The Future of Credit Unions

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The Future of Credit Unions
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Team 1Mary Cunningham, Chris Day, Gene Foley,
John Hirabayashi, Sheila Wojcik

• Questions
• 5. Is there still a need for the credit union
  model? If so, what do credit unions provide that
  other institutions dont?
• 1. What values does the credit union industry
  hold and how do we leverage this value system for
  future growth?

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Value System

• Cooperative Structure
• Not-for-Profit status (income tax exemption)
• Pro-Consumer
• Providing meaningful and empowering financial
  literacy

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Share of Total U.S. Bank Deposits7,500 Community
Banks ( 7
The Future of Banking in AmericaFDIC Conclusions

• Community Banks share of deposits, assets and
  branches have fallen steadily and significantly
  since 1985
• Community Banks constitute 94 of the number of
  all banks in the nation
• Community Banks are very important in two
  specific sectors of business and the economy
  small business lending and agricultural lending

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The Future of Banking in AmericaFDIC Conclusions

• Small bank failures have represented a
  disproportionate share of FDIC losses since 1998.
• Community Banks compete by their ability to
  handle soft data their tendency to rely on
  retail deposits for funding and their emphasis on
  personal service.
• Community Banks usually charge lower fees for
  deposit services.
• Community Banks provide a third of this countrys
  commercial and industrial loans and more than 40
  of commercial real estate loans.

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The Future of Banking in AmericaFDIC Conclusions

• The niche for Community Banks is in suburban
  markets and agricultural lending (Community banks
  hold over two thirds of all farm mortgages in the
  country.)
• After tax ROA for all Community Banks has
  consistently averaged about 1.10 for the past 10
  years. They are outperforming Community Credit
  Unions, which have averaged about 80 bp for the
  same period.
• Credit Union competition for Community Banks is
  restricted primarily to small, local and urban
  markets and is not as significant because 88 of
  credit unions are under 100 million in assets.

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The Future of Banking in AmericaFDIC Conclusions

• Community banks should continue to occupy an
  important position in the banking industry in the
  foreseeable future if policy makers can maintain
  economic stability and moderate the impact of
  regulatory burden.

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• Bank Lite
• vs
• Credit Union Microbrew

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Credit Union Strengths

• Close to customers
• Product innovation and speed to market (we are
  comparatively nimble)
• Strong Political Lobby
• Excess Capital (/- 60 billion)

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Credit Union Market Positioning

• We Sell Trust

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Strategy

• You Wont Get Screwed Product Line
• Clean Credit Cards National Branding
• The Good House Keeping Logo
• - Low offering rate
• - No Universal Default Clause
• - No Hidden Fees
• - Counseling / workout if you get in trouble

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Strategy

• Credit Unions solve retirement crisis
• Vehicle to Privatize Social Security
• -Leverage existing clout on the hill
• -Already in place with employees and firms
• -Highly regulated by a government agency
• National Partnership with AARP
• -Natural fit with membership organization
• Leader in Reverse Mortgages
• -Required Financial Counseling
• -Prevent bottom feeders from stealing peoples
  homes