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<p>Since this is the first issue of Credit Union Times for the new year, here are my credit union predictions for 2002. As the overall economy improves throughout the next 12 months, I predict that credit unions will produce some impressive numbers in all key areas. This includes substantial growth in members, assets, mortgage loans, and service to low-income communities. The money that poured into credit unions and corporates in 2001 will begin to depart, but will not return to the low levels of the liquidity difficulty experienced approximately 18 months ago. The number of natural person credit unions over $1 billion will reach 60. The number of corporates will decrease by two, maybe three, due to mergers. Retiring Wescorp CEO Dick Johnson’s big shoes will be filled by an executive from outside the credit union industry. Credit union CEO departures, due primarily to retirements, will accelerate in 2002, as will the hiring of banker replacements. However, some of the most high-profile credit union CEO slots will be filled from within. The total number of credit unions will shrink substantially through the usual routes of mergers and liquidations. Merging credit unions will tend to be larger than in the past. One such merger will involve two very large, well-known credit unions that have been in merger discussions before. The record pace of charter conversions will not only continue but increase, especially federal charters to state charters and especially in California. A large increase in the number of conversions to community charters will follow. Conversions to thrift/bank charters will also increase but not substantially. However, the size of the credit unions making the switch will be much larger, thus representing a healthy increase of members and assets going to the banking industry. CUSOs will see an unprecedented growth spurt during the year, particularly special purpose CUSOs formed by small (initially) groups of credit unions. Which leads to this prediction: a three-part pattern for leading edge services for credit unions will become clear. Leading the pack will be traditional credit union vendors. Credit union data processing firms will capture a larger share of the spotlight as they adjust quickly to marketplace demands. Fierce competition for a shrinking market (fewer CUs overall; more larger CUs) will fuel a drive to excellence and to price cuts. Next, credit unions will be offered an increasingly larger number of high-tech options by non-traditional service providers such as CUNA (CUNA Network Services), US Central (Corporate Network eCom), corporates (Mid-Atlantic Corporate FCU EBPP), CUNA Mutual Group (Members Development Corporation), etc. While most of these initiatives will enjoy limited to good success, at least one will stumble badly with serious financial consequences. The third group is the CUSOs organized to provide products and services either not available or not up to the requirements of the organizing credit unions. Somewhat related, such successful ventures as the California-based CO-OP ATM Network will have one of its best years despite a new CU player who will find the going rough. A number of predictions involve NCUA. Early in the year, the board will operate with only two members, one of whom, is Yolanda Wheat, a lame duck. Sometime in 2002 (depending on the FBI’s schedule), there will be a full three-person board (one man; two women) consisting of two Republicans and one Democrat. There will be a large number of unanimous votes at NCUA Board Meetings, but a number that will follow party lines. Credit unions will begin to see and reap the benefits of NCUA’s RegFlex, incidental powers, and at least one new similar initiative that Dollar will introduce. An already good relationship between NCUA, credit unions, and credit union trade groups will continue to improve despite continued disagreements and discussions on such touchy subjects as the NCUA budget and OTR. Enthusiasm, for new private share insurance initiatives will fade. In the early part of the year the controversial Community Action Plan (CAP) will continue to generate a good deal of contentious discussion. Eventually Board Member Wheat will go away. So will any further mention of CAP. CUNA will enjoy a number of legislative successes, but not under the umbrella of the Renaissance Commission which will be all but forgotten. NAFCU will also do well with its full legislative and regulatory agenda throughout the year. NASCUS will gain more respect. Low conference attendance will cause all three groups to reevaluate their pricing structures, locations, and formats, but they won’t make any significant changes. Overall credit union satisfaction ratings will continue to slip downward, although modestly, in the various surveys and studies that measure such things. The trade groups will launch efforts to find out why. Fees and trust issues will surface. Meanwhile, credit unions will build more headquarters facilities and more branches, hire more high-level staffers, and win more accolades in various “Best Places to Work” recognition programs. There will be a technology shake-out in 2002. New players will continue to come on the scene, many of them quite large but previously unaware what a potentially lucrative market credit unions represent. Watch for several niche players, alliance partners, and CU group related entities to disappear. Not nearly as bad as the dot-bomb fiasco in 2001, however. Aggregation will come of age in 2002 as will electronic payment products and systems, spurred on partially by the continuing concerns over anthrax. A watered down version of bankruptcy will pass, three national leaders will step down unexpectedly, there will be a dramatic increase in the number of CU credit card portfolios sold, and at least one credit union CEO will be fired for spending too much work time sending out offensive e-mails to friends and relatives. All in all, 2002 should be a most interesting and eventful year for credit unions. Happy New Year! Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]</p>

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Peter Westerman

Credit Union Times

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