By Ray Birch
IOWA CITY, Iowa—While most agree they are still in “wait and see” mode, should their credit unions receive a refund from the corporate stabilization fund, CEOs are saying they will look for ways to return it to members.
This is part two of a two-part series in which CUToday.info polled credit union executives for how they would handle a payout from the Temporary Corporate Credit Union Stabilization Fund.
As CUToday.info reported, the NCUA board has indicated that between $600-million and $800-million could be returned to credit unions next year as the TCCUSF winds down a decade after the financial crisis.
Waiting & Seeing
At the $3.9-billion University of Iowa Community CU in North Liberty, Iowa, CEO Jeff Disterhoft said no decisions will be made on how a refund will be returned until more time passes and a rebate becomes more assured.
“We've not yet made decisions related to any rebate money, if only because we'd prefer to wait and see how much of it truly comes to fruition,” said Disterhoft. “Depending on the materiality of any reimbursement actually received, it would seem logical that it be returned to our members either in the form of improved pricing on products and services on both sides of the ledger, or perhaps as some sort of patronage dividend. Again, we'd likely wait to see exactly what we have to work with before beginning our deliberations.”
Evan Clark, DOCFCU
‘The Money Belongs to Members’
Doug Fecher, CEO of the $3.6-billion Wright-Patt CU in Beavercreek, Ohio, said his credit union is clear on what it will do if and when the money arrives.
“Although our credit union has yet to discuss this matter, what is clear is that the money belongs to members, not credit unions, and it is likely WPCU would find a way to return this to members,” said Fecher. “Our capital position is strong so we wouldn’t likely use it to bolster reserves. We are a credit union that pays excess earnings to members in a special dividend. That would be an option we would look at closely.”
A Boost to Competitiveness
The $439-million Department of Commerce FCU in Washington said the money will help keep the credit union competitive.
“We always try to keep our certificate rates at the top nationwide,” said CEO Evan Clark. “This refund will help us maintain those rates and reward our savers.”
Tina Sbrega, CEO of the $439-million GFA FCU in Gardner, Mass., sees NCUA’s decision to target a refund for next year as prudent.
“I am pleased to see that NCUA is recognizing there is no need to retain these funds until the original fund closing date,” said Sbrega. “As for what will be done with the money, I am sure it will be varied across the industry. Regardless, the monies are better used in the hands of our credit unions, particularly during this prolonged low-rate environment where our margins continue to be squeezed. For GFA it may mean that we will be able to add a few new positions that have been on the radar for a while, as well as allowing us to continue to invest in technology.”
A Return For Most Active Members
At $1.5-billion Arizona FCU in Phoenix, more money would be given back to members who are using the credit union the most.
“We would use our rebate to most certainly return a large portion to members proportionate to their economic participation with our cooperative,” said CEO Ronald Westad. “We would also retain a portion for future investments in service enhancements. The amount of money contributed to stabilize our industry was both meaningful and material for credit unions of all sizes. In this low-interest-rate environment, it will be especially meaningful to those credit unions operating on a thin margin.”
The Challenge for Small CUs
CEOs who spoke with CUToday.info agreed that thin margins and low income are big issues with small credit unions.
“Coping with the added burdens of excess regulation has taken a toll on all credit unions, and particularly on the smaller ones,” said Laida Garcia, CEO of $455-million floridacentral in Tampa, Fla. “This fund rebate will provide some relief to our smaller credit unions. We will add any fund rebates to capital.”
Disterhoft concurred that regulation has hit small CUs the hardest and that a refund would give them a “shot in the arm.”
Noting that the stabilization fund kept the CU industry safe and sound during the financial crisis created by the banks, McLaughlin turned his attention to the plight of the small CU today.
“I’d point to the trending statistics of our industry, with nearly 20% of all credit unions having lost money in 2016, an alarming number of smaller credit unions being forced to merge each year and virtually no new credit unions being formed,” said McLaughlin. “It is critically important that the stabilization funds go back to credit unions and their members as soon as possible. Having worked at a smaller credit union, I can tell you that even the smallest of windfalls can be extremely beneficial.”