CARSON CITY, Nev.—While some might refer to the recent economic downturn as a financial crisis, a recession, or even the ""Great Recession," Wally Murray calls it "The Dark Times."
Certainly Murray, president and CEO of $456 million Greater Nevada Credit Union, witnessed plenty of darkness during a three-year stretch starting in 2008. The CU went into the recession in good shape, posting $2.9 million in net income for 2007 with a net worth ratio of 9.14% ("well capitalized").
The following three years brought losses-$7.9 million in 2008, $10.9 million before assessments in 2009 and $2.4 million before more than $1.1 million in assessments in 2010-and its net worth dropped to 7.19%, 5.64% and 5.45%, respectively. The latter two ratios making it "undercapitalized."
Recovery began in 2011 with net income of $6.2 million before paying $1,015,800 to the Temporary Corporate CU Stabilization Fund, and its net worth up to 6.87% ("adequately capitalized"). In 2012 GNCU reported net income of $9.5 million before $384,988 to the Temporary Corporate CU Stabilization Fund, and net worth at 8.93% ("well capitalized").
In the credit union's most recent Call Report, for the first half of 2013, Greater Nevada had net income of $4.1 million before $336,000 to the Temporary Corporate CU Stabilization Fund and a net worth ratio of 9.60% ("well capitalized").
One common factor during the recovery-with the overall economy improving, GNCU has had to take far fewer hits from bad loans. "Writing off fewer loans is a main factor in our improvement, as it has for a lot of credit unions," Murray told Credit Union Journal. "Also, we initiated a number of efficiencies during the dark times that we are leveraging now. We became more efficient in lending, both on the consumer and real estate side. We have expanded electronic channels, which has allowed us to deliver better member service. And we were forced to become better at reaching out to members who were experiencing difficulties."
Stronger Lending
Lending has also been "stronger" the last two years, Murray noted, helping GNCU's climb back into the black. He said it was assisted on the real estate side with a large number of HARP refinancings, but it also has had more strength in consumer lending.
Asked about NCUA state-by-state data that showed Nevada was one of just a handful of states that had negative loan growth in the first half, Murray said not all of Greater Nevada CU's loan growth showed up on its balance sheet because it sold off many real estate loans.
"That might skew the NCUA data," he said, adding other CUs in the state have employed the same ALM strategy. "We could have shown significant loan growth, but that would have meant keeping a lot of 30-year, fixed-rate loans on our books."
The dark times forced GNCU to take a look at its overall product mix and specifically its checking accounts, according to Murray.
He said the credit union made several changes to make checking more attractive to our membership, including the introduction of a checking account called "We Rock," designed for younger members.
"Members who make qualified electronic purchases earn rebates on iTunes and Amazon," he said. "We have more than 3,000 of those accounts now, with 1,000 in our student sector. We are very happy with that."
State Of Auto Lending
Auto lending is going "pretty well," Murray assessed. He said GNCU re-engaged the indirect market and is seeing "good" results.
"The dealers are glad to have us back, and we have expanded our preferred dealer network with certain local dealers. We market the dealers and they allow us to have the first look at the loan deal when one of our members goes in to buy a car. We manage this internally."
GNCU serves all of Northern Nevada from its headquarters in Carson City, including Reno and numerous rural communities. Murray said every market has its "individual nuances" but in general housing prices have rebounded "significantly" across its service area. In some areas, home prices have increased 20% each of the last two years.
"We actually are experiencing a shortage of inventory as a lot of people are looking to buy and there are not a lot of homes on the market right now. Construction has lagged because that industry was really devastated by the recession."
Another factor leading to improvement is increased emigration from California. To fix its budget woes, Murray noted, the Golden State hiked business and personal taxes. As a result, businesses are looking at relocating to Nevada and many retirees are coming over.
"They can buy a lot more home for a lot less money, and they pay less in taxes."
Crystal Ball
Murray's present outlook for the future is "favorable" overall, but he has some concerns. He said the biggest worry is unemployment still is relatively high in GNCU's service area, stuck at more than 9% in many communities.
"We are not doing back flips, but that is part of our conservative nature," he said. "We will expand our branch network in 2014, which will be the first time we have added branches since 2007."
According to Murray, one factor that yields a good opportunity in the next few years for GNCU and all credit unions in the Silver State is community banks in Nevada were hit "even harder" by the recession than credit unions. These community banks are "largely gone," he said, because they were not well capitalized and did not operate conservatively enough.
"The barriers for re-entry for community banks are much higher now due to capital requirements, so their ability to re-emerge is higher," he said. "In many ways, the credit unions in the state are well positioned to become better community lenders overall. We have a lot of businesses coming to us looking for capital, so small business lending and small business services are big opportunities over the next two or three years.
"The future looks bright for credit unions in Nevada, and I am happy we are still part of it," he added.
