news.cuna.org/articles/122540-finance-issues-take-center-stage
2023_FCC_Steve_Arbaugh
Steve Arbaugh, EVP/CFO at SECU of Maryland, moderates a discussion with finance leaders.

Finance issues take center stage

Liquidity challenges, threats to noninterest income top leaders’ concerns.

Bill Merrick
May 22, 2023

Pressure on liquidity and noninterest income dominated discussions Sunday during the Finance Leader Exchange at the 2023 CUNA Finance Council Conference in Anaheim, Calif.

Steve Arbaugh, executive vice president/chief financial officer (CFO) at $5.3 billion asset SECU of Maryland in Linthicum, Md., and former CUNA Finance Council chair, and Brad Barnes, CFO at $908 million asset Air Academy Credit Union in Colorado Springs, Colo., and current CUNA Finance Council chair, moderated the session.

Participants highlighted several trends:

Liquidity challenges. Finance leaders are employing deposit promotions and loan pricing strategies to boost liquidity.

Regulators are focusing more on liquidity during examinations, prompting some attendees to borrow money from the Federal Home Loan Bank to improve their liquidity position.

While some attendees are purposefully shrinking their loan portfolios to improve liquidity, doing so can affect earnings, adding pressure to margins.

CUNA Finance Council

Competition for deposits, particularly from the Apple Card’s high-yield savings account. Apple attracted $1 billion in deposits in four days.

“They’re making it very easy for people,” one attendee says. “Everyone has an iPhone and knows who Apple is. We need the tech stuff younger people want.”

  • Concerns about commercial real estate. The growing number of commercial tenants not renewing their leases due to remote work is worth watching.
  • Difficulty attracting and retaining staff, particularly accountants.
  • The prospect of lower interest rates and the corresponding effect on investment portfolios.
  • Declining noninterest income due to regulatory pressures from the Consumer Finance Protection Bureau and other factors.
  • Current expected credit losses (CECL) implementation and the impact on both GAAP and RAAP capital ratios.
  • Fraud issues with members: who’s responsible for the loss and the potential impact on earnings?

Many attendees have reduced fees for overdraft protection, and must find replacements for this income.