ST. LOUIS (9/9/14)--In an interview with the St. Louis Business Journal Sept. 5, Missouri Credit Union Association (MCUA) Chair Brian Eyestone discussed the reasons behind recent increases in credit union membership growth both nationwide and in Missouri.
Nationally, credit unions surpassed the 100 million membership milestone this summer. In Missouri, credit union membership increased at a 5.5% rate in 2013.
Eyestone, president of Southpointe CU, with $25 million in assets, attributed the increase in Missouri's credit union membership to a consumer awareness campaign by the Missouri Credit Union Association. Missouri credit unions gained name recognition and reputation in key demographics during the MCUA's Bank On More campaign.
Nationally, he said, credit unions have been on a growth spurt since Bank Transfer Day in 2011, when consumers protested bank fees en masse by switching their accounts to credit unions. Much of that momentum was driven by social media, Eyestone said. "If you're not on social media, you're missing out on the next generation," he advised.
Eyestone cited business lending as a growth area for credit unions. But because member business lending (MBL) at each credit union is capped at 12.25% of assets, credit unions are severely limited on how much they can serve their members, he said. The Credit Union National Association and credit unions are urging Congress to increase credit unions' MBL cap to 27.5% of assets. CUNA and credit unions say that increasing the cap would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.
Another regulatory challenge facing credit unions is the National Credit Union Administration's risk-based capital (RBC) proposal. Eyestone noted that the NCUA proposal would require a credit union to have a 7% net worth ratio with a risk-based ratio of a 10.5%, compared with the current requirements of 6% and 8.5% respectively.
The proposal would make mortgage and business lending harder, he said, because of the increased amount of capital that would be needed. "We can't sell stock like banks to grow capital," Eyestone said. "Any revenue we don't pay back in dividends goes into capital. That's how we grow capital."
CUNA has advocated that the NCUA withdraw the proposal and instead pursue RBC standards as part of a multifaceted capital reform strategy. CUNA has expressed concerns with the proposal's interest-rate risk scheme, risk weights and implementation period should the rule prevail.