Lending

Economy is ‘Recovering, Not Recovered’

Despite good news regarding CU membership, lending, and earnings, some CUs continue to struggle.

October 21, 2013
KEYWORDS credit , earnings , growth , loans , unions
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NCUA’s second-quarter call report data revealed much cause for optimism: substantial increases membership, loan, and earnings growth.

And yet, credit union loans should be growing at double-digit rates judging by previous economic recoveries.

Credit Union Magazine recently asked Mike Schenk, CUNA’s vice president of economics and statistics: What gives?

CU Magazine: NCUA recently released second-quarter call report data. What caught your attention?

Schenk: We haven’t spotted any shocking new developments but we do see a continuation of several key trends and important changes that we’ve been following over the past several quarters. These include a strong, sustained increase in total credit union membership, overall improvement in loan growth, and high earnings.

CU Magazine: Can you give us some context on today’s strong membership growth?

Schenk: Sure. Over the past 20 years, membership growth has averaged 2.1%. In 2003, those growth rates began a fairly steady decline, hitting a low of 0.7% in 2010.

Since 2010, we’ve seen an astounding turnaround with a 1.5% increase in 2011, a 2.1% increase in 2012, and, in the most recent data, a 2.1% increase in memberships in the year ending June 2013.

This might not sound like a huge number. But remember, the U.S. population has been growing at a rate of roughly 0.9%, according to the Census Bureau. That means credit union membership is growing at more than twice the rate of population growth.

It’s clear: More consumers are discovering the credit union difference, and an increasing number of Americans realize that credit unions are their best financial partner.

CU Magazine: That’s an incredible turnaround. What’s causing this shift?

Schenk: There are a number of factors at play. One of the more compelling developments was Bank Transfer Day which, at a certain level, was a reaction to big banks announcing stiff increases in consumer fees.

But on a broader level, membership growth reflects the public’s disgust with the general bad behaviour many banking institutions have displayed—behaviours that ultimately spawned the financial crisis.

Even today, the Chicago Booth/Kellogg School Financial Trust Index shows that 62% of the public trusts credit unions—the highest rating in the financial sector.

In contrast, the index shows just 28% of the public trusts big banks. With a disparity like that, continued growth in membership is a safe bet.

CU Magazine: And loan growth is back?

Schenk: Well, it’s like the overall economy. Recovering, not recovered. Improving—but we’ve got a ways to go to get back to “normal.”

Credit union loans actually declined (-1.2%) in 2010—the first time that’s happened in modern history. Overall, credit union loan portfolios grew by 1.2% in 2011, and by 4.8% in 2012. The new data shows growth of 5.5% in the year ending June 2013.

Looking at previous economic recoveries at this stage, four years into recovery, credit union loans typically grew at double-digit rates. The long-run average annual growth rate in loans is 7.8%, and a bit over 9% if you remove the Great Recession from the average.

NEXT: Better news ahead?

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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