As someone who currently serves on the board of a credit union, I’ve seen firsthand how difficult credit union balance sheet management can be in today’s environment.
Credit unions are inherently conservative institutions, and for good reason. However, that conservatism has created more challenges—from underwater government bonds to rising costs of attracting and retaining top talent—as interest rates and market conditions have shifted over the past few years.
The good news is that there are two compliant, proven strategies already being used by some of the nation’s most successful credit unions: 701.19 guidelines and charitable donation account strategies.
See how these strategies can not only strengthen your balance sheet but also help you fund employee benefits and charitable giving in smarter, more sustainable ways.
Understanding the NCUA 701.19 Guidelines
The National Credit Union Administration (NCUA) issued the 701.19 guidelines to help offset banks’ advantage of being able to hold a wider variety of assets on their balance sheets compared to credit unions.
These NCUA 701.19 guidelines allow credit unions to use investments previously deemed impermissible, provided they use the proceeds from these investments for employee benefits. This opens the door to more flexible, strategic credit union balance sheet management while remaining fully compliant
How 701.19 Products Benefit Credit Unions
Proceeds from these investments can be used to offset rising employee-related costs,including:
- Health insurance premiums
- Training and professional development
- Paid time off and vacation benefits
- Deferred compensation plans
- And more
Additionally, the products we offer credit unions through our partners are closely aligned with credit unions’ conservative risk profiles. These indexed products perform well when the stock market goes up and are protected against market downturns.
They also offer a substantial upfront bonus, which can help credit unions sell underperforming bonds without immediately recognizing a loss on the balance sheet.
Even if you don’t currently hold bonds you’d like to replace, the increasing cost of retaining top talent makes these strategies worth considering as a part of your long-term plan.
How Charitable Donation Account Strategies Benefit Credit Unions
As nonprofit organizations, credit unions are committed to giving back to fellow nonprofits. Many allocate significant annual budgets towards charitable causes, but that money often comes from operating income.
With charitable donation account strategies, credit unions can hold a percentage of their net worth within the account. Each year:
- 51% of the proceeds are used to support nonprofit organizations
- The remaining 49% can be used at the credit union’s discretion, from marketing efforts to employee expenses or other strategic initiative
These accounts allow you to fund your charitable giving with an evergreen investment instead of taking it out of your budget every year.
With a long history of using insurance products to help strengthen the financial stability of businesses, our team of advisors is uniquely qualified to guide credit unions through these opportunities. Combined with our exclusive relationships with specialized partners, Dannah Investment Group is able to structure and advise on these solutions in ways few firms can.
If you’d like to explore how 701.19 guidelines and charitable donation account strategies could benefit your institution, I’d love to sit down with you and walk you through it—just pick a date and time for our meeting.
