CURRENT Newsletter | 11 March 2021 - Virginia Credit Union League

Join us March 17 for a free compliance/regulatory update with attorney Jay Spruill. The hour-long webinar (10 a.m. start time) will cover frequently asked questions on the League compliance hotline, key federal regulatory issues, and any recently enacted state laws that might affect your operations.

Also, feel free to send your questions prior to the webinar to your League’s Mary Amyx at mamyx@vacul.org. She’ll gladly forward them to Jay to ensure they are covered during the webinar.

Learn more and register here.

Diversity, Equity and Inclusion Webinar March 18

Special Webinar with NCUA Diversity Communications Specialist Marty Raines

Diversity, Equity, and Inclusion, or DEI, have been popping up in conversations, in the media, and on meeting agendas with increasing frequency lately. But beyond buzz words and catchphrases, what do they really mean?

In this March 18 webinar presentation (10 a.m.-11 a.m.), NCUA's Diversity Communications Specialist Marty Raines will define diversity, equity, and inclusion, and more importantly, share what they mean for our credit unions. Join us to learn how DEI contributes to talent, growth, and innovation, and to find out what the NCUA is doing to help you enhance your DEI efforts.

Webinar: Why Text Messaging is Essential for Your Credit Union

Secure, TCPA-compliant Text Messaging with your members is easy with Eltropy's award-winning platform! Eltropy's CEO and co-founder Ashish Garg will share how Eltropy’s secure and compliant platform can help your credit union communicate effectively during the pandemic and beyond. Learn more by joining us for an April 1 webinar (2 p.m.).

Your League is partnering with Eltropy through TRGroup, a partnership we formed with six other Leagues to deliver best-in-class services and educational opportunities!

Financial Education Committee Sharing ‘Message of Hope’ in Thanking Teachers, School Staff

It’s been an especially tough year on our teachers, educators and school staffs. The League’s Financial Education Committee has launched a new initiative called “Message of Hope” to thank those educators for their work in continuing to educate and mentor young people during the pandemic.

They are also reminding educators that credit unions stand ready as a financial education resource, by providing classroom materials and presentations, including virtual or in-person participation.

If you want to thank your local educators for their tremendous work during the pandemic, contact your League’s Mary Amyx for details on recording a short video message via Tribute.

Learn more about the “Message of Hope” initiative!

YPN Hosting March 18 Lunch & Learn

The Young Professionals Network is hosting a virtual Lunch & Learn Meeting March 18 (1 p.m.-2 p.m.). Mark Odom and Bianca Sutterluety (ABNB Federal Credit Union) will be our hosts and facilitate a discussion on “Tips for Growing Your Credit Union Career.”

Virginia Sister Society Hosting March 23 Virtual Event

The Virginia Sister Society of the Global Women’s Leadership Network is offering a free virtual program on March 23, offering participants an opportunity to connect with peers to discuss these five topics:

Managing Remote Employees Effectively
Professional Growth and Development
Transitioning From Crisis Management to Growth Management
Rebuilding Teams and Morale Post Pandemic
Leading With Strength, Even When You May Not Feel Strong

Free Webinar March 25: Boost Interchange Income, Reduce Expenses and Ready Your CU for the Future

Learn how your credit union can maximize its interchange income, reduce expenses and plan for future solutions -- all through a strong network optimization plan! The “Durbin world” has been around for a while, but it’s not always easy to navigate, so let our partners at Fiserv help you!

We’re providing free training on March 25 on “Network Optimization” strategies with Carol Specogna and Patti Bart- Jagodzinski.

Small Credit Unions Not Sharing in Recovery

Small credit unions had an advantage in interest income, fees and provision expenses in the fourth quarter over those with more than $1 billion in assets, but small credit unions’ high overhead burden kept their margins far below larger ones.

A CU Times analysis of NCUA data released March 4 showed the 4,832 small credit unions’ annualized return on average assets was 0.59% for the three months ending Dec. 31, down from 0.66% in the third quarter and 0.60% in 2019’s fourth quarter.

For the 301 medium-sized credit unions (assets of $1 billion to less than $4 billion), ROA was 0.83% in the fourth quarter, roughly on par with both 2020’s third quarter and 2019’s fourth quarter.

For the 74 large credit unions (assets of $4 billion or more), fourth-quarter ROA was 1.00%, an improvement not only of 13 basis points from the third quarter, but also 6 bps from 2019’s fourth quarter.

Net income isn’t the end-all goal of credit unions, but it is the engine that keeps net worth margins in safe zones, and provides the capital credit unions need to invest to be able to attract and retain members with the level of services they expect.

Overall, the NCUA showed net income came in at 0.83% for the fourth quarter, up from ROA of 0.80% in both 2020’s third quarter and 2019’s fourth quarter. For the year, ROA was 0.71%, down from 0.94% in 2019.

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Advocacy / Governmental Affairs

MBL, FOM Changes Would Help CUs Advance Financial Inclusion

Credit Unions are mission-driven and well-positioned to address inequity and advance financial inclusion and in the financial services sector, CUNA wrote to House Financial Services Committee leadership Wednesday. CUNA notes that women- and minority-owned businesses (MWBEs) face barriers when it comes to access to credit and financial services, a situation made worse by the pandemic.

“Credit unions are committed to financial inclusion and access. MDI and CDFI credit unions play a critical role in advancing financial inclusion and the economic well-being of their members, including MWBEs,” the letter reads. “We are pulling together as a movement to support our members and make a difference in their lives during this difficult moment, but we know that, given the opportunity, we could do more, especially when it comes to providing access to capital to America’s small businesses.”

CUNA offers two suggestions for Congress to help credit unions increase service to MWBEs:

Ensure that all available small business credit is deployable during the recovery by at least temporarily removing the member business lending cap for emergency-related loans. CUNA estimates this would free up more than $5 billion in capital, creating nearly 50,000 jobs at no cost to the federal government; and
Facilitate the addition of underserved areas to credit unions’ fields of membership by considering legislation that expands the opportunity to serve underserved communities to all Federal credit unions.

Learn more

Compliance / Regulatory Affairs

Comment Period Now Open for NCUA Proposals on Risk-Based Capital, Adding an ‘S’ to CAMEL

Two months after the NCUA board approved two proposals, the agency has now opened up the comment window feedback on its proposal to simplify rules on risk-based capital and to add an “S” to the CAMEL rating system.

The comment period is open for 60 days and will run through May 10.

As CUToday.info reported here, at its January meeting the board OK’d both proposals on a 2-1 vote over objections from then NCUA Board Member and now Chairman Todd Harper, who said portions of the capital proposal were a bad idea “built on rubble.”

The capital proposal includes two risk-based capital requirements. Under the first, the agency has proposed replacing the risk-based capital rule with a risk-based leverage ratio requirement that would use relevant risk attribute thresholds to determine which complex credit unions would be required to hold additional capital.

The second plan calls for retaining the risk-based capital rule that was first approved in 2015 and after numerous delays is now set to take effect Jan. 1, 2022, but would enable eligible complex FICUs to opt in to a “complex credit union leverage ratio” (CCULR) framework to meet all regulatory capital requirements.

As CUToday.info reported, NCUA said the CCULR approach would be modeled on the “community bank leverage ratio” framework implemented under the 2018 economic growth and regulatory relief law.

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CFPB: Equal Credit Opportunity Act Prohibits Lenders From Sexual Orientation, Gender Identity Discrimination

The CFPB will interpret the Equal Credit Opportunity Act (ECOA) and its rules to prohibit discrimination based on sexual orientation and/or gender identity, the agency announced Tuesday.

“In issuing this interpretive rule, we’re making it clear that lenders cannot discriminate based on sexual orientation or gender identity,” CFPB Acting Director David Uejio said. “The CFPB will ensure that consumers are protected against such discrimination and provided equal opportunities in credit.”

“This prohibition also covers discrimination based on actual or perceived non-conformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other association,” the agency said.

Since the rule is being issued as an “interpretative rule,” the CFPB is not required to open it for public comment. The rule will become effective on the date it is published in the Federal Register.

The agency noted that in 2016, the CFPB indicated that the law supported arguments that the prohibition against sex discrimination could be interpreted broadly. And last year, the U.S. Supreme Court ruled that the prohibition against sex discrimination in the Civil Rights Act of 1964 encompasses sexual orientation and gender identity discrimination.

Learn more

Banking Committee Deadlocks on Chopra Confirmation, But CFPB Nominee Will Still Get Vote on Senate Floor

The nomination of Rohit Chopra to head the CFPB can still move to the Senate floor even though the Senate Banking Committee deadlocked on President Biden’s choice to head the agency.

During a vote on Chopra’s confirmation Wednesday, the committee tied, 12-12. Senate Banking Chairman Sherrod Brown (D-Ohio) indicated the tie means that the nomination still can move to the Senate floor., but it will need to clear an additional procedural hurdle -- the Senate will need to vote on a motion to discharge it from committee. (American Banker, March 10)

Pandemic Response

House Members Receptive to Extending PPP Deadline

Leaders of the House Small Business Committee signaled during a Wednesday hearing that they are open to extending the Paycheck Protection Program’s lending authority past its March 31 expiration date.

“It’s clear small businesses still need help, but lingering issues in the program [have created a] need for Congress to consider a short-term extension,” said Rep. Nydia Velazquez, D-N.Y., the committee's chairwoman.

Rep. Blaine Luetkemeyer, the committee’s ranking Republican member, said that error codes are holding up as many as 50,000 applications and that 10,000 of those may not get be resolved by the end of the month. Against that backdrop, the Missouri legislator said it is “very concerning” that Small Business Administration would be forced to stop processing loans at the end of the month.

Administration officials announced plans on Feb. 22 to use gross income rather than net profit to determine loan amounts for self-employed entrepreneurs. The SBA issued an interim final rule implementing the change on March 3.

Lisa Simpson, vice president of firm service at the American Institute of Certified Public Accountants, said her group is calling for an extension of at least 60 days.

“With an impending ... deadline for the PPP, there is very little time for small borrowers to determine their loan amount eligibility, file an application and resolve any potential error codes,” Simpson said. (American Banker, March 10)

Even Temporary MBL Relief will Get Capital to Businesses

The arbitrary credit union member business lending cap is an obstacle for businesses to get capital and should be at least temporarily lifted, CUNA wrote to the House Small Business Committee Wednesday. The letter also notes that despite the Paycheck Protection Program (PPP) receiving additional funds in December COVID relief legislation that more will likely be needed in 2021.

“Looking forward, beyond PPP, small businesses across the country will continue to be in need of funds and credit unions are in a position to pump billions of capital into the economy. There’s only one obstacle: an arbitrary credit union MBL cap which currently limits credit union lending activity to 12.25% of assets,” the letter reads. “Even temporarily lifting the cap will result in more credit union business lending.”

Learn more

Financial Services / Economic News

Report: U.S. Economy to Expand Nearly Twice as Fast as Expected in 2021

The American economy will accelerate nearly twice as fast as expected this year as result of the just-passed $1.9-trillion stimulus plan combined with the rapid vaccine rollout, which will lead to a powerful recovery from the pandemic, according to a new analysis released by the Organization for Economic Cooperation and Development (OECD).

But other countries, especially those that have stumbled with their vaccination campaigns, including in Europe, risk falling behind in the global economic recovery, the organization added.

In its half-year outlook, the organization projected the United States would expand 6.5% this year, up sharply from 3.2% forecast in December. The surge in the world’s largest economy will generate enough momentum to help lift global output 5.6%, from a 3.4% contraction in 2020.

China, which contained the virus earlier than other countries, remains a big global winner, with growth of 7.8% forecast. The report notes that although a global recovery is in sight, spending by governments intended to jump-start their economies will have limited impact unless authorities accelerate national vaccine rollouts and relax virus containment measures. If vaccination programs aren’t fast enough to cut infection rates, or if new variants become more widespread and require changes to vaccines, consumer spending and business confidence would be hit, the report adds.

Learn more

Mortgage Refinance Demand Plunges 43% from a Year Ago

The recent sharp rise in interest rates is now taking a toll on mortgage refinance demand, as the number of borrowers who could benefit shrinks.

Applications to refinance a home loan fell 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. They were also 43% lower compared with the same week one year ago. That is the first year-over-year drop since March 8, 2019. Last year at this time mortgage rates fell dramatically as fears of the coronavirus hit financial markets. That caused a large spike in refinance demand, hence this year’s comparison.

The refinance share of mortgage activity decreased to 64.5% of total applications from 67.5% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.26% from 3.23%, with points decreasing to 0.43 from 0.48 (including the origination fee) for loans with a 20% down payment. While the weekly move is not that large, rates are now up 40 basis points since the start of this year.

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News From Credit Unions

Credit Union Welcomes Joe Raichel as Chief Lending Officer

Community Credit Union is thrilled to announce the hiring of Chief Lending Officer (CLO), Joe Raichel (pictured left). The new position of CLO reports to credit union President/CEO, Alison DeTuncq and will support the credit union’s strategic direction of consumer, indirect, and real estate lending, as well as business lending and services.

Raichel joins the credit union with over 23 years of financial services industry experience in consumer and commercial lending/banking and has a strong passion for developing community partnerships with area nonprofits.

Learn more

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