RANCHO CUCAMONGA, Calif.-The biggest concern for credit unions in the second half of 2012 is not whether the economy will continue to rebound, according to one expert, but what to do about all the excess liquidity pouring into credit unions post Bank Transfer Day.
"Credit unions are certainly more healthy now than a year ago," said Stan Hollen, CEO of CO-Op Financial Services. "We have better ROI and are serving a lot more people. The challenge is the liquidity situation. We can't earn enough on investments so lending is the key."
Hollen urged every credit union to explore new areas of lending, including a harder look at credit cards. Auto lending, he said, will hold its own. "But even car loans depend on the area of the country. Some are better than others."
If slow lending can't improve then the CU must look at cutting operational expenses even further, with Hollen advising not cutting back on attracting new members. "Outsourcing is providing a great deal of operations savings, we are seeing."
While the new member may not be taking out enough loans to balance out the money they are depositing, Hollen noted that the newbies are increasing debit and credit transaction volume. Debit transactions are up 9% to 10% from a year ago and credit is up 5%, said Hollen. The debit growth, Hollen believes, is helping to offset the loss in interchange, which he expects will not be that great in 2012 but will eventually trickle down to CUs under $10 billion in assets. "Overall interchange income may be off only 7% to 9%. It may stabilize there for a while until we see big box retailers squeeze the big PIN networks."
Hollen said he is guardedly optimistic about the economy, but is not expecting much reduction in unemployment or robust new job creation.
