How does the Credit Union invest or utilize member deposits?
Chevron Federal Credit Union (CFCU) follows a very traditional “credit union” approach to managing funds. We take in member deposits and lend out funds to members in the form of consumer and real estate loans. We do not lend more than we have on deposit. Approximately 80% of member deposits are currently loaned out to members. The remaining 20% or so of member deposits is invested in securities, virtually all of which are issued directly by a government agency with the full faith and credit of the U.S. government or by government-sponsored entities.
This traditional approach is applied to all deposited funds, whether in savings accounts, checking accounts, money market accounts, or certificates.
What is the condition of the Credit Union’s real estate loan portfolio?
CFCU has traditionally maintained a loan portfolio with one of the lowest loss ratios in the industry, and that remains true today. Real estate loan delinquencies in 2010 were just 0.26%. By comparison, peer credit unions with assets greater than $1 billion registered an average delinquency rate of 1.85% and commercial banks were even higher.
This helps explain why, as many financial institutions now sit on the sidelines, CFCU continues to offer all varieties of loans – first mortgages, home equity loans, auto loans – while providing our members with great rates and personal service. Because of our ability and willingness to lend, we were invited by Chevron Global Relocation Services to be a preferred lender for relocating employees.
How safe are the Credit Union’s investments?
By policy, CFCU’s primary investment objective is to ensure preservation of principal. Accordingly, our investments are limited almost entirely to the safest type of securities, those that have the explicit or implied backing of the U.S. government.
None of the collateral behind these investments includes the mortgage instruments that have been prominent in the news such as subprimes, option adjustable rate mortgages, and no-documentation loans.
Since CFCU typically holds investments to maturity, we expect all of our investments to return full principal plus interest.