The substantive economic and market-related challengesexperienced nationwide over the past several years have highlightedthe need for our industry to be better equipped at the strategicand operational levels to handle unforeseen market opportunitiesand challenges. Supplemental capital is a tool that credit unionscould find useful for various scenarios, and for that reason itshould be available to those who are interested in the opportunityit may provide and equipped to properly and prudently manage itsuse.

With net capital of nearly 12% and continued strong ROA, SanDiego County Credit Union does not currently have a pre-designatedreason to consider the use of supplemental capital in the nearfuture. However, if supplemental capital was made available to theindustry, management would take a look at potential opportunitiesto further strengthen our strategic position based on the relatedparameters associated with its use. On a prospective basis, theavailability of supplemental capital could be highly important as astrategic and financial tool as the financial services industry andrelated competitive and market-related factors continue toevolve.

I would suggest that the need for supplemental capitalavailability in perspective relative to our industry, and the factthat many credit unions who would most likely be able to availthemselves of this tool are already well-capitalized, is asfollows: The best time to check your roof for leaks and continuedstructural integrity is while the sun is shining brightly, notafter the hurricane has already arrived. 

Teresa Halleck
President/CEO
San Diego County Credit Union
San Diego, Calif.
Assets
$5.4 billion

Yes. Supplemental capital is an important tool that will helpwell-managed credit unions of all sizes meet their members' demandsfor affordable financial services.  

Current law restricts the ability of credit unions to buildcapital, limiting their ability to serve members. Otherwise,healthy credit unions are being forced in some cases to discouragedeposits, make fewer loans and scale back member services. Thismakes no sense.

Access to supplemental capital will allow credit unions to growwith their members' needs. Supplemental capital would enhance ourability to serve members by making loans, opening new branchlocations and expanding member service offerings.

Access to supplemental capital will also strengthen the abilityof credit unions to weather inevitable economic downturns. And itwill improve the safety and soundness of the entire credit unionsystem without imposing additional cost or risk on taxpayers byproviding an additional buffer against operating losses and claimson the National Credit Union Share Insurance Fund.  BECUsupports H.R. 3993, the “Capital Access for Small Businesses andJobs Act,” as a bipartisan solution with broad-based industrysupport. 

Gary Oakland
President/CEO, Boeing Employees Credit Union (BECU)
Tukwila, Wash.
Assets
$10 billion

Yes. Law requires credit unions to maintain a net worth ratio of7% to be considered well- capitalized and specifies that onlyretained earnings constitute net worth for credit unions. Thisrequires credit unions to focus on revenue generation.

In the current economic climate, with suppressed consumerappetite for borrowing and historically low loan rates, interestmargins are eroding, meaning that credit unions have to findalternate revenue streams to build and maintain net worth.

What are the alternatives?

Added or increased fees to the membership–not ideal. It isanticipated that Congress and the Consumer Financial ProtectionBureau will further erode this revenue stream.

Explore off-balance sheet ventures. While there are some goodalternatives to explore, some come with a high degree of risk orneed for investment in the infrastructure to manage them. This isnot practical for small to mid-sized credit unions.

Merger. Merger should be reserved as a strategic decision ratherthan necessity. Extreme consolidation of the industry leads tofewer consumer choices.

We would be inclined to use supplemental capital to maintain alow-cost consumer financial services choice and provide expandedconvenience through service delivery channels. 

Kathleen Romane
President/CEO
Lacamas Community Credit Union
Camas, Wash.
Assets
$191 million

I do support credit union access to supplemental capital, eventhough Community America is not currently in need as we arewell-capitalized. Broader access to capital is important forfinancial institutions that are growing faster than they canproduce capital and this additional capital enables credit unionsto be more competitive in the marketplace. The acquisition ofsupplemental capital allows you to better serve your members,whether they are new or existing members. Not only does this allowfor additional membership growth, it allows for deeper memberrelationships that will ultimately help members achieve theirfinancial goals. 

Dennis Pierce
CEO
Community America CU
Lenexa, Kan.
Assets
$1.8 billion

We absolutely support legislation that would allow credit unionsto raise supplemental capital and measure capital adequacy througha risk-based capital methodology as adopted in Basel I/II/III.There are significant growth opportunities ahead for credit unionsand community-based institutions, but it will take significantlevels of capital to support that growth. Even if annualizedearnings were to move back to 1% or higher, our growth will stillbe limited by relatively slow growth in capital.

For the past 30 years, community-based financial institutionshave been losing market share to the largest 100 banks. Creditunions, community banks and thrifts had nearly 60% of the retaildeposit market in 1992. Today that stands below 30%, with creditunions below 10%.

Many consumers are fed up with the large, impersonal banks andare looking to move their financial business back to localinstitutions. We see this everyday in our market. The ability toraise supplemental capital is essential to enabling credit unionsto achieve their potential in the marketplace today. If the valueproposition we provide to our members based on cooperativeprinciples is so valuable, then we should be striving to make amuch bigger difference in the marketplace. 

Chuck Purvis
Chief Operating Officer
Coastal Federal Credit Union
Raleigh, N.C.
Assets
$2 billion 

Yes. At this time, we have had to decrease rates in order todiscourage deposits. This should be a time when we should beexcited to grow with all the press promoting credit unions. Wewould use it to assist us with managing our share growth. Theaccess to supplemental capital could assist all credit unions thatwould like to grow but do not have the capital to maintain it. 

Maria LaVelle
CEO
Westmoreland Community FCU
Greensburg, Pa.
Assets
$51 million