It's that time of year again, folks. It's time for reflecting onthe past year and making resolutions while forecasting what's tocome. I have to say as I wrap up my second full year as editor ofCredit Union Times, I did pretty darn well with last year'spredictions.
The big news of 2009, of course, has been the weakened state of theeconomy, and credit unions have discovered that they are not immuneto the outside world just because they are responsible stewards oftheir own institutions. They are inextricably tied in the Gordianknot that is the global economy.
As such, credit unions were faced with challenges andopportunities. As of October, CUNA found credit union delinquencieshitting 1.8%, nearly double historic norms. That rate will edgehigher in 2010 as unemployment bobs around 10% and the second waveof ARMs resets. I would not be surprised to see credit uniondelinquencies settle around 2.5% or higher.
At the end of 2008, I had predicted the credit union communitywould dwindle from 8,198 total institutions to 7,600. I was wrong.As of October, there were 7,889, and I don't predict nearly 300credit unions closing up shop in the next two months. However, it'snot outrageous to say that the credit union community will shrinkby 500 institutions in 2010, and that's not necessarily a badthing.
As it should be, only solid institutions that commit to slow andsteady evolution will survive. This year serves as perfect evidencethat calculated growth within your own corporate belief structure,rather than joining the rat race to earn a quick buck, is crucial.Credit unions, large and small, that adhere to this will prosper in2010 and beyond, and the credit union industry will be better forit.
The same goes for corporate credit unions. If the NCUA rule movesforward pretty much as proposed, I'd expect possibly half a dozenleaner and more geographically focused corporates to emerge.
Last year in my Dec. 24 column, I predicted credit union capitalwould fall to 10%; this one was right on the nose, according to thelatest figures from CUNA. As mergers increase and the economyreturns and consumers continue pouring funds into credit unions,this figure should hold steady with possibly a slight uptick at theend of the 2010. Mark my words though: Americans' newfound thriftwill be a mere memory five years from now. Their short attentionspan and the latest PlayStation will distract their attention tosavings in the long run.
I had high hopes for credit unions' share of the mortgage market todouble from the 3.9% they held last year, but it wasn't to be.However, the 5.2% of the mortgage market they've achieved is nonetoo shabby. That figure will continue on its upward trajectorythrough 2010.
I also stated in my column a year ago that CUNA and NAFCU wouldcontinue to have troubles getting along, and it seems as if therelationship has become even more tenuous. I realize that wasn'treally going out on a limb.
I also said that the two major national trade groups would not bein serious merger talks, which, given NAFCU's sharp and publicrebuff every time the subject arises, I believe is still true.However, drastic times call for drastic measures. The credit unionsystem even post-recession will have a difficult time justifyingfinancial support for the two separate groups. I continue to feelthat each group has its strong suits, but I believe backers of eachgroup and both groups will have to seriously reconsider the SOP. Ifsomething is not done to consolidate or at least better coordinatetheir efforts, the two groups could atrophy and damage everyone'sefforts.
If a merger of the two is to be completed, the best approach wouldbe to start fresh with a new name and marry the best of each. I usethe term marry intentionally because it would have to be treated asthe joining of equals and not CUNA taking over NAFCU. (Though FredBecker might welcome CUNA merging into NAFCU.)
One issue that CUNA and NAFCU have worked in concert is increasingthe cap on member business lending. CUNA and the leagues flew inseveral hundred credit union executives to lobby for thelegislation, which had a strong chance of being added to the jobsbill, but did not make it. I had predicted bits and pieces ofCURIA, of which the MBL cap was one, would be broken apart intoseparate legislation and pass the House in 2009. Close but nocigar.
Similarly, I had said making credit unions subject to the CommunityReinvestment Act had a good chance of passage in the 111thCongress. Not yet, but lawmakers probably realize that next yearmay be their last shot at it. The Dems are going to be losing seatsin both the House and Senate, which will hamper any effort on thisover the following few years.
And finally, a resolution: Credit unions must continue to, or insome cases re-learn, to work within the cooperative structure theyhave. I believe credit unions should have expanded business lendingand risk-based capital, but you don't. Credit unions have to workwithin the framework they have. Keep reaching for those expandedauthorities while at the same time taking a rejuvenated andcreative look at reality.
Credit unions must find ways to not only deepen their relationshipswith their members, but also with other credit unions. They mustfully embrace where they stand in the larger scheme of globalfinancial services. At the same time credit unions should explorealigning themselves as strongly with all parts of the cooperativemovement as they do to other types of financial institutions.
Here's to prosperity for you and yours from Credit UnionTimes.
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