What Every Credit Union Should Know About Home-Based Credit Unions

NCUA asserts home-based credit unions are "stuck in the past," but the fact these credit unions have an average charter length of 55 years and have survived the Great Depression, World War II, the Vietnam War, and the Great Recession tells a more meaningful story.

Chartered on Jan. 1, 1935, Meriden Postal Employees Federal Credit Union ($839K, Wallingford, CT) is the oldest of the home-based federal credit unions. The youngest, First Frontier Federal Credit Union ($449K, Lynbrook, NY), earned its charter in 1986. The average length of a home-based credit union’s operating life is more than 55 years. These credit unions, on average, have been serving their members nearly 20 years longer than NCUA has been an independent agency managed by a three-person board.

There have been 24,854 credit union charters issued since Congress passed the 1934 Federal Credit Union Act. Only 4,105 remain in operation; that’s a survival rate of just 16%. Today’s 74 home-based credit unions operate in 21 states and their names testify to the many groups across America that have sought to manage their own financial affairs with a member-owned cooperative:

  • Rutherford Postal District Employees FCU
  • Trenton Teachers FCU
  • Piney Grove Community FCU
  • IBW Employees FCU
  • New Mexico Correctional Employees FCU
  • St. Paul’s Euclid Parish FCU
  • Steamfitters Philadelphia FCU
  • Bay Ridge Lodge No 632 FCU
  • Helping Other People Excel (HOPE) FCU
  • United Methodists of Mississippi FCU

Financial Condition: Stable And Sound

Given that 85% of the federal charters no longer exist, it is a reasonable assumption that any group of institutions that has been operating for more than 55 years has mastered basic operational and financial requirements while providing worthwhile member service. Indeed, the numbers support this conclusion.

  • The 74 home-based credit unions collectively were managing $166 million in assets for 27,376 members at December 2013.
  • The average loan balance was $7,775. The loan portfolio was composed of 42% autos, 35% unsecured, and 14% real estate, i.e., predominantly traditional consumer lending products.
  • The average savings balance was $5,095, on which the credit unions paid a dividend of approximately 1% compared with an industry average of 0.67% for all of 2013.
  • 91% of the savings reported by these credit unions are in regular shares
  • The capital-to-assets ratio was 15.58%. As a result, the income statement shows break-even operations, ROA -0.01 basis point, as these credit unions need no new capital.
  • Shares grew 1%.
  • Total loan originations were $37.7 million, down slightly from $40 million the year prior.
  • With fees at 1.6% of total income, these credit unions charge a fraction of the industry’s fee average of 29%.
  • The expense-to-average assets ratio is 2.32%, less than the 3.17% average for all credit unions. This suggests a lot of volunteer labor.
  • The average salary per employee is $24,000 compared with $65,000 for all credit unions.

There is nothing in either the consolidated financial results or individual ratios that suggest this segment of the cooperative system is anything but safe and sound. The data shows home-based credit unions are serving their members conscientiously.

May 14, 2014

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