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CURRENT Newsletter | 8 December 2020

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News About Credit Unions

Education & Training

News From Credit Unions

Headlines

Virginia Credit Union League President Rick Pillow Honored with Leadership Award

Rick Pillow, president of the Virginia Credit Union League (VACUL), was recognized with the 2020 Eagle Award by the American Association of Credit Union Leagues (AACUL) during AACUL’s virtual 2020 Winter Meeting last week.

The Eagle Award is AACUL’s highest honor and was established in 1981 to recognize a League President who has an outstanding record of achievement at the league level, a willingness to speak out on critical and controversial issues, demonstrated leadership beyond the league level, innovation in creating or implementing new ideas, and unremitting dedication to credit union personal principles and an unflagging focus on important issues.

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Turnkey Mortgage Solutions: Learn More about Our New Partnership with CUMA During Dec. 10 Webinar

Looking for a turnkey, customizable mortgage solution for your credit union? Credit Union Mortgage Association (CUMA), your League’s newest business partner, boasts a 40-year track record of providing best-in-class mortgage-related services to credit unions of all asset sizes, including origination, processing, underwriting, servicing, closing and secondary market access. Join us for a Dec. 10 webinar (at noon) to learn about CUMA and what they can help you do for your members!

Register here

CUMA is a full-service mortgage company, owned 100% by credit unions, exclusively serving credit unions. Learn more about our partnership.

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

Register here

Why Becoming a Community Development Financial Institution Might Be Right for Your CU

More than ever, 2020 has shown a spotlight on the incredible impact that credit unions make in their communities. Whether it’s working around the clock to process Payment Protection Program loans, participating in social justice initiatives or giving their employees time off to vote, credit unions have consistently demonstrated their commitment to serving the needs of their communities.

But equitably meeting those needs in minority or low-income communities takes commitment and innovation. That’s where the U.S. Treasury Department’s Community Development Financial Institution (CDFI) Program can help.

Created by Congress in 1994, the CDFI program was designed to combine federal money with private capital to help qualified financial institutions meet the need of under-served communities that typically lack access to affordable loans and safe financial services.

As a League, we are committed to the success of credit unions. Government funding for the program can change from year-to-year and there are currently legislative proposals for unprecedented levels of funding. We want to make sure all credit unions who qualify can take advantage of all CDFI benefits. Inclusiv is holding weekly informational meetings for credit unions interested in the CDFI program.

Register here to learn more: CDFI Education Sign-up

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House-Senate Coalition Endorses $908 Billion Bipartisan COVID Relief Proposal

U.S. House Speaker Nancy Pelosi (D-CA-12) and Senate Majority Leader Mitch McConnell (R-KY) continue to push competing coronavirus stimulus measures while a bipartisan group of lawmakers yesterday unveiled their own $908 billion package, in a new effort to pass relief in the final weeks of the Trump administration.

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A Race Against the Clock to Extend CUs’ Liquidity Backstop

The clock is ticking for one of the credit union industry’s biggest legislative pushes this year.

Changes made to the National Credit Union Administration’s Central Liquidity Facility this spring as part of the Coronavirus Aid, Relief and Economic Stimulus Act are set to expire on Dec. 31. Industry groups have spent months pushing for an extension, but with little success so far. As a result, time is running out for lawmakers to take action before thousands of credit unions lose a liquidity backstop.

This is the last week House and Senate lawmakers are scheduled to be together in Washington before adjourning for the year. The House is expected to leave by Friday while the Senate will stay one week beyond that, though there are some talks that House members could extend their stay. Regardless of how long lawmakers stay in town, CARES Act provisions related to the CLF won’t last past the end of this year without congressional action. (American Banker, Dec. 7)

News About Credit Unions

Number of Members, Total Loans Decline at All CUs Below $1 Billion in Year Ending Sept. 30

Overall credit union membership and total loans in every asset category below $1 billion declined in the year ending in the third quarter of 2020, according to new data released by NCUA.

The declines in member growth and loan performance are masked by the overall CU performance numbers. Driven by CUs of $1 billion or more, total assets in federally insured credit unions rose by $248 billion, or 16.1%, for the year ending Sept. 30 to $1.70 trillion, while total assets were up $69 billion, or 6.3%, over the year to $1.2 trillion, according to new data released by NCUA for the 5,133 federally insured credit unions as of Sept. 30, 2020.

Not surprisingly, the latest data show declines in net interest margins and ROA as total membership slowly approaches 124 million people. The agency’s analysis noted loan balances were up in most categories compared to the second quarter, but again, only among the largest CUs.

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Margins Holding Up Better at Credit Unions Than Banks

Margin compression has been less severe recently at U.S. credit unions relative to U.S. banks and thrifts.

The credit union industry's net interest margin was 3.28% in the third quarter, down 34 basis points from the year-ago period. In contrast, the margin for commercial banks, savings banks, and savings and loan associations declined by approximately twice as much.

Credit unions have bested their banking counterparts in terms of net interest margin in every quarter since 2015. The gap between the two industry aggregates had ranged from 8 basis points to 30 basis points through the first quarter of 2020. But in the quarter ended June 30, the gap exploded to 64 basis points. It then edged up to 65 basis points in the most recent quarter.

In part because of loan composition, credit unions are better situated than banking institutions to moderate margin pressure in a declining rate environment. Credit unions specialize in consumer and one-to-four-family mortgage lending, with a concentration in fixed-rate loans, whereas the banking industry's portfolio is far more diverse, with a greater emphasis on adjustable-rate loans.

Additionally, banks and thrifts have been more active participants in the Paycheck Protection Program, which has exacerbated margin compression during the last two quarters. PPP loans comprised 4.7% of total loans and leases for the banking industry at Sept. 30, compared to just 0.8% for credit unions. (S&P Global Marketplace, Dec. 7)

Prize-Linked Savings Accounts Get a Boost from Flood of New Deposits

The deposit boom at credit unions is trickling down into prize-linked savings programs.

Many credit unions offer prize-linked savings as a way to improve members’ financial behaviors through gamification. These initiatives require members to make at least one deposit per month into a savings account and those deposits then qualify account holders for the chance to win periodic rewards. Not all credit unions offer these programs, and the additional funds are not generally considered to be so substantial that they have a dramatic impact on the balance sheet. (American Banker, Nov. 10)

Your League partners with the national Save to Win program after a successful effort several years ago to pass a state law allowing financial institutions to participate in such programs.

Credit unions interested in offering Save to Win accounts to their members should contact Jessica Thelen at Jessica.Thelen@CUSolutionsGroup.com.

Large CUs Deepen Their Stake in PPP Lending

Paycheck Protection Program loans made up a significant portion of the loan portfolios at four of the top credit union lenders in this area during the third quarter.

Navy Federal Credit Union in Vienna, Va., reported the largest jump in PPP loans from the second to the third quarter at 14.1%. The $131.6 billion-asset institution had $163.6 million of these loans, making up just 0.2% of its portfolio. The $4.1 billion-asset Northwest Federal Credit Union in Herndon, Va., had the second-biggest increase at 11.6% and had a total $110.7 million in PPP loans, according to the S&P data. (American Banker, Dec. 3)

Education & Training

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.

News From Credit Unions

1st Advantage Named One of The Top Lending Partners for Virginia by Business Finance Group

Business Finance Group has named 1st Advantage Federal Credit Union one of the top lending partners in Virginia for 2020. In addition, Paul Szabo, Commercial Lending Manager for 1st Advantage, has been named the top lender for the state of Virginia.

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ValleyStar CU Among CUNA Lending Council’s 2020 Award Winners

CUNA Lending Council announced its 2020 award winners during the virtual conference on November 4, 2020. Click here to view the full awards presentation.

ValleyStar Credit Union (Martinsville, Va.) was honored with an Excellence in Lending Award from the Council for creating their own Payroll Protection Program (PPP) lookalike program to help their existing business members. The Excellence in Lending Awards honor credit unions that exemplify lending excellence by going above and beyond in their roles to serve members while maintaining sound credit union financials.

“This is the way we acknowledge our best and brightest,” said Jim Block, CUNA Lending Council Chair and EVP/COO, BCU. “Lending Council members nominate their peers or their own internal credit union stars who deserve the spotlight.”

ABNB FCU Appoints Andrew Keeney to Board of Directors, As Longtime Member David Krause Steps Down

Retired attorney Andrew Keeney has joined ABNB Federal Credit Union's Board of Directors following longtime member David Krause's decision to step down after more than 19 years of service.

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