By Frank J. Diekmann
According to the CUToday.info 2018 Member Giveback Tracker, credit unions have announced special bonuses, loan rebates and other payouts to the tune of about $180 million so far.
It’s an impressive number and a clear differentiator from banks, but it would be even more impressive were it not for the fact credit unions themselves received nearly three-quarters of a billion dollars in refunds last year from the merger of the Temporary Corporate CU Stabilization Fund and the National Credit Union Share Insurance Fund.
So, just where has the other $588 million or so gone? There is a very good question to ask about why more of it wasn’t returned to members. Don’t bother emailing me, as I know the answer from many is going to be that they returned it to members, just not directly (sadly, many CUs still either lack the data or don’t compile it on which members drive the greatest value, and just spreading it around to everyone equally isn’t really equal). Those CUs will say they have made capital investments in technology and physical facilities back-end LOS.
No doubt, too, the $735 million returned from the merger of the funds also went to boost capital at many credit unions, especially smaller and even mid-size operations that have been challenged to really boost their net worth. I had one person suggest to me there may even be a CEO or two who invested the funds in ways that goosed the metrics used as part of their annual incentive plans, and while I’m going to say that I don’t know if it’s true or not, I do have to believe that number is limited.
In the coming weeks CUToday.info will be probing deeper on where the refunds have been invested. If you want to share a thought on the subject, I’m at Frank@CUToday.info.
Meanwhile, About the Other Guys
Speaking of where did the money go…
As CUToday.info reported here, the nation’s banks have had yet another resoundingly profitable quarter, reportingaggregate net income of $59.1 billion in the fourth quarter of 2018, up $33.8 billion (133.4%) from one year ago. The improvement in net income was led by higher net operating revenue and lower income tax expenses, the FDIC said, releasing the data as part of its Quarterly Banking Profile.
So you don’t have to, I’ve done the math and it turns out $59 billion is more than $750 million or so. A LOT more. And how much of that do you believe is going to flow back to banks’ customers in the form of bonus interest and loan refunds? I’m going to say a LOT less. As in zero. And note those profit figures are just for the fourth quarter; the FDIC won’t be releasing the annual numbers for 2018 for a little while longer, since big numbers like those require extra fingers to calculate.
No one in credit unions has ever denied banks have a right to make a profit; it’s the sole reason for taking the risk of chartering a bank. What rings the Chutzpah Meter ever more loudly each quarter is the bank criticisms that credit unions have forgotten their missions (the bankers’ current FOM litigation claims CUs have abandoned the poor who live in urban cores) and, ringing the meter like a five-alarm fire, that credit unions are eating the lunches of banks that can now barely break even.
It seems pretty obvious at least a portion of those profits must have gone toward video-editing software that is used to show banking industry spokespersons keeping a straight face even when laughing.
Frank J. Diekmann is Cooperator in Chief at CUToday.info and can be reached at Frank@CUToday.infoor followed @FrankCUToday.