The weekly CUAD Legislature Today Radio hour provided a plethora of information this week.  Highlighting the first half hour of the program was Melanie Stillwell, President/CEO of Western Cooperative Credit Union in Williston, ND.  As Congress is looking at Capital Reform Legislation, Ms. Stillwell provided first-hand details on capital issues that are impacting financial institutions in the oil producing counties. 

Last month, Congressman Pete King (R-N.Y.) and Congressman Brad Sherman (D-Calif.) introduced Capital Access for Small Business Act (H.R. 719) which would allow well-capitalized credit unions to match a growing deposit base from a growing membership with capital from sources other than retained earnings--which currently is the only type of capital that counts at a credit union. The bill is substantially similar to last year's H.R. 3993, which had 45 cosponsors. "

Did You Know?

·       Credit unions remain the most highly regulated and restricted of all insured financial institutions. By law – not regulation, as is the case for other insured depositories – credit unions must maintain a 7% net worth (or leverage) ratio in order to be considered “well capitalized.”  The law also specifies that only retained earnings constitute net worth for credit unions. 

·       All other U.S. depository institutions and most credit unions in other countries are permitted various forms of alternate or supplemental capital.

What are the Implications for Credit Unions?

·       Long term influences on credit union net income are not promising.  Net interest income, essentially the difference between what credit unions earn in interest on loans and investments and what they pay in interest and dividends on savings has been on a long-term downtrend caused by intense competition on both sides of the balance sheet.  This pressure is unlikely to abate significantly going forward.  In addition, interchange income, an important source of non-interest revenue, is under political pressure and is likely to diminish.

·       Without access to supplemental capital, and with earnings power facing headwinds, credit unions and their members will face a protracted period of reduced member service, disadvantageous member pricing, and very slow growth, unless Congress allows credit unions to access supplemental forms of capital.

·       Supplemental credit union capital will reinforce and strengthen the regulatory incentive for credit unions to remain exceptionally safe and sound, and, will allow credit unions to do even more to serve all their members.  This would benefit all credit unions whether they use the authority or not.

Senator John Warner, (D-District 4) from Ryder, ND was the guest on the second half of the CUAD Legislature today Radio hour.  Senator Warner is a member of 2 credits unions and he and his wife are former volunteers.

The Credit Union Assoc. of the Dakotas is the Tuesday Sponsor of the “Legislature Today” radio/web cast program which is broadcast live from the Historic Peacock Alley each weeknight in downtown, Bismarck.  The Live program is broadcast/web cast live, state-wide on KFYR AM as the flagship station here Bismarck and is simulcast on 1100 The Flag in Fargo and on KTGO AM 1090, which covers northwestern North Dakota’s oil country.

Here are the links to last night’s broadcast:

Podcast – Page
http://podcast.flagfamily.com/?p=archive&cat=the_legislature_today

Podcast – RSS
http://podcast.flagfamily.com/feed.php?cat=the_legislature_today

Photo:  Sen John Warner (D-District 4), Ryder, ND, a credit union member talks about credit unions with Host Dale Wetzel on last nights broadcast of Legislature Today.