By Ray Birch
ALEXANDRIA, Va.—The NCUSIF rebate is arriving at just the right time for some CUs, many of which plan to use the unplanned-for funds to underwrite higher CD rates to stop deposit outflows as rates rise, in addition to investing elsewhere.
Raising rates is just one of the uses for the funds being returned to credit unions following the merger of the Temporary Corporate CU Stabilization Fund into the share insurance fund, according to credit union CEOs who told CUToday.info that the refunds, generally, will be put to use to keep the credit union competitive, strong and relevant with members.
This report is part one in a two-part series.
In all, NCUA has returned approximately $836 million to credit unions.
Scott Wilson, CEO at the $537-million SeaComm FCU in Massena, N.Y., said his credit union intends to use the money to continue to invest in its “robust digital strategy” to ensure the CU remains relevant.
“We want to ensure that we remain relevant not only to our current members, but future ones as well,” said Wilson. “Investment in technology is critical in our long-term landscape, especially when competing with fintech companies.”
Wilson emphasized that SeaComm realizes what it is up against.
Scott Wilson
“We recognize we are not just completing locally but beyond our FOM,” he said. “Therefore, we are always strategically reviewing our current offerings so that we will ensure that not only our mobile platform is meeting our members’ needs, but adding channels such as our a new SeaComm Pay app to make purchasing much simpler for our members, while adding additional security features like turning cards on and off when they are not in use.”
The New Item? ITMs
Phillip Buell, CEO at the $853-million Superior Credit Union in Lima, Ohio, said his credit union is also using the rebate to invest in technology to return greater member value.
“We are currently piloting new ITM units that provide fully automated teller services,” Buell said. “Many of our ATMs are near end of life and need replacing. With the ITMs, we now provide extended hours for teller services of 7 a.m. to 7 p.m. The funds from the NCUSIF rebate enabled us to move the project timeline ahead.”
Boosting Cyber Security
The $23-million Manchester Municipal FCU, Manchester, Conn., is also using the rebate for technology—but tech to defend the credit union and its members from cyber crime.
“For the past several years we have wanted to strengthen our debit card program against fraud and bolster our cyber security program at the credit union,” said CEO Lori Herrick. “It's a never-ending battle against fraud and the protection of our members’ accounts is our highest priority. This rebate has helped us to finalize these plans and get this accomplished this year.”
Manchester Municipal was able to upgrade its server and core software to add 24/7 monitoring of member accounts.
“We're also adding the ability for our members to turn on and off their debit cards at any time to help mitigate fraud losses,” she said. “We're trying every avenue to stop fraud from plaguing our members and our credit union. Debit card fraud is extremely costly to any financial institution, especially a small credit union. We return funds withdrawn from our members’ accounts every time fraudulent activity occurs. The merchants often deny our claims by stating the card was present. This means we have no rights, we get nothing back. In the end, the merchant has their money, our money, the fraudster has the stolen merchandise, and the credit union takes the loss.”
Phillip Buell
Herrick added that some of the rebate will go to a donation to a local food bank and Veterans home the CU supports annually.
“We're going to be able to make an extra donation this year,” she said. “We’re very excited about that.”
CD Rates Rising
As CUToday.info recently reported here, the war for deposits is underway and certificates have once again become appealing to investors. A number of credit unions said the NCUSIF funds will be used to keep deposit rates, especially CDs, at the top of the market as a defensive move to stem outflows and to ensure money is there to fuel strong lending growth.
“This money is going straight into our bottom line as net income,” said Laida Garcia, CEO of $467-million floridacentral Credit Union in Tampa, Fla. “Since we have experienced strong loan growth and don’t want to slow down our momentum, we are looking to increase deposits, particularly CDs, and have significantly increased our CD rates in order to attract more monies. Earning a higher rate of return on their deposits will certainly be a benefit to our members. The NCUA rebate will help in covering the increase in cost of funds.”
‘A Few Mouse Clicks’ And…
In Washington, Evan Clark said the Department of Commerce FCU will use the rebate to bolster reserves and keep CD rates as high as possible.
“In a rising rate environment a credit union should consider it a win if they can retain their deposits,” said the CEO of the $439-million credit union. “When Fed funds were at zero, money market mutual funds were paying their members close to zero. In some instances the rate was less than zero when fees were considered. Now the Fed funds target is 1.75% to 2%, that means that most money market mutual funds are paying close to 2%.”
Clark noted that when rates were close to zero, it wasn’t all that challenging for credit unions hold rates down and still retain deposits.
Evan Clark, DOCFCU
“Now you can easily go out to a money market mutual fund—it’s just few mouse clicks to open an account—and get 2%,” reminded Clark. “That’s enough of a difference that members, especially those with lots of cash, will be paying attention to. That’s why we’ve raised rates on our money market accounts and CDs as the Fed has moved rates.”
Higher Than the Market
John Holt, CEO at $450-million Nutmeg State Financial CU in Milford, Conn., said his shop, too, has its eye on the battle for deposits and it seeks to ensure liquidity while lending is strong.
“We have decided to increase our CD rates,” said Holt. “Our 36-60 month CD rates are presently higher than anyone’s in the market.”
Holt added that the extra dollars will also assist efforts to improve the CU’s digital delivery channels.
Turn to CUToday.info tomorrow morning for part two of this report.