By Frank J. Diekmann
There’s a glaring, Estes Park-size irony taking place in credit unions right now that few seem willing to talk about and which is perhaps best illustrated this way:
Consider for a moment if this were your credit union’s membership profile at the end of 2020: close to 90% of your members were financially worse off than they were at the start of of the year. Their paychecks have gotten smaller. They’ve taken on more debt and are seriously struggling. They lack any real plan for digging their way out of the hole and improving their household balance sheets.
Now consider that your board and senior management team took all that into account and emerged from their Zoom-based 2021 planning meeting with this strategy: Hey, let’s pretend those members don’t exist and let them work it out however they can, while we instead highlight the 10% of members who are actually doing quite well. Mission accomplished!
OK, but that sounds foolish, not ironic, you’re thinking. So, let me finish, because here’s the (sad) irony.
Last week at CUNA’s GAC the trade group unveiled a major commitment to “financial well-being” of members. It’s a laudable objective. But this is the thing—the example above isn’t about any particular credit union—it’s about the U.S. credit union community itself. Who is looking out for the movement’s financial well-being? The answer appears to be no one.
An Admirable Objective
During GAC CUNA launched what it is officially calling the “Financial Well-Being for All” initiative, which it described as a “movement-wide effort to amplify and quantify how America’s credit unions are working to improve the financial state of their members and to encourage them to more obviously integrate financial well-being into their corporate strategies.”
It’s an admirable objective made all the better by the fact it’s not limited only to CUs of a certain asset size.
But speaking of assets…
Two days after GAC officially closed NCUA released year-end numbers for federally insured credit unions that, overall, looked pretty good in the same way those “Americans’ Wealth Keeps Growing” headlines also look peachy. Overall.
But beneath the topline finding that overall CU assets, loans and membership were up in 2020 was this alarming fact: credit unions in every asset category below $500 million lost both members and loans during the year.
The Numbers
Consider this:
- FICUs with at least $100 million but less than $500 million in assets increased to 1,063 in Q4 and together held $237.5 billion in total assets, or 13% of total system assets. CUs in this category reported an 8.6% decline in total loans outstanding. Membership fell 9.5%. Net worth fell 5.9%.
- FICUs with at least $50 million but less than $100 million in assets rose to 687 in Q4 and held $49.4 billion in total assets, or 3% of total system assets. These CUs reported an 11.1% decrease in total loans. Membership fell 11.3%. Net worth declined 6.3%.
- FICUs in the $10M-$50M category declined to 1,541 in Q4 and held $39.5 billion in assets, or 2% of total system assets. These CUs reported an 18.2% decrease in loans, with membership down 15.7% and net worth declining 12.3%.
- Finally, talk about the underserved. FICUs under $10 million declined to 1,159 in Q4 and represented $4.8 billion in assets, or just 0.3% of total system assets. The smallest CUs reported a whopping 24.5% decline in loans, a decline in membership of 19.3%, and a drop in net worth of 17.5%.
Hold On To Your Hats
Credit unions below $500 million in assets represent 4,450 of the 5,099 federally insured CUs that hit “send” on a 5300 Report at year-end. That’s 87% of all credit unions, but what they really represent are close to 100% of the “Main Street,” white-hat wearing, know-our-members-by-name CUs that are spotlighted before Congress when GAC is in town. You know, the CUs that are key to protecting the tax exemption.
And yet, to quote Billy Shakespeare, the first manager of Globe Theater Employees CU, “There’s the rub.” In this case, it’s the fact those same CUs represent just 13.9% of all CU assets, and the leaders of many of those shops have expressed to me in the past their own bewildered and disappointed belief the powers-that-be in the “system” don’t really care much if they are rubbed out. And by rubbed out, we all know that means merged out. I spoke with one representative of a national trade group this week who more or less acknowledged it's a fait accoumpli.
Disagree with them? Then ask yourself who is looking out for these CUs’ financial well-being? Where is the coordinated effort to quantify how they can improve their own financial state? Who is encouraging these CUs to not just integrate their own financial well-being into their corporate strategies, but offering real-world examples of how do to so? Who is saying you don't have to merge?
An Issue Exposed
If these issues sound familiar, maybe it’s because they echo points I raised earlier after credit unions fell behind banks for a second year in a row when ranked by consumers on service.
If you’re paying attention, you’ll see there’s something bigger going on. The questions then and now are where is the leadership? Where is the worry? Who has a plan? Could U.S. credit unions perhaps find an example for cutting costs and improving services from their co-op counterparts in other countries, as this recent WOCCU webinar suggested?
The pandemic has exposed many things, most especially that beneath the topline numbers it isn’t just that many consumers/members are falling further behind financially—it appears many credit unions are, as well.
Paying real attention and dedicating real resources to the financial well-being of those consumers/members couldn’t come at a better time. But if more attention and resources aren’t also dedicated to many of the credit unions that serve them—and soon--they aren’t going to be around anymore to provide the help.
And that’s not good for anyone’s financial well-being.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of the new book, ‘501 Name Tags: Everything You Need to Know About Business Can be Learned at a Conference & Forgotten in the Trade Show.” For info: www.501nametags.com.