Credit union management and officials under stress can respond in similar ways.
Rather than literally taking drugs, some chase numbers and look to make a quick buck. A handful of credit unions pursued the outrageous claims of Millionaire University's real estate scheme, and others were lured to the highly unrealistic returns from Centrix' indirect lending plot. These were temporary solutions that ended in the ruin of these credit unions and discontinued service to their members.
Right now, otherwise healthy credit unions are getting caught up indirectly in the subprime mortgage debacle and increased delinquencies across the board. These credit unions need to respond soberly to ensure their future viability. While other credit unions should keep an eye on these credit unions and how they're handling their individual situations for the good of the entire credit union community, each credit union needs to handle its situation based on its local economy, field of membership and other unique characteristics.
In other words, while most of the news is focused on the national economy or even the worst spots in the real estate market like California or Florida, this is about as useful as a national weather forecast. Credit union executives and boards should be looking right out their own windows to see what's going on outside. Not all credit unions need to be reconsidering their business lending programs or real estate lending. In fact, many credit unions will find the current circumstances the perfect time for investing.
Credit unions have built up stockpiles of capital. Ever hear the Wall Street adage "buy cheap, sell dear?" Depending upon your market now can be the perfect time to buy land or buildings for future expansion. Even good employees can be come by a bit cheaper nowadays in some areas. This investment in leaner times, while maybe psychologically difficult to grasp, can help boost your credit union's fitness, not just for the sprints but for the long distances ahead.
Other credit union executives might feel a different kind of pressure: that of public relations. Recently, Wescom Credit Union decided it would lay off a number of employees. Instead of burying his head in the sand, CEO Darren Williams talked with Credit Union Times about his plans to turn around the credit union's fortunes. Of course, I have a natural bias for working with the press. But it was a smart move to explain himself before others tried to do it for him. In another example of savvy thinking, Texans Credit Union ran into trouble in the last year with its commercial and development loans, and its executives spoke with us about their plans and progress in correcting the situation.
Traveling in the exact opposite direction of a healthy response to stress, First Basin Credit Union CEO Shem Culpepper said in a deposition in May that his credit union had only conducted internal investigations into changing its charter from a credit union to a mutual savings bank. Problem is not only has Culpepper not been very open with the press about the attempted charter change, which was halted before balloting could be completed, but he apparently was not entirely forthcoming in a deposition either (See story, page 1). According to two different sources--granted both of which have an interest in keeping First Basin a credit union--his credit union was provided information by CUNA and the Texas Credit Union League regarding some possible negative effects of his credit union converting to a mutual savings bank.
In the case of The Wall Street Journal front-page article on the corporate credit union network losses, it looks like the PR machine was in high gear working with the reporter on the story. While some of the corporate sources for the story said they were disappointed it wasn't more positive, they still were able to get their points of view heard. Not all news will be positive but working with a reporter should yield better results from all perspectives than not.
To wrap up this analogy, credit unions can choose to work out their muscles, either via PR or investing in the future during this down time for some, to lead a healthy, strong and long life. Or they can try steroids in the form of short-term gain real estate investments that have no way of living up to expectations in the long term and often cause more harm than good. Only you, the officials and management of the credit unions can decide whether your credit union will respond to current market stresses to maintain for the long haul or shoot for a short-term fix.
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