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Fight Is On For Smaller CUs

Posted on December 5, 2011

IRONDALE, Ala.-As the corporate CU market shakes out, at least one CEO believes the emerging battleground will be in fighting for the business of small and mid-size credit unions.

"One of the things I want to make sure Corporate America doesn't do is focus exclusively on large natural-person credit unions," said Thomas Bonds. "I think the backbone of the credit union network as a whole-and even the corporate network as a microcosm-still rests with small to medium-sized credit unions. These are the guys that have supported us throughout this crisis and rely on us because they don't have the financial wherewithal to make the infrastructure up themselves. One of the things we're really focused on is not simply going after the large credit unions and the big dollars."

Rather than an emphasis on growth, which other corporates have said will be an area of focus in the coming year, Corporate America plans to concentrate on payment delivery systems, along with increasing infrastructure in both technology and staffing.

Yet Bonds also predicted that the corporate system will continue to see some fluctuation and said that the dust had not yet fully settled. But he was quick to add that he was not projecting any types of failures, in part because "by and large, the large corporates have all taken care of their messes." The problem, he said, lies with unrealized losses in investment portfolios, which could lead to trouble.

"The first thing I would do in evaluating a corporate credit union is look at unrealized losses on the balance sheet," said Bonds, noting that more detailed analysis is warranted in that event. "The last thing a natural person credit union needs to do is suffer another loss at a corporate credit union" because the corporate didn't plan for unrealized losses. After all, he added, the failed WesCorp began realizing unrealized losses before any natural person CUs lost money there.

Article reprinted from Credit Union Journal, Monday, November 14, 2011; By:  Aaron Passman

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