HARRISBURG, Penn.—On the 11th day of Christmas, my credit union gave to me: $10 million in interest savings.
That’s a holiday tune Pennsylvania State Employees CU members are singing this year about what their credit union will likely have provided to them by year’s end as part of its “Save Our Members A Million Dollars” refinancing effort.
“This was our first year following a model we ‘borrowed’ from MSU FCU in East Lansing, Michigan,” said PSECU CEO Greg Smith. “We weren’t sure how the program would go, so we set the target at $1 million. Now it looks like the accumulated interest savings for our members will surpass $10 million.”
On the 12th Day of Christmas, members, too, will be singing merrily, thanks to this year’s $12.5-million Relationship Reward bonus. The bonus represents surplus capital returned to the members.
$42.5 Million In Givebacks
“2016 will be our fourth consecutive year of returning surplus capital and will bring the four-year total to $42.5 million,” said Smith.
The $4.3-billion PSECU’s Relationship Reward is the standard patronage dividend, explained Smith.
“Our board reviews our capital position versus the various capital requirements we must meet and then we quantify our other risks—interest rate risk, credit risk and other possible risks, such as lower interchange, CFPB outlawing NSF charges, etc.,” explained Smith. “We add all of those risks up and then compare that to our current capital position—we’re currently at about 10.80%. Our ‘required capital’ from this calculation is just slightly under 10%. The board’s feeling is that the excess capital should be returned to the membership.”
The Relationship Reward will be distributed on Jan. 5.
Simple Solution
“The formula is fairly simple. About $3 million will go in fixed payments,” said Smith. “For example, members who use online or mobile banking receive $5. Members who use our VISA card receive $10; e-statement members receive $5, etc. The remaining $9.5 million will be a function of dividends earned over 2015 and interest paid. With loan rates being higher than share and CD rates, the borrowers will get the larger share of the distribution.”
Smith reminded that PSECU also gives back to members all season with market-leading loan and deposit rates.