BOSTON - With economic turbulence swirling all around, the key to the credit union movement's future will be for CUs to do more than just survive — they must strive to boost earnings.
That was the message from Callahan & Associates President Chip Filson, who said the danger is in settling for just trying to get through this time instead of continuing to grow.
Filson pointed to the troubled sand states and noted that the CU systems in Arizona and California have allowances available to cover up to 100% of potential losses, and, along with Florida, have some of the nation's highest core earnings. Despite their dire economies, credit unions there have, for the most part, the ability to write off the losses they're likely to keep taking and still be in good shape thanks to their capital making capacity.
"That's how CUs are healed. When you have problems you do it through earnings," said Filson. "We have not only a strong balance sheet — often strongest with states with the most problems, but we also have an incredible capital creating capacity."
The cooperative movement has made some strong strides in the last 18 months as mortgage marketshare is up to 5.3% and a quarter of all vehicles financed in Jan. 2009 were financed by credit unions. That number is hovering in the 21-22% now, said Filson, but it is still a marked climb from the low teens that CUs saw just a few years ago.
An increased regulatory burden and the corporate assessment may make the cost of doing business more expensive, but the only good solution to that problem is to grow earnings, the Callahan president insisted.
"We have to work to heal problems and not merge problems away," he said. "This idea that we're losing out on markets is wrong."
