Banks Pay Bonuses to Shareholders; CUs Pay Bonuses to Members

Both the credit union and banking industries are emerging from the financial crisis with high performers, but it’s credit unions who share that success with loyal account holders.


The released earnings of banking giant JP Morgan Chase is sparking criticism and questions over how the nation’s largest financial institutions will handle the results of this year’s reporting season. In a report released on Friday, JP Morgan reported earnings topping out at more than $11 billion; 2009 was a banner year for the bank.

JP’s executives are certainly satisfied; its shareholders even more so. The report highlights one of the major differences between banks and credit unions. Profits from banks are doled out to shareholders and distributed as bonuses; credit unions, on the other hand, have the opportunity to offer bonus dividends and interest refunds to members (albeit, not all credit unions offer such perks). Beyond standard loyalty points and credit card rewards programs, bonus dividends and interest refunds are ways some credit unions differentiate themselves in a saturated market.

Whereas the focus of JP Morgan and its cohorts – short-term returns or long-term value – remains questionable, the value orientation of credit unions is clear: It’s all about the members. Credit unions such as Otis FCU ($112.9M, Jay, ME), American 1 ($173M, Jackson, MI), OMNI Community ($228.9M, Battle Creek, MI), and Goldenwest ($719.8M, Ogden, UT) have paid out hundreds of thousands of dollars in year-end dividends and rebates.

Want more tangible evidence of the focus credit unions dedicate to members? In 2008, credit unions paid out nearly $58 million in interest refunds, down approximately 15% from 2007 levels. Bonus dividends are not separated from regular dividends in call report data, but the difference between reported year-end total dividends and annualized third quarter dividends is slightly more than $300 million. Check back in mid-February for an update with year-end 2009 data.


Jan. 20, 2010