BOISE, Idaho — The time for risk-based capital “is well overdue” for credit unions and conditions are improving for passage perhaps in a year, according to former NCUA aide Kirk Cuevas.
Addressing the annual meeting of the Idaho Credit Union League May 16, Cuevas, a principal partner in Dollar Associates, the Birmingham, Ala., consulting firm and former NCUA chief of staff, said the one size fits fall rule of a 7% threshold is grossly antiquated and needs to be adjusted by Congress so CUs can adequately serve members.
“I think it will happen in a year or so,” forecast Cuevas.
The banking industry has long been a formidable obstacle, but the political landscape seems to be changing for the better, he said noting risk-based capital would help regulatory agencies now handcuffed by the 7% rule in treating troubled CUs alike.
“Now the agencies have to wait until a credit union is on death row before they can act,” said Cuevas.
The Dollar Associates consultant said the move toward risk-based capital “is at last getting traction” among lawmakers as many see the folly of CUs tied to identical risks whether it be a student loan or a 30-year fixed mortgage.
With 11.5% net worth ratios CUs could do far more to reach out to members with branches, ATMs and new product investment, he told the Idaho meeting.
Miss. League Launches Awareness Campaign
BILOXI, Miss. — Following a year of consumer and industry research, the Mississippi Credit Union League is moving ahead this fall with its first CU awareness blitz using a broad mix of TV, radio, print and billboards.
The $350,000 ad campaign, to be financed through CU contributions based on a $1-a-member formula, will be developed over the summer under guidance of a league task force, explained Charles Elliott, president/CEO of the 99-member trade group.
Elliott said Mississippi CU leaders had no problem taking their time to agree on the need for CU awareness following the lead of other states.
“Sometimes these things take a while to coalesce but now we find is the time we can launch a campaign,” said Elliott.
The task force, he said, will determine which awareness campaigns currently employed by other leagues might fit the Mississippi market adding “there are a lot of good ones.” He mentioned those aired by the California/Nevada, Utah and Alabama leagues as possibilities.
“It’s fortunate we don’t have to create our own,” said Elliott, noting the need for an awareness campaign was cited last fall during league CEO dialogue meetings and also evident in consumer research conducted by CUNA.
Taking time to plan an awareness is not a bad thing, and Mississippi CUs have a favorable story to tell “considering we have the eighth highest capital ratio and third in return on assets,” said Elliott.
Details of the planned awareness campaign were announced during the league’s annual meeting held here May 8-10.
NCUA Says CUs Can Get Investment Loans
WASHINGTON — Federal credit unions can borrow money to make an investment as long as they follow all the applicable borrowing and investing laws, according to an opinion issued by NCUA last month.
“Under the FCU Act, FCUs have the express power to borrow from any source, limited to 50% of paid-in and unimpaired capital and surplus,” NCUA Associate General Counsel Sheila C. Albin wrote in a letter to Patricia Zyma, senior vice president/chief financial officer of Utilities Employees Credit Union in Reading, Pa.
Albin also noted that federal credit unions must follow federal rules regarding what is a proper investment. Federally-insured state credit unions are subject to special reserve requirements for investments that may be legal, according to state law but don’t conform to the Federal Credit Union Act, or NCUA regulations, she added.
Badger State CUs Bests Banks in Slow Economy
MILWAUKEE, Wis. — With a 20% rise in earnings in this state’s credit unions, the leading local newspaper, The Milwaukee Journal Sentinel was sure to notice.
A recent story in the newspaper highlighted how CUs there had fared better than banks in the economic downturn. Posted earnings for Wisconsin’s CUs rose almost 20% in the first quarter even as banks struggled to increase net income.
With net income of more than $28.1 million in the quarter ended March 31, up from $23.5 million in the same quarter in 2007, CUs are staying in front, according to a new report by the state Office of Credit Unions.
Suzanne T. Cowan, director of the Office of Credit Unions told the Journal Sentinel that the type of lending typically conducted by credit unions made them less susceptible to big losses on loans.
The story noted that banks, expecting losses, had placed more money into reserves, which cuts earnings. “I think it’s just the nature of the lending of credit unions,” Cowan said of the relatively strong showing in the quarter.
Cowan said credit unions, “generally because they’re smaller, they tend to be a little more conservative and they don’t take those big fliers on some of those loans.”
According to the regulator’s report, the state’s credit unions reduced by 7.3% the amount added to loan-loss reserves in the quarter. Income from interest on loans grew by 6.6% in the quarter, while income on investments was flat.
FISolv Slates Continuity Planning Webinars
INDIANAPOLIS — FISolv is planning five more Webinars on business continuity planning this summer.
The sessions will focus on plan development and newly updated FFIEC guidance. Each will be hosted by WebEx and start at 1 p.m. EDT.
The schedule and topics are:
-June 17: 5 Keys to a Successful Business Continuity Plan (45 minutes)
-June 26: Building your BCP Team (90 minutes)
-July 10: Board and Senior Management Responsibilities (90 minutes)
-July 22: Pandemic Planning (90 minutes)
-Aug. 6: Testing and Maintaining your BCP (90 minutes).
FISolv (www.fisolv.com) specializes in helping financial institutions create business continuity and disaster recovery plans that comply with FFIEC guidelines. For more information on the Webinars, e-mail Randall Smith, senior vice president of business development, at firstname.lastname@example.org.
NY League President Says Mortgage Bill May Hurt
ALBANY, N.Y. — A proposed bill aimed at mandating that financial institutions make loans at affordable rates could hurt credit unions by making interest rates too low, New York State Credit Union League President William J. Mellin told state lawmakers.
“While we agree that the existing [interest rate] thresholds are perhaps too high for the industry, we are concerned that the thresholds proposed in this bill are too low,” he said during his May 12 testimony before the Standing Committee on Banks.
He noted that credit unions don’t engage in predatory practices and because of their unique structure and philosophy should be exempted of any threshold.
The bill, introduced as part of Gov. David Paterson’s legislative package, seeks to expand protections to certain mortgages and amend the state’s legal code to include crimes relating to mortgage fraud. Mellin said his group supports those aspects of the measure.
Service CU Goes Live With MobileBanc24
PORTSMOUTH, N.H. — Service Credit Union has launched its new mobile banking service, MobileBanc24.
The $1.2 billion credit union serves a worldwide military and Department of Defense civilian membership that the management thinks will make good use of the ability to check balances and transaction histories, pay bills in dollars and Euros, and transfer funds between accounts at Service CU and other institutions.
“All of our products and services are available to our members worldwide, which is critical to our mobile membership. MobileBanc24 adds more access and convenience,” said Gordon Simmons, president/CEO of the 109,000-member credit union (www.servicecu.org).
Service CU is using an Internet-based mobile banking platform from MShift Inc. (www.mshift.com) to provide the service to nearly any handheld device on any carrier, and is the California-based company’s 59th credit union customer.