Southeast Corporate: 'Prepare For Liquidity Cycle'
Learning from the four hurricanes that struck Florida last year, Southeast Corporate FCU is taking quick action to aid credit unions affected by Hurricanes Katrina and Rita in Louisiana, Mississippi and Alabama.
"So far we've provided all the liquidity needed," said Southeast Corporate senior VP Greg Wirthmann.
But liquidity is a short-term issue. Wirthmann said those credit unions are now also going to need education on how their balance sheets are going to evolve over the next several weeks and months. Wirthmann noted after a large disaster, credit unions are short of cash as members make numerous withdrawals. But then aid begins arriving in the form of government checks and insurance payout, among other sources. "Then they become awash in liquidity," he said.
Liquidity demands change yet again when members being rebuilding efforts and need loans, such as homeowners repairing flood damage or a destroyed roof.
That process usually begins about six months after a disaster, Wirthmann said. A special webinar is being planned to educate credit unions on this liquidity "cycle" after a large-scale disaster.
Southeast Corporate has already made supply runs to Mississippi credit unions providing generators, gas and other operating materials. Now, Wirthmann said, Southeast is taking four steps to ensure CUs have the funds to operate and provide to their members, including:
* Hurricane Relief Overnight Loan-a reduced loan that is 1.75% less than a settlement loan.
* Over the Limit Fees-fees will be waived during the crisis.
* Subsidized Term Loan-a six-month loan at below market rates that is funded by other credit unions, which is a good example of "credit unions helping other credit unions", according to Southeast Corporate official Ellen Davies.
* New investment products-Wirthmann said Southeast is presently planning a special ladder investment product that would ensure a CUs liquidity would return on a regular basis.