Bill Cheney, President/CEO ; Credit Union Natl. Assn. (CUNA) at the International Co-operative Alliance Global Conference in Cape Town, November 2013.

1. The economic downturn
and U.S. CUs
October, 2013
Bill Cheney
President/CEO
Credit Union Natl. Assn. (CUNA)
bcheney@cuna.coop
@BillCheney

2. TODAY’S TOPICS
• How credit unions continued to serve in downturn
• Overall impact of downturn on credit unions
• Where we are today
2

3. CU PERFORMANCE IN DOWNTURN
70%
• Credit union/co-op
advantages
• Focus on service (not profits)
• Countercyclical lending role
65.8%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-13.5%
Business loan growth,
2007-12
Credit Unions
Banks

4. CU PERFORMANCE IN DOWNTURN
20%
17.0%
18.0%
15%
10%
5%
10.0%
7.9%
6.2%
3.3%
5.1%
6.5%
0%
-5%
-1.9%
-10%
-4.3%
-9.3%
-15%
Business loan growth, by year
2007-12
Credit Unions
Banks
-1.6%

5. CU PERFORMANCE IN DOWNTURN
• Why did credit unions
outperform banks?
– Management incentives induce
lower risk
– Lower risk subjects operations to
less volatility
– … resulting in continuing lending
– (banks curtailed lending, due to
damaged balance sheets)
1.2%
1.0%
0.99%
0.8%
0.61%
0.6%
0.4%
0.2%
0.0%
Average annual
net charge-off rates,
1992-12
Credit Unions
Banks
Credit union standard deviation: 0.22%; bank standard deviation: 0.62%
5

6. CU PERFORMANCE IN DOWNTURN
• Why did credit unions
outperform banks?
– Management incentives induce
lower risk
– Lower risk subjects operations to
less volatility
– … resulting in continuing lending
– (banks curtailed lending, due to
damaged balance sheets)
2008, 18.
0%
20.0%
18.0%
16.0%
14.0%
12.0%
2007, 11
%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1st mortgage loans,
growth at CUs
6

7. CU PERFORMANCE IN DOWNTURN
• Membership growth
– Blunder by Bank of America;
imposed fee on debit card use
– Consumers rebelled;
widespread dissatisfaction
with big banks
– Social media triggers
‘Bank Transfer Day’
7

8. CU PERFORMANCE IN DOWNTURN
• Significant media attention

9. CU PERFORMANCE IN DOWNTURN
• Membership growth
– Millions more joined credit unions
– Led to largest one-year growth in 12 years
– Significant growth immediately before, after
‘Bank Transfer Day’
1.8
2
1.7
1.5
1.2
1
1.2
1.4
1.1
1.3
1.2
0.6
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Annual membership # change, in millions
9

10. CU PERFORMANCE IN DOWNTURN
• Downturn downsides for CUs
– Collapse of ‘corporate’ credit unions
– Smaller credit unions struggling
CU ROA,
2009-13(MY), in bp
84
CU member growth
by categories, MY '13
3.6%
84
68
50
0.4%
18
-1.1%
-2.2%
2009
2013
<$5M
>$100M
10

11. CU PERFORMANCE TODAY
• Credit unions are recovering
– and thriving
– Lending is on the upswing
– Nearly 96% are ‘well
capitalized’
– Net worth reaching prerecession levels
– Membership at 97 million –
and growing
• On right track – working to
stay that way
CU loan growth,
2009-13(MY)
4.8%
1.2%
2009
5.5%
1.2%
-1.2%
2013
11

12. WHAT WE’VE COVERED
• Because of co-op structure, credit unions continued to
serve
– Lending, adding members
• Recession took its toll …
• … but we have recovered
– and are moving on to building our CU movement
12

13. Thank you
October, 2013
Bill Cheney
President/CEO
Credit Union Natl. Assn. (CUNA)
bcheney@cuna.coop
@BillCheney