Credit unions benefit from bank consolidation

Vermont Business Magazine, Mar 01, 2002 by Barna, Ed

Local proximity is not an issue, in an era of electronic data management, telecommuting, and - teleconferencing. More significant is the way combining memberships allows the credit unions to acquire the often expensive technology that enables state-of-the-art services.

No recession here

The experiences of individual credit unions vary, and the recession has affected them to different degrees. But judging by the experience of the nation's federal credit unions, 2001 wasn't such a negative year.

That was the conclusion of the National Credit Union Administration (NCUA), an independent federal agency that supervises and insures both federal and state credit unions (they are also regulated by federal and state banking authorities).

A NCUA press release on Feb. 15 reported that, "Federally insured credit unions are healthy and doing well based on statistics reported by the nationIs 9,984 federally insured credit unions at year-end 2001. While membership continues to expand year after year, moving up from 77.6 to 79.3 million members in 2001, the major category balance sheet, income statement and ratio changes occurring at federally insured credit unions in 2001 follows:

* Assets increased 14.4 percent, up from $438.2 to $501.4 billion.

* Loans increased 7 percent, up from $301.3 to $322.3 billion.

* Savings increased 15.2 percent, up from $379.2 to $437 billion.

* Equity increased 9.4 percent, up from $50 to $54.8 billion.

* Loan to share ratio declined from 79.5 to 73.8 percent.

* Net worth to total assets declined from 11.4 to 10.8 percent. The last two were not negatives, because an influx of deposits helped net worth increase by $4 billion. NCUA attributed this as "a response to the nation's weaker economy as members shift savings into secure accounts and reduce levels of personal debt."

The greater growth in deposits took place at a time when mortgage real estate loans went up 16.7 percent, after rising 7.8 percent the preceding year. Used auto loans grew 10.4 percent, but new auto loans were up less than 1 percent - in NCUA's view, probably due to attractive interest rates offered by the captive insurance companies of the automakers to spur sales despite the economic slowdown.

The surge in net worth was great enough so that NCUA decided there should be no dividends for the year 2001. It was the strongest showing in 15 years, the agency said. Checks with a variety of Vermont-based credit unions tended to support the idea that mutual association for savings and loan purposes is growing in popularity.

Safety in numbers

The New England Federal Credit Union's leading position in terms of assets is immediately understandable once one knows its history. It's one of many enterprises in Vermont that is in the black because of Big Blue. Formed by IBM employees in 1961, it picked up the employees of the Vermont Health Care Credit Union (covering the FletcherAllen Medical Center) in 1997, according to president and CEO David Bard. Another plus for them has been the availability of very high quality board members, who have been able to contribute special expertise and have brought strong supervisory skills, he said. Their appeal to members, Bard said, is a combination of services, prices, and support.