WASHINGTON — Despite the numbers of economic and regulatory challenges the industry now faces, credit unions the have invested funds to support the National Credit Union Foundation are by and large standing behind those investments, according to Foundation Executive Director Steve Delfin.
"You know I have a history with the worlds of philanthropy and charitable giving," Delfin said, "and I have to say how impressed I am with the levels of commitment we are seeing from the credit unions, credit union leagues and even vendors who have supported us financially. It's really inspiring."
Delfin reported that roughly 685 natural person credit unions, corporate credit unions and credit union leagues have invested in support of the foundation, the most ever, mostly through share accounts or share certificates of deposit invested with the foundation's community investment fund.
The foundation then splits the interest the invested money earns with the credit union's state credit union foundation and the credit union itself. The foundation uses its portion of the interest to help fund its activities.
The certificates are generally either short term (90 days) or longer terms (one to four years), and, Delfin said, generally, the foundation is seeing credit unions renew their commitments to their investments when the CDs come due.
"Generally, we see them come through in clumps," Delfin said. "Maybe a league will have done a special promotion to support foundation investment in a given month in a previous year so we will see the CDs come up for renewal in that month."
Delfin acknowledged that the foundation has been paying close attention to the investment levels in the fund as the credit union industry began struggling with a seriously deteriorating economy and resulting lack of liquidity.
Credit unions might be particularly tempted to pull their foundation investments because of both their longer terms and their particular vulnerability to low interest rates environments.
Essentially, when interest rates are low, the amounts of money needed as investments grow-right at a time when credit unions find it more difficult to make large investments.
For example, currently, the interest rate for the CIF share account is roughly 1.9%, the foundation reported. That means a CU investing in a CIF share account today would receive a dividend of 0.95%. NCUF would net 0.475%, and the state foundation or league would be granted 0.475%.
This means a CU investing $1 million in a CIF share account today would generate net donations of $4,750 to NCUF and $4,750 to their state foundation or league, while keeping $9500 for itself. The foundation had been concerned that the return might be too low for credit unions that might need to use that investment for other pressing needs.
But Delfin said the foundation has not seen anything more than a handful of withdrawals or even credit unions moving their longer term investment to shorter term instruments.
"The feedback we have received from credit unions is that many regard their investment in the CIF as almost like a an investment in a 401(k) plan," Delfin said. "That is the analogy they use. They say, 'We would have to be terribly dire circumstances before we touch that money,'" he added.
Delfin also explained that the foundation had taken steps previously to prepare itself for the potential downturn by increasing its reserves from six months worth to one year.
"I am in regular contact with other philanthropic leaders across the country," Delfin said. "And there was a lot of observation 18 months or two years ago about the potential for a housing bubble to have severe consequences, so even then the foundation started preparing against coming up on some harder times."
But Delfin also noted that the foundation was acutely aware of how much of the CIF's limitation's as a philanthropic vehicle and said the foundation was eager to hear the suggestions and ideas on how to broaden and deepen the foundation's philanthropic roots in the future.
"This was something we actually began a couple of years ago and has really only gotten even more topical now," Delfin explained. "The task force was charged with brainstorming and exploring other avenues the foundation could use to help us raise funds for our programs," he said, adding that some of the task force's suggestions would be shared with foundation leaders at CUNA's coming Governmental Affairs Conference in Washington.
Delfin declined to indicated what the suggestions would be, but outlined a couple of areas where he said the Foundation might innovate a bit in its funding. For example, he pointed out that the foundation has never done any so-called philanthropic marketing, where part of the price of a product or service would go to support the foundation.
Delfin said the foundation would consider approaching vendors or leagues that operate things like bill-pay programs or process debit or credit cards to explore the possibility of letting credit unions designate a portion of their interchange off of each transaction to support the foundation.
Overall, Delfin said the foundation wanted to be clear about its understanding that 2008 would likely be a hard year, just as it would be across the philanthropic world, but that it believed that credit unions understood that its funds programs and grants that are key to what credit unions do both now and in the future.
"There is a paradox about America that was first recorded by d'Tocqueville," Delfin said. "When times get harder, Americans actually give more. Maybe they might not give as much in absolute terms per person, but they give more. Or if they can't give money, they do something else. I believe our credit unions understand that these are the times to make sure they give, if only to keep an already bad situation from getting much worse."
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