Download November 2012 Report
The election is over. Credit unions can now put behind them much of the uncertainty that has stalled plans and progress and get on with shaping the future.
It’s a future in which credit unions have an opportunity to play a large role. Collectively, the credit union system is the third-largest mortgage lender in the nation. Credit union membership is pushing 100 million Americans; that’s nearly one-third of the nation. Credit unions are making a tremendous impact on the country, but they must assert themselves in promoting that to lawmakers and leaders.
Credit unions are organized solely to serve members. Credit union members want to see improvements within their communities, and credit unions contribute to such improvements by helping one family at a time, one loan at a time, one IRA at a time. This is their main function. But it doesn’t help the membership to serve in silence. Credit unions should make themselves better known within their communities and press for action at the local and national level to improve those communities.
Locally, credit unions strengthen and improve the areas surrounding their branches. They do this by helping individual families and members, but they also extend credit to small businesses and make in-kind or monetary contributions to charities and civic organizations.
Nationally, activity is occurring that will have implications for credit unions for years to come. The NCUA board named Mark Treichel executive director of the agency in October; the role is the most senior position at NCUA and is responsible for daily operations. Treichel assumes his new role at the end of 2012, and sometime in 2013 the president will nominate a new NCUA board member. Additionally, the 113th United States Congress, its members no longer preoccupied with electioneering, will likely revisit the Dodd-Frank Act. The Consumer Financial Protection Bureau also will be pressing its agenda. Credit unions should already be planning how to reach out to elected officials to talk about not only the credit unions consumer impact but also what it can do in the future given the proper laws and regulations.
Credit unions have spurred local economic growth by extending credit to responsible small businesses. Since 2008, credit unions have granted more than $51.6 billion in business loans, helping more than 289,000 businesses. Such growing businesses, in turn, have been able to hire employees whose wages go back into the local economy.
Outside of granting business loans, credit unions have found other ways to support local businesses. WestStar Credit Union ($132.9M, Las Vegas, NV) has organized job fairs to help local employers fill thousands of jobs, and the Central Ohio Chapter of Credit Unions has lured shoppers into locally owned stores during organized “cash mob” events.
Credit unions are directly responsible for job creation as well. Since second quarter 2007, credit unions have added 840 branches to the credit union network and a net total of 11,230 full time equivalent employees. Such expansion promotes local economic activity and increased employment provides stable jobs, salaries, health care, and benefits to local workers.
For members, credit unions funded $85.5 billion in consumer loans through June. This is well above the $72 billion funded in 2009. But credit unions aren’t just granting credit, they are granting credit at better rates and terms than their for-profit competitors. Indeed, refinance programs such as Educators Credit Union’s ($1.4B, Racine, WI) “Sit and Save” and Seven Seventeen Credit Union’s ($814.0M, Warren, OH) “Simplify & Save” have saved members millions of dollars in interest payments. The members, in turn, have used the savings to pay down loan burdens or pump cash back into their local economies, creating a multiplier effect.
In three-quarters of American communities, it takes three years or less for a homeowner to realize savings from buying a home versus renting, reported CNN in September. In the first quarter of 2012, the credit union system became the third-largest mortgage lender in the United States, following only Wells Fargo and JPMorgan Chase. Increasingly, the public views credit unions as a trusted, low-cost provider of mortgages. In the first half of 2012, credit unions originated more than $56 billion in first mortgages, capturing close to 8% of the national first mortgage origination market share.
But it’s for members that needed extra assistance during the economic downturn that credit unions have truly made their mark. As of the first quarter 2011, the first quarter in which credit unions reported troubled debt restructures (TDRs), credit unions had modified slightly more than 135,500 loans totaling nearly $7.7 billion. And in the following five quarters, credit unions continued to increase both the number and the balance of TDRs they held on their books. To date, they hold more than 164,000 TDRs totaling more than $9.3 billion.
In October, the Phoenix Business Journal reported Arizona State Credit Union ($1.4B, Phoenix, AZ) had saved 600 members more than $2 million annually through the federal government’s Home Affordable Refinance Program, which helps move underwater homeowners into more affordable mortgage terms. And Orion Federal Credit Union ($530.8M, Memphis, TN), formerly Memphis Area Teacher’s Credit Union, launched a program in 2010 that allows borrowers with poor credit history to rent a credit union REO property for up to two years and purchase it if they establish a history of making timely, reliable payments. Again, it is this attention to saving members money and putting them on more secure financial footing that has allowed members to increase savings, reduce debt, and contribute to local economies.
Credit unions have been a source of financing for young people who wish to attend college or gain accreditation through a community college. As of the first quarter 2011, the first quarter in which credit unions reported private student lending, credit unions had made nearly 236,000 loans totaling more than $1.0 billion. And in the following five quarters, credit unions continued to increase both the number and the balance of private student loans they held on their books. As of midyear, they hold nearly 343,000 private student loans totaling almost $1.7 billion.
But credit unions provide more than monetary assistance for formal higher education. They are also the leader in providing free and reliable financial education to all classes of people, including people challenged with debt, first-time homeowners, young parents, and people saving for retirement as well as those already in retirement. In the second quarter of 2012, 2,905 credit unions, or nearly 41% of all credit unions, reported offering financial education services of some kind. This includes one or more of the following: financial counseling, basic money management skills, financial literacy workshops, first time homebuyer programs, and in-school branches. Whole communities are lifted up when their people make smarter financial choices.
It doesn’t help the membership to serve in silence.
Credit unions should make themselves better known within their communities and press for action at the local and national level.
Community banks can, and do, claim to address the same kinds of issues as credit unions. They, too, can say they lend to small businesses, hire local residents, and help spur housing. But community banks cannot say they are cooperatives organized solely to support members.
The boards of community banks can sell out or move to where they believe the profits are fatter. Credit unions do not sell out and move on. They find alternative solutions.
When it became clear Park Community Federal Credit Union ($557.1M, Louisville, KY) could not continue operating its branches in Macon, GA, the credit union had to decide what to do with members, loans, and other assets. In March 2010, it exited Georgia and transitioned 2,000 former members and eight employees to a cooperative peer, Robins Federal Credit Union ($1.8B, Warner Robbins, GA).
A credit union can only be as prosperous as its members. And member prosperity is correlated with community prosperity. That inextricable link makes the credit union work to improve the community like no other type of financial services institution.
University Federal Credit Union ($1.5B, Austin, TX), helped underwrite and launch Opportunity Austin, a five-county initiative of local businesses and the Austin Chamber of Commerce that attracts companies and jobs to the region. It's CEO, Tony Budet, participates in credit union organizations as well as locally focused organizations in Austin’s non-profit, civic, and medical sectors. Read more about Budet and UFCU in “Gaining Influence In A Metropolitan Area.”
Communication Is More Important Than Ever
Credit unions are different from for-profit financial institutions. They are different in design. And they are different in outcome. This is a vital point to impress upon local and national elected leaders. Credit unions cannot overstate it.
Credit unions do not exist for profit but for improvement. They should be as well known within their communities as the schools, the chief employer, and the firehouse. State and federal legislators should recognize credit unions as much as any major corporation within their districts. And when credit unions speak up within the public forum, the corridors of the bureaucracies, or the halls of legislators, people in power need to listen, heed, and support.
Don’t hide your light under a bushel. How do you communicate your community service and civic accomplishments internally? To the credit union system? To your members? To your community? To your lawmakers? Verbalize the benefits of the credit union model and recruit more supporters. Disseminate the virtues of the cooperative structure and gain more champions among lawmakers and bureaucrats. Doing so will make the system better. It will also make our lawmakers, our cities, our counties, our states, our nation, and our world better.
In your planning this year, think broader than what you can do to improve your credit union. Think of how you can impress upon the entire community — and your local, state, and federal officials — the fact that credit unions are a vital pillar of the community, however defined. In the coming year, make your credit union even more vital to its community … then continue shining your light for all to see.
This article appeared originally in the November 2012 issue of The Callahan Report. Click here to read a Q&A with Tony Budet, CEO of University Federal Credit Union ($1.5B, Austin, TX).