The weekly recap features news on regulatory actions, mergers and other issues facing the credit union space. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.
In the spotlight
Trends in the credit union space can come and go as quickly as those in the fashion world. But the universal employee concept is here to stay, according to an industry consultant.
In an interview, Glenn Grau, vice president for Pittsburgh-based branching consultant PWCampbell, said 99% of branches the company is now working on — whether new builds or renovations — are for credit unions using the universal employee model. The model involves training some or all branch staff to fulfill multiple roles, such as customer service or teller duties. Grau said his company is doing very few traditional buildings any more.
The universal employee model is attractive because it reduces staffing and cuts overhead costs. It also encourages more personal interaction between employees and members.
"It has that personal touch where it's a one-stop shop for them," Grau said. "They don't have to go over here to cash a check and then talk to another person to get a loan."
Grau said many credit unions are trying the concept out in one or two branches first rather than converting their entire system at once.
Many of those branches are also continuing to shrink in size. Years ago, the average size of a branch PWCampbell worked on was about 3,000 square feet, and today, many of them come in at about 1,500. And staffing in those branches continues to shrink. When Grau was a banker he had a staff of 10 employees in a branch that had $50 million in deposits. Today, he sees clients that use four full-time employees to run branches that are open six days a week.
In other news
* While tax reform muddied fairly strong results by banks in the fourth quarter of 2017, performance by credit unions, which are not subject to corporate income taxes, was marked by a notable slippage in credit quality. Short-term interest rates rose throughout 2017 and long-term rates rebounded from recent lows in the latter half of the year driving loan yields higher. Meanwhile, deposit costs rose modestly from recent lows allowing net interest margins to expand.
* Declining new car sales combined with the possibility of a profusion of autonomous vehicles hitting the roads in coming years are giving some U.S. credit unions pause when it comes to auto lending. Auto has long been the bread and butter of credit union lending, but car loans can only be made if the vehicles are actually selling. And auto industry consultants J.D. Power and LMC Automotive forecast retail light-vehicle sales for 2018 to slip 1.5% year over year, to 13.8 million units.
* Pentagon FCU is the third-largest credit union in the U.S. by assets with nearly $23 billion at the end of 2017. S&P Global recently sat down with President and CEO James Schenck at the company's Tysons Corner, Va., headquarters. Schenck said PenFed announced eight mergers in the past two years, but the company is expecting 90% to 95% of its future growth to be organic. He said Pentagon FCU is not currently seeking out merger partners.
* The Senate bipartisan bill revising large swaths of the postcrisis Dodd-Frank regulatory framework just underwent a fresh round of changes that added provisions concerning consumer protections and a clarification of how foreign banks would be regulated by the Federal Reserve. Sen. Mike Crapo, R-Idaho, who is leading the movement on the bill, released a substitute amendment adding at least three consumer protection provisions for student borrowers, victims of identity fraud and service members dealing with foreclosure.
* The country's largest credit unions again saw the fastest loan and membership growth in the fourth quarter of 2017. In the U.S., federally insured credit unions posted total assets of $1.38 trillion in the last quarter of 2017, up by $86 billion from the the previous year, according to a report from the National Credit Union Administration. Credit unions with more than $1 billion in assets held $875.6 billion in assets, or 64% of the total. These credit unions reported loan growth of 13.7% and membership increase of 9.0%.
* Former Parsons Pittsburg CU CEO Nita Rae Nirschl was sentenced to five years in federal prison and ordered to pay restitution of more than $10 million for embezzling millions of dollars from the credit union, according to a press release from the Department of Justice. She pleaded guilty to one count of embezzlement, one count of money laundering and one count of attempted tax evasion.
