It's a Wonderful Life at SunCorp
By: Charlie Watts
Sales and Marketing Manager

Ah, the holidays! It is that special time of year again. One of my favorite things about the holiday experiences are the great shows and movies that line up on television. There are the holiday specials, the old Rudolph the Red-Nosed Reindeer cartoons, The Christmas Story, and one of my all-time favorites, It’s a Wonderful Life.

It’s a Wonderful Life is an excellent movie about the character George Bailey. He is a good citizen that has always been giving of himself to his family and his town of Bedford Falls. George suddenly runs into some financial trouble and is facing the loss of his company. Because of this, George considers all of his possible ways out of this mess including suicide, but fortunately he is visited by an angel. The angel shows George what things would have been like in Bedford Falls, if George had never been born. The visions of Bedford Falls without George Bailey are nightmarish and it makes him realize that he has touched many people in a positive way and that his existence has truly been a wonderful one.

There are many similarities between George Bailey’s story and the credit union movement’s current situation. Watching this movie made me wonder what life might be like for credit unions in the Mountain and Great Plains States if SunCorp never existed. So what if SunCorp and its fellow corporate credit unions never existed?

If SunCorp never existed, then credit unions would be struggling with higher operating expenses and lower service levels because they would all be forced to use either the Federal Reserve Bank (Fed) or a correspondent bank {wince!} for their payment systems processing. The fees charged to credit unions for processing would be much higher because correspondent banks would have never felt competitive pricing pressure from corporate credit unions. Additionally, credit unions would be earning lower ROAs because they would be forced to pay for float, where with SunCorp they get immediate credit for their deposits.

If SunCorp never existed, then credit unions would not get the same great service from the Fed or correspondent banks that they are used to getting from SunCorp. Check images could be delayed for days at correspondent banks, where only with SunCorp are credit unions provided same day images. Credit unions would also be missing the strong relationships, expertise, and knowledge that are offered by SunCorp Member Service Representatives (MSRs), Business Development Officers (BDOs), and other staff members.

If SunCorp never existed, then smaller credit unions would suffer immensely from these high fees and poor service at the Fed and correspondent banks, especially because of their low volumes and lack of negotiating power. Instead of the approximately 320 credit unions in Colorado, Utah, Nebraska, and Wyoming that currently exist, I’d guess that less than 100 credit unions would remain. This is the product of increased merger activity that would have happened over the last 30 years resulting from efforts to reduce fees through economies of scale. Even the largest credit unions in the region would be suffering with poor service from the Fed. Also, these large credit unions would not be receiving discounts due to declining item volumes, which in turn, would squeeze their ability to price competitively against banks in their respective markets. The Fed has consolidated to one processing location which would cause an even bigger reduction in service. It would take days or sometimes even weeks to get a response from the Fed.

If SunCorp never existed, then credit unions would also be experiencing lower ROAs from a lack of investment opportunities. SunCorp has traditionally offered certificates that paid yields averaging about 15 basis points, or 0.15%, higher than comparable agency securities. SunCorp currently runs an average certificate book of about $1 billion. Therefore, without SunCorp, member credit unions would be earning roughly $1.5 million less in interest income each year.

If SunCorp never existed, then credit unions would be forced to deal with less liquidity and tighter cash management policies. Credit unions would have no choice but to look for lines of credit from the Federal Home Loan Bank (FHLB) and correspondent banks. The pricing on advances from FHLB has historically been very competitive; however, credit unions must put up mortgage related assets and capital as collateral for these borrowings. Therefore, credit unions that traditionally don’t portfolio their mortgage loans would be carrying them on their books, along with their related interest rate and credit risks. Also, Cash management would be much tougher without SunCorp, because credit unions would now have to manage to avoid daylight and overnight overdrafts at the Fed or their correspondent banks. With SunCorp, credit unions are offered loans with competitive rates including the Settlement Loan, which gives overdraft protection whether or not the credit union has a line of credit in place.

If SunCorp never existed, then the cooperative credit union philosophy of placing members-owners first would be vacated. Other vendors are primarily profit driven entities that are in it for the benefit of their managers and owners. SunCorp is different. SunCorp is not a vendor to you; SunCorp is your strategic, cooperatively owned partner; SunCorp is your back office. SunCorp was created by and is owned by you, our credit union members, and we work with only one goal in mind, to provide you with low cost, effective products and services for your collective benefit. If SunCorp never existed, this positive result of the cooperative credit union movement would be lost, along with all of its benefits for credit unions.

It is difficult for me to ponder what life might be like if SunCorp never existed. It is difficult because as I’ve shown above, I believe that SunCorp historically has added much value to our credit union members. All of our forefathers in the credit union family built a foundation together over many years that was strong enough to withstand many economic downturns in the past. Unfortunately, like every other financial industry in the world today, this current economic recession is different and it has put a large dent in our armor. However, regardless of what caused this mess, we are in it, and we must deal with it.

We at SunCorp apologize profusely for the losses we have caused you from our ownership in U.S. Central and our investment portfolio. Our goal is to continue to work for your benefit for as long as you feel that SunCorp’s value is needed. We thank you for your support and we look forward to serving you in the future.