Tunnel to Towers Foundation - Donate Just $11.00 a Month

The Tunnel to Towers Foundation is dedicated to honoring the sacrifice of FDNY Firefighter Stephen Siller, who laid down his life to save others on September 11, 2001. For 20 years the Foundation has supported our nation’s first responders, veterans, and their families by providing these heroes and the families they leave behind with mortgage-free homes. For more about the Tunnel to Towers Foundation and its commitment to DO GOOD, please visit T2T.org.

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Tunnel to Towers Foundation

Honor Stephen Siller’s legacy by making a one-time or monthly donation.

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Other Ways to Give

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Houston Texas Fire Fighters FCU Board Announces New Chief Executive Officer

The Houston Texas Fire Fighters Federal Credit Union Board of Directors is pleased to announce the appointment of Pamela McIver as the credit union's new Chief Executive Officer, replacing Steve Gilman, who is retiring in December, after serving six years as the credit union's President and CEO. 

McIver is a seasoned credit union executive with 28 years of financial institution experience. She started her career at HTFFFCU in 1993 as a Staff Accountant, and moved up through the organization to her current position of Vice President – Chief Financial Officer, prior to her accepting her new assignment as CEO. 

HTFFFCU Board Chairman Brian McLeroy said “We are excited to have Ms. McIver as our new CEO. She is a proven leader who will bring the highest level of financial experience and management skills to our organization.”

McIver said “I am thankful for the opportunity to serve as the next CEO of Houston Texas Fire Fighters Federal Credit Union. Our team will continue its efforts to provide competitive products and services that meet the financial needs of the fearless Houston firefighters and their families.” 

McIver received a Bachelor of Science degree in Accounting from Alcorn State University and an MBA from the University of Houston.

Houston Texas Fire Fighters Federal Credit Union
Houston Texas Fire Fighters Federal Credit Union currently has more than 17,000 members in the Houston, Texas area. It offers a full line of financial products and services, including mortgages and consumer loans products. Membership is open to the City of Houston firefighters and eligible family members.

Three Must Haves For 2022

Key Trend Summary

In 2022 members will expect to be able to access 75% of all banking services digitally.

Digital is the Branch

Unprecedented pace of adoption of full service digital banking by members fueled by pandemic.

• Five years ago, credit unions saw about 15% of the business that was previously done in branches conducted through their digital channels.
  
  
• Two years later, in 2018, 25% of members were using digital channels to match their needs with the institution’s offerings.
  
  
• The Covid-19 pandemic accelerated this trend and in 2021 credit unions saw an average of 50% of their business coming through digital channels.

This trend toward full service digital banking will reach a tipping point in 2022. Members of credit unions will default primarily to digital channels when searching for solutions to match their financial needs.
 

Attributes of Winning Credit Unions

This tipping point will bring exponential growth to those credit unions that are embracing the combination of big data and artificial intelligence to orchestrate a unique journey for each member. These credit unions will exhibit the following characteristics.

1. Cultural transformation will precede digital transformation. Winning credit unions will embrace the cultural transformation that must precede digital transformation to succeed. This is the foundation for redefining how value is delivered to members.
   
   
2. Digital will be relational, not primarily transactional. Winning credit unions will be laser focused on augmenting existing digital platforms with technology that creates a relational rather than transactional digital experience.
   
   
3. Intelligent AI and big data will be embraced. Winning credit unions will go beyond personalization and invest in machine learning AI and big data platforms capable anticipating member needs. ​

​​​​​​Summary 

By transforming their cultures, adopting a relational rather than transactional only approach to digital and leveraging emerging technologies to provide uniquely tailored advice and direction for their existing and prospect members, these winning credit unions will level the competitive landscape meeting and exceeding the value delivered by mega and digital-only banks.

Want to learn more about how Finalytics.ai is impacting CUs? Visit www.Finalytics.ai.

 

What CUNA, NAFCU & NCUA Say about Rates

CUNA

Inflation continued to its rapid rise in November, leading a CUNA economist to predict the Fed will start to tighten its monetary policy in the first half of next year.

The U.S. Bureau of Labor Statistics reported Friday that the Consumer Price Index rose 0.8% from October to November after seasonal adjustments, down slightly from the 0.9% gain in October. Prices over the past 12 months are up 6.8%.

“Inflation continued to surge in November,” Dawit Kebede, a CUNA senior economist, said. “Supply chain disruptions, higher demand for goods that continue to exceed pre-pandemic levels and increases in COVID-sensitive items such as shelter contributed to the rise.”  In previous months, the Federal Reserve had been focused on supporting maximum employment and considered inflation spikes to be transitory due to supply chain issues.

“Now the Fed seems to be concerned with stabilizing prices since COVID-related disruptions may not ease up soon,” Kebede said. “There are expectations the Federal Open Market Committee will announce at its meeting next week that it will end asset purchases before June. This will pave the way for possibly of raising the federal funds rate in 2022.”

NAFCU

Chief economist Curt Long also said he expected November’s inflation increase will convince the Fed to hasten its pace for ending asset purchases.

“Doing so would open the door for liftoff beginning in March, with June being the most likely candidate for the next rate hike,” Long said.

Long said many analysts think inflation will begin to subside in December. Energy prices were a major factor for the increase, but wholesale prices sank quickly following the announcement of higher production targets from OPEC.

Vehicle prices continued to contribute to inflation. The seasonally adjusted CPI for new cars rose 1.1% from October to November on top of a rise of 1.4% in October. The used vehicle CPI rose 2.5% in November, the same as the previous month.

Over the past year, inflation was 11.1% for new vehicles and 31.4% for used cars and trucks.

Cox Automotive reported Friday that the average new car sold for $46,329, up 0.7% from October and up 13.2% from November 2020. Last month it reported used car list prices were $26,971 in October, up 1.6% from October and up 25% from a year ago.

NCUA Chairman Todd M. Harper on Thursday said despite the economy’s recovery, credit unions need to pay heed to threats from new COVID-19 variants and inflation.

“It has been almost 40 years since most Americans had to worry about inflation,” Harper said during a speech given at an online meeting of Women in Finance & Housing, a group based in Alexandria, Va.

“Yet, inflation remains elevated at 6.2%, according to the consumer price index.”  TodHarper said inflation is widely expected to ease, especially after supply chain disruptions end.

“However, the Federal Reserve acknowledged that it now appears that factors pushing inflation upward, such as difficult to predict supply disruptions, will linger well into next year. In addition, the Federal Reserve notes with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace.

“All of these conditions add additional inflationary pressure,” Harper said. “Persistently high inflation could lead the Federal Reserve’s Federal Open Market Committee to remove its monetary policy accommodation earlier and more aggressively than expected, boosting short-term interest rates.

Higher rates typically cause consumers and businesses to constrain their borrowing and spending. Also, if short-term rates rise more than long-term rates, the yield curve will flatten, putting downward pressure on net interest margins at many credit unions and banks,” he said.

“Although economic forecasts point to a near-term steepening of the yield curve, the overall interest rate environment will remain challenging, especially for credit unions and other financial institutions that rely primarily on investment income.

“The ability to manage interest rate risk will remain a crucial determinant of a financial institution’s performance going forward. To remain on a sound footing, all financial institutions will need to continue to pay careful attention to the fundamentals of capital, asset quality, earnings, and liquidity in the months ahead,” Harper said.

Federal Reserve - Could see rate hikes sooner than is priced in by markets.

A major shift is underway at the Federal Reserve to begin to remove the central bank’s massive pandemic easing policies, and could see it hike rates sooner than is priced in by markets.

Comments by Fed officials suggest the central bank is likely to decide to double the pace of its taper to $30 billion a month at its December meeting next week. Initial discussions could also begin as soon as the December meeting about when to raise interest rates and by how much next year with Fed officials set to submit a fresh round of economic forecasts and projections for the fed funds rate.

There is no consensus yet on when to begin hikes, but it’s clear that the faster taper is designed to give the Fed flexibility to raise rates as soon as the spring. The markets do not appear to expect the first rate hike until the summer.

St. Louis Fed President James Bullard said Friday he wants asset purchases to end in the first quarter so the Fed can position itself “soon” and make every meeting “live” for a possible rate hike. Several other officials have now spoken openly about the chance for multiple rate hikes next year and the potential need to raise rates to combat inflation.


Fed Chair Jerome Powell in testimony last week supported the idea of a faster taper and made a dramatic shift when he said the big concern with another wave of the coronavirus or new variant was inflation, because it might keep people out of work and worsen supply constraints. It was a big change for Powell and the Fed since previous virus waves have mostly raised worries about weak demand, not tight supply. Until the taper was announced in November, Fed officials were mostly silent about the rate outlook.

Economic data in November played a big role in the Fed’s shift. The consumer price index showed higher and more widespread inflation. That added to concern of how higher housing prices might drive up the CPI in coming months.

The jobs report in November showed strong payroll growth, but few workers coming off the sidelines and back into the job market. The progress in December, with labor force growth of about 600,000, appeared to do little to change the outlook for a tight job market.

Meanwhile, after a weak third quarter, all appearances are that the economy is accelerating again, raising the question for the Fed about whether the economy needs continued Fed asset purchases and zero rate hikes all the way thru next summer.

The central bank chief did nothing in his testimony to dissuade the market that the current pricing in of two rate hike rates next year was wrong.

Powell and the Fed have shown they will provide at least several months lead time to markets for a change in policy. So if the Fed wants maximum flexibility to hike, discussions about how far and how fast would need to begin soon, even as soon as the December meeting.

How Benefits Are Now Being Used to Recruit, Retain and Motivate Senior Execs

FT. LAUDERDALE, Calif.–There is new pressure on credit unions to provide benefits plans to senior executives as the Great Resignation remains the new reality in the employment landscape, according to a trio of experts.

Speaking to NAFCU’s CFO Conference, the three experts, all of whom are with executive benefits consulting firm Gallagher, outlined what they are seeing and why when it comes to recruiting and retaining leadership.

Addressing the meeting were Liz Santos, chief of staff in the executive benefits practice, VP Tyler Talbot and Relationship Manager B.J. Burt.

According to the trio, executive benefits plans are not just about retaining C-suite leaders but also can and should be used to drive performance.

Nonqualified benefit plans are a specialized tool for highly compensated execs and staff that bridges the gap between 401(k) and other retirement options, the audience was told. They can be tailored to any credit union’s needs, they added.

“When properly designed they can mitigate the benefit expense and any excise tax liability,” said Santos.

The Case for Retention

The three pillars of the case for retention include, according to Santos:

Continue reading 👀

There’s Apparently No End to the Road When it Comes to Rising Used Car Values

 AWRENCEVILLE, Ga.—Is there no end to the road when it comes to rising used car values? There doesn’t seem to be, as used values continued there march upward in November, with the Black Book Used Vehicle Retention Index reached another record high.

Black Book reported the Index increased to 189.9 points, a 9.7 point (or 5.4%) increase from October (180.2). The Index currently stands 45.4% above where it was this same time last year.

“With no short-term resolutions to new inventory problems, dealers are continuing to spend money on used inventory, pushing wholesale prices up to new records across all segments in November,” said Alex Yurchenko, chief data science officer at Black Book. “Cars of all sizes and vans had the largest increases as used and new inventory in those segments declined to much lower levels compared to other segments of the market. We expect the used car prices to increase again in December but at a much lower rate as the volume of new inventory is starting to level off and consumer demand is softening a bit with record breaking used retail prices.”

How Index is Calculated

The Black Book Used Vehicle Retention Index is calculated using Black Book’s published Wholesale Average value on two- to six-year-old used vehicles, as percent of original typically equipped MSRP. It is weighted based on registration volume and adjusted for seasonality, vehicle age, mileage, and condition.

Click here to obtain a copy of the latest Index data. 

CUTimes

Steve Rick CUNA Mutual - Long-Term Interest Rates? Here’s One Economist’s Forecast

MADISON, Wis.–It’s a key question in front of many within credit unions as both decision-makers and consumers: “What can we expect for long-term interest rates during the next five years?”

CUNA Mutual Chief Economist Steve Rick has offered his view as part of the latest Trends Report released by the company.

“As the economy recovers over the next few years and inflation runs above the Federal Reserve’s 2% average target, we can expect the 10-year Treasury to increase from 1.5% today to 3% by 2026,” Rick stated. “Moreover, the recent announcement by the Federal Reserve that they have begun to taper their quantitative easing program--printing up money to buy Treasury bonds and mortgage-backed securities--by $15 billion each month will increase long-term interest rates over the next year.”

So, what impact will this have on credit unions? Rick pointed to the chart, below, which he noted shows the strong correlation between the 10-year Treasury interest rate and credit unions’ yield on assets ratio.


“As the market interest rate falls, so do credit union loan and investment yields, pulling down the yield-on-asset ratio,” Rick stated. “Historically there is a 1.3 percentage point difference between the 10-year interest rate and the credit union yield-on-asset ratio. This difference is the credit spread which accounts for the risk differential between lending to the credit-risk-free U.S. government and consumers.

“Even though we expect market interest rates to rise in 2022, we are forecasting credit union yield-on-asset ratios to fall to a record low 2.7 percentage points due to a one-year lag effect,” he continued. “By 2026, credit union yield-on-asset ratios are expected to climb to 3.9%, still below the 4.6% average reported by credit unions over the past two decades.”

The full Trends Report, including a “first in credit union history,” can be found here.

Richards & Associates, CPA's

Weekly News Summary

Here are some things that were in the news last week. Please share these articles with your Supervisory Committee and Board of Directors. If you missed previous editions of the weekly news, summaries of those can be viewed at our archive.

Have a great week!

Mike Richards, CPA

Economic and Industry Issues

Knowledge is the key to effective corporate governance. Staying abreast of economic and industry issues affecting your credit union will prepare you for those responsibilities.

• Welcome to the PSCU Payments Index Read More
• New NAFCU campaign, ‘Stop Big Bank Bullies,’ calls out banking industry misconduct Read More
  

Regulatory and Accounting Issues

Regulatory and accounting issues are changing all the time. Staying abreast of those changes is an important part of the corporate governance.

• Federal Credit Union Meeting Flexibility in 2022 Due to the COVID-19 Pandemic Read More
• FASB reconsiders accounting for troubled debt restructuring by creditors Read More
  

Fraud Awareness

As you will see from reviewing these articles, fraud can happen in any credit union. Staying vigilant is the key to preventing your credit union from being the next victim.

• Safeguarding Against Fraud: 5 Best Practices to Know Read More
• Romanian National Sentenced for Stealing $80K from Credit Union Accounts Read More

New-home sales saw a slight increase of 0.4% in October

ARLINGTON, Va.—New-home sales saw a slight increase of 0.4% in October to 745,000 annualized units, while prior months saw a downward revision of 75,000 units. Compared to last year, October sales were 23.1% lower, according to new data.


Curt Long

“New home sales advanced by a modest amount in October, and those gains were swamped by downward revisions to prior months,” said NAFCU Chief Economist and Vice President of Research Curt Long. “The initial September sales estimate was downgraded from 800,000 to 742,000 units.”

October sales in the Midwest rose by 11%, followed by the South (+0.2%). Other Census regions saw a dip in new-home sales including the Northwest, which fell by 11.8%, and the West, which dropped by 1.1%.

Based on current month sales, the new federal data show there were roughly 6.3 months of supply in October, up by 0.2 months compared to September. Unsold homes left on the market increased by 10,000 homes to 389,000 in October, representing a 37% increase from year-ago inventory levels.

Sentiment Remains ‘Solid’

“Homebuilders are dealing with labor and supply shortages, and there are many reports of builders slowing sales through the difficulties. Homebuilder sentiment was solid in October, and rose in November to its highest level since the spring,” noted Long. “New home inventory levels are keeping pace with sales, and price increases have slowed lately.”

Of note, the median home price on a non-seasonally adjusted basis rose by 0.7% in October to $407,700, which is 17.5% higher than last year.

“Construction permits peaked in January and have since settled a bit lower, though still above pre-COVID levels,” concluded Long. “Until the supply chain unkinks, production and sales of new homes are likely to remain modest, which will maintain price pressures in the resale market.” 

CU Today