Successfully navigating the perilous seas of the deepesteconomic decline since the great depression and a global creditmarket meltdown was no easy task... congratulations. Sure most ofus have some water in our boat needing to be pumped (not bailed)out, but we were available for members when they needed us most.Coming into the recession, the fundamentals of solid capital levelsand disciplined underwriting helped us weather a serious storm.From this position of strength we helped a record number of membersimprove their cash-flow through refinances, extended credit whenothers had exited the market and provided a safe haven for memberdeposits.

Is it over yet? Metaphorically moving from thesea to land, we are on the road to recovery, but the road is filledwith ruts and loose stones. Stumbles are likely; falls (double-diprecession) are possible. If this was the great recession, why wouldyou expect a normal recovery? While many economic indicators areheaded in the right direction, there are a great many risks aswell. Credit crisis II could easily begin in Europe, the commercialreal estate markets, Fannie Mae/Freddie Mac, or any combination ofthe above. Given unprecedented global fiscal and monetary stimulus,interest rate spikes are possible and would trigger a majoreconomic setback. Indexed interest rate resets would generatepayment shocks and likely set off round two of delinquencies,defaults and charge-offs. The list goes on and on.

Am I pessimistic about the future? No, we willrecover, but I am also pragmatic, knowing recoveries are notstraight lines moving from the trough of the recession to the nextpeak. I will become more confident when I see consistent,sustainable employment gains, particularly in the privatesector.

Since St. Mary's Bank opened its doors 101 years ago, thenation's credit unions have survived and prospered through 20recessions. We accomplished this by focusing on member financialwell being and constantly evolving to meet members' needs. Will wesuddenly stop evolving? Our history and knowing a great number ofcredit union leaders, gives me confidence in our future. If allgoes right, we should see slow, but steady progress towardrebuilding capital.

Not intending to pile on, but beyond the current economicchallenges we have a rapidly evolving legislative and regulatoryenvironment. So far, everything I've seen detracts from the bottomline and our ability to rebuild capital. From NSF to interchange,non-spread revenue will be diminished. From compliance tohealthcare costs, expenses will rise. Throw in assessments andaverage investment yields just barely above cost of funds and wehave an environment where all expenses must be challenged. And weneed to revisit potential economies-of-scale through a commoncredit union back-office platform.

Moving beyond the near-term, my big concern is that economiccycle and legislative/regulatory issues are stealing preciousleadership time from strategic preparedness. Boomers are enteringtheir retirement life phase en masse. How do we remain relevant tokey membership segments? Has anyone noticed the next generation ofborrowers rarely sits across the desk from the loan officer? How dowe become relevant to the membership segment needed to lead us intothe future?

CUNA Mutual Group Chief Economist Dave Colby submitted thisguest blog entry.