By Thomas L. Randle, Jr., CCE
In Florida, Nevada, California and other states, we see credit unions hurting. Many need to downsize assets to stay between 6 and 7 percent net worth. We are one, and are selling loans to a CU in a state that hasn't been affected and is well-capitalized. There are many such states and credit unions. The CU System is not acknowledging the economic crisis as a disaster. Natural disasters and terrorist attacks bring out the best in the "people helping people" mission. This economic crisis has not caused deaths or property loss, so don't crucify the comparison. The point is there is a crisis and we as a cooperative movement are not responding. There have been dissolutions of credit unions, and dismissals of CEOs as a result of this crisis.
For those personally affected, I would bet they have a different opinion as to how lives have been affected. More CEOs are going to lose their careers, pensions, and more credit unions will fail or merge. The demographics have long predicted that CEOs are aging and the number of CEOs who will retire in the near future is enormous. Not only will the movement lose the leadership, institutional knowledge, legislative contacts, and network, those CEOs may be forced out, owing to circumstances beyond their control, without the financial promises after a long and illustrious career of helping people.
Like many of my peers, if the provision for loan loss expense were at budgeted levels, our ROAA would be above 1 percent. Like most of you, we have reduced expenses and cost of funds, reduced staff positions, used prudent borrowings at lower rates from the Fed to fund liquidity and loan demand, and are willing to do that which is necessary to continue to serve our members. That means additional cuts, staff reductions and downsizing assets, even at the risk of adversely affecting interest income in 2009.
The CU System has not rallied around these challenges as it would if were this a natural disaster. NCUA is rattling its sabers that tougher actions will be taken, and had to make a public statement. That does not address a resolution of our challenges, so do not expect assistance from the regulators. They have never seen the conditions that exist today (and neither have most of us). One thing the regulators are not going to allow are mergers of credit unions in which there is not a significant reduction in risk to the insurance fund. With so many CUs operating under Documents of Resolution due to mortgage defaults, the consolidation of credit unions that wish to do so are being told no, even when it makes sense and would improve the surviving organization.
We have the power to leverage the CU System to help each other. There are a lot of credit unions with net worth ratios above 10 percent...many have capital ratios above 20 percent. It is estimated that there is $30 billion in excess capital in the CU System (based upon the amounts greater than 7percent). Yet, we are failing each other in the time of need. CUNA and the leagues are silent. Where is the cooperative spirit? Where are the leaders of the movement on this? The lack of dialogue is embarrassing. This is family. We take care of our own.
I may be naïve about a lot of things. We are the best and the brightest. There are solutions if we try. Well-capitalized credit unions can buy loans and investments, make deposits at below-market rates, offer agreements to manage data processing and other back-office functions, set up holding companies that allow credit unions to operate in their communities without the loss of identity or autonomy, etc. A really good friend has offered to sell repo vehicles in the state where his credit union is located because that market is not flooded with repos. What ideas do you have?
How can we move this conversation to action? I know you also care. So let's do something. Sorry if I stepped on some toes. I mean no disrespect.
Thomas L. Randle, Jr., CCUE, CCE, is CEO of Sarasota Coastal Credit Union, Sarasota, Fla. Reach him at 941.907.4001 (O), 941.650.9027 (C) or 941.907.4814 (F).
