What it Will Take for a Small CU to Survive

08/27/2023 02:54 pm

By Homer Fager

In a 2021 article, Bill Streeter, former editor-in-chief at The Financial Brand, asked, “Can a $50 million, $200 million or even a $500 million credit union expect to survive?”

This group represents 87% of all credit unions, and 66% of those are $100 million in assets and below. How can these small credit unions survive the competitive forces of dominant megabanks, rapid uptake of digital banking, fintech inroads, low rates and operating expenses? 

Per the National Credit Union Administration’s 2020 Annual Report, the benchmark for bank profitability–return on average assets ratio (ROA)–for all credit unions ranged from a high of 0.78 for billion-dollar institutions to a low of 0.06% for less than $10 million in assets. The FDIC report, Community Banks Remain Resilient Amid Industry Consolidations, acknowledged those institutions with less than $500 million in assets find it tough to comply with regulation, higher capital requirements, aggressive competition for deposits and loans, etc.

Managerial Governance Change Required

To manage this reality, a change of managerial governance by small credit unions must take place. No amount of market research or collaboration will change their ROA or provide scale to compete in the 4th Industrial Revolution environment. 

What is causing the low ROA of small credit unions? Its “FMB” (front, middle, back office) expenses. Small institutions do not have the scale to manage the cause of low ROA, which is fixed costs. When an examiner reviews a credit union’s financial condition, they consider budget, budget variance, risk profile, operational structure, and fixed expenses. In accounting, fixed expenses or costs are those operating expenses that do not change with increasing or decreasing services or products delivered to customers. They are normally time-related, such as interest, rents, utilities, labor, IT (staff, hardware & software) paid per month, and are also called overhead costs. 

What has to change are which FMB activities are maintained as manager’s primary responsibility–fixed or variable expense? 

Managers of small credit unions must change their business model from that of a fixed-expense operation to a variable-expense operation. “MB” expenses are not primarily the responsibility of managers; it is member-centric service that takes place in the front office. Other than regulatory audits, managers need not handle middle office, day-to-day compliance, accounting or HR activities. Activities relating to “MB” and IT services are not primary, they need to be outsourced.

Improving Advantage

Outsourcing of selected services is a means to gain scale that leads to reducing costs and increasing the institution’s ROA. The cost-benefit from outsourcing comes due to reduction of operating labor and overhead expenses while focusing on core competencies, such as member-centric service. By focusing on core competencies the entity improves its competitive advantage and efficiency by redirecting internal resources to its primary need, front office consumer-centric service. 

A most important advantage of outsourcing and, possibly most noteworthy, is the option to afford expertise and best in class software previously unaffordable. When incorporating outsourcing a significant benefit is the scale outsourcing brings, which equals lower cost per member leading to improved capability. The reduction-profitability realized is the cost-benefit of economies of scale produced by outsourcing of back-office accounting and middle office regulatory reporting functions. 

This economies of scale (EOS) technology helps small credit unions grow into consumer-centric enterprises. EOS technology is a digital-first core solution that will integrate with unlimited number of options from internal business to external third-party platforms. EOS technology is a corrective action to the previously noted operating expense/ROA disadvantage that small credit unions must manage. 

Call to Action

Managers of small credit union: Join the 4th Industrial Revolution and build a disruptive cyber-physical customer-centric enterprise. In short, survival is possible, but it calls for a change of managerial governance by small credit unions managers. The single element small credit unions lack is scale, which outsourcing non-growth activities can correct. 

How large of a scale is required? Mega-institutions with asset above $3.8 billion have economies of scale from 286,000 to 320,000 members and ROAs above 1.2, versus 0.40% for $500 million institutions per Weiss Ratings. 

Credit union managers need to incorporate 4th Industrial Revolution’s disruptive trends of “cyber-physical systems” integrating modern digitization, physical, and biological processes with the needs of the enterprise and their consumers. 

Homer Fager is the former president of core data processor FedComp Inc., a small business owner and advisor, and a multi-million-dollar project manager, providing him an extensive resume of experience in governance, risk, and consulting work. 

What the Data Show in the War for Talent

By Ray Birch

DUBLIN, Ohio—The war for talent is still heated but it could be cooling, according to new data that show the dramatic increases in credit union pay—especially at the upper levels—are beginning to soften.

As CUToday.info reported, new data released by CUES reveals base salary, base salary plus bonus, and total compensation packages increased last year across 20 of 22 positions at credit unions that are surveyed by the association. 

According to CUES, key findings in its most recent survey show:

• A credit union’s asset size continued to be the leading influencer on compensation levels.
• The most common length of a CEO contract is three years.
• 24% of reported CEOs are female.
• 93.1% of CEOs were reported to be eligible for bonuses (down from 93.8% last year) with an average bonus amount of 20.7% of base pay (up from 16.8% last year).
• The top four factors leading CEOs’ bonuses were earnings, board evaluation, loan growth, and membership growth.
• 63.9% of reported CEO’s are eligible for professional association membership(s) as a perquisite.
• Over 91% of CEO’s have a four-year college degree or higher.
• More than 25% of CEOs were reported to have the CCE designation, while the number averages less than 10% for non-CEO positions.

Still High, But…

“Overall, what we're seeing, among the executives, down to the salary positions and even to some of the hourly employees, is that compensation is still high,” said Scott Hackworth, president of Industry Insights, which conducted the study for CUES.

And it's particularly high at the top ranks, he said.

“For instance, the CEO's salary, on a same sample basis, is up about 8% from last year,” said Hackworth. “That's coming off of a 9% increase last year in the previous survey. Those are really large percentage changes for total compensation. Obviously, some of that is becoming more incentive based. So, it's based on the bonus as well.”

Actual salary is going up in the 5% to 6% range, Hackworth told CUToday.info.

“But, still, that's very hefty over the 3% to 4% historic annual shifts that we've seen,” he said.

An Ongoing Battle

What the numbers show, said Hackworth, is the war for talent remains very much a battle.

“There's still definitely a lot of demand for talent, a lot of interest in maintaining and retaining, and also attracting really good talent for those top positions,” he said. “But, there is a softening in pay increases a little bit from last year—and I think it will further soften this year.”

While demand from executives for more money will never go away, credit unions need to pay closer attention to the effects of big pay hikes on the bottom line, remiinded Hackworth, who thinks that is beginning to occur.

“For credit unions, seeing the close to double-digit percentage pay increases each year is getting hard to swallow,” Hackworth contended. “Unless it’s increasingly becoming heavily performance-based, to continue this trend just places a great deal of pressure on the credit union.”

Scott Hackworth

Boomers Moving On

Hackworth reminded the pressures placed on credit unions regarding CEO retention really began during the pandemic as a significant number of veteran leaders deciding it was time to retire, creating a shortage of talent and a large number of positions to fill.

“It's still an uncomfortable time,” he said. “You're still fighting for talent—the unemployment rate is at 3.5%, which is crazy. There's still a lot of pressure out there. However, it's feeling more manageable than recently, and that's across the board.”

Hackworth said he believes the data show credit unions have been extremely aggressive in recent years in their efforts to keep good talent at the top.

“They’ve been making sure they have maintained their executive talent,” he said.

New Incentives to Remain

Hackworth said the data also show credit unions have been focusing on hiring or promoting younger leaders, meaning somewhere down the road a second wave of retirements will eventually challenge a new generation of leadership.

“I think in the past credit unions may not have been that aggressive in incenting leaders to remain, and that has now changed,” Hackworth said. “We're seeing in the data that some of the CEOs and some of the top titles are younger than they have been, which is what we'd expect after a lot of the Boomers have moved out.”

Hackworth reiterated that the high percentage pay increases CEO leaders have seen in recent years is not sustainable.

“So, next year it’s going to be another 8%, 10%?,” he asked. “Those are difficult percentages to maintain, especially longer term. Some of this has to subside.  It's been 8%-9% increases, but we're expecting it’s going to fall to the 6%-7% range over the next couple of years.”

A ‘Robust Time’

Hackworth called it a “robust time” for credit union talent at all levels.

“We're seeing the salaries are increasing, and that is tied to total compensation. And, it’s extremely tied to the size of the institution,” he said.

The percentage of women CU CEOs continues to steadily increase, added Hackworth, pointing out the survey found 24% of CEOs are female. Other surveys of credit unions have found that figure to be significantly higher.

“That is a great trend. We’re seeing more diversity, as well, among races. But increases there, compared to the increase in female CEOs, is moving a little slower,” he said.

Report data comes from credit unions who participated in CUES Executive Compensation Survey and/or CUES Employee Salary Survey between Jan. 1 and April 17 of this year.  

For more info: CUES 2023 Compensation Surveys Executive Summary. CUES said its Unlimited+ members have free access to the results of both surveys.

Top 10 Generative AI Tips Associations Can Use to Create Content and Drive Efficiencies

 

Top 10 Generative AI Tips Associations Can Use to Create Content and Drive Efficiencies

 Allison Kral August 25, 2023 3 min. to read

Contrary to popular belief, ChatGPT doesn’t think.

It doesn’t understand what you’re saying. Rather, tools like ChatGPT function by predicting the next best word.

That’s why it’s so important to ensure you’ve got a grasp on prompt engineering when using AI language models.

Prompt engineering is the intentional use of language that guides AI to give desired outputs and can help optimize your use of AI. Let’s unravel the intricacies and capabilities of prompt engineering, six prompting techniques, and simple tips that will empower you to get the most out of AI for your association.

What is Prompt Engineering and Why Should You Use It?

At its core, prompt engineering involves a calculated orchestration of language to direct AI models toward generating desired outputs. The magic lies in structuring prompts that shape AI behavior in ways that echo your objectives. This dual-pronged approach entails ensuring the next words generated are precisely what we need while injecting a specific intent to craft outcomes that resonate with your goals.

Not only can prompt engineering help you reach your goals, but when used correctly, it can also be invaluable when navigating complex tasks. By presenting intricate problems as a series of strategic prompts, you can guide AI models to produce coherent and precise solutions. For example, ChatGPT could create a comprehensive marketing plan for your team’s annual conference based on each member’s specific roles and your organization’s overall goal.

Related: Can ChatGPT Become an AI Tool for Associations? Learn More >

6 Types of Prompt Engineering Techniques

As you explore prompt engineering, it’s critical to understand the six techniques you can use to master your AI outputs.

1. Information/Instructional Prompting: This cornerstone method involves furnishing AI models with explicit or implicit instructions. The precision of these instructions is pivotal, dictating the course of the AI's response. Well-constructed prompts lay the foundation for accurate outcomes.
2. Roles: Imbuing AI models with distinct roles imparts unique perspectives or identities. This creative avenue often yields captivating content that aligns seamlessly with the desired output, adding a dash of personality to your AI-generated responses.
3. Few-Shot Prompting: In scenarios where training data is scarce, few-shot prompting empowers AI models to conjure meaningful outputs with minimal training examples.
4. Chain of Thought: This approach compels AI models to engage in structured thinking or reasoning sequences, mirroring human thought processes. Especially apt for intricate questions or concepts, it enables the generation of responses that navigate complexities adeptly.
5. Think, Reason, Plan, Answer: This technique instructs AI models to follow a structured pattern of thinking, reasoning, planning, and answering. It safeguards against shallow or incomplete responses, yielding thoughtful and well-reasoned outputs.
6. Prompt Chaining: By stringing together multiple prompts in succession, prompt chaining builds upon previous prompts, furnishing additional context and guidance. This methodology offers a comprehensive framework for shaping AI behavior.

It’s key to note that the first five techniques involve using one prompt, while the final technique —prompt chaining—uses multiple prompts.

Related: The Ultimate Guide to Prompt Engineering: Improve Your Input for Better Output  Learn More >

Top 10 Simple Tips for Getting the Most Out of Your AI Tools

No matter the technique you use, these simple tips can help you leverage this advanced technology to achieve your revenue and membership goals.

• Use the OpenAI Playground. The OpenAI Playground is a user-friendly interface that allows you to interact with ChatGPT models and gain deeper and more contextual chat results.
• Be specific. Provide a clear, specific prompt, which can include your role, process, and goals. The more precise your instructions, the better your results will be. 
• Be specific. Provide a clear, specific prompt, which can include your role, process, and goals. The more precise your instructions, the better your results will be. 
• Ask AI to explain itself. Ask “Why did you do this?” to understand the tech’s logic.
• Think step by step. You may not understand the answer you received, so ask ChatGPT to reveal its step-by-step thinking process.
• Avoid biased language: Be cautious of asking the AI leading questions that might introduce biased or inappropriate content. Prompt the AI to provide objective and unbiased information.
• Experiment with variations: Don't hesitate to experiment with different phrasings or prompts. Sometimes a slight rewording can yield more relevant or creative responses.
• Review and refine: Always review the AI's response. If it's not exactly what you were looking for, consider refining your prompt and asking the AI to try again.
• Offer examples: Using the few-shot prompting technique, present the AI with a few examples of what you want, and it will often be able to generate the desired content.
• Build on previous responses: If a single prompt isn't enough, consider using prompt chaining. Use multiple prompts in succession to build on previous responses and provide additional context.
• Break down complex requests: If you have a complex question or task, break it down into smaller parts. Ask the AI to think, reason, plan, and then answer. This often leads to more structured and thoughtful responses.

Become a Prompt Engineering Pro

Interested in learning more about how you can get usable results from AI? Sign up for our free, on-demand webinar, "How to Get Useable Results from AI: An Introduction to Prompt Engineering for Association Professionals," where you’ll also gain an understanding of how AI works, key use cases for your organization, and specific prompting techniques.

Today: Vote opens on transformation to America’s Credit Unions

    Today, members of CUNA and NAFCU will receive ballots to vote on the proposed merger of the two associations to form America’s Credit Unions. The vote will remain open for 60 days.

“The formation of America’s Credit Unions will be an opportunity to better serve our collective membership, lead the industry into the future, and ensure the growth and prosperity of all credit unions. America’s Credit Unions will maximize value and efficiency for members, while remaining focused on providing relentless advocacy, unparalleled compliance assistance, and impactful educational events,” wrote NAFCU Board of Directors Chair Gary Grinnell and CUNA Board of Directors Chair Lisa Ginter in messages to member CEOs ahead of the vote.

Members were asked to whitelist the electronic ballot email; please check your inbox for these messages and reach out to NAFCU Member Services via email or at 800.344.5580 with questions.

Additional details on the Transition Board of Directors and dues structure can be found online. Credit unions are encouraged to continue providing feedback throughout the vote period. CUNA and NAFCU will keep members informed of developments.

Even as Economy Remains Stronger Than Projected, Fannie Mae Forecast Still Sees ‘Eventual Downturn’

WASHINGTON—Recent economic data points to a stronger economy than previously expected, but the current business cycle “contours” still point to an eventual downturn, according to the August 2023 commentary from the Fannie Mae Economic and Strategic Research Group.

Given the “recent flurry of strong consumption data combined with two consecutive months of annualized Consumer Price Index (CPI) measures coming in close to the Fed’s 2% inflation target,” the ESR Group noted that the odds of a “soft landing” have increased, Fannie Mae said.

However, the ESR Group added, the full lagged effects of monetary policy tightening are still working their way through the economy.

The ESR Group analysis, for example, said wage growth also likely remains too high to be consistent with 2% inflation over the long run, which it believes will keep monetary policy tight. Additionally, the ESR Group posited that the recent rise in medium- and longer-term Treasury yields will likely weigh on interest-rate-sensitive sectors in coming quarters.

The ’If’ and the ‘When’

While the ESR Group noted that both the “if” and “when” of a recession are uncertain given the strength of recent economic data and decelerating inflation, their baseline forecast is for one to occur, now expected to begin in the first half of 2024, Fannie Mae said.

Regardless of whether the economy enters a recession, the ESR Group is forecasting home sales will remain subdued within a tight range.

If the economy avoids a recession, the ESR Group said it expects home sales activity would continue to be suppressed by a lack of existing home inventory for sale combined with continued affordability constraints and homeowners remaining “locked in” to their low mortgage rate.

The Alternative

Alternatively, if the economy enters a recession, improvements in affordability and inventory stemming from likely lower interest rates is expected to be offset at least in part by a weaker labor market, tighter credit, and worsened consumer confidence, Fannie Mae said.

“Regarding new homes, both sales and construction have performed comparatively well despite higher mortgage rates to date; however, the ESR Group notes some downside risk given mortgage rates are again near 7% and homebuilder confidence pulled back in August,” Fannie Mae said.

Easy to Run ‘Aground’

“It is easy to run your forecast ship aground by underestimating the American consumer,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Despite reduced saving, increased rollover credit card balances, and rising credit costs, consumers are sustaining consumption, supported by a decline in inflation.

“Nonetheless, tightening monetary policy takes a toll,” continued Duncan. “Will it result in a recession? Our base case forecast is a mild recession, and it looks as though the alternative is a soft landing, which is slow growth with only a small increase in unemployment. The difference between those two alternative outcomes is not expected to make much difference to home sales. The risk to housing activity is that inflation has bottomed out and begins to reaccelerate, requiring additional tightening from the Fed.”

Going, Going… Americans Set to Run Out of ‘Excess Savings’ by Q3

SAN FRANCISCO–Americans are exhausting their pandemic savings – and could run out of funds by the end of the third quarter, according to a new study from the Federal Reserve Bank of San Francisco. 

The Federal Reserve-SF defined “excess savings” as the difference between actual savings and the pre-recession trend.  

As of June, the Fed bank estimates show U.S. households held less than $190 billion of aggregate excess savings. 

"There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023," San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira said in a blog post.

‘Beyond Their Means’

According to the two researchers, government data showed consumers were spending beyond their means during the last quarter of 2022 and first quarter of 2023.

"The Bureau of Economic Analysis recently revised its previous estimates to show household disposable income was lower and personal consumption was higher than previously reported for the fourth quarter of 2022 and first quarter of 2023," Abdelrahman and Oliveira said. 

Revised Numbers

They added that the combined revisions brought down the Bureau's measure of aggregate personal savings by more than $50 billion.

As CUToday.info has reported, consumer spending has remained robust and has helped to head off or delay forecasts for a recession. But as CUToday.info has also reported, Americans’ credit card debt has now topped $1 trillion.

IRS Issues Ruling on Federal Credit Unions and COVID Credit

WASHINGTON–The Internal Revenue Service has issued a ruling that credit unions can receive a 2021 COVID Credit, but not 2020.

In other words, federally chartered CUs can’t claim the employee retention credit for periods in 2020 but can do so for periods in 2021, because later amendments to the terms of the credit made them eligible, according to the IRS.

Specifically, FCUs can’t claim the credit for wages paid after March 12, 2020, and before Jan. 1, 2021.

The ruling was issued by the IRS Office of Chief Counsel in a newly released legal memorandum.

According to the IRS, FCUs are able to claim the credit for wages paid after Dec. 31, 2020, and before Oct. 1, 2021, the IRS said.

The Employee Retention Credit (ERC) – sometimes called the Employee Retention Tax Credit or ERTC – is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.

Ten-Year Treasury Hits a 15-Year High

WASHINGTON–The yield on the 10-year U.S. Treasury note has hit a 15-year high, which could lead to higher costs for many borrowers.

The increase in yields is also “raising concern” on Wall Street about the potential fallout in the stock, bond and housing markets, the Wall Street Journal added.

A key benchmark for interest rates across the economy, the 10-year yield settled at 4.258%, according to Tradeweb, up from 4.220% earlier this week, marking its highest close since June 2008, months before the collapse of Lehman Brothers and expansive Federal Reserve policy “ushered in more than a decade of historically low bond yields,” the Journal added.

‘Nervous’ Investors

“The rise in yields is making investors nervous, because past surges have at times proved destabilizing for markets,” noted the Journal analysis. “With the 10-year yield still well below the level of short-term interest rates set by the Fed, some analysts see ample room for it to keep climbing—a development that could lead to unexpected disruptions, as investors are forced to unwind wagers based on projections for lower yields.”

The report further noted the 10-year yield has been climbing for weeks based largely on a run of solid economic data, which has prompted many investors to abandon bets that the U.S. is headed toward a recession over the next six to 12 months.

An ‘Extra Boost’

In addition, longer-term yields got an extra boost this month when the Treasury Department announced that it would need to borrow more than anticipated in the coming months to finance the federal budget deficit, the Journal added.

CUToday

Service One CU Selects Dolphin Debit to Manage Its ATMs

BOWLING GREEN, Ky.–Service One Credit Union has turned over management of its ATM fleet to Dolphin Debit, saying the move will improve members’ access to their money at all times.

The $277.5-million credit union, which has more than 16,000 members, said the move includes the replacement of six existing ATMs.

Service One decided in 2022 on a new ATM strategy, according to Michelle Dyer, SVP/COO. The top priorities were reduced ATM downtime, improved member service, and cost savings, she said, noting that “ATMs are very important to our members having access to their funds during off hours and on weekends. This helps us to provide a better member experience.”

Dyer added that prior to the decision to work with Dolphin Debit, “We considered other vendors, and decided that Dolphin offered the options that worked best for us.”

According to the company, since the credit union started working with Dolphin Debit, not only has the credit union achieved its reduced downtime objective, it has welcomed Dolphin’s attentive client service.

“Dolphin has been responsive and willing to work with us on any issues,” Dyer said. “And we do like the available reporting.” 

Added Joe Woods, SVP-marketing and partnerships with Dolphin Debit, “Outsourcing ATM management has worked well for Service One as it has for so many other credit unions. Turning that over to Dolphin Debit allows these institutions to focus on more strategic concerns, leaving the day to day fleet management to us.”

More Americans Failing to Make Payments on Cards, Auto Loans

NEW YORK—More Americans are failing to make payments on their credit cards and auto loans, according to a new report.

New credit card and auto loan delinquencies have now surpassed pre-COVID levels, according to a report issued by Moody’s Investors Service.

The rate of new credit card delinquencies hit 7.2% in the second quarter, up from 6.5% in the first quarter, according to the Moody’s report, which was based on household debt data published earlier this week by the New York Federal Reserve, CNN Business said.

“That closely watched rate measures the percentage of loans that became 30 or more days delinquent. This metric is now ahead of where it was in the second quarter of 2019, before the COVID-19 pandemic rocked the economy,” CNN Business stated.

Also Above Pre-COVID Levels

The rate of new auto loan delinquencies is also on the rise, hitting 7.3% in the second quarter, compared with 6.9% in the first quarter. That’s also above pre-COVID levels, the report added.

However, auto loan and credit card delinquencies remain well below Great Recession levels, CNN Business noted.

“Still, the findings suggest that more consumers are struggling to keep up with high prices as they plow through savings built up over the past three years. Moody’s warns that new credit card and auto loan delinquencies will both continue ‘rising materially,’ peaking in 2024 at between 9% and 10%, compared with 7% pre-COVID,” CNN Business said.

The good news from the Moody’s report is that fewer Americans are falling behind on their mortgage payments, CNN Business added.

CUToday

NCUA provides clarity on cyber incident reporting requirements

In a new Letter to Credit Unions sent Monday, the NCUA summarized its amendments to part 748 – which take effect Sept. 1 – requiring all federally-insured credit unions to notify the NCUA as soon as possible, and no later than 72 hours, after the credit union reasonably believes it has experienced a reportable cyber incident.

The letter offers additional commentary surrounding the definitional components of a substantial cyber incident and provides specific information about how to report an incident to the NCUA.

The NCUA instructs credit unions to either call the NCUA at 1.833.CYBERCU (1.833.292.3728) and leave a voicemail or use the NCUA Secure Email Message Center to send a secure email to cybercu@ncua.gov.

In addition, the letter describes what content should be included in the cyber incident report and highlights that sensitive personally identifiable information, indicators of compromise, specific vulnerabilities, or email attachments should not be sent to the NCUA.

View the Letter to Credit Unions. NAFCU will continue to advocate for harmonization of incident response requirements as the Cybersecurity and Infrastructure Security Agency (CISA) makes progress towards implementing its own set of rules under the Cyber Incident Reporting for Critical Infrastructure Act. 

Americans Have Now Charged Their Way To More Than $1 Trillion Card Debt

 NEW YORK–Americans now collectively owe more than $1 trillion on credit cards.

According to a new report on household debt from the Federal Reserve Bank of New York, total credit card debt rose nearly 5%, or about $45 billion, in the second quarter to a new high of $1.03 trillion.

Although delinquency rates are still low by historical standards, rising balances may present challenges for some borrowers going forward, particularly when student loan payments resume this fall, according to the New York Fed.

A ’Huge Test’

"The resumption of student loan payments will be a huge test for many cardholders, shrinking the amount they have to devote to paying off card debt and leaving some people simply unable to make minimum payments at all," Matt Schulz, LendingTree's chief credit analyst, told CNBC. "One trillion dollars in credit card debt is staggering. Unfortunately, it is likely only going to keep growing from here."

CNBC noted that after a sharp slowdown in 2020, credit card balances have grown year over year for the past seven quarters, largely due to strong consumer spending in the face of higher prices, the New York Fed researchers found.

‘Brisk Growth’

"Credit card balances saw brisk growth in the second quarter," Joelle Scally, regional economic principal in the New York Fed's research and statistics group, said in a statement. "And while delinquency rates have edged up, they appear to have normalized to pre-pandemic levels."

The average credit card rate is also more than 20% on average, another all-time high.

Tesla Adds New 7-Year Auto Loan Term; Musk Calls Card Debt ‘Freaking Scary’

AUSTIN, Texas–Tesla has introduced a new 84-month auto loan term for buyers of its vehicles.

CEO Elon Musk said the seven-month term is in response to rising interest rates.

In addition to the 84-month financing option in the U.S., Tesla has also added the option for a 96-month loan in Canada, also largely due to rising interest rates, according to Musk, Automotive News reported.

The rate on Tesla’s seven-year loans for its Model 3 was 6.39%.

“When interest rates rise dramatically, we actually have to reduce the price of the car, because the interest payments increase the price of the car,” Musk said during a quarterly earnings call. “So, we have to do something about that.”

According to data from Experian cited by Automotive News, approximately 34% of new vehicle loans in Q1 were for more than six years, dropping from about 38% in 2022.

In the second quarter of this year, Tesla delivered a record 466,140 units. It has also lowered the prices on some of its vehicles.

‘Kind of Breaking Even’

“If interest rates continue to rise, that reduces the affordability of cars. And for a lot of people, they’re really kind of just barely breaking even every month,” Musk added. “In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Like, credit card debt is freaking scary.”

One Study Finds Employees Nearly 20% Less Productive When Working From Home; Even Zoom Wants Workers Back in Office

WASHINGTON–As credit unions continue to wrestle with appropriate work-from-home/on-site work policies, a new study suggests those working from home are almost 20% less productive than those who come to the office.

That comes at the same time video-conferencing giant Zoom also wants its own employees to return to the office for at least a few days per week.

The new research results are included in a working paper that's being circulated by the National Bureau of Economic Research, economists from the Massachusetts Institute of Technology and the University of California, Los Angeles, who observed data-entry workers in Chennai, India, across two groups — those working from the office and those working from home — over test periods of eight weeks.  

The Key Finding

The key finding? Those in the work-from-home group were 18% less productive than those working from the office. 

According to the researchers, to gather subjects for the study they posted advertisements for entry-level data jobs in local newspapers, and ultimately observed a total of 235 workers.

“These workers were then divided into two groups that were randomized across skill level and preference for working from home or the office — among other traits — and given identical tasks, resources, and goals,” Business Insider reported. “The report noted that both groups were also asked to work for approximately 35 hours a week. However, those working from home were given the flexibility to choose when they worked, while those coming into the office were restricted to a 9 a.m. to 5 p.m. schedule.”

For those working from home, Business Insider reported the researchers also took low-resolution pictures of the workers every 15 minutes through a camera built into a laptop they provided, to ensure they weren't outsourcing their work. 

The Main Measure

“The main measure used to gauge productivity in the study was ‘net typing speed,’ which the report defined as the number of correct entries typed per minute, according to Business Insider.  The study also measured the "accuracy" of the workers by comparing the ratio of correct data entries to total data entries, along with idle times. 

“Why data-entry workers? The report noted they're ubiquitous across India, the job doesn't require high-level skills, it can be easily performed in both remote and office settings, and collecting detailed measures of productivity and output for data-entry workers is a relatively straightforward process,” Business Insider explained.

A Caveat

There is a caveat, and that is that cultural norms in Chennai, India, are different from the U.S., U.K., or other places, David Atkin, one of the authors of the study, told Fortune. And that is that in developing countries like India, homes are more likely to be "smaller, more cramped and hot, and have noise pollution," all of which are likely to affect productivity at home. 

“Still, one of the reasons remote workers could be less productive than their office counterpoints is because of challenges in communication that arise from virtual work,” Business Insider added, citing an earlier study of more than 60,000 staff members at Microsoft who transitioned from office work to remote work between December 2019 and June 2020 that found the employees became "more siloed, less dynamic" and weren't able to form as many new connections compared to the pre-pandemic days.

Zoom Doesn’t Want Its Staff to Zoom

Meanwhile, in an ironic announcement, Zoom, whose name became synonymous with remote work, is also asking its workers return to the office at least part time.

The San Jose, Calif.-based company is asking employees who live within a 50-mile radius of its offices to work onsite two days a week, a company spokesperson confirmed in an email to the Associated Press. The statement said the company has decided that "a structured hybrid approach – meaning employees that live near an office need to be onsite two days a week to interact with their teams – is most effective for Zoom.”

The new policy, which will be rolled out in August and September and was first reported by the New York Times, which reported that Zoom CEO Eric Yuan fielded questions from employees unhappy with the new policy during a Zoom meeting.

Steven Rick - Fed Rate Cut Unlikely in Near Future, Says TruStage Forecast

MADISON, Wis.–TruStage’s chief economist isn’t expecting the Fed to lower rates anytime in the near future.

Steve Rick

In the company’s July Trends Report, which reflects CU performance data through May, Steve Rick noted that recent Bureau of Labor Statistics data indicated headline inflation rose only 3% during the year ending in June 2023, down from the 9% reported in June 2022.

“So, with inflation rapidly approaching the Federal Reserve’s 2% inflation target, can we assume the Fed is done raising interest rates and may begin lowering them sometime soon? Well, not so fast,” stated Rick.

Rick pointed out the Federal Reserve’s preferred measure of inflation is the core personal consumption expenditure index.

A ‘Better Measure’

“The term core means it excludes the volatile food and energy sectors to get a better measure of the underlying inflationary pressures in the U.S economy,” Rick wrote in the Trends Report. “This inflation measure has been stuck at 4.6% year-over-year inflation for the last six months. The Federal Reserve is worried that the very strong labor market and rising wages are keeping this inflation measure elevated above their 2% target. So, the Federal Reserve is not expected to lower interest rates anytime soon and will in all likelihood raise the fed funds interest rate to 5.6% by the end of the year. They are hoping this will create the proverbial ‘soft landing’ where inflation subsides without causing a recession.”

The Forecast

Rick is forecasting the rise in short-term interest rates will continue liquidity and funding cost pressures for banks and credit unions for the next 12 months.

“We don’t expect the Federal Reserve to lower interest rates until the middle of 2024,” he said.

CEOs of CUNA, NAFCU Offer First Public Remarks Since Announcing Merger Plan; Numerous Issues Discussed

COLORADO SPRINGS, Colo.–The CEOs of CUNA and NAFCU made their first joint appearance  since the two trade groups announced plans to merge, addressing reasons for the proposed merger and what those who may oppose the merger should do, and further speaking to the concerns of smaller CUs and what will happen with conferences, as well as stressing the combination is not being driven by problems at either group.

During a 45-minute Q&A at the Defense Credit Union Council (DCUC) annual meeting, CUNA CEO Jim Nussle and NAFCU CEO Dan Berger answered questions posed by DCUC CEO Tony Hernandez, as well as from CUToday.info and members of the audience.

As CUToday.info reported here, the two trade groups are proposing to merge and create a new organization called America’s Credit Unions that will be led by Nussle—who was appearing at the DCUC meeting on the 89^th anniversary of CUNA’s creation--with Berger departing NAFCU at year-end. At one point Berger received a standing ovation from the audience.

A voting period is to begin later this month and conclude on Nov. 1. Both Nussle and Berger urged credit unions to vote in favor of the proposal.

From left, Tony Hernandez, Dan Berger and Jim Nussle

Here is a look at what was discussed, the issues covered and more:

Hernandez: What happens between now and Nov. 1? What should credit unions do to educate themselves on this?

Berger: Communication will be ongoing. Jim will be the CEO starting Jan. 1. My board has asked me to stay until the end of the year.

Nussle: We are working closely together as we go through this. I’ve had a lot of members ask, make phone calls, wanting to know what is going to happen with buildings and this and that. (Editor’s Note: NAFCU owns its Arlington, Va., headquarters building.) We’re going through a due-diligence process to make a lot of those decisions.

This is the first opportunity to make a new national trade association, depending on your perspective, since NAFCU was created or CUNA was created. We have a huge mission ahead of us. We need to create it the way credit unions do it, and that’s together. It’s up to our members.

As I think about the road ahead the things we need to think about are: 

One, the culture of our team. Many of you  have a connection with someone on the CUNA or NAFCU team and we want to keep that.

Two, as we’ve been talking about this we are also in a running gunfight of our own on interchange. Yes, we have a merger to do, but we also have to win interchange right now. We can’t wait until next year for a new organization. We are winning but we have work to do.

Three, this is your organization. I’m part of it. I get the honor to lead it. But it’s your opportunity to say more of this, less of that. We need to think about the future challenges of the next five, 10 and 20 years for credit unions. This is the time for that conversation. I am in listening and learning mode. Our boards have challenged us to go out and listen first.

Fourth, education. We need to train the future leaders of this industry to future-proof this industry. It’s not about an organization it’s about the people who make it up.

Five, cooperative networking. Our secret sauce has always been if we are in a room like this we solve problems together. We have a lot of work to do on what is the best, how to get to the next level. But we are surrounded by a great team culturally and professionally, with the right tools and temperament.

Berger: Something else I want to make clear is both boards don’t want this to be a CUNA 2.0 or NAFCU 2.0. They want this to be a new organization that is the best trade organization it can be.

The goal is to do this by early 2025 and be fully launched, although those dates are flexible. I will tell you the chair of America’s Credit Unions is our vice chairman, Brian Schools of Chartway FCU. Our treasurer, Karen Harbin (CEO of Commonwealth CU) will be treasurer of America’s Credit Unions. I will tell you that Brian and Karen are not shrinking violets. The CUNA board members are saying the same thing.

Hernandez: In the new ecosystem we’re getting into, how does the vision work with all these big issues such as interchange and fighting banks? How does that work in the complete ecosystem that includes the leagues, DCUC and others?

Nussle: The tentpoles are likely not going to change too much, because of what the value proposition for CUNA and NAFCU has been: advocacy. Relentless, measurable advocacy so we can be accountable to our members and challenge each other.

Too often trade associations have members that send in the check and they say ‘Get it done.’ CUs will send the check, but will also say, ‘What do we have to do? Leadership at the grassroots, state and national levels will be a hallmark going forward. Advocacy is big-top tent pole.

The boards have said we want one national voice. In order to have a strong voice you need to have good ears.

Part of the reason we came together is there has been a lot of consolidation (in credit unions). It means we can be a more intimate group.

NAFCU has some of the best compliance around, but CUNA has some really good platforms.

Berger: We have been talking for the last seven eight months about this. I’ve given a frank overview of our internal operations and what we do well and what they do well. This is about a new trade association that will kick butt on behalf of the industry. There will be hiccups and things to work through. It’s trust but verify, but we are working closely together. We have to make sure this is a success; there is no alternative.

Hernandez: How in this new organization with so many voices and issues do we resolve the voice of the minority and we figure out our issues going forward?

Nussle: One voice requires two ears. That’s not new. We haven’t always agreed on everything and we talked it out. My dad was a church choir director.  I believe the choir is the most beautiful sound you can have vocally. It brings in harmony, different words and lyrics. You can have men’s and women’s, higher and lower voices. It’s not Jim’s voice, it’s the entire movement’s voice singing together from the same song sheet with the same sound. It’s surround sound advocacy.

Hernandez: As members get to Nov. 1, we talk facilities, staff…

Nussle. I hope they’re not worried about that. I hope they are worried about the value proposition and creating an all-star staff.

Hernandez: But as this goes forward, will there be milestones/measurements?

Nussle: We’re still working all those out. We have a board holding our feet to the fire to have all of those things completely buttoned down. I want our members to focus on the value proposition. And don’t just ask what the association can do for you, but ask what you can do to take the association to a higher level. This is not the time in my estimation to focus on those small tactical issues, but on our strategic direction for the future.

Hernandez: DCUC has always worked well with both groups. What is your perspective? How can DCUC or defense CUs help add or magnify the voice?

Berger: Communication. Continue to talk to Jim and his team.

Nussle: (DCUC has) always been in the choir. But you’re not big enough to have the influence. We are not big enough without you to have that influence. We have to go together. We are not big enough to turn into this faction, that faction.

I would add one thing and I think it is a capability for the future we should give some serious thought. Some of our credit unions and military and defense CUs do an excellent job of communicating with members on issues that are important. Some are reluctant to do that because it can smack of politics. We have to figure that out. We have to do a better job, together, of being able to communicate on the reason for being and the challenges going on in policymaking that they can engage in and make it easy.

For that next, better trade organization, we will have to do a better job.

Hernandez: Beyond the Credit Card Competition Act, what are the next battles?

Berger. CFPB. And then the CFPB. And then a little more CFPB. I think they’ve gone well beyond their congressional intent and we need to put pressure on Congress to reel them back in a little bit. They are problematic for many of our credit unions.

Nussle: I agree. I would just add that generally speaking financial services has not been as disrupted as other industries, but it’s coming. And the unregulated financial services is another point we have to get serious about. That allows us to build partnerships with other financial services groups and regulators.

Berger: There is going to be another Black Swan event, we just don’t know what it is. I agree with the non-depository fintechs (issue). These apps need to be part of the same regulatory schematic as other institutions and we need to make sure consumers are protected. It could be commercial real estate. There are a lot of balloon payments out there in these portfolios.

When those events happen, that’s why it’s important to have one strong trade association there in Washington. When those hiccups come, (Congress) wants to know what’s happening, wants to know how credit union members are being affected in districts.

Hernandez: Any other comments?

Nussle: Please lean into this process. You are truly creating the next national trade association for credit unions. Give us your feedback. Both of us have on our websites a place to go if you have a comment. Please vote in favor of this so we can create that next great trade association.

Hernandez: What were your proudest days in the movement?

Berger: I think it’s the culture we have created at NAFCU. We have worked really hard at it. Early on as CEO I had an executive coach and he showed me my blind spots and things I needed to work on. I thought I was a pretty good communicator and I learned I had to communicate it eight or nine more times. I thought we could get the culture right in six to 12 months and he said I was smoking that hippie lettuce.

It took longer, but we got there. We talk a lot about extreme member service and I’m very proud of it. I think the culture helped many people in the industry. I’m going home to Florida on Jan 1. I look forward to it. I will be watching from afar. Jim can call me as often or as little as he likes.

(Berger was given a standing ovation by the audience following compliments from Nussle.)

Nussle: I will be calling. And I want to be very clear. CUNA and NAFCU are in their strongest positions they have ever been. Our boards did not come together because there is a problem except that we want to work together to be solving for problems.

CUToday.info: What about concerns expressed by smaller credit unions that they are going to be less of a priority or lost in this larger, merged trade association?

Nussle: They haven’t been forgotten so far. I met with our small CU committee just this last week. One of the first meetings I took was to talk about that particular issue. How do they feel? What do they need? What do they need more of? Less of?

All credit unions are a priority. I have had conversations where a lot of our larger CUs have said if it weren’t for our smaller credit unions we wouldn’t be as effective in our relations with policymakers.  Often, they have the best relationships at the local level. That’s not disrespecting anybody, that’s the bread and butter. Advocacy can’t change when it comes to that, it has to be attuned to them.

With compliance, my gosh, most of the smaller credit unions would not have been able to survive under this environment without the kinds of compliance information and education that is provided.

The (America’s Credit Unions) board was created to have a specific class to ensure the voice of smaller credit unions. Smaller credit unions have always been at the table at CUNA and at NAFCU. Of course, we’re going to have to earn this, to prove this. But I don’t think there should be concerns on the part of smaller credit unions.

Audience Member: What is the plan for conferences and events? NAFCU has some of the best conference planners.

Nussle: We have conferences contracted out for a few years here. I don’t want to make any announcements. We will figure it out. I see (NAFCU’s) Congressional Caucus as a potential benefit for us to add to GAC. But I want to let the teams come together and talk about those things. How can they be synergized?

Berger: We are contracted a lot through 2024. There is some duplication. But Jim and his team will have to make decisions on that.

Audience Member: Is there a contingency plan if this isn’t approved?

Nussle. Yes.

Audience Member: What about those of us thinking about voting no. Where should we go?

Nussle: First, come to me. Go to the boards, the transition boards, the current boards of CUNA and NAFCU. And NAFCU.org/merger and CUNA.org/merger are places to go.

 

Nearly 80% of Americans Say It’s a ‘Bad Time’ to Buy a Home

CUToday

WASHINGTON—Americans are feeling pretty pessimistic when it comes to purchasing a home.

The Fannie Mae Home Purchase Sentiment Index (HPSI) increased slightly in July, as consumers’ increased confidence regarding their personal financial situations, but that was largely offset by further pessimism toward homebuying conditions, Fannie Mae reported.

Three of the HPSI’s six components increased month over month, including the components measuring job security and home price expectations. However, 82% of consumers reported that it’s a “bad time to buy” a home, a new survey high and up from 78% in June.

The full index is up 4.0 points year over year.

“While consumers are reporting confidence in the components related to their personal financial situations, it’s unlikely we’ll see housing sentiment catch up to other broader economic confidence measures until there is meaningful improvement to home purchase affordability,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

Duncan noted that in July, a significant majority of consumers indicated their jobs are stable and that their incomes are the same or better than they were twelve months ago.

‘All-Time Low’

“However, homebuying sentiment once again matched its all-time low, with only 18% telling us that it's a good time to buy a home,” Duncan said. “Unsurprisingly, consumers continue to attribute the challenging conditions to high home prices and unfavorable mortgage rates. Further, the share of consumers expecting home prices to continue to rise has also been on a steady climb since March, which may only add to perceptions of unaffordability.”

Duncan added that Fannie Mae has not seen much movement in the “good time to sell” component over the last few months, an indication that the current low levels of existing homes for sale will likely continue to persist in the near term, as also reflected in our latest forecast.”
Survey Highlights

According to Fannie Mae, highlights of the survey include:

• Good/Bad Time to Buy: “The percentage of respondents who say it is a good time to buy a home decreased from 22% to 18%, while the percentage who say it is a bad time to buy increased from 78% to 82%. As a result, the net share of those who say it is a good time to buy decreased 8 percentage points month over month,” Fannie Mae said
• Good/Bad Time to Sell: “The percentage of respondents who say it is a good time to sell a home remained unchanged at 64%, while the percentage who say it’s a bad time to sell remained unchanged at 36%. As a result, the net share of those who say it is a good time to sell remained unchanged month over month,” Fannie Mae said
• Home Price Expectations: According to Fannie Mae, “The percentage of respondents who say home prices will go up in the next 12 months increased from 36% to 41%, while the percentage who say home prices will go down decreased from 26% to 24%. The share who think home prices will stay the same decreased from 37% to 34%. As a result, the net share of those who say home prices will go up in the next 12 months increased six percentage points month over month.”
• Mortgage Rate Expectations: Fannie Mae noted the percentage of respondents who say mortgage rates will go down in the next 12 months remained unchanged at 16%, while the percentage who expect mortgage rates to go up decreased from 47% to 45%. “The share who think mortgage rates will stay the same increased from 36% to 38%. As a result, the net share of those who say mortgage rates will go down over the next 12 months increased three percentage points month over month.”
• Job Loss Concern: “The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 77% to 80%, while the percentage who say they are concerned decreased two percentage points from 22% to 20%,” Fannie Mae said. “As a result, the net share of those who say they are not concerned about losing their job increased six percentage points month over month.”
• Household Income: “The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained unchanged at 19%, while the percentage who say their household income is significantly lower remained unchanged at 10%,” according to Fannie Mae. “The percentage who say their household income is about the same remained unchanged at 71%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago remained unchanged month over month.”

Join us at the National Council of Firefighter Credit Unions for unparalleled networking and industry insights!

Did you know that attending the National Council of Firefighter Credit Unions Conference on October 3-6, 2023 in Clearwater Beach, FL would be highly beneficial for a credit union service provider, director, or staff of their credit union for several reasons? 

First and foremost, it provides an unparalleled opportunity to network and establish connections with other credit union directors specifically focused on serving the firefighter community. This collaboration can lead to knowledge sharing and exchange of best practices, helping the director gain insights into successful strategies employed by others in similar positions. 

Additionally, the conference offers valuable educational sessions and workshops tailored to the unique challenges and opportunities faced by credit unions serving firefighters. Acquiring specialized knowledge in areas like risk management, tailored financial products, and member engagement can empower the director to better serve their members and enhance their credit union's effectiveness. 

Lastly, attending the National Council of Firefighter Credit Unions allows leaders to stay updated on the latest trends, industry shifts, and regulatory updates relevant to their credit union, ensuring they are well informed and equipped to navigate the rapidly changing financial landscape.

2023 Schedule

2023 Speakers

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By Firefighters for Credit Unions Serving First Responders

Reactions To Historic NAFCU/CUNA Merger

By Ray Birch CUToday

WASHINGTON–Just what will the proposed merger between CUNA and NAFCU mean to individual credit unions? A survey of CUToday.info of CEOs across the country has found generally neutral to positive reactions, with many taking a wait-and-see approach, but others having concerns over a lack of “checks and balances,” compensation paid to association executives, and fewer resources for smaller credit unions.

The CUToday.info poll of CEOs on the question of having just one national trade association representing the nation’s 4,800 credit unions also found many see benefits from the consolidation, such as a stronger and more unified voice in Washington, greater efficiencies and potentially lower overall costs for membership.

CUToday.info has made multiple attempts to get additional comment from CUNA and NAFCU beyond the statements issued earlier this week and asking for more details on the merger and what lies ahead, but both trade groups have declined comment.

Historic Turning Point

As CUToday.info reported, in what would be a historic turning point in U.S. credit union history, CUNA and NAFCU have announced plans to merge and form a new organization to be called America’s Credit Unions.

If the merger is approved, CUNA President and CEO Jim Nussle will hold the same position with the merged organization. NAFCU reported its president and CEO, Dan Berger, made a decision earlier this year to step aside to fulfill family obligations and pursue other opportunities, but he will remain at the association until year-end before departing.

According to the associations, the boards voted unanimously in May to merge the two organizations. The merger will now be subject to approval from members of CUNA and NAFCU during a 60-day voting period, which is planned to begin later this month.

‘Sweet and Sour’

Mira Ness

Mira Ness, who heads the fast-growing $73-million New York University Federal Credit Union here, told CUToday.info she has hope for America’s Credit Unions, yet has concerns with having only one trade association.

“I was kind of shocked when I heard the news, thinking immediately this is something that is sweet and sour for us,” Ness said.

Ness believes a unified voice helps credit unions in Washington, but also believes a lack of competition between two trade groups leaves few checks and balances.

“You know, a monopoly is never good,” she said. “We’ll have to see how this goes.”

NYUFCU has been a member of both trade associations for more than 15 years, and Ness applauded NAFCU’s attention to helping small credit unions, especially with compliance assistance.

“NAFCU was always fast and responsive. I really liked NAFCU. Their compliance education and compliance manuals are the best. I hope America’s Credit Unions will be able to rise to the same level,” said Ness, who added her credit union also got more out of NAFCU’s meetings, which she termed more “intimate” than CUNA’s. “But, more than anything I really hope it's going to be a lot stronger and a lot more valuable trade association. I hope by merging, we get the best of both worlds, without too much of a hike in dues.”

Concerns Over Pay

Another CEO, speaking on the condition of anonymity, had similar concerns about how small shops could be ignored by a very large organization, adding she was surprised to see how much Nussle is being paid by CUNA as the trade group in the red in 2020 and 2021.

As CUToday.info reported, according to IRS Form 990 data available through ProPublica, CUNA posted a loss of $5.362 million for its fiscal year 2021, following a loss of $9.8 million in fiscal year 2020. For 2021, the trade group had total revenue of $69.543 million against total expenses of $74.906 million. It reported total net assets of $41.038 million.

Both 2020 and 2021 were years marked by the pandemic, which shut down many of the events and meeting sponsored by the trade associations that are significant revenue generators.

In 2021, CEO Jim Nussle was CUNA’s highest compensated employee with reportable W2 compensation of  $1.798 million, plus $487,821 in other compensation from organization and related organizations. 

The same 990 information filed by NAFCU shows the trade group has remained in the black. For its fiscal year 2021, NAFCU reported total revenue of $21.551 million and net revenue of $1.725 million, with net assets of $18.028 million. It showed $1.795 million in net income in 2020. 

Darin Moody

‘Competition is Always Good’

At the $890-million Utah First CU in Salt Lake City, CEO Darin Moody compared the merger of the two trade groups to two credit unions consolidating.

“When the CEO is retiring and the organization lacks vision and energy to move things forward, a merger is a common occurrence,” said Moody, who said his organization—which has been a CUNA member—is looking forward to what results from the combination. “I realize keeping an organization going is difficult and hard work. But losing an independent voice is unfortunate for credit unions. Competition is always good, even among trade organizations.

“Lawmakers benefit from a united voice,” continued Moody. “There is a great opportunity to have broad representation so all voices can be shared, and yet come to a united decision that represents the industry clearly with lawmakers. I believe this benefit outweighs all challenges that may come with the merger.”

Gets More from the League

Christine Wood

In Signal Hill, Calif., Christine Wood, CEO of $90-milion VA Desert Pacific FCU, said her credit union has fared best with just support from its state league.

“I’ve always felt the league has done a better job of providing guidance and resources compared to CUNA and NAFCU, whether it’s advocacy or education or compliance support,” Wood told CUToday.info, adding her CU only pays league dues. “Although a portion of our dues go to CUNA, we don’t quite feel like we know enough about the benefits they provide to us as a small FI. Maybe the merger will make a difference with a single entity focusing on the future of credit unions. I’m not sure if the merger makes a difference.”

‘Quite Shocked’

Thomas Dominique was another CU executive surprised by the announcement.

“I was quite shocked,” said the CEO of the $125-million Labor CU in Washington. “This is the credit union advocacy equivalent of JP Morgan Chase and Bank of America announcing a merger. After digesting the news for a minute, I see the value that this will bring not only to advocacy efforts, but to the members of both groups.”

But Dominique does have some concerns.

“Having these two groups operate separately had created a diversity of options when it comes to the various certification programs, conferences, schools…as well as when advocacy efforts are needed,” he explained. “When a legislative bill that impacts our industry is up for debate, having two large associations attack this might possibly have greater weight than one mega-association will in the minds of the politicians, who receive the advocacy letters and testimonies.  Also, federally chartered credit unions have slightly different restrictions and limitations—and some advantages—than state-chartered credit unions. CUNA does a good job of representing all credit unions, but having an association focused on federally chartered credit unions’ needs was beneficial.”

Dominique said as the merger unfolds and America’s Credit Unions moves forward, he will be watching for how the new entity addresses the specific needs of the two types of charter.

“I also will be watching out for how the different certifications and training programs will shift,” he added. “Our board relies on NAFCU for some of their training and certifications, and watching how these events will shift in focus and scope during the merger will be something we monitor. Also, as we were a member of both, and with dues paid to both, I will be watching for some cost savings in our membership dues since (we will be) paying a single association.”

Scott Wilson

Not a Surprise

Scott Wilson, CEO of $807-million Sea Comm FCU in Massena, N. Y., was not surprised by the announcement by the two organizations.

“I am certainly not surprised by the intent to merge,” said Wilson, whose CU has been a member of both CUNA and NAFCU. “It is indicative of what is happening across our industry and our two trade associations’ reasons are similar to why natural-person credit unions merge, as well.  The combined resources will allow our industry to have a bigger impact in Washington. Certainly, it will be more efficient. I wasn’t surprised, as this topic comes up on occasion—about how having two trade associations that do similar work just doesn’t make a whole lot of sense today, especially since NAFCU no longer just focuses on federal issues.”

 A unified message will be the biggest benefit, asserted Wilson.

“Having one voice that is united…Not that both organizations have been that far apart, but a unified message will be something that will be much better in the long term,” he said.

Ending Divisiveness

Jeff Carpenter

In Oklahoma City, Okla., the CEO of $1.5-billion Weokie FCU said the combination will end “divisiveness.”

“I am now in my 36th year working in credit unions; 19 of them were spent at the state leagues and CUNA,” said Jeff Carpenter. “In 2011, I was hired as CUNA’s first vice president of membership and spent nearly five years helping credit unions understand and leverage their league/CUNA membership. During that time I saw first-hand how two associations could create divisiveness over unity. I see significant benefits of a united voice in Washington, and increased efficiency by eliminating duplicative functions and coordination of efforts.”

But even as competitors, CUNA and NAFCU spent significant energy cooperating and collaborating for the benefit of credit unions, added Carpenter.

“However, both organizations appropriately spent funds trying to sell their value proposition, and now these resources can be dedicated to representing and serving credit unions,” said Carpenter, whose organization is affiliated with the Heartland Credit Union Association and CUNA.

Unbiased Review Needed

Carpenter hopes that nothing will be lost in the merger and that Nussle and Berger will complete an “unbiased review” of both organizations’ strengths and weaknesses to create a new organization that delivers “best in class in every product, service and function. Over the years there were some who felt that two associations created a good check and balance system and fostered debate over differing views. I believe that a balanced approach can still be achieved, with all voices being heard through a representative board, committee structure and strong leadership that encourages and invites different views as part of healthy debate on critical issues.”   

Luke Labbe

‘Wicked Good Deal’  

In Saco, Maine, PeoplesChoice CU CEO Luke Labbe said his $332-million shop had for many years sought to NAFCU.

“But, as a state-chartered institution, we could never join NAFCU and I always felt that was discriminatory. When NAFCU changed its policies (by opening to all federally insured CUs) around this issue they offered a wicked-good deal, so, we signed up,” Labbe explained. “We took advantage of some research, but never attended trade shows, and quite frankly, we have too many trade shows in general. We truly didn’t have the time to utilize both resources, so we dropped NAFCU after a couple years. With the continued CU consolidation this makes a lot of sense.”

‘We See Value’

In Montpelier, Vt., Robert Miller, president and COO of the $3-billion New England Federal Credit Union and the $1.1-billion Vermont State Employees CU, which are in the process of merging themselves, is another in favor of having only one, larger, trade association.

“We see value in having one unified trade association and voice working to support and advance credit unions,” Miller said. “We look forward to learning more information as part of the process. We currently belong to both associations.”

Michael Goad

‘Logical Move’

Michael G. Goad, president and CEO of $2.1-billion Dow Credit Union in Midland, Mich., said the merger was a logical move.

“The combination of CUNA and NAFCU makes complete sense given the strength of both organizations and the promise of a bigger, even more powerful primary national advocate and trade organization for the industry,” Goad said. “Dow Credit Union currently belongs to both organizations. We appreciate how their approaches complement each other and we look forward to experiencing how America’s Credit Unions will bring the best of both organizations together to serve credit unions across the country. We believe the combined organization will have even more effective advocacy with federal lawmakers and regulators due to greater resources and focused messaging.”