ORLANDO, Fla.-During a panel discussion here credit unions were told what to expect for the rest of the year economically, and given some insights into what Washington might have in store.
The discussion took place during PSCU's annual meeting. Bill Hampel, CUNA's chief economist, told CUs they can expect to see much of the same the rest of the year: an increase in savings, lagging loan demand, increases in delinquencies charge-offs as much as 1.25%.
Prior to the corporate assessments, CUNA projected average 2009 ROA for CUs at 40 BPs, with a slight increase to 50 BPs in 2010. Overall, average CU industry capital should decline to about 9.5% this year, he said, which is still healthy. Hampel pointed to efforts to spread the assessment to 15 basis points per year over several years, and clarified that in cases where a lender offers a qualifying modification that the loan would be excluded from any cramdown in bankruptcy.
When an audience member expressed concern that a mortgage modification means taking an immediate financial hit, Hampel explained, "The sorts of mods being talked about are more about interest rate reductions than principal forebearance. The theory is that the sort of loans to get modified are the ones that are already troubled and that you are likely to count against your ALL anyway."
Meanwhile, Kirk Cuevas, a partner in Birmingham, Ala.-based Dollar & Associates and a former NCUA chief of staff, said, "I believe wholeheartedly that there are some opportunities even though there is no question that 2009 is a tough year. The question for many of our clients is do we hunker down or do we press on."
He quoted current White House Chief of Staff Rahm Emmanuel, who said, "Let's not waste a good crisis," as also good advice for credit unions. "There is no question banks are suffering a huge credibility gap," said Cuevas. "We have had in the last year probably some of the best publicity we have ever had in terms of where people should put their money and do business."
Cuevas also urged credit unions not to lose focus on the strategic goals set for the year. He added that Dollar Associates has been urging its clients to focus on six things: police your policies; check your checking and realize that free checking is not enough anymore; Investigate collaboration and CUSOs; manage your marketing and continue to market the CU, and commit to your community and "let them know you are there to help them weather the storm."
