LAS VEGAS-The last time Cumorah CU experienced delinquencies and foreclosures in large numbers, terrorists had wrecked the U.S. economy by highjacking planes and flying them into buildings.
Now it is the economy itself going down in flames, and CU Journal asked Cumorah CU CEO Tony Mook how his credit union, located in one of the hardest-hit states, how his credit union-and his members-are holding up.
Credit Union Journal: What is it like to run a credit union in Nevada these days?
Mook: Times are tough, and our members are feeling the pinch. I went to dinner with a neighbor, who also is a credit union member, Saturday night and found out he'd been laid off last month. A civil engineer, he'd been with the company 20 years. He's contacted a variety of firms looking for work, but nothing doing.
With declining property values and dead auto values, additions to everyone's provision for loan losses have impacted earnings. It's as tough a time for financial institutions as I've seen since 1976, when I started my career.
CUJ: What are the biggest challenges?
Mook: Several challenges come to mind. Reducing operating expenses while shoring up provision expense isn't much fun. Maintaining member service standards while reducing staffing levels is difficult, too. Dealing with liquidity issues due to the declining wealth effect of diminished property values and members living off their savings also is challenging.
CUJ: What direct and/or indirect effects is your CU feeling from the housing market?
Mook: I keep telling my members we didn't make Alt-A or subprime loans, but that we're suffering the collateral damage of members who made the choice to utilize those loan products elsewhere. We've seen an increase in delinquencies, foreclosures, and repossessions similar in scope to early 2002: the aftermath of 9/11.
CUJ: Have the failures of IndyMac and WaMu allowed you to gain members and/or deposits?
Mook: Local bank failures have had more of an impact on us in Nevada than IndyMac or WaMu, and have generated some deposit growth and new accounts, as well as increased activity for our investment division. I've talked to some of those folks who also mention putting some money away in their mattresses as well...with faint faith in the financial system.
CUJ: Are economic conditions in your market still worsening, or have things already hit bottom and are improving?
Mook: Tough to say. I'd guess we're still a few months from a bottom here, and I don't see a sharp recovery either.
I'd say we're in for a prolonged bottom as things sort out, with a very slow recovery later next year as the bailout package and additional economic stimulus incentives finally impact the economy.
CUJ: How is lending going?
Mook: Now that the horse is out of the barn, we've closed the lending barn door by stiffening terms and raising rates. With liquidity tight, lending standards will remain tight for some time.
