Insights from Catalyst

Seeking authority to issue secondary capital is not a new endeavor for low income-designated (LID) credit unions, but – with asset growth strong – interest and strategic value for it has increased in recent years. Even though NCUA authorized LID credit unions to count uninsured secondary capital as capital in 1996, the number of credit unions that have issued uninsured secondary capital has been fairly flat until recently.

After the January Georgia Senate runoff elections and the presidential inauguration, the Democrats officially have control of the Presidency, the House and the Senate (by the narrowest margin possible). What does that mean for credit union investors?

Person-to-person. Peer-to-peer. P2P. All different ways to describe online technologies that essentially allow consumers to transfer funds from their financial institution account to another individual's account via the Internet or a smartphone app. But techy definitions aside, many consumers simply define P2P as: convenience.

Most financial managers understand that bond prices have an inverse relationship with interest rates. It’s the basic premise of interest rate risk, which credit unions generally prefer to avoid on their balance sheets. The record low-rate environment of the COVID-19 pandemic has shifted the focus of some portfolio managers, while others remain tied to pre-pandemic policy parameters. Unfortunately, those parameters may be working against your credit union’s long-term interests.

Since March 2020, we’ve received many questions regarding the economy, market and rates. With so much economic and COVID-19 data available, it is hard to synthesize everything and come up with one conclusive answer regarding the future or what the new “normal” may be. The new normal for credit unions will vary depending on membership base, asset size and services offered. However, one aspect we must adjust to is the low interest rate environment.