Article

Secondary Capital Helps Boost Financial Well-Being for Credit Union Members, Communities

diverse people putting their hands together
By Emily Loftis

3 minutes

Great Lakes Credit Union selects Brean Capital to guide a milestone $10 million investment from other credit unions.

Great Lakes Credit Union, a Northern Illinois-based credit union with more than $1 billion in assets, is focused on empowering its 80,000 members and the communities it serves—promoting financial literacy; giving back to community organizations through donations and its “Great Wave” volunteer program; and ensuring financial well-being is both simple and achievable for all, regardless of a person’s starting point.

To continue expanding its programs, GLCU recently secured a milestone $10 million in secondary capital through its strategic partnership with Brean Capital, New York, an independent advisor that serves the needs of credit unions and banks across the nation.

Awarded in late 2021, the secondary capital is enabling GLCU to move forward key strategies in its long-term plans, including enhancing its distribution channels, implementing technology upgrades, improving operations, and elevating the suite of product offerings for its members. Through these moves, GLCU aims to strengthen its commitment to its members and diverse communities for years to come.

For example, portions of the capital are earmarked to enhance GLCU’s community outreach with such programs as its financial and housing counseling arm, which is certified by the U.S. Department of Housing and Urban Development. As one of just six credit unions in the nation offering a HUD-certified counseling program, the funds will reinforce GLCU counselors’ assistance to those in need through a variety of services, such as help with foreclosure, renting or buying a home, home financing, credit counseling, and debt consolidation.

The infusion also will help GLCU continue to grow its membership base in Chicagoland and the surrounding areas and fulfill its commitment to financial empowerment and community giveback.

Some specific actions supported by the secondary capital now underway include the opening of a new digital-first branch in Libertyville, Illinois; call center enhancements to innovate and streamline the member experience; upgrades to self-service member options; technology enhancements for the credit union’s digital roadmap; fortifying relationships with members and their communities by expanding financial education options; and enhancing relevant products and services.

“With this secondary capital, we’ll be able to expand the work we’re doing to financially empower people and communities across Northern Illinois,” says CUES member Steve Bugg, President/CEO of GLCU. “It will enable us to offer innovative new products and services—as well as provide expanded financial tools and resources—to remain relevant to our members in the ever-changing financial services industry.”

How the Secondary Capital Process Worked for GLCU

According to the Illinois Department of Financial and Professional Regulation, Great Lakes CU is the first state-chartered credit union in Illinois to be granted the secondary capital  .

GLCU was eligible for the infusion of secondary capital due to its status as a low-income credit union, meaning at least 51% of its members are from low-income households or meet low-income thresholds based on data from the U.S. Census Bureau and requirements outlined in the National Credit Union Administration’s Rules and Regulations.  

The application process was managed with due diligence, strategic input and a member-focused vision involving GLCU executives, board members and the finance team, in partnership with Brean Capital. As the chosen financial advising partner, Brean Capital’s expertise ensured the process was streamlined and successful.

Five credit unions from across the U.S. invested in GLCU to make the deal happen. Investment amounts ranged from $1 million to $3 million each, depending on the credit union, to total the $10 million granted.

“The investors in this transaction benefitted from an attractive yield   and a means to diversify their asset mix,” said Jeremy Colvin, managing director of Brean Capital. “They also benefitted from helping another credit union successfully deploy growth initiatives to support membership.”

In essence, the secondary capital from the investing financial institutions functions as a loan to GLCU, enabling it to grow its portfolio of products, tools and services for members.

GLCU will repay this capital to the contributing credit unions once it is at maturity and over the course of a 10-year period. Interest-only payments are scheduled for the first five years and will be paid on a quarterly basis. As for the last five years, the invested financial institutions will be paid principal and interest quarterly.

Both the yield and the return for investor credit unions were derived from two forces: market conditions at the time of the investment as well as the comparative pricing of other credit unions’ secondary capital in the market.

For interested credit unions to qualify as investors, they needed board approval; state-chartered credit unions also needed verification from their state supervisor that they had the authority to invest in the secondary capital.

While the use of the capital is not restricted by regulation, GLCU’s board of directors is focused on leveraging it for improvements that will positively impact the credit union’s members and communities.

Emily Loftis is the Content Marketing/PR specialist for $1 billion Great Lakes Credit Union, Bannockburn, Illinois.

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