Life Is A Highway ... July 12, 2010

Congress Returns To Session; Continue Contacts With Lawmakers

Congress returns to session this week following the July 4th District Work Break. The next district break is scheduled for August 9, so time is crucial for credit unions to contact their senators to encourage support of legislation that would lift the member business lending (MBL) cap for credit unions.

Credit union backers are specifically supporting Sen. Mark Udall's (D-Colo.) amendment to raise the cap to 27.5% of a credit union's assets. Udall’s provision could be added to a bill that is intended to stimulate more credit for small businesses, and the Association, along with CUNA, is urging credit unions to garner senators’ support for the addition to the bill. That bill also proposes to provide community banks with an extra $30 billion to lend to small businesses through a government-backed, taxpayer-covered lending fund.

The comprehensive financial regulatory relief package, passed by the House, is still awaiting a Senate vote. Although credit unions have opposed the reform package because of the impact of government price-setting of interchange fees, the bill does provide for the Federal Reserve to set interchange fees.

To contact Senators Casey and Specter regarding support for the Udall Amendment, use CUNA’s CapWiz Center at http://capwiz.com/cuna/home/.

Updated information and talking points are available in the Governmental Affairs section of the Association’s website.

Mid-Atlantic Corporate Moves Ahead With Plans For Successful Future

Mid-Atlantic Corporate FCU announced Friday it is building on plans to ready itself for new regulatory realities and other marketplace changes.

Mid-Atlantic has been providing regular communication to members to inform and prepare them for the corporate’s planned changes. Jay Murray, President/CEO, and other senior managers held a series of town hall meetings during the first quarter, and have spoken on the topic of “what’s next for corporates” at chapter meetings, webinars, and other events, including Mid-Atlantic’s recent annual meeting.

Step one for Mid-Atlantic was to introduce a new membership plan requiring a level of capital commitment as a condition of continued membership. To date, Murray says the corporate has received commitments from 637 members totaling $116.8 million in capital.

Mid-Atlantic’s strategy for achieving and maintaining the regulatory “well capitalized” designation includes monitoring its total deposits and introducing a maximum deposit limit for each member.

As part of its planned changes, Murray announced last week that the corporate is realigning staff and consolidating some departments, resulting in a 16 percent reduction in full-time employee positions.

“We’re adjusting staff levels to meet business levels – a necessary step to ensure Mid-Atlantic’s continued strength and efficiency, as well as our ability to deliver the services credit unions need,” Murray said. “At the heart of the staff repositioning is making sure we have the right people in the right places.”

Murray noted that in recent years Mid-Atlantic’s team has become known for product and service innovation, especially in the payments arena. “That capability, combined with our sensible approach to asset/liability management and careful eye on expenses, will remain vitally important going forward. The changes we’re making today will hold Mid-Atlantic in good stead as the new regulation takes effect,” he said.

Harrisburg Happenings

You can find this week’s edition of Harrisburg Happenings at http://www.pcua.coop/Affairs/Legislative-Publications.aspx. This publication highlights the latest happenings from the state capitol.

Education & Training

Education & Training

Boomer Or Bust

In six months, the oldest of the baby boomer generation will turn 65, which is the age many members historically start leaving their credit unions. Pennsylvania boomers total 3.4 million, representing 27.5% of the population and holding an incredible 797% of the state’s consumer assets.

The Association, in partnership with CUNA Mutual Group, is pleased to present Boomers Key to Keystone State, a free webinar focused on keys to retaining this market.

For more information or to enroll for the July 27 webinar, click here. 

Chapter News

Chapter News

The 24th Annual Greater Philadelphia Credit Union Golf Outing raised more than $11,000 for The Children’s Hospital of Philadelphia’s Cystic Fibrosis Research. Hosted by the Philadelphia Chapter of Credit Unions, the Golf Outing took place Thursday, June 10, at the Westover Country Club in Jeffersonville. Eighteen PA credit unions and 20 organizations helped to sponsor the event, which is organized annually in memory of Michael F. Ambrose, Jr. Freedom Credit Union President/CEO Lee MacMinn, and EVP/COO, John F. King, along with Craig McClure and Jack Cunningham, have served as Golf Outing committee members for the past 24 years, organizing the charity event with great success in both participation and fundraising. To date, the event has raised $180,000 for The Children’s Hospital of Philadelphia.

Newsmakers

TruMark Financial Credit Union relaxed its dress code and allowed employees to wear jeans on Friday, June 11, and Friday, June 25, in support of Habitat for Humanity, raising $1,083.

National News

National News

CUNA Mutual issues $85M in surplus notes

MADISON, Wis. (7/12/10)--CUNA Mutual Group has entered into an agreement with several institutional investors to issue $85 million in fixed-rate, 20-year surplus notes, in a move aimed at creating opportunities for future growth.

"Surplus notes are a cost-effective opportunity in this low-interest environment to take advantage of our financial strength and raise new capital," said Jeff Post, president/CEO of CUNA Mutual. "The new capital increases our already strong financial position and gives us flexibility to invest in opportunities that will drive future growth."

A surplus note is a bond-like instrument issued primarily by mutual insurance companies. They are debt-like in that they pay an interest rate and have a finite maturity. During that period, CUNA Mutual pays an interest rate to its investors.

"Investors' willingness to purchase our surplus notes is a major achievement for CUNA Mutual," Post said. "The ready acceptance of these notes by sophisticated investors is a major vote of confidence in CUNA Mutual's strategy, our relationship with our customers--and our future."

CUNA Mutual will use the infusion of capital to support its credit union market and diversification strategies that will drive future profitable growth. The initiatives could include acquisitions and/or investment in business-to-consumer initiatives in the credit union marketplace, the company said.

"Essentially this is a form of subordinated debt--analogous to alternative capital for a credit union--that is issued to sophisticated investors to raise capital," Eric Richard, executive vice president and general counsel for the Credit Union National Association, explained. "The issue process is complicated, involving rating agencies, investment analysts, and other due diligence comparable to what happens in an initial public offering--except this is debt, not equity."
CUNA Mutual Group

Consumer credit at CUs down in May

MADISON, Wis. and WASHINGTON (7/12/10)--Consumer credit outstanding at credit unions continued to drop in May--to $223.7 billion from April's $224.8 billion and March's $228 billion, according to the Federal Reserve's Consumer Credit report, released Thursday. The figures are not a surprise to economists at the Credit Union National Association (CUNA).

Credit unions followed the trend for financial institutions overall in consumer credit outstanding and for nonrevolving credit, which decreased over the month. However, they bucked the trend in revolving credit, which continued to increase at credit unions while decreasing among other financial institutions or staying the same.

Revolving credit at credit unions grew to $34.6 billion in May--up from $34.5 billion in April and $34.3 billion in March. Nonrevolving credit totaled $189.1 billion in May, a decrease from $190.3 billion in April and $193.7 billion in March.

Overall consumer credit in May for all institutions decreased at an annual rate of 4.5% to $2,415.3 billion (or $2.4 trillion), compared with April's $2,424.4 billion, said the report. Revolving credit decreased 10.5% to $830.8 billion in May from the previous month's $838.2 billion. Nonrevolving credit also dropped, by 1.5% to $1,584.5 billion from $1,586.3 billion the month before.

"These numbers do not come as a surprise," said Mike Schenk, vice president of economics and statistics, and senior economist at CUNA.

"CUNA, in fact, provides the numbers to the Fed and the Fed in turn uses them to produces its estimate of consumer credit trends," he told News Now. "Our source is about 500 credit unions that provide us with a monthly financial snapshot--via participation in our Financial and Statistical Trends (FAST) program. The data in that program are summarized in CUNA's Monthly Credit Union Estimates Report (use the link to download the report).

So what do the numbers mean? "Basically what is going on is this: consumers have high levels of debt, and they are paying down that debt to more manageable levels," said Schenk.

"This is being magnified by historically low deposit yields and a volatile stock market," he said. "Even among those that have manageable debt loads it seems that, for many, paying down that debt is more palatable than accepting near-zero returns on savings and investments."
CUNA's Monthly CU Estimates Report
CUNA Consumer Lending eSchool

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