The Economy and Credit Union Strategy: A Recession or Not?

Now that the government has stated officially 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. However, many reports continue to show companies and other organizations taking seemingly drastic steps to prepare for worsening times.

 
 
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:

  1. What are the dominant external drivers that I should pay attention to?
  2. What are my members' needs in this environment?
  3. 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.

 

 

 

Jan. 14, 2002


Comments

 
 
 
  • We were almost opposite of many credit unions. With a large group of retirees, we lost shares when rates started down. And, we had the best loan volume year that we have had in the history of this credit union. We tried to have a "no growth" year but grew 16%; shares grew 15.5% and loans grew 41.2%. Auto loans grew 68.46%. We are a $54 Mil credit union
    Anonymous
     
     
     
  • Need to go deeper.
    Anonymous
     
     
     
  • It's comforting to know that discussions we are having are similar to what "is actual"
    Anonymous