The single best antidote for the economic and financial problems facing credit unions, is the extraordinary earnings opportunity provided by counter cyclical lending and share growth. Credit unions cannot raise capital. They must earn it. The best time to grow and harvest is when others cannot.
Below are three examples of the many positive results posted by credit unions through the first quarter of this year. All of these results continue to highlight credit unions focused on providing their members with the services they need despite the current challenges.
While the first quarter normally sees a significant inflow of shares due to year-end bonuses and tax refunds, Navy Army Federal Credit Union ($728M in Corpus Christi, TX) saw member shares increase by 37.4% over the first quarter of 2008. IRA/Keogh Accounts and Share Certificates drove the growth in balances. Outstanding balances in IRAs increased 50.9% over the previous March and Share Certificates grew by 49.1%. The average share balance held by members increased by 18.9%, indicating the credit union had a solid mix of increasing balances from existing members and transfer balances from new members. The credit union ranks fourth in terms of deposit market share among the six counties they serve in Southern Texas. Wayne Vann, CEO, remarked, "We did lower our share rates three times in March in an effort to slow growth. But a lot of the growth was momentum from our fall campaign focused on safety and soundness. The larger community viewed us as a resource."
In San Francisco, the median single-family home sales price has dropped 22.9% since March of 2008, yet S.F. Police Federal Credit Union ($533M) is doing record business. Heavily promoted on their website, the credit union has gained traction in their local market with an advertised "$500 Flat Fee" Refinance. Total outstanding real estate loans have increased 18.6% over last March. In the first quarter of 2008, the credit union originated $8.2M of Firsts; in the first quarter of 2009, that grew to $12.5M, an increase of over 50%.
Many of the nation's largest banks either required a government bailout or were merged away completely in 2008. This led to some distrust in financial institutions as consumers questioned the safety and soundness of their financial institutions. Largely insulated from some of the more untrustworthy practices, credit unions have seen a "flight to quality" as membership levels continue to increase. Digital Federal Credit Union ($4.5B in Marlborough, MA), for example, saw membership increase 10.7% over the 12 months ended in March.
It is no secret that credit unions are seeing their bottom lines impacted by recent assessments beyond their control. However, even in dealing with this unexpected expense, credit unions have continued to have a positive member impact in the current environment.