March 4, 2015

Consumers demand it! It’s time to set your sights higher on the mobile channel...

This article by CUNA Mutual Group's Steve Hoke, director of loan growth products, originally appeared in Credit Union Magazine














If your basic online banking functions such as checking balances and transferring funds work smoothly for members who login on their smartphones, you’ve accomplished goal No. 1 for mobile banking: You’re meeting their basic needs and expectations.

But it’s time to set your sights higher.

Use your mobile services to encourage deeper relationships, especially with younger members who will need loans, credit/debit cards, and other services that—unlike most mobile services—directly add to your bottom line.

According to a Federal Reserve survey of mobile phone users [pdf] who had used mobile banking within the last 12 months, 39.1% were 18 to 29 years old, and 33.7% were 30 to 44.

The survey also measured the percentage of mobile phone users who said they’d used specific mobile banking services. Ninety-three percent said they’d checked account balances or conducted a recent transaction.

The next two most popular actions were downloading the financial institution’s mobile banking app (72%) and transferring money between accounts (57%).

These three services probably drive the most mobile traffic to your site. Look further down in the survey results, however, and you’ll see mobile services that not only drive traffic but have the potential to enhance loyalty.

For example:

  • 53% of mobile phone users surveyed received an email alert and 43% received a text message alert from their banking institution within the previous 12 months. That’s the financial institution reaching out to the mobile user, providing a valuable service and creating another touch point.
  • 41% located the closest in-network ATM. This uses mobile devices’ GPS capability.
  • 38% deposited a check using their mobile phone camera.

The lesson? Design your mobile experience to take advantage of this technology’s features to create more meaningful touch points with mobile banking users.

Loans are a stronger bond to your credit union than account maintenance. Require the bare minimum data your credit union needs on an application to begin the decision process.

Later, you can get the other information you need to complete the transaction in person, on the phone, or via email.

Payment protection products are a good way to protect members while establishing an additional relationship. Your mobile lending platform should be able to cross-promote these products.

This gives your lending staff a head-start in bringing these options to members’ attention at the loan closing.

For your mobile strategy to build loyalty that lasts, you must continually test your site’s mobile capabilities. This technology changes quickly, and users’ expectations change
with it.

Loyalty, in this arena, doesn’t mean finding members who will stay with you no matter what—it means adapting to their needs as they change.

Mobile Banking: Consumers Set the Bar Higher

Google’s 2013 Our Mobile Planet survey showed that mobile device users increasingly expect mobile-optimized websites.

Respondents who completely agreed with the statement, “I expect the websites I visit on my smartphone to be easy to navigate and access as they are when I visit them on the desktop PC or tablet,” increased from 61% in 2011 to 65% in 2012, and to 70% in 2013.


Visit CUNAMutual.com for more information.

February 20, 2015

Summit on Cybersecurity and Consumer Protection: Reflections and Key Take-Aways from CUNA Mutual


Last Friday, President Barack Obama and the White House held a Summit on Cybersecurity and Consumer Protection with the nation's top tech companies and cybersecurity experts. CUNA Mutual Group's Jay Isaacson Vice President, Business Protection was in attendance. What follows is Jay's account of the event and his key take-aways with a particular focus on the impacts to the credit union industry. 




From the moment I walked on the Stanford campus there was a feeling of interest, enthusiasm, and excitement for a day focused on a critical issue that faces all businesses (large or small) domestically and globally.

A line of attendees were already gathered at the entrance by the
6:45 a.m. opening which gave me the impression the people
 here today understand that cyber threats are a vexing issue
that no one is immune to and see the immense value in
learning more about how this risk can be better managed.
Mix in a dose of healthy skepticism about the government's
true intentions behind wanting more data and information,
and I think this captures the environment.
Over half the attendees were Stanford students and the remainder was a mix of public sector, university faculty (Stanford and other schools), and private sector (no shortage of journalists). I was told there were 1,500 invitees.

John Hennessy, President of Stanford University, kicked off the day speaking about the importance of the cybersecurity issue and how thrilled he was to be host of this historic event.

Lisa Monaco (National Security Council) and Jeff Zients (National Economic Council) provided introductory remarks. Lisa made a point of comparison between cybersecurity and terrorism (which was echoed many times later in the day), and said that both of these risks require communication, threat intelligence, and collaboration across industry verticals, sectors, private and public channels, and international support. Jeff highlighted that cybersecurity is also an economic issue and by building better cybersecurity practices (hygiene), it better positions U.S. companies to compete on the global stage (over time this strong practice will engender trust).

Kenneth Chenault, CEO American Express spoke on the first panel about the core values of American Express and the one core value that he kept coming back to as it related to this topic was ‘trust’ (a perspective that was shared by all of the CEO’s on the panel). The value of trust is something that had strong resonance to me and it is a perspective that I think would be widely shared by credit union leaders.

The first panel was moderated by Secretary Jeh Johnson,
US Department of Homeland Security. Panelists included:
Kenneth Chenault, Chairman and CEO, American Express;
Anthony Early, Jr, Chairman and CEO of Pacific Gas & Electric;
 Mark McLaughlin, President and CEO of Palo Alto Networks;
Bernard Tyson, President and CEO of Kaiser Permanente,
and Elizabeth Sherwood-Randall, Deputy Secretary,
US Department of Energy. 
Chenault also noted that customers hate passwords (a sentiment that was also rehashed throughout the day), and he made a very interesting point in that current regulation only allows AMEX to send text messages to 10% of their current cardholder base (consumers must opt in to this feature). Of the customer group to whom they have sent text messages to in order to confirm the legitimacy of their transactions, 36% of cardholders responded back in less than 60 seconds--an impressive response rate to an enhanced security feature! He used this point as an opportunity to highlight a need to reevaluate existing regulations for data security purposes.

Speaking specifically of financial institutions, he highlighted the importance of data sharing and noted that FIs have one of the most mature information sharing tools out there which has enhanced sharing and improved data security efforts (the tool highlighted was FS-ISAC). He noted that AMEX was hit over 100,000 times last year with some type of attack. He closed his comments asking what we as a country want our values to be with respects to the cybersecurity issue, which I thought was an interesting question and one that set the day up well.

The remaining panelists reiterated the key points of trust and the value of information sharing with their industry peers ("we are competitors, but on cyber/data security issues we stand together," was a common perspective reiterated). Mark McLaughlin, President and CEO of Palo Alto Networks, had a question from the moderator that asked him to assess the importance of information sharing for varying sized organizations. He noted it was important for all companies, but thought it was particularly important for smaller organizations since they simply don’t have the same level of people, IT tools, and financial resources that a larger firm can bring to this issue.

The second panel was moderated by Secretary Penny Pritzker,
US Department of Commerce. Panelists included: Ajay Banja,
President and CEO MasterCard; Peter Hancock, President and
CEO of AIG; Renee James, President of Intel; Brian Moynihan,
Chairman and CEO of Bank of America, and Nuala O’Connor,
President and CEO, Center for Democracy & Technology.
The second panel was conducted completely via Q&A from the moderator and highlights included:
  • Discussion of the NIST framework and how NIST creates a high level framework that helps define cybersecurity best practices--however NIST is a starting point and will need to evolve over time given the sophistication of cyber-attacks (I agree that NIST creates a high level framework and starts to build a common language around cyber risk management). The companies on this panel have adopted NIST and supported the framework. They see this as NIST 1.0 and that it will need to evolve to 2.0, 3.0, etc.
  • Renee James, President of Intel, highlighted that her firm and the technology industry is building in greater levels of security capabilities on hardware, but the industry has work to do on this front.
  • Ajay Banja, President and CEO MasterCard, talked about the distaste that consumers have for remembering passwords and in some ways that may be an antiquated model. Innovation is coming along with EMV and more advanced security (he specifically highlighted a partnership between MasterCard and First Technology Federal Credit Union to make this point. First Technology is rolling out retinal scanning and biometrics to confirm identity and verify transactions.

Tim Cook, CEO of Apple, then took the stage. Overall, Mr. Cook's comments focused on Apple’s enduring commitment to protecting the privacy of their customers and while not directly saying so, it appeared his commentary was focused on concerns about the type of information the government is truly after. His was a short but impassioned speech and I think it captured a view that Mr. Cook shares with other tech focused companies out in Silicon Valley. He also briefly mentioned Apple Pay and the efforts they have made to make payments more secure and easier for consumers.

“If those of us in positions of responsibility fail to do everything in our power to protect the right of privacy, we risk something far more valuable than money--we risk our way of life. Fortunately, technology gives us the tools to avoid these risks, and it's my sincere hope that by using them and by working together, we will,” said Cook.

President Obama’s remarks closed out the session. Ultimately, he again made the point that the government can play a valuable role in the “wild west” of cyber space and that is a role connecting government threat intelligence with private sector threat data to help everyone improve their understanding of real time cyber risks. It was clear from Cook's commentary that some skepticism remains in private industry.

Key themes and take-aways: 

  • Cybersecurity threats are growing in number and complexity, which makes this risk a critical topic for any organization. It also validates the need for the summit and puts more importance on continued dialogue and action after the summit.
  • Cybersecurity is a unifying mission for companies that doggedly compete against one another in our economy.
  • Information sharing is a critically important component to an organization's defense against cyber-attacks. An information sharing network should be robust with connection points across the industry, and the public sector can play a role in terms of disseminating real time threats.
  • Privacy continues to be of utmost importance and organizations have a duty to protect their customers Personally Identifiable Information (PII). Some have argued that information sharing could be in conflict with this. Generally, my view is that a great deal of information that can help credit unions can be shared without releasing any PII. Emphasis of sharing should focus on types of attacks and vectors utilized.
  • We are at a time period of rapid innovation for technology (particularly payment technology), which is exciting but also emphasizes the importance of finding talented employees to bring this innovation to life.
  • We are still very early in the Internet age and we are still shaping what it will become. There is a clear opportunity to make the Internet better.

How this impacts credit unions:

  • NIST framework is gaining traction with government and regulators and is something that credit unions should begin to familiarize themselves with to assess their cyber risk management and preparedness.
  • Information sharing is a key piece to the NIST framework and was a big focus of this session. Credit unions should look for opportunities to do this while protecting member PII.
  • Payment innovation is forthcoming and it is important for credit unions to understand and assess these new options becoming available (EMV, tokenization, biometrics) to remain relevant with their members (particularly younger members).
It was an honor for me to be a part of this event and share my experience with you here. My team and I will continue to stay connected to what’s happening in the cyber landscape and share our learnings with credit unions.

February 18, 2015

Credit Union Trends Report: February 2015 (December 2014 data)

ECONOMIC, COMPETITIVE, AND INTEREST RATE ENVIRONMENT

The economy grew 2.6% in the fourth quarter of 2014, above its underlying potential growth rate of 2.0-2.5%. This will use up some of the economy’s excess capacity and close the gap between actual output and potential output. Inflation, however, plunged in December falling 0.4% due to falling energy prices and the strengthening dollar. Low inflation won’t stop the Federal Reserve from beginning the process of normalizing interest rate in the second half of 2015.

The unemployment rate fell to 5.6% in December as the economy added a remarkable 329,000 jobs. Wage growth will begin to accelerate over the next few months as the labor market approaches full employment. Lenders loosened their lending standards for consumer and mortgage loans in the fourth quarter, according to the Federal Reserve’s Loan Officer Survey.


Credit Union Trends Report Highlight Video:



Report Highlights:

  • During December, credit union members slowed their pace of debt accumulation and saved most of their gasoline price dividend, credit unions reduced their excess liquidity by making loans and repaying borrowings, and the economic recovery became a self-sustaining economic expansion.
  • At the end of December, CUNA’s monthly estimates reported 6,535 CUs in operation, down 11 CUs from one month earlier. The number of credit unions declined by 260 in 2014, fewer than the 275 reported in 2013.
  • Credit union savings balances rose 0.2% in December, above the 0.3% decline reported in December 2013, as members pocketed some of the savings at the gas pump. Credit union savings balances rose 4.8% in 2014, faster than the 3.6% pace reported in 2013. Asset growth of 5.2% in 2014 outpaced savings growth as credit unions turned to borrowings to fund some of their assets.
  • The nation’s CUs increased their loan portfolios 0.7% in December, a slight deceleration relative to the 0.8% pace reported in December 2013. Loan balances rose 10.2% during 2014, the fastest pace since 2005.
  • Credit union memberships rose a remarkable 464,000 in December to reach 101.9 million, a 0.5% increase from November. Memberships rose 3.6% during 2014, the fastest pace since 1988.
  • Credit union loan delinquency rates fell to 0.82% in December, down from 1.00% set in December 2013, and less than half the 1.88% reported in February 2010 in the aftermath of the Great Recession. Credit union loan-to share ratios reached a new cyclical high in December, breaching 74.7% above the 71% reported in 2013.

February 17, 2015

Keeping CU members in their homes: Innovative alliance with D+H drives enhanced protections

We are excited to offer a new mortgage payment protection insurance product to credit unions and their members, through an alliance with D+H via an integration with MortgagebotPOS™ , D+H’s consumer direct mortgage solution.
“Just as today’s potential homeowners are concerned with their ability to secure a mortgage, they’re also concerned with their ability to keep their home,” said Alan Bahr, director of product management for CUNA Mutual Group. “It is important that we help credit unions ensure members can maintain the security of their families’ long-term financial health, including their home.”  

The alliance will bring to life the credit union industry’s first, all-in-one, residential mortgage protection product to cover members in the event of unexpected job losses, death or disability – all within one, seamless user experience for application and enrollment.

Through the alliance, we are able to integrate our new mortgage payment protection insurance product directly into MortgagebotPOS. This will allow credit unions to seamlessly provide quotes and enroll members in the new insurance offering. The product will launch later this year and will include complimentary loan officer training for the credit unions.
“We’re excited to be working with D+H, a market leader in lending technology solutions,” said Chuck Cashman, vice president of business development and strategic alliances for CUNA Mutual Group. “This alliance means that credit unions will have a new critical service to offer their members. It also provides a strong competitive advantage for the credit union industry.”

Mortgage payment protection is a unique and voluntary insurance offering designed to cover mortgage payments during a critical period following the occurrence of a borrower’s death, disability, or involuntary unemployment.

Currently, there are more than 6,500 credit unions and 100 million credit union members in the United States. In 2015, CUNA Mutual Group’s mortgage payment protection product will be available to many of the nation’s credit unions that currently use the MortgagebotPOS market leading consumer direct solution for taking mortgage applications.
“This collaboration between D+H and CUNA Mutual Group clearly illustrates the unwavering and strong commitment of both companies to continue to invest in new and innovative ways to support credit unions for the future,” said Cashman.


February 9, 2015

Welcome to TruStage Connect: My name is Michelle, what can I assist you with today?

We want to make the experience of evaluating and choosing an insurance plan that best fits each individual's needs easier and more streamlined. This is the driving motivation behind our most recent project: TruStage Connect.

We are excited to announce we have launched a new, real-time service to help simplify the purchase of personal insurance products for credit union members. 

TruStage Connect is a live video and text chat for the life and accidental death and dismemberment insurance offered through trustage.com. It also leverages the expertise of licensed insurance agents who can share their screen with the consumer to help them navigate the website to shop for insurance.

“Expanding the TruStage customer experience to include live chat is a direct reflection of our continued focus on today’s consumer,” said Susan Sachatello, senior vice president, TruStage. “We care about making it easier for them to evaluate and choose insurance that best fits their needs. Through live chat, our licensed experts simplify the task of choosing and buying life insurance.”

The new live video chat service is one of the first of its kind in the insurance industry, connecting consumers with a licensed agent as they browse the website to shop for insurance products. It’s also the latest example of CUNA Mutual Group's ongoing commitment to consumer-focused initiatives and innovation.  

“Today’s consumer has high expectations based on their experiences with retail consumer brands,” said Sachatello. “TruStage Connect is one more way we're delivering on those expectations and making it even simpler for credit union members to protect their families.”

About TruStage

Protecting more than 15 million members, TruStage insurance products and programs include, auto, home, life, accidental death and dismemberment and health insurance. They’re available to credit union members across the U.S. and offer them compelling and successful ways to build financial security for their families. Credit union members seeking more information can contact TruStage at 888.888.0375.

February 4, 2015

Celebrating $1 Billion: Making A Difference for CUs

By: Jane Chesbro, CUNA Mutual Group's Vice President of Specialty Distribution

We're very excited to announce that CUNA Mutual Group’s Total Benefits Pre-Funding (TBPF) program reached a major milestone in January - $1 billion in assets under management!


This is exciting because it's a positive sign credit unions are taking advantage of previously impermissible investments to help fund the rising costs of employee benefits programs.

TBPF defrays the rising cost of benefits because it allows credit unions to offset employee benefits obligations by using potentially higher-yielding investments that would otherwise be considered “impermissible” by the NCUA.

This matters to credit unions because they are often challenged with flat or even shrinking margins due to returns on assets not keeping pace with rising operating expenses, especially those related to employee benefits. On top of that, family health care premiums have increased nearly 70 percent over the last 10 years*.

CUNA Mutual Group launched its TBPF program in 2008 because it was becoming increasingly difficult for credit unions to maintain a competitive benefits package and remain an employer of choice. TBPF offers credit unions an array of investment options that can help close the employee benefits gap.

Since launching the program 226 credit unions joined, and assets under management have more than doubled in the last two years. Participating credit unions shared $40 million of incremental investment returns in 2014 alone**. That extra income helps the bottom line and can be used to continue offering, or potentially add, high-quality employee benefits, which helps ensure the credit union's long-term success and competitiveness.

To learn more about our TBPF programs, call our Executive Benefits Service Center (1.800.356.2644, Ext. 6651035) or visit www.cunamutual.com/tbpf.

*Kaiser Family Foundation/Health Research & Educational Trust 2014 Employer Health Benefits Survey
**CUNA Mutual Group data

February 3, 2015

A Look Beyond the Bottom Line

Soon, corporate earnings reports and other year-end statistics for 2014 will begin flowing into the media, where they will be parsed by journalists and industry analysts. CUNA Mutual Group’s numbers will be among them, and the company expects excellent 2014 results.

That’s a good sign for the credit union industry as a whole, but it’s more than that. It means CUNA Mutual Group will continue to invest more effort, expertise, and resources on behalf of all credit unions and members, as the company does year after year.

Here’s a look beyond the bottom line—beyond products and services—at some of what CUNA Mutual Group does to support the credit union industry:

Advocacy: Lending a Strong Voice to Credit Unions That Need to be Heard 

Working alongside credit unions and other industry partners, CUNA Mutual advocates for our industry with legislators and regulators at the federal and state levels. Whenever the credit union industry needs to be heard in Washington or in state capitals, CUNA Mutual Group is there.

In March 2014, the IRS reversed its ruling about Unrelated Business Income Tax (UBIT), resulting in millions of dollars in refunds to more than 200 state credit unions. CUNA Mutual Group’s Larry Blanchard, who chaired the UBIT Steering Committee, has been involved in this fight since 1995, and hundreds of the company’s employees joined in the UBIT effort by contacting their legislators.

The UBIT campaign isn’t unique. In December, CUNA Mutual Group partnered with the National Cooperative Bank to form a national Co-op Coalition to stand together in mutual support as Congress embarks on tax reform. The group is holding monthly meetings, and its early members include trade groups and similar apex organizations of mutual insurance companies, credit unions, cooperative housing, co-op utilities, and worker and agricultural-related co-ops. Blanchard and Charles Snyder, president and CEO of the National Cooperative Bank are co-chairing the coalition.

Research: Fueling Innovation and Growth

CUNA Mutual Group is a founding member of the Filene Research Institute—our industry’s “think and do tank,” and supports The Cooperative Trust, a community of young credit union professionals. The company also sponsors its own research, including the monthly Credit Union Trends Report.

Infrastructure: Investing in the Industry’s Critical Support System

CUNA Mutual Group provides financial and other support for a network of organizations—state leagues, CUNA, CUES, the National Credit Union Foundation, the World Council of Credit Unions, and dozens more—that credit unions use for critical services: training, leadership development, compliance resources, community-building initiatives, and much more.

Community Building: Giving Back, Lending a Hand, Caring

Local, national, and global community groups receive millions each year from CUNA Mutual Group, often in cooperation with credit unions and industry partners.

In addition to schools, neighborhoods, community centers, and food pantries in communities that are home to CUNA Mutual Group offices, the company also supports the United Way, Children’s Miracle Network hospitals, Susan G. Komen, Juvenile Diabetes Research Foundation, Boys & Girls Club, WOCCU Relief Fund, the Credit Union Cherry Blossom Run, and on and on.

Money isn’t everything, however. CUNA Mutual Group also takes enormous pride in how many hours, how much sweat, and how much care individual employees devote to helping people. It’s a reflection of the credit union ethic of people helping people.

In the end, that’s really what CUNA Mutual Group is: A reflection of the credit unions it serves. It’s hard to quantify that, and it’s unlikely to get much media attention. But it bears repeating every so often.

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates.

January 15, 2015

Credit Union Trends Report: January 2015 (November 2014 data)

ECONOMIC, COMPETITIVE, AND REGULATORY ENVIRONMENT

Economic activity surprised on the upside in the third quarter with the government reporting the economy grew 5.0%, at a seasonally adjusted annual rate, and rose 2.7% year over year. Inflation moved in the opposite direction, plunging 0.3% in November as energy prices dropped 3.8%. Consumer prices rose only 1.3% during the last year, below the Federal Reserves’ 2.0% inflation target. The unemployment rate was unchanged in November at 5.8%, despite the economy adding 353,000 jobs.

The stage is set for economic growth to exceed 3% in 2015 and the economy to generate over 250,000 new jobs each month. This will put upward pressure on wages later in the year. The Federal Reserve will therefore seriously consider raising short-term interest rates sometime in the second half, albeit at a significantly slower pace than previous rate-tightening cycles in 1994 and 2004.

Report Highlights
  • During November credit union members borrowed and spent, credit unions recapitalized, inflation dropped, the labor market strengthened and economic growth accelerated.
  • At the end of November, CUNA’s monthly estimates reported 6,543 CUs in operation, down 42 CUs from one month earlier. Year to date the number of credit unions declined by 252, above the 242 lost in the first 11 months of 2013.
  • Credit union savings balances fell 0.1% in November, but rose 4.2% from one year ago. Year-over-year asset growth of 5.2% is outpacing savings growth due to borrowings rising 16% and capital rising 10%.
  • The nation’s CUs increased their loan portfolios 0.6% in November, a slight acceleration relative to the 0.5% pace set in November of 2013. Loan balances rose 10.5 during the last 12 months, the fastest pace since January 2006. 
  • Credit union memberships rose 303,000 in November to reach 101.9 million, a 0.3% increase from October, and 3.6% year to date. Year-over-year, memberships are up 3.9%, the fastest pace since June 2003 when the economy was recovering from the 2001 recession. 
  • Credit union capital grew 0.7% in November to help push the movement’s overall capital-to-asset ratio over 10.8%. Credit union loan delinquency rates fell to 0.77% in November, down from 1.03% set in November 2013. Credit union loan-to-share ratios reached a new cyclical high in November, breaching 74.5%, the highest since November 2010. This improved credit union bottom lines in 2014 and will continue to do so into the new year.

Total Lending

Credit union loan balances rose 0.6% in November, slightly better than the 0.5% pace reported in November 2013, and rose a strong 10.5% during the last year. With loan growth exceeding savings growth since March 2013, the credit union movement’s loan-to-share ratio reached 74.5%, up from a 66.3% cyclical low set in March 2013. This shift toward loans pushed CU yield-on-asset ratios to 3.4% in the third quarter from 3.33% in the second.

U.S. Households’ debt burden, measured by total-debt-to-disposable-income, fell to 97% in the third quarter of 2014, the lowest level since the third quarter of 2002, and down from the 124% record high set in the fourth quarter of 2007. The deleveraging phase of the business cycle appears to be coming to an end. So if households can keep their total debt growth rate less than or equal to the growth rate in disposable income, debt burdens will remain manageable.


Credit Union Consumer Installment Credit (CUCIC)

Credit unions’ consumer installment credit balances rose a robust 1.0% in November, or $3.1 billion, significantly above the 0.3% gain, ($0.6 billion) reported in November 2013. The surge in debt corresponded with a strong 0.7% growth in total retail sales in November. Retail sales were 5.1% above their year-ago level, the strongest growth since July 2013. Rising confidence, jobs, wages, wealth and real purchasing power drove the spending spree. During the last 12 months, credit union consumer installment credit balances rose a remarkable 14.2%, the fastest pace since July 1995. Excluding credit unions and guaranteed student loans from the aggregate consumer loan data reveals the consumer loan performance in the banking arena. We see bank balances are increasing at a modest 3.9% pace. 

Vehicle Loans

Credit union auto lending remains a bright spot with balances rising 0.8% in November, greater than the 0.7% reported in November 2013. Vehicle sales (cars and light trucks) rose to 17.2 million units on a seasonally adjusted annual rate in November, the second strongest month of the year, and up 5.6% year over year. Improving consumer fundamentals drove the strong sales number: strong job growth, improving household wealth, subprime borrowers with greater access to credit, falling gasoline prices, attractive discounting offers and favorable lending terms. During the last 12 months, credit union auto loan balances rose 15.4%, the fastest pace since May 2000.

Credit union new auto loan rates continue to beat bank loan rates by over one percentage point. Currently, credit union 5-year new-auto loan rates average 2.62%, 117 basis points below the bank average of 3.79%, according to data gathered by Informa Research Services. Expect auto lending to remain strong in 2015 as vehicle sales are expected to approach 17 million units due to the economy and labor market picking up momentum.


Real Estate-Secured Lending – 1st Mortgages and Other Real Estate

Credit union first mortgage loan balances rose 0.5% in November, faster than the 0.3% reported in November 2013, as credit unions continue to pick up a greater share of the mortgage market and fewer originations were sold into the secondary market. Credit unions now make up 7.9% of all U.S. first mortgage originations, up from a 2.5% average prior to the Great Recession. During the last 12 months, first mortgage balances rose 8.8% due to a 15.6% rise in adjustable-rate mortgages and a 6.1% gain in fixed-rate mortgages.

Notwithstanding the rising loan balances, first mortgage loan originations were down 30% during the first 9-months of 2014 compared to 2013. Credit unions originated only $68.7 billion from January through September and sold $22.4 billion to buyers in the secondary market. And of the $68.7 billion originated 62% were fixed-rate loans, 16% were adjustable-rate loans and the remaining 22% were balloon or hybrid loans. During the similar period in 2013, credit unions originated $98.1 billion and sold $47.2 billion. Of those loans originated 78% were fixed-rate due to the record low interest-rate environment at the time.

First mortgage credit quality improved significantly over the last year as measured by delinquency rates falling from 1.28% in the third quarter of last year to 0.96% today. Moreover, first mortgage charge offs fell from 0.20% to 0.11%, although this is still greater than the 0.02% reported in 2006. Improving credit quality will encourage credit unions to loosen their underwriting standards as well as hold more of the loans originated on the balance sheet.

Home equity loan balances rose 0.5% in November, a significant turnaround compared to the 0.5% decline reported in November 2013. Home equity loan balances are up 9% during the past 12 months due to a 5% rise in home prices, the improving job market, rising consumer confidence, consumers releasing pent up demand for durable goods, and lower interest rates. Second mortgage loan balances, however, declined 2.9% during the last year as repayments, prepayments and chargeoffs exceeded new loan originations. Members continue to roll their second mortgage balances into their refinanced first mortgage as they take advantage of these low mortgage interest rates.

Surplus Funds (Cash + Investments)

Credit union surplus funds fell 1.4% in November, or $5.4 billion, in order to fund a 0.6% increase in loan balances, $4.3 billion and to meet member deposit withdrawals of $1.3 billion. Surplus funds as a percent of assets now stand at 32.6%, down from 36.1% in November 2013. This shift in the mix of credit union assets from low-yield investments to higher-yielding loans contributed to the increase in credit union asset yields over the last year.

The composition of surplus funds for the average credit union is 24% cash (cash on hand, deposits at corporate credit union or deposits in other financial institutions) 51% in investments of federal agency securities (obligations of Fannie Mae and Freddie Mac) 12% in CDs at commercial banks and S&Ls, 3% in obligations of U.S. government securities and the remaining 10% in other investments. The Great Recession and the associated corporate credit union goings-on caused a tectonic shift in the composition of surplus funds. In 2007, credit unions held approximately 33% of their surplus funds in shares/deposits at corporate credit unions. Today, only 5.6% of cash and investments are held at corporate CUs.

Savings and Assets


Credit union savings balances fell 0.1% in November, as the excess funds that were deposited in October, due to the month ending on a payroll Friday, were used for monthly expense payments in November. U.S. personal income rose 0.4% in November and is up 4.2% during the last 12 months. With personal spending up a strong 0.6% in November, the national savings rate fell to 4.4%, the lowest rate this year. During the last 12 months, credit union savings balances rose only 4.2%, below the 10-year average growth rate of 5.5%. Year-over-year asset growth of 5.2% is outpacing savings growth due to borrowings rising 16.2% and capital rising 10.2%.

Capital and Other Key Measures

Credit union capital grew 0.7% in November, pushing the credit union average capital-to-asset ratio over 10.8%, creating fortress like balance sheets for many credit unions. During the last 12 months, credit union capital grew 10.2%, the fastest pace since April 2003. The growth rate of capital is also known as the return-on-capital ratio, a key indicator of financial performance. Expect earnings performance to improve in 2015, pushing the capital ratio over 11.3%.

Credit union loan quality indicators are now back to pre-recession levels. The CU loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to 0.77% in November, from 1.03% in November 2013 and approximately equal to the 2007 average delinquency rate of 0.76%. Better credit quality numbers are encouraging credit unions and banks alike to loosen their loan underwriting standards and increase their loan volumes. 

Credit Unions and Members

As of November 2014, CUNA estimates 6,543 credit unions were in operation, 42 fewer than October. Using a 3-month moving average to smooth out large month-to-month volatility shows an average loss of 37 credit unions per month. Credit unions cease to exist for a number of reasons – merger, purchase and assumption, or liquidation. The vast majority cease to exist as the result of a merger with another credit union. NCUA data shows 182 credit unions merged during the first 9 months of 2014, down slightly from 195 mergers during the similar time period in 2013. Year-to-date, the number of credit unions fell 252, slightly above the 242 credit union decline reported in 2013.

Credit unions added another 303,000 memberships in November, bringing the year-to-date increase up to 3.6 million members. Credit unions were attracting members at a record pace during the first 11 months of 2014, averaging over 325,000 new memberships per month. In percentage terms, credit union memberships rose 0.3% in November, 3.6% year-to-date and 3.9% during the last year, the fastest annual pace since June 2003.


There is a confluence of factors bringing about this membership surge: robust job growth, strong new auto sales, aggressive credit union auto pricing relative to banks, an increase in credit demand by the general public and relatively tight bank loan underwriting standards. Credit union membership growth is positively correlated with U.S. job growth and in November, the U.S. economy added 353,000 jobs, exceeding most economists’ expectations. With job gains expected to remain robust in 2015, credit unions can expect another year of strong membership growth.

If you would like a PDF copy of the full report, please email Jess.Noelck@cunamutual.com

January 14, 2015

Are you ready? Get your TILA/RESPA game on!

CUNA Mutual Group is helping credit unions comply with the Consumer Financial Protection Bureau’s TILA/RESPA Integrated Disclosure Rule by offering a free webinar.

Registration Details:


Title: “TILA/RESPA: More Than Just the Loan Estimate and Closing Disclosure”
Date: Tuesday, Jan. 20
When: Multiple sessions offered throughout the day
Who: Free for all credit unions
Link to register: www.cunamutual.com/tilarespa

Why you should attend:


“The TILA/RESPA Integrated Disclosure rule will completely overhaul the way credit unions go about mortgage lending and will likely impact the types of mortgage lending credit unions engage in,” said Maureen Clark, assistant regulatory compliance manager for CUNA Mutual Group. “CUNA Mutual Group is here to help credit unions prepare for the impacts this new rule will have on their closed-end real estate lending business.”

In addition to the Loan Estimate and Closing Disclosure, TILA/RESPA requires two new documents: the Escrow Cancellation Notice and the Settlement Service Providers List, which will both be discussed in detail for scope and purpose during the webinar.

“Not only are the TILA/RESPA disclosures new, it is crucial to have a plan in place for the crossover period from the current disclosures to the new TILA/RESPA Integrated Disclosures,” Clark said. “Once the rule comes into effect on Aug. 1, NCUA examiners will be focused on compliance with the new requirements.”

The Consumer Financial Protection Bureau (CFPB) issued the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Rule in November 2013 to simplify and improve disclosures consumers receive when applying for and closing on mortgage loans. The disclosures under TILA and RESPA currently provided at the time of application and closing have been integrated and the new disclosures will need to be provided to credit union members for mortgage applications received on or after Aug. 1. The TILA/RESPA rule becomes effective and must be complied with on Aug. 1. 

Register for the free TILA/RESPA Webinar


January 13, 2015

Q&A with lending and compliance leader -- A lifetime of insight

Bill Klewin retired from CUNA Mutual Group on Friday, January 9. Recently, Bill sat down with Frank Diekmann, Cooperator-in-Chief at CUToday, and elaborated on his 28 years with CUNA Mutual, most recently as our lending product compliance leader, on lending, compliance and what's ahead. 

Here are the insights and knowledge that he's shared from the perspective of his life's work serving the credit union industry...

CUToday.info: Given the length of your career with CUNA Mutual, what strikes you most as you approach the last day on the job in contrast to what you encountered on your first day walking in the door?   


Klewin: The sophistication of the issues and the complexity of the credit union business is the greatest change. When I first started at CUNA Mutual, a large credit union was one greater than $10 million in assets. That meant that the kinds of products and services offered by credit unions weren’t anywhere near as diverse, sophisticated, or complicated as they are now. Few credit unions had first mortgage programs, and only a brave few had home equity lines of credit. Share drafts were relatively new products and still controversial in some leaders’ opinions. Most credit unions had only one or two branches and dealt with walk-in traffic, the phone, and the U.S. Postal Service as means of communications.   
From a consumer regulatory compliance standpoint, while the credit unions were subject to the rules, compliance was viewed in many circles as a nuisance. I remember one specific situation where a board actually voted that they didn’t need to comply with consumer regulations as they were “not necessary” to protect their members. 
CUToday.info: You have held a number of roles while at CUNA Mutual, including some time in the Office of General Counsel. Can you speak to the issue of some of the risks or vulnerabilities that you have seen?
Klewin: In credit unions, the biggest risk I see involves fair lending issues, both from the Equal Credit Opportunity Act and the Fair Housing Act. The ramifications of even an allegation of violations of fair lending laws can be existential. While the rules are slightly different, their purpose is similar. Their purpose is to promote the availability of credit by prohibiting discrimination in lending based on certain characteristics, such as race, gender, or marital status. Imagine the headline in your local paper-“The ABC Credit Union has been accused of discriminating against their members in their lending programs on a prohibited basis.” A credit union may not be able to survive such an allegation, let alone a determination it actually did discriminate on a prohibited basis.) 
I discuss the “disparate impact” test below and difficulties it creates in compliance.  Unfortunately, you don’t need to go so far as a “disparate impact” test case to find real problems in credit unions in fair lending.  For example, I am always concerned about and have written and taught extensively what I refer to as “happy talk” from credit union staff. 
“Happy talk” is the non-business related talk staff engages in with potential borrowers. It may appear as innocuous as a question about when two borrowers are getting married or when a pregnant woman is expecting her baby. Seems like chit-chat, but when that chit-chat is coupled with a denial of a loan, it can take on much more sinister overtones.  Imagine being sued for discrimination in denial of a loan based on child-bearing (a prohibited basis) and having your loan officer asked on the witness stand whether they asked the borrower about her baby.
The loan officer will have to testify he did ask the question, but it had nothing to do with the loan decision. Even if the jury decides it wasn’t used in determining the woman’s creditworthiness, the taint on the credit union’s reputation and the risk of future liability remains. 

These kinds of small interactions could have outsized ramifications, even to the continuing existence of the credit union. Fair lending, from a compliance standpoint, is THE “keep-me-awake-at-night” risk. A credit union can’t quantify it very well, and it can’t totally mitigate the risk at all. It’s a Sword of Damocles over their head.

CUToday.info: You have spent a considerable amount of time in credit union lending. How has that evolved from both the CU standpoint and the solutions that CUNA Mutual has sought to provide?  
Klewin: The biggest change has been the level of sophistication a credit union lender must have about so many issues in being a successful lender. In the past, a lender had a limited number of products available and a limited number of distribution channels for her products. 
For example, a lender back then may only have made auto secured loans and personal loans out of one branch office. In that case, she could focus on minutiae of underwriting and, if a loan was granted, completing the paperwork appropriately.  
As an aside, I saw many loan and deposit documents that were completed by hand, and used rate charts in determining the numerical disclosures.   For those who don’t remember, a rate chart was a pre-calculated chart that showed the loan officer what payments should be, given certain interest rate and loan term assumptions. After a factor was found, simple math was used to calculate the remainder of the disclosures.  Needless to say, there were many errors in such a manual approach. It led to what I referred to as the “Friday afternoon-Monday morning syndrome.” There was a demonstrable uptick in errors on Friday afternoons due to higher volume and on Monday morning due to, well, it being Monday morning. 
CUNA Mutual, from the very beginning of the technology revolution made solutions available as I note below. In the case of loan calculations, CUNA Mutual began with a device called “Loan Star” to help with these calculations and continues today to support a calculation engine used in many data processing systems. Now, a lender has a full array of products, credit cards, home equity lines of credit, first mortgages, business loans, heck, loans secured by ocean-going boats; you name it, likely a credit union lender needs to consider almost any type of loan. Additionally, those loans can come from multiple branches in multiple states, through the internet, the phone, mobile devices. 
The breadth, depth, and complexity of a lender’s job are the greatest challenges. CUNA Mutual has responded over the years with products and services to help credit unions with the lender’s challenge, including LOANLINER documents for almost any credit union lending need, loanliner.com, Smart Phone Loans, the Lender Development Program, and Loan Generation Marketing.  I’m proud that our products help thousands of credit unions meet their members’ needs.
CUToday.info: What have you found to be some of the lessons learned and best practices observed when it comes to the lending process? Are there certain places where some credit unions get tripped up?

Bill Klewin has recently retired from CUNA Mutual Group, well known to many following a long career that included being the primary architect behind the company’s LOANLINER solution and numerous appearances before credit union meetings. At the time of his retirement, Klewin was the lending product compliance leader. In that role he was responsible for issues involving regulatory compliance, lending and credit union operations. Klewin joined CUNA Mutual Group in 1986 as assistant counsel. After 10 years in the Legal division, he was named vice president and managing director of CUNA Mutual Group’s Lending Lab and product leader for LOANLINER and the Student Loan Network. He rejoined the Legal division in 2007 as associate general counsel.

January 8, 2015

CUNA Mutual Group Financial Strength Affirmed By A.M. Best

A.M. Best Company has affirmed the financial strength rating of CMFG Life Insurance Company (CMFG Life) and MEMBERS Life Insurance Company at “A” (Excellent). A.M. Best also affirmed the “A” (Excellent) rating for CMFG Life’s property/casualty subsidiaries: CUMIS Insurance Society, Inc. and CUMIS Specialty Insurance Company, Inc.  A.M. Best has assigned an issuer credit rating of “bbb” to CUNA Mutual Financial Group, Inc., the intermediate holding company within the group. The outlook for all ratings is stable.

Alastair Shore
Chief Financial Officer
“CUNA Mutual Group is committed to long-term growth," said Alastair Shore, executive vice president and chief financial officer for CUNA Mutual Group. "This confirmation of our financial ratings is important to us as we shape the company that will serve credit unions and members for generations to come.”

In affirming CMFG Life’s “A” rating, A.M. Best cited the company’s “position as the leading provider of insurance and financial services products to credit unions, their employees, and members, strategic changes to the organizational structure to improve capital flexibility, prudent capital management and reduction in investment risk.” Also cited was the company’s modest financial leverage with strong interest coverage.

Regarding CUNA Mutual Group’s property/casualty subsidiaries, A.M. Best recognized their favorable level of risk-adjusted capitalization, conservative balance sheet, overall operating profitability and well-established niche position in the credit union segment. Producers Agriculture Insurance Company and its 100 percent reinsured affiliate, Producers Lloyds Insurance Company both of Amarillo, Texas, which were previously rated with the property/casualty entities, were acquired by HCC Insurance Holdings, Inc. effective Jan. 1, 2015.

December 22, 2014

"Thank You for Being in My Toolbox"

Last week we told you the story of one of the 8.5 million credit union members we helped protect this year from unforeseen setbacks to payments on vital resources like cars and homes. 

To us, putting a face to what we do, to really know the members we serve, is so important to us. So much so that following her claim, we invited Helen Agnew, a member of CU Community Credit Union in Springfield, Missouri, to visit our CUNA Mutual Group headquarters in Madison, Wisconsin. She had a chance to tell her story in person and meet many of the employees who made a difference for her.
Click image to watch Helen meet the people who serviced her claim
We recognize stories like this because we know we can't exist without our customers, without the credit unions, without the members. Helen shared a similar sentiment about the work we do when she said, "it really was the safety net we needed at a time that we really didn't have any other options. If my story touches one person who can repeat it, it is worth it." We really hope Helen's story can spread and can help others' as well. 

It truly is a team effort, and we would never have been able to have this impact on Helen's life if it wasn't for the care that her credit union took when providing her the loan and debt protection to cover her in case of the unexpected. 

Carolina Decker, VP of Lending at CU Community Credit Union told us they see themselves as partners with their members. "All our products are designed to help members when they get into a pinch. They are designed to take over loan and car payments so that’s one less thing the member needs to worry about if and when something unexpected happens, like a job loss or a medical emergency."

Helen's credit union said they find the debt protection products like this and also for disability and life to be the most valuable offerings to their members from a lending perspective. Carolina said they recommended Helen sign up for the unemployment insurance because "unexpected circumstances happen, things you can’t control, and CU Community Credit Union wants to be sure that our members successfully make it over the bumps that life throws at you. Financial stress doesn't need to further impact the stress of losing a job."

Thank you to partners like CU Community Credit Union and to members like Helen Agnew for sharing their stories -- this is our purpose!



December 17, 2014

Credit Union Trends Report: December 2014 (October 2014 data)

ECONOMIC, COMPETITIVE, AND REGULATORY ENVIRONMENT

Economic activity increased 3.9% in the third quarter, at a seasonally adjusted annual rate, and grew 2.4% year over year. Final sales, which exclude the support to GDP from inventories, rose 4.1% indicating spending momentum is building for the U.S. economy.

The economy added 243,000 jobs in October, slightly less than the 271,000 reported in September, and the unemployment rate fell to 5.8%. This signals a tightening labor market with wage growth expected to accelerate in the near future. The 25% drop in oil prices from July through October provided consumers a boost in purchasing power similar to the 29% oil price drop experienced back in 1998. By 1999, retail sales grew at an annual pace of 8.5%, twice the 4.5% reported in 2008, which indicates retail sales and credit union lending in 2015 are looking up.

Report Highlights

  • At the end of October, CUNA’s monthly estimates reported 6,585 CUs in operation, down 5 CUs from one month earlier. Year to date the number of credit unions declined by 210, below the 236 lost in the first 10 months of 2013 and also 2014.
  • Credit union savings balances rose an outsized 1.3% in October, and 4.6% year-to-date, due to the month ending on a Friday payday and falling gas expenditures. Year-over-year asset growth of 5.8% is outpacing savings growth due to borrowings rising 19.2%.
  • The nation’s CUs increased their loan portfolios 0.85% in October, 8.9% YTD and 10.3% during the past year. Member business loan balances rose 3.8% in October, the fastest growing category, followed by adjustable-rate mortgages, 2.3% and new auto loans, 2.2%.
  • Credit union memberships rose 186,000 in October to reach 101.6 million, a 0.2% increase from September, and 3.3% year to date. Year-over-year, memberships are up 3.6%, the fastest pace since July 2003. With job growth expected to be over 250,000 a month in 2015 and new car sales to reach 17 million units, membership growth will remain strong for the next 12 months.
  • Credit union capital grew 9.9% during the last 12 months indicating stronger earnings performance for many credit unions. The movement’s return-on-asset ratio rose to 0.88% in the third quarter, up four basis points from the second quarter, due to a 7 basis point increase in asset yields, a 3 basis point increase in non-interest income, a 3 basis point increase in operating expenses and a 3 basis point rise in loan loss provision expense. Credit union capital-to-asset ratio remained at 10.8%, the highest in six years.

Total Lending

Credit union loan balances rose 0.85% in October, slightly better than the 0.72% pace reported in October 2013. During the last 12 months, credit union loan balances rose 10.3%, as credit union members’ willingness and ability to borrow and spend have both rapidly improved. Consumer confidence in October rose to levels not seen since October 2007, two months before the onset of the Great Recession.

Credit union loan delinquency rates (delinquent loans as a percent of total loans) fell to 0.74% in October, the lowest rate since August 2007. There is a strong correlation between credit union loan delinquency rates and the nation’s unemployment rate. During the last 12 months, the unemployment rate fell 1.5 percentage points, from 7.3% to 5.8%, while the delinquency rate fell 0.25 percentage points, from 1.01 to 0.74%. The dramatic improvement in both metrics is encouraging lenders to loosen their loan underwriting standards.

Credit Union Consumer Installment Credit (CUCIC)

Credit unions’ consumer installment credit balances rose 0.85% in October, or $2.5 billion, above the 0.5% reported in October 2013. Rising debt levels coincided with a modest 0.3% growth in total retail sales. Retail sales were depressed because of falling gasoline prices. But retail sales excluding gasoline stations rose a healthy 0.5%, indicating consumers did spend some of the money saved at gasoline stations. During the last 12 months, credit union consumer installment credit balances rose a healthy 12.3%. The last time credit unions reported annual growth over 12% was back in 1995. Credit card balances were unchanged in October signaling members are still wary of taking on higher-rate debt, and are using their credit cards for payment convenience by paying off new charges.

Vehicle Loans

Credit union auto lending continued to surge in October with new auto loan balances rising 2.2%, above the 1.6% reported in October 2013. This is the fourth month out of the last 5 that monthly new auto loan growth exceeded 2%. During the last 12 months, credit union new auto loan balances rose 20.5%, the fastest pace since August 1995. Vehicle sales (cars and light trucks) rose to a 16.5 million seasonally adjusted annual rate in October. Auto sales are currently growing at the fastest pace since 2006, the year home prices peaked.

Vehicle sales were boosted by increasing household wealth, lower gasoline prices, an improving labor market, new models, and better access to credit for borrowers with less than a prime credit history. The sales of expensive cars, those priced over $50,000, have surged by over 30% in the last year and will reach over 1 million units sold in 2014.

Meanwhile the sales of cars priced less than $50,000 are up 4.1% during the last year. Vehicle sales are expected to remain above 16 million units through 2017 as pent up demand is satiated and the economy produces around 3.4 million jobs annually.

Real Estate-Secured Lending – 1st Mortgages and Other Real Estate

Adjustable-rate first mortgage loan balances rose a robust 2.3% in October, the second fastest growing loan category for the month, and were up 15.4% year-over-year. Fixed-rate first mortgage balances fell -1.2% in October, but are up 5.3% during the last year. Existing home sales rose 1.5% in October, but are up only 2.5% during the last 12 months. The existing median home price reached $208,300 in October, up 5.5% since October 2013. Refinancings remain tame and are near a 6-year low given that mortgage rates have been so low for so long. Most homeowners who were willing and able to refinance have already done so.

Low interest rates, improving consumer confidence and rising home prices pushed home equity loan balances up 1.4% in October, significantly better than the -0.3% reported in October 2013. During the last year, home equity balances rose 7.8%, the fastest pace since August 2009. Credit unions’ interest rates on home equity lines of credit average 4.11% in October, according to Informa Research Services, 26 basis points lower than the bank average. Second mortgage loan balances also rose in October, increasing 1.1%, as the first mortgage refinance business dried up and fewer second mortgages were rolled into refinanced first mortgages.

Home prices rose 0.5% in October and are up 6.1% during the last 12 months, according to the Core Logic Home Price Index. However, prices are still 12% below their peak set back in April 2006. The home appreciation rate is expected to taper off to 5% in 2015 due to an increasing supply of homes. Rising home prices will increase household wealth and maintain the upward momentum of the Consumer Confidence Index. Both will encourage consumers to lower their savings rate and increasing spending on consumer durables in 2015.

Mortgage credit is still constrained because of new regulations, but is slowly easing as policymakers work to bring down some regulatory impediments. The Federal Housing Finance Administration, FHFA, announced plans in October to reintroduce mortgages with down payments as low as 3% through Fannie Mae and Freddie Mac. This should increase access to mortgage credit, which in turn boosts homeownership with low-to-moderate income and first time homebuyers.

Surplus Funds (Cash + Investments)

Credit union surplus funds rose 2.4% in October, or $9.0 billion, due to a large $13 billion surge in savings deposits. Savings balance growth has averaged a little over 3 billion each month. So approximately $10 billion of the $13 billion surge in savings balances was due to the month of October ending on a payroll Friday. Credit unions therefore placed the lion’s share of these new deposits into short-term investments with the expectation of abnormally large deposit withdrawals in the month ahead.

During the first nine months of 2014, the yield on surplus funds rose to 1.21%, up from 1.10% reported during 2013. The gain was a consequence of credit unions shifting investments into longer maturity investments. Surplus funds with a maturity less than one year fell from 42.5% in 2013 to 39.8% today. Meanwhile, investments with 1-3 years maturity rose from 23.9% of surplus funds in 2013 to 26.4% in 2013. Investments with even longer maturities rose from 21.2% to 23.6% of surplus funds. This is a signal credit unions believe the Federal Reserve will keep rates lower for longer.

Savings and Assets

Credit union savings balances rose an outsized 1.3% in October, and 4.6% year-to-date, due to the month ending on a Friday payday and falling gasoline prices reducing gas expenditures. This pushed year-over-year savings balances growth to 5.0%. Total credit union savings balances now stand at $972 billion, or 5.5% of nominal gross domestic product. In other words, credit union members’ savings deposits equal approximately 20 days of annual national income, up from 16.4 days set back in 2007, just before the onset of the Great Recession. Year-over-year asset growth of 5.8% is outpacing savings growth due to borrowings rising 19.2% and capital rising 9.9%.

Capital and Other Key Measures

Credit union capital grew 9.9% during the 12 months ending in October, while the 3-month moving average rose to 10.1%, the fastest year-over-year pace since June 2003, see figure 6. Net income is the income statement flow account that allows the balance sheet capital account to increase. Net income as a percent of assets came in at a relatively strong 0.88% in the third quarter, above the 0.69% reported in the third quarter of 2013 and above the 0.83% reported in the second quarter of 2014. Rising net interest margins during the last year boosted credit union return on assets.

Credit Unions and Members

As of October 2014, CUNA estimates 6,585 credit unions were in operation, five fewer than September. Using a 3-month moving average to smooth out large month-to-month volatility shows an average loss of 24 credit unions per month.

This is slightly more than one credit union per business day being merged into another credit. Year-to-date, the number of credit unions fell 210, slightly below the 236 credit union decline reported in both 2013 and 2014. During the past 12 months, the number of credit unions fell 249, compared to the loss of 281 credit unions in 2013.

Strong job creation in October helped propel credit union membership gains to 186,000. Total memberships reached 101.6 million, a 3.6% increase over the last year. This is the fastest membership growth rate since July 2003. Memberships rose 0.2% in October, faster than the zero growth reported in October 2013, and 3.3% year-to-date.

U.S. job growth and credit union membership growth is highly correlated. In October, the U.S. added 243,000 jobs, down from 271,000 reported in September, but above the previous 3-month moving average of 239,000. The types of jobs created were well-diversified across many sectors: lower-paying retail jobs, middle-income manufacturing and construction jobs, and higher-paying professional and healthcare jobs. In 2015, job growth is expected to accelerate to over 300,000 net new jobs per month. This will underpin continued strong credit union membership growth next year. The labor market tightened in October as the unemployment rate fell to 5.8% from 5.9% in September. Expect wage gains to accelerate in earnest in 2015 as the unemployment rate approaches its long-run natural rate of 5.5%.

If you would like a PDF copy of the full report, please email Jess.Noelck@cunamutual.com

December 16, 2014

2014: Our Year Measured in Customer Impact

As we look back over the past year, our purpose is clear. We exist to help people build a better financial future, and we do this by focusing on our customers and living our commitment to doing business with integrity.

We measure how well we've performed and lived up to our purpose in ways--big and small--that we have impacted our customers.

The cumulative impact of our products and services on those we work hard for all year is impressive and means a great deal to us, but hearing individual stories of those we have helped means even more.

DEBT PROTECTION

We have protected more than $260 million in credit union member loans, enabling 8.5 million members to keep their homes and cars if unforeseen setbacks were to come.

Helen Agnew is one of those 8.5 million and her story is our purpose. A member of CU Community Credit Union in Springfield Missouri, Helen tells us how the credit union offered our debt protection product on a loan that ultimately made all the difference in keeping her and her daughter on their feet when she became unemployed. (Click image to watch.)

TRUSTAGE INSURANCE

This year, we launched 3 new insurance products: Whole Life, Children's Whole Life and Health. We also optimized our Life claims handling process for beneficiaries, with 25% of claims now paid on the initial call. There are now more than 15 million credit union members protected through our TruStage insurance.

Belinda Lockridge is just one of those members but her story is our purpose. She is representative of the millions of underinsured Americans we serve to build financial security for their families. (Click image to watch.)

RETIREMENT SERVICES

As a provider of retirement plans for credit unions and small businesses, we strive to include educational features that will improve the organizations’ participation rates in the programs. 

More than 45,000 credit union and small business employees now track their progress toward retirement and are able to easily make adjustments through our online planning tool. 

Nathan Grossenbach of Shoreline Credit Union in Two Rivers, WI tells the story of how we exceeded their expectations with the transition to a new 401(k) plan and helped their employees understand the plan and how they would benefit from participating. His story is our purpose. (Click image to watch.)

 BUSINESS PROTECTION

This year with our business protection solutions and risk management resources, we  paid $64.7 million in claims (through Q3) and sent alerts to 24,000 credit union employees, helping them mitigate and overcome risks. We also visited nearly 1,000 credit union sites to assess risks and provide strategic consultation. 

Unfortunately, Augusta VAH Federal Credit Union experienced a devastating fire to its main branch in 2011.CEO Phyllis Cochran's story--of how our teams helped her CU recover--is our purpose(Click image to watch.)

CUNA MUTUAL GROUP'S WEALTH MANAGEMENT

CUNA Mutual Group's Wealth Management helps consumers achieve a more secure financial position by helping them save for and realize their lifetime dreams, whether that’s their child’s education, a dignified retirement, or simply financial peace of mind. We’re doing this by providing unique, simple-to-use, high-value service and product solutions to consumers through financial advisors.

This past year, we paid credit unions more than $65 million in fee revenue.

David Young, EVP at Commonwealth Credit Union in Frankfort, Kentucky, shares why they partner with CBSI to enhance their investment services and deepen member relationships. His story is our purpose. (Click image to watch.)

In 2015, our focus on our purpose -- helping people build a better financial future -- will be stronger than ever. We'll continue investing in our capacities and optimizing our products and processes to better serve our credit union customers and their members. We will build on our strengths and accelerate our growth for the healthy future of the credit union industry. Our customers are our purpose.

Watch for more updates in the coming weeks on these stories and where we are headed in 2015.


December 10, 2014

28 Years Later: Bill Klewin Retires, Still Energized by Credit Unions' Passion

Bill Klewin, director of regulatory compliance for CUNA Mutual Group, is retiring after 28 years with CUNA Mutual Group. Andrea Stritzke, formally with PolicyWorks in Des Moines, Iowa, will be filling his position at the company in January.

Bill Klewin
Director of Regulatory Compliance
“Bill will be missed, not only as a long-term and dedicated employee, but as a nationally recognized consumer lending expert and valued industry resource for credit unions,” said Kathy Blumenfeld, vice president, CUNA Mutual Group Lending and Payment Security. “The expertise he brought to the position through his many industry speaking engagements and relationships is difficult to replace. But we are thrilled to have Andrea step in and build on what Bill has established. Andrea is uniquely qualified to step into this position without missing a beat.”

Klewin joined CUNA Mutual Group in 1986 as associate legal counsel and has held numerous leadership positions, including his most recent role as director of regulatory compliance for the company’s Lending and Payment Security business. Klewin made his mark on credit union lending with creative solutions, fresh ideas and LOANLINER® product designs. Throughout the last several years, Klewin led the company’s lending products through a highly active regulatory environment. He built a strong team of compliance experts and readied them to successfully handle ongoing regulatory changes.
“I’ve been helping credit unions with their lending, operations and regulatory compliance for 28 years. The most rewarding part of my job was exchanging insights with our customers. I will miss their questions and comments, their camaraderie and their passion about what we do. Most of all, I will miss the feeling of satisfaction when I have helped someone at a credit union solve a particularly troublesome problem. Thank you to everyone with whom I’ve worked."

Andrea Stritzke
Stritzke joins CUNA Mutual Group from PolicyWorks in Des Moines, Iowa, where she served as vice president of regulatory compliance, and was responsible for the delivery of PolicyWorks’ regulatory services and new product development while providing credit unions consultation and training on various regulatory matters. In addition, Stritzke assisted credit unions with strategic compliance program management, and is a nationally recognized speaker on lending and deposit compliance issues.