A recession is when your neighbor is out of work. A depression is
when you lose your job - or so the old clichés went during
the last downturn at the beginning of 1990.
Now that the government has stated officially what many have
known for months - that the US economy shrank in the third quarter
and is in a recession -how should credit union managers change
strategy, if at all?
Not only are the industry numbers excellent, most managers report
having a very successful year. The primary goals are getting more
loans and increasing non-interest income.
However, many reports continue to show companies and other organizations
taking seemingly drastic steps to prepare for worsening times.
Major organizations such as Ford Motor Company, the University
of Iowa and US News & World Report have stopped all employer
matches for 401(k) plans. Thirty-five states expect budget deficits
next year led by an $8 to $14 billion estimated shortfall in California.
Hotel, travel and airlines have already reduced employees and
cut back on capital and other expenditures.
The three-part business assessment for credit unions is:
- What are the dominant external drivers that I should pay
- What are my members' needs in this environment?
- How should my credit union respond?
There is no consensus as I talk with CEOs. Some are using the
low interest rates to borrow long term from the Federal Home Loan
Banks. Others are preparing for a downturn by refocusing on loan
quality and tightening expenses. Military and government credit
unions are seeking new physical locations to offset the tighter
security in their sponsor locations. Finally, some are pursuing
technology implementation and innovation. The one area all agree
on is seeking more loans. But what if consumer spending slows?
Undoubtedly, "one size does NOT fit all" when it comes
to a credit union's financial circumstances. However, I have the
feeling that some CEOs are watching the scoreboard while others
are watching the line of scrimmage. The coming year of 2002 will
certainly bring more diversity of performance than at anytime
since the early 1990's. Stay tuned.