CURRENT Newsletter | 23 December 2020
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Happy Holidays! All of us at your League wish you a safe and happy holiday! Our offices in Richmond and Lynchburg will be closed Dec. 24, Dec. 25 and Jan. 1.
Headlines
- Share Your Story of How You've Helped Members During Pandemic
- Overdraft Services Webinar: 10 High-Risk Issues You Need to Address
- 1st Advantage’s Paul Muse to Serve on CULAC Board of Trustees
- Latest Economic Impact Payments Expected Soon
- CDC Panel Clarifies Financial Institution Worker Vaccine Allocation
- CUNA National Young Professionals Virtual Conference scheduled for Jan. 13-14
- Takeaways from NCUA's 3Q State-Level Data
- Rule Needed to Protect CUs from Higher Asset-Size Thresholds Due to COVID
Compliance / Regulatory Affairs
Financial Services / Economy
- New Stimulus Package Clears Path for Increased SBA Lending
- End of Refi Boom Could Put Squeeze on CUs in 2021
- Credit Unions Defy Low-Income Forecasts in 2020
News From Credit Unions
Headlines
Share Your Story of How You've Helped Members During Pandemic
During one of the recent CUNA-League Small Credit Union webinars, we worked on how to tell your credit union’s story in simple but powerful ways. We’d like you to put that story to important practice this week. We’re asking credit unions to submit simple stories about how they’re helping members during these challenging times via our Advancing Communities advocacy initiative.
Advocacy is what we do as an organization; same for CUNA and our fellow Leagues. And we know that if we can help credit unions share stories with lawmakers, especially as new members of Congress and state legislatures are sworn in, we can preserve the tax status and strengthen the operating environment for the movement.
So, we're asking you to share your story, because people connect with real stories about real people. Simply click on the "share your story link" on the top-right corner of our Advancing Communities homepage and record a brief message that spotlights your credit union's good work on behalf of your members!
Overdraft Services Webinar: 10 High-Risk Issues You Need to Address
Plaintiff attorneys continue to send demand letters and/or file lawsuits against credit unions alleging improper assessment of overdraft and/or NSF fees.
The Credit Union Times reports that Navy Federal Credit Union will settle a class-action suit for $16 million that will reimburse an estimated 700,000 current and former members charged fees for overdrafts.
TD Bank recently agreed to pay $97 million in restitution to approximately 1.42 million customers, as well as a $25 million civil penalty to settle allegations brought by the Consumer Financial Protection Bureau that it engaged in illegal overdraft fee practices.
These legal actions spotlight a few of the issues you have to worry about with your overdraft services deposit programs. Join us a for a Jan. 13 webinar through TRGroup for a discussion of overdraft-related risks, including:
- Per item per time issues
- Debit Card Pending Issues—what are good funds?
- Timing of disclosures when you open accounts off-premise
- Opt-In and Opt-Out Procedures for one-time debits and ATM transactions
- The Regulations, the guidance, the exam
1st Advantage’s Paul Muse to Serve on CULAC Board of Trustees
The Credit Union Legislative Action Council’s (CULAC) Executive Committee met last Thursday and confirmed nominees for new terms on the CULAC Board of Trustees, including Virginia representative Paul Muse (1st Advantage Federal Credit Union). CULAC is CUNA's federal political action committee.
The CULAC Board of Trustees serves as the governing body for CULAC and includes a representative from all 50 states and the District of Columbia.
Latest Economic Impact Payments Expected Soon
A second round of Economic Impact Payments will be sent to around 160 million eligible Americans starting next week due to the passage of the latest COVID relief bill.
The legislation provides $600 for eligible individuals, including dependents. Those who made below $75,000 on their 2019 tax returns will get the maximum benefit, with amounts pro-rated until the cut-off threshold of $87,000, if there are no dependents.
The government is likely to disburse the majority of the funds via ACH direct deposit or check if the IRS does not have accurate account data. It is also possible prepaid cards will be sent.
Credit unions should be prepared for increased ACH activity, as well as potential increased need for members to withdraw funds and/or cash paper checks.
CDC Panel Clarifies Financial Institution Worker Vaccine Allocation
Financial services employees should be included in Phase 1c of COVID-19 vaccination, a Center for Disease Control and Prevention panel voted Sunday. The presentation from the ACIP COVID-19 Vaccines Work Group covers phased allocations of vaccines.
According to the presentation, finance professionals fall under the non-frontline essential workers category, along with IT/Communications professionals and food service industries, among others.
Frontline essential workers are designated as “workers who are in sectors essential to the functioning of society and are at substantially higher risk” of exposure to COVID. Frontline essential workers include first responders and education workers and are designated Phase 1b in the presentation. (CUNA News Now, Dec. 21)
CUNA National Young Professionals Virtual Conference scheduled for Jan. 13-14
Young professionals can grow leadership skills while exploring the unique and rewarding experience that comes from building a lifelong career in the credit union movement at CUNA National Young Professionals Virtual Conference, Jan. 13-14, 2021.
Takeaways from NCUA's 3Q State-Level Data
The credit union industry is staring down a wave of negative financial trends.
The National Credit Union Administration released more data last week on the industry’s third-quarter performance. This data, which looked at the median percent change from the third quarter of 2019 at the national and state level, showed that credit unions are dealing with a glut of deposits while lending declines.
The number of institutions turning a profit continues to fall, dropping to 82% of all federally insured credit unions at the end of the third quarter — a 7-point decline from the same period last year.
At least 65% of credit unions in every state and Washington, D.C., reported positive net income during the first three quarters of the year, down from 70% for the same period in 2019.
Return on average assets also took a hit. For the first three quarters of the year, the median for this metric was 0.42%, down from 0.65% for the same period in 2019.
Credit unions in Idaho, at 85 basis points, and Oregon, at 82 basis points, managed to maintain the highest ROA for the first three quarters of 2020. (American Banker, Dec. 20)
Rule Needed to Protect CUs from Higher Asset-Size Thresholds Due to COVID
NCUA should publish an interim final rule to allow credit unions to use 2019 asset-size data for regulatory requirements through the end of 2021, CUNA President/CEO Jim Nussle wrote to the NCUA board Tuesday.
Federal banking agencies passed an interim final rule allowing banks, through the end of 2021, to use asset data as of Dec. 31, 2019 to determine applicability of certain assert-based thresholds.
“CUNA strongly urges the NCUA to address this issue as the banking agencies have and publish an interim final rule for credit unions that will allow them to use 2019 asset-size data for regulatory requirements through the end of 2021, so they will not be required to comply with new regulatory or reporting requirements until the beginning of 2022, at the earliest,” Nussle wrote.
Compliance / Regulatory Affairs
Fed Finalizes Rule Eliminating Reserve Requirements
The Federal Reserve Board issued a CUNA-supported final rule on reserve requirement ratios on transaction accounts Tuesday. The final rule adopts without change the interim final rule issued by the Fed amending Regulation D to lower reserve requirement ratios on transaction accounts maintained at depository institutions to 0%.
CUNA fully supports the Federal Reserve Board eliminating reserve requirements for financial institutions.
The Federal Reserve Board also issued proposed amendments to Regulation D which would:
- Replace references to an "interest on required reserves" ("IORR") rate and to an "interest on excess reserves" ("IOER") rate with a single "interest on reserve balances" ("IORB") rate; and
- Simplify the formula used to calculate the amount of interest paid on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks.
Financial Services / Economy
New Stimulus Package Clears Path for Increased SBA Lending
The new stimulus package is providing more than just emergency relief for small businesses.
While the $900 billion legislation revives the Paycheck Protection Program, it also enhances key elements of the Small Business Administration’s traditional lending efforts. That could result in a major lift for lenders and borrowers when the time comes to invest in an economic recovery, industry experts said.
The package authorizes $2 billion for the SBA’s 7(a), 504 and Microloan programs, while allowing the agency to waive borrower and lender fees, according to legislative summaries of the law. The SBA will be able to raise the standard guarantee on 7(a) loans to 90% from 75%, retain the size threshold for SBA Express loans at $1 million and authorize a 504 Express program to expedite approval of loans under $500,000.
“We think banking and small businesses are winners from the proposed second round of fiscal stimulus,” Chris Marinac, an analyst at Janney Montgomery Scott, wrote in a note to clients Tuesday. “Remember, banks are mirrors of the communities they serve. An improved economy should be [a] positive.” (American Banker, Dec. 22)
End of Refi Boom Could Put Squeeze on CUs in 2021
Credit unions should prepare for the mortgage refinancing boom to slow next year.
Consumers rushed to refinance mortgages and purchase homes this year as interest rates fell below 3%. That has driven a significant portion of credit union loan growth this year.
However, the pace of refinance activity is expected to decline next year so credit unions need to prepare for ways to make up for that lost income. The purchase market should remain healthy, and pent- up demand for other types of credit could help soften the blow, experts said.
Declining refinancing "will eat into the profitability of credit unions but I’m hoping what may not be available in terms of refinancing, we will see a return to purchase applications,” said Brian Turner, president and chief economist at Meridian Economics. “But that’s dependent on how successful the distribution of the coronavirus vaccine is and how quickly members will respond with their purchasing behavior.”
Credit union lending has increased this year, though some categories of loans have fared better than others. Total loans outstanding increased by more than 6%, to $1.2 trillion, in the third quarter from a year earlier, according to data from the National Credit Union Administration. (Credit Union Journal, Dec. 22)
Credit Unions Defy Low-Income Forecasts in 2020
Usually when CUNA and CUNA Mutual Group economists get together, they emerge with forecasts that turn out to be reasonable approximations of reality.
They were remarkably accurate this year in many respects despite the unprecedented turbulence of novel forces unleased by the COVID-19 pandemic.
But they’ve missed on their income predictions this year. They predicted returns on average assets (ROA) that were far below those that actually found their way into NCUA Call Reports.
Things turning out better than expected should be a good thing, and perhaps it is. The troubling part is that many of the assumptions that went into those forecasts might be truer than the NCUA reports.
News From Credit Unions
Riverside Health System ECU to Merge with 1st Advantage FCU
Riverside Health System Employees Credit Union (RHSECU), an $8 million credit union located in Newport News, VA has announced their intent to merge into 1st Advantage Federal Credit Union, an $800 million credit union headquartered in Yorktown, VA. The merger is planned for early 2021.
RHSECU notes this was a strategic decision to offer members enhanced services, products, and added convenience. The merger has been approved by the Boards of both credit unions and the National Credit Union Administration.
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