty, volatility, and risk that’s not going away,” said Jeff De Cagna, FASAE, executive advisor for Foresight First, LLC. “Every decision, therefore, is higher stakes, and every board needs to change its perspective on risk from the idea that something is either risky or not, but rather to say that every decision involves risk.”

More importantly, today’s climate of rapid change means a risk-averse board often stifles organizational growth and puts an association at a disadvantage. “When boards are slow to react, they really miss opportunities,” said Barbara Arango, CAE, executive director of the Illinois Parks and Recreation Association.

That’s why CEOs must encourage their boards to adapt quickly to the changing landscape and embrace risks.

“Every board needs to change its perspective on risk from the idea that something is either risky or not, but rather to say that every decision involves risk.” — Jeff De Cagna, FASAE, Foresight First, LLC

Leaning Into Risk

De Cagna said the first step for boards looking to take calculated risks that improve their association’s long-term future is to understand the risk might not pay off.

“We often hear people say, ‘Failure is not an option,’” he said. “Failure is always on the table, and until we get comfortable with that, we are always going to struggle with these kinds of choices.”

Allowing failure as a possibility widens a board’s view so it considers all its options, rather than immediately disregarding suggestions it thinks could fail. Once all the options are presented, De Cagna says, boards should follow a four-step process: understanding, or “making sense of,” the issue of concern; “making meaning” of it—figuring out how it applies to your members or industry; deciding whether and how to move forward; and evaluating the outcome.

“That process of sense-making, meaning-making, decision-making, it’s circular,” De Cagna said. “How that system works together is it enables the decision-making process to not avoid risk—because those things really can’t be avoided—but to make sure we are doing our level best to come out with the right outcomes rather than outcomes that are ill-considered and ultimately detrimental to the organization.”

Of course, the CEO and other staff are an important information source for that process.

“Staff is going to be really important to making sure that [the board is] only risking what can be risked,” Arango said. “They can’t be risking so much that they’re risking the entire association, but risking enough to hopefully provide a reward back to the association.”

In addition, giving the board a chance to evaluate a decision lets them assess whether the risk paid off or it needs to set a new course.

“Even if it is a success, there are always things that can be improved,” Arango said. “It’s important for boards to not look at something that didn’t work out as a complete failure. There is always something that you learn from it. Usually, it’s going to be something that maybe works, but didn’t work as well as hoped. There is always something that can be taken back and refined for the next time.”

Speeding Up Adaptability

Arango said one reason boards have historically been slow to act is because they meet infrequently. With virtual meetings, many have met more often and were able to quickly handle pandemic-related changes.

“It’s provided a great opportunity for boards to speed up that process and be able to take advantage of the opportunities as they came up, rather than being very slow and somebody else takes advantage of those opportunities,” she said.

More frequent meetings can also provide boards with more fluidity. While boards love to create plans, De Cagna urges a more flexible approach.

“I know everyone says the plan is dynamic, and the plan can change,” he said. “In my experience, when a plan is set, that is what people do: They follow the plan. We need to ask, ‘How do we navigate this by observing and listening and learning and seeing what’s happening and making course corrections, instead of committing ourselves to an A to B to C to D kind of plan?’”

Whatever tools organizations put in place for their boards, the choices won’t be easy. “It’s not about a choice between risk or no risk,” De Cagna said. “All the decisions from this point forward are going to be hard. It’s a question of, do we make the right hard decisions?”

Rasheeda Childress

Rasheeda Childress is a senior editor at Associations Now. She covers money and business.

NCUA To Host Webinar Thursday on Changes to Call Report

ALEXANDRIA, Va.–NCUA will host a webinar on changes to its Call Report Form 5300 on Thursday, February 10, 2022, 2 pm EST

Registration for the “Call Report Changes” webinar is open. The webinar is scheduled to begin at 2 p.m. Eastern and will run for approximately 90 minutes, according to NCUA.

The agency said staff from its Office of Examination and Insurance will cover Call Report changes for natural-person credit unions effective with the March 2022 reporting cycle, including new schedules for risk-based capital and the Complex Credit Union Leverage Ratio (CCULR), which became effective in January.

The webinar will be closed captioned and archived online approximately three weeks following the live event, NCUA said.

How Banks & Credit Unions Should Prepare for Rising Interest Rates

 The Fed is set to raise interest rates in 2022 faster than it has in decades. An overhang of excess deposits has many banks and credit unions wondering how to approach the coming year. Analysts say a key to remaining competitive will be aligning rates with relationships.

Bankers knew higher interest rates were on the way, but few expected the extraordinary pace at which they are now expected to rise. Previous rising-rate periods since 2000 have seen relatively modest rate hikes compared to what analysts are predicting now and it could have significant impact on bank and credit union deposit strategies.

March 2022 is when the first of several interest rate hikes from the Federal Reserve is expected to kick in, although the central bank didn’t specify timing in its official announcement. The quarter point increase would be the first increase since 2018.

Most forecasts call for at least four rate increases totaling 125 to 150 basis points over the course of the year. That’s a dramatic shift from earlier expectations, prompted by inflation surging to a level not seen in four decades.

“Clearly, we have entered into the rising rate environment that just a few months ago none of us were predicting for 2022. It’s now about how we navigate that, what do we do about it,” observes Brad Resnick, Director at Curinos.

To help assess the potential implications of these rate increases for banks and credit union deposit rate strategies, Curinos looked back to the last two rising rate cycles, 2004-2007 and 2015-2019. During a webinar on the subject they compared deposit rate sensitivity (beta responses) to those earlier Fed rate increases, and found that while rates rose faster in the 2004-2007 period, there was a more modest and methodical rate increase in the 2015-2019 period. CONTINUE READING

Holiday Dinners distributed by New Orleans Firemen’s FCU

New Orleans Firemen’s Federal Credit Union collected and distributed 60 holiday meal baskets in their Bogalusa and Lockport communities. Firemen’s Federal has an active presence in Bogalusa and Lockport and is the primary community development financial institution serving these underserved communities.


This endeavor was possible due to the generosity and compassion of Firemen’s Federal Credit Union and their partner Kasasa, Ltd. Vouchers for turkeys were donated by Kasasa, and Firemen’s Federal employees collected, packed, and distributed the meal baskets. Each basket was packed to feed a family of five and contained the turkey voucher, mashed potatoes, macaroni and cheese, green beans, yams, desert, and other items needed to provide a complete holiday feast.

“The last two years fighting to survive a pandemic, and this past August’s devastating hurricane, have taken a toll on our population. It has created emotional and financial strain, uncertainty, and stress on underserved family units. This is especially hard during the holiday season.

Knowing how serious food insecurity is in Louisiana, we are honored to have the privilege to give back in this small way to our communities,” said Firemen’s Federal CEO Judy DeLucca.

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. As a certified Community Development Financial Institution (CDFI), New Orleans Firemen’s Federal Credit Union proudly serves the underserved and brings a full array of financial service products to communities that have been underbanked and excluded by mainstream financial institutions.

Mastercard has struck a non-fungible token (NFT) payments deal with Coinbase.

PURCHASE, N.Y.—Amid a wave of recent crypto partnerships, Mastercard has struck a non-fungible token (NFT) payments deal with Coinbase.

Coinbase customers will be able to use Mastercard credit and debit cards to make purchases on the crypto exchange’s upcoming NFT marketplace, CNBC said.

Late in 2021 Coinbase unveiled plans to launch the platform for minting and buying nonfungible tokens, which have exploded in popularity over the past 12 months.

“By teaming up with Mastercard, Coinbase executives said they’re looking to reduce friction in the NFT buying process,” CNBC reported. “Right now, that often requires customers opening up a crypto wallet, buying digital currencies, then spending those on NFTs in an online marketplace.”

 

Home Mortgage Disclosure Act Data Collection Requirements for Calendar Year 2022

Regulatory Alert (22-RA-01) Home Mortgage Disclosure Act Data Collection Requirements for Calendar Year 2022 Dear Boards of Directors and Chief Executive Officers: If your credit union makes residential mortgage loans and meets all four criteria outlined below, you must comply with the Consumer Financial Protection Bureau’s Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). Regulation C requires you to collect HMDA data associated with mortgage loan applications processed during 2022, if: Your credit union’s total assets as of December 31, 2021, exceeded $50 million; Your credit union had a home or branch office in a Metropolitan Statistical Area on December 31, 2021; Your credit union originated at least one home purchase loan (other than temporary financing such as a construction loan) or refinanced a home purchase loan, secured by a first lien on a one-to-four unit dwelling during 2021; and Your credit union originated at least 100 covered closed-end mortgage loans in each of the two preceding calendar years (2020 and 2021) or at least 200 covered open-end lines of credit in each of the two preceding calendar years (2020 and 2021). Read the Regulatory Alert

Some See a Ongoing Rise in Used Car Values, Some Big Lenders Disagree

DETROIT––Not everyone agrees with those analysts who are forecasting used car values and demand for loans will continue to rise in 2021. In fact, Ally Financial said last week that it is embedding a potential 15% to 20% cumulative decline in used-auto values by the end of 2023 into its assumptions, the Wall Street Journal reported.

“It is natural for lenders and investors to anticipate the end of the current used-vehicle boom, and valuations of banks with big auto-finance businesses seem to partly reflect that,” the Journal reported. “Lenders such as Ally and Capital One Financial are trading at forward price-to-earnings valuations that are relatively low compared with where they normally trade versus S&P 500 banks overall, according to FactSet data.”

The Journal report noted that industry-tracker Cox Automotive has forecast that the Manheim index of used-car prices will be a mere 3% lower by this December than it was in December 2021.

“Perhaps a price decline could accelerate quickly the following year,” the Journal stated. “For the time being, though, things like the supply-chain snarls for chips that are making new cars take longer to build still appear to be a factor. Ally said that, although it is forecasting cautiously, ‘recent trends indicate ongoing resilience’ in used values.”

Tight Inventory

Despite high used-car prices, strong demand and tight inventory at auto dealers, the Journal reported that Ally and Huntington Bancshares both noted upticks in dealer credit utilization in their quarterly updates, “indicative of needing to finance inventory that isn’t instantly moving off the showroom floor. More new cars on lots might lead to fewer buyers winding up in the used-car market.”

Both General Motors and Ford Motor have also steered a way into the used car market via online platforms, the Journal added.

62% of Leases Bought Out

“That same trend of scarce inventory has also likely played a role in more vehicles being bought out at the end of leases—meaning that a lease financing provider isn’t able to take an off-lease car and sell it into the hot market,” the Journal added. “Ally reported that 62% of leases were bought out in 2021, compared with a figure typically closer to 30%, muting lenders’ upside to rising used values to a degree. Falling used-car prices would reduce the gains on selling cars, but they also could lead to more cars winding up in lenders’ hands in the first place.”