before that spent 35 years in the Navy, retiring as vice admiral.
Credit Union Times: How would you assess the state of the credit union movement?
Cutler Dawson: It's pretty good. The reason I say that is because we have some significant opportunities with the fallout from the financial crisis. I think credit unions are seeing a flight to trust. We [at Navy Federal] have had $3.3 billion in new deposits this year alone. We have opportunities to reassure our membership and gain new members. We are also seeing gains in direct deposits, CDs, credit cards and mortgages. On mortgages, members are bombarded with ads and teaser ads and they didn't trust them. And now, they are calling us first. Our goal is to make $6 billion in mortgage loans this year, which would be the highest since 2003.
At the same time, there is continued pressure on all credit unions because of the economic and real estate downturn. The key is to find ways to work through the current environment without it having an overly negative impact on your members and employees. Most credit unions are doing just that.
CU Times: One of the big issues facing the movement is the problems facing some of the corporatecredit unions. How do you deal with the troubled corporates while having as small an impact on the NCUSIF?
Dawson: The NCUA has taken in comments from many credit unions on this. One of their goals is to protect the share insurance fund and natural person credit unions. When they release their proposals, they will have three key elements: 1. Set proper capital requirements and at the same time they will expect those that don't meet the requirements will have to be recapitalized by those credit unions that choose to use them. 2. Eliminate the expanded investment authority of the corporates. 3. They'll limit the exposure of the share insurance fund to some future corporate credit union losses. Those who invest in corporates won't have the expectation of a guarantee from NCUA. Credit union members shouldn't have to pay for the misguided investments of corporates they don't use.
CU Times: Assess the performance of the NCUA in recent months and what changes do you expect during the tenure of Chairman Matz?
Dawson: She is a good selection, because of her former work on the NCUA and at Andrews Federal Credit Union. Having both of those experiences will make her more effective. The work of the professional staff will remain the same and one of their big motivations will be how to protect credit unions and the NCUSIF. We'd call it, in Navy parlance, "underway as before,'' with the biggest issues being the corporate situation and the continued pressure on natural person credit unions.
CU Times: Assess how the NCUA does its job? Do they strike the right balance between ensuring safety and soundness and giving credit unions leeway to innovate?
Dawson: I'd like the NCUA to continue to be our regulator and not go away and be absorbed under a larger regulator. Credit unions didn't create this crisis and are helping a lot of people as they work their way out of it. And the NCUA deserves some of the credit. Recent events have given everyone a wakeup call on risk and some credit unions got things out of balance in that area. In light of that, the NCUA will look at the future with an even more careful eye to make sure things stay in balance. The NCUA has a significant job to do to make sure we make the right decisions to keep safe and sound. Some credit unions got out of whack, like Cal State 9, and I'd like to have seen those guys regulated harder because I'm paying the bill. Every credit union will say it's getting the proper amount of regulation and the NCUA should look harder at the other guys.
CU Times: Navy Federal has been in an expansion mode. You've expanded your field of membership to the entire military and opened more branches. What additional plans do you have in this area?
Dawson: It all starts with membership. We ask ourselves, "How can we increase member service?'' If we do that right, the growth follows. We don't do it for the sake of growth. We just opened a new branch at Peterson Air Force Base in Colorado Springs, Colorado, it's our 179th branch. In the past two plus years we've opened 66 new branches. For the future, we will continue to open branches, probably about 10 per year, but that could change.
In May of 2008, we were approved to serve all branches of the military and our existing members were pleased. We have also worked to improve people's online experience and by the end of the year we will have implanted the first phase of our mobile banking capability. On July 15, we had a record number of people on our Web site-just under 1 million-and there are usually 600,000-700,000 on a military payday. We have also worked to reduce the average wait time when people call.
Also, we are building out our facility in Pensacola, Fla. and it will eventually have a capacity for 3,000 employees, currently we have around 1,400 employees there.
CU Times: You've had a large ad campaign in print, on broadcast and in Metro stations, what additional plans do you have in this area?
Dawson: Well, the ads have been designed to reassure people that we are safe and sound. Also, I've done ads with members of our staff explaining that I served in the military and we understand the needs of military members and their families.
CU Times: How have economic and housing crises impacted you, especially on the mortgage side in terms of foreclosures?
Dawson: Our foreclosures have been up at a level that parallels the national numbers. We have $28 billion worth of mortgages that we service, and we currently have 140 REO properties on a $28 billion portfolio. Three to five years ago we might have had 15-20 of those properties.
CU Times: How have you changed your lending practices?
Dawson: We require more of a down payment. As with all credit unions, our basic philosophy has not changed. We try to put folks in the right home, for the right price with a loan payment they can afford.
CU Times: Any other growth areas?
Dawson: We see significant opportunities for credit unions in general, and ourselves in particular in our credit card portfolio. Because of changes in the law and regulation some credit card issuers are revamping the way they do business. According to a recent study by Consumer Reports, we were ranked one of the two most exceptional credit card issuers and we want to build on that.