The Credit Union Difference Makes Us Stronger

Happy spring, everyone!

Finally, spring is here, a time to look forward to increased daylight, warmer weather, time spent outside, and making memories with family and friends.

It is also a time where many of us find ourselves reviewing personal finances to ensure we are on the right track. In light of the recent and unfortunate news surrounding stability within the American banking system, it becomes relevant to understand and appreciate how credit unions differentiate from banks, and why credit unions remain a stable, necessary, and popular choice for over 130 million Americans. An important point to remember is that credit union members have never lost a penny of insured savings at a federally insured credit union.

Erie Federal Credit Union was officially chartered in 1936, and since then, has survived not only establishing itself in the middle of the great depression, but has continuously survived 11 more recessions over the course of its 87-year existence. We are grateful to the almost 73,000 individuals who trust and have chosen membership with Erie FCU. Our savings and loan products, and diverse financial literacy efforts, are available to assist members in developing healthy money habits. No matter the age, we are here to provide financial solutions to ensure our members’ financial stability.

The Credit Union Difference

• Not-for-profit. Credit unions are not-for-profit financial cooperatives that exist to serve their members. Unlike banks, they do not issue stock or pay dividends to stockholders. Credit union profits are returned to their members in the form of lower fees and better loan and deposit rates. Credit unions are not a threat to the market share of banks. In fact, banks control over 92% of financial institution assets and reported $263 billion in profit in 2022.

• Ownership. Credit unions are owned by their members. Coming from diverse socioeconomic backgrounds, every credit union member has equal ownership. A credit union is governed by a volunteer Board of Directors, elected by and from its membership.

• Eligibility. People can qualify for credit union membership through their employer, as well as through organizational affiliations like religious institutions and social groups. In addition, people can qualify to join a community-based credit union, like Erie Federal Credit Union.

• Insured. Like banks, credit union deposits up to $250,000 per depositor are federally insured by the National Credit Union Share Insurance Fund (NCUSIF), a fund that is backed by the full faith and credit of the U.S. government. Higher insurance levels are available to certain types of accounts like joint accounts and trusts. A relatively small number of credit unions opt for private deposit insurance, which is regulated by state financial regulators. For example, Erie FCU maintains Excess Share Insurance (ESI), which provides additional coverage beyond primary NCUA coverage up to an additional $250,000, essentially extending combined coverage up to $500,000 per individual/joint depositor.

• Different. Unlike recently closed banks like Silicon Valley and Signature, more than 91% of deposits in unions nationwide are insured. The remaining percentage includes deposits that exceed the maximum federal deposit insurance amount.

• Safe. The current average credit union net worth ratio is 11%, a signal that credit unions are healthy and stable. Erie FCU maintains a net worth ratio of 9.73% at the time of this writing. This remains well above the ‘well-capitalized’ threshold of 7.00% established by the National Credit Union Administration (NCUA).

• Regulated. The National Credit Union Administration (NCUA), as well as state financial regulators, provide thorough oversight, examination, and supervision of America’s 4,912 credit unions.

• Taxed. Credit unions pay taxes (~$25 billion annually) in payroll, sales, property, and other taxes. In 1937, Congress exempted credit unions from the federal income tax. In return, credit unions provide financial benefits back to their communities in the form of more affordable financial services. In fact, credit unions are two times more likely than banks to offer free checking accounts. Taxing credit unions would be an immediate tax increase on 130 million credit union members, threaten credit union member benefits, and limit consumer financial choices.

• Stable. Credit union management does not face stockholder pressure for maximum short-term profits. They also do not have compensation packages that encourage risky market behavior. Thus, credit union management avoid high-risk, higher return business practices. Credit unions provide responsible loans and stable financial products to members.

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• Responsible. As in past crises, credit unions worked around the clock during the pandemic to provide their members with necessary resources to stay in their homes with the lights on and food on the table. Nearly all their members had access to loan modifications and waived fees. Credit unions provided more than 200,000 Paycheck Protection Program loans to local small businesses during the pandemic, with an average loan size of $47,600. During government shutdowns, many credit unions extend low or no-interest bridge loans to government employees.

• Empowerment. Credit unions exist to help people meet their financial goals, making their members fiercely loyal. Sixty-one percent of credit union members have incomes between $25,000 and $100,000, and nearly 60% of credit union branches are in low and moderate-income neighborhoods. Members know that their credit union will be there for them in good times and bad. Credit unions assist their members in becoming better educated consumers of financial services. Credit union members benefit from lower fees, lower loan rates, and higher deposit yields. The credit union difference is about improving the financial well-being of our members and advancing the communities we serve.

On behalf of all of us here at Erie Federal Credit Union, we wish you a most enjoyable spring!

Brian J. Waugaman, CEO

PS - We want to CU you! Our Annual Meeting will be held virtually and in-person on May 8, 2023. Join us for the State of the Credit Union and a preview of what’s to come.This is a great opportunity to “see” your fellow members and friends. Annual Meeting details can be found later in this newsletter!