Bunker Mentality or Time to Flourish?

CU360
April 1, 2010 | COMMENTS

Given today's economic uncertainty, is this the time for credit unions to adopt a bunker mentality, or is it an opportunity to flourish?  That's the question put to Credit Union Retired Executives (CURE)— an online network of former credit union executives who volunteer time to advise those currently working in credit unions.

Here's what they have to say:

CUs are the solution

The opportunity is here, but can we take advantage of it? While each individual credit union may not be in a favorable position, as a movement we're in the best position to move beyond our 6% share of financial-services industry assets. Many banks are seen as part of the economic problem, while all that we are and do is an advantage in this marketplace.

But what are we doing—pulling back, cutting branches, and slashing marketing budgets? We might need to cut expenses, but cutting back on expansion, community involvement, and marketing is counterproductive. If we're happy continuing at the 6% level, as we have for the past 20 years, then retreat into the bunker. But I suggest we go on the offensive and invigorate the movement for future generations.

Use capital to spur growth

The current economic and social environment presents a rare window for credit unions to showcase their uniqueness. Members are threatened with job-related instability and loss of income. Communities are imposing more fees and taxes. Social services are faced with increased demand and reduced resources.

A bunker mentality might be prudent for a credit union that's thinly capitalized. But well-capitalized credit unions might consider putting more money into members' pockets instead of building up an ever-expanding capital account. By using ingenuity to develop attractive products and services, these credit unions could develop reputations for offering the best deals. Besides serving members and potential members well, wouldn't this be a marvelous counterpoint to the rest of the financial marketplace?

Champion consumers' interests

In these tough times, volunteers and management are challenged by a rise in insurance premiums, personal and real estate loan delinquencies, bankruptcies, and regulatory exams and directives.

For some credit unions, that means shoring up their defenses and hiding until the bad news is over. But safety also has its risks. If you want to win this battle, seize this opportunity and aggressively recruit new members.

When looking for opportunities, the preferred strategy is “full speed ahead.” If you see other credit unions in trouble, it might be time to “join forces”—a better term than merger. There might be economic incentives and more regulatory support for these ventures than under normal circumstances.

After 140 bank failures in 2009, consumers wonder what the future holds. Some credit unions have gone after bank customers with direct marketing campaigns. Others might be able to extend their branch networks by purchasing bank branches from distressed institutions, much as occurred after the savings and loan crisis some years ago.

Build your current membership base and add relationship-oriented members. Analyze your strengths, weaknesses, opportunities and threats. Weigh benefits and risks. Then jump into the sunlight and move ahead to benefit your members and potential members.

Build on great publicity

Out of the economic carnage of the past 18 months, credit unions are now positioned to fulfill their promise as the mainstream financial choice for American consumers. Credit unions are receiving excellent national and local media coverage for their ability to serve consumers at a fair price without government bailouts. I only hope that the entire movement can agree on an approach to capture more market share and keep the momentum going.

Now is not the time to hunker down and stay below the radar. True, losses from bad loans and reduced earnings plague many credit unions. Additional assessments to bolster the insurance fund could put more credit unions in the red. In spite of these setbacks, credit unions are foundationally strong.

Credit unions have the opportunity to capture more consumer market share, and they're also well-positioned for the small-business market. Legislation has been introduced that would allow credit unions to make more business loans, and they have the potential to take on business loans that banks are now hesitant to make.

There might never be a more opportune time to step into the spotlight and showcase credit unions' strengths. We really are the best deal for consumers, and that message needs to be continuously repeated through as many channels as possible.