Securing Secondary Capital
Capital is the key component that drives any successful financial institution. Appropriate utilization of capital or having the ability to access secondary capital is a necessity for growth. Accessing secondary capital allows for additional asset growth which produces increased earnings and immediately increases net worth. This results in the credit unions ability to expand member services and fuels future growth. With the exception of low-income designated institutions, credit unions are the only financial institutions in the country that do not have access to secondary capital sources.
CU Capital Market Solutions (CMS) specializes in providing qualified LICU’s with a Secondary Capital plan to grow their asset base, improve earnings, control risks and enhance the member experience. Since everything starts with capital, CMS will:
- Create the secondary capital plan.
- Prepare the secondary capital application to the NCUA for secondary capital authority.
- Source investors to fund the secondary capital plan.
- Provide for the efficient deployment of the capital once received.
- Provide proprietary sources for non-member deposits to complement member deposit growth.
- Provide access to specialized assets to complement member loan growth.
- Provide policies and procedures to manage the secondary capital/balance sheet plan to manage associated risks.
- Monitor the process to help insure the plans success.
Facts and Benefits of Low Income Designation
Low-income designation (LID) is a classification for credit unions that meet certain membership criteria. The classification entitles these credit unions to legislated benefits.
Comparison between a LID and non-LID Credit Union
|Primary benefits – eligible to:||LID Credit Unions||Non-LID Credit Unions|
|Accept non-member deposits from any source.||Yes||Access resources of other federal government agencies and non-profits with lower barriers|
|Offer secondary capital accounts||Yes||No|
|Receive exemption from the aggregate loan limit for member business loans (MBLs).||Yes||Only under limited circumstances. Otherwise, MBL limited to lesser of 1.75 times NW or 12.25% of assets.|
|Apply for grants and low-interest loans from NCUA.||Yes||No|
|Receive consulting services from NCUAs Office of Small Credit Union Initiatives (OSCUI).||Yes||Limited to credit unions:
< $50 million in assets,
< 10 years old,
or proposed charter groups.
|Access resources of other federal government agencies and non-profits with lower barriers.||Yes||No|