Large Dividend is One Way to Avoid Too Much Capital

In response to your recently expired poll question on awarding patronage dividends (see question on page 10), in my view the question is not worded correctly. At Power FCU, we have given back $1 million four times out of the last seven years. The $1 million giveback for 2004 was divided between the borrowers and savers of our credit union. We did that by applying a percentage of 5.50% to the year-to-date loan interest paid or dividends received as an interest rebate and dividend bonus. Why is your question wrong? We already provide great rates throughout the year. That was not the reason that we do a giveback. It’s really dependent upon two things, the profitability of the current year and the capital needs of the credit union. The net worth ratio at Power is over 12%. We maintain our ratio to be above peer for regulatory and competitive reasons. Do credit unions really need net worth ratio to be over 10%. I would really like to see one legit reason why. In fact, I would vote in favor of a national referendum of forcing a giveback if any credit union’s capital exceeded 10%. I believe that a credit union is “hoarding” its members’ money if the capital ratio exceeds 10%. For the credit union, it’s simply a source of cost free funds to be used to prop up a credit union’s future earnings. I just wish more board members would see that and force more givebacks to their members. I am also sure that members could utilize the excess capital in a credit union better than any credit union can utilize the excess itself. I would like any credit union manager or NCUA examiner to tell me why we need more than 10% in net worth. Members could put that money to better use by either making loan payments, buying something that they need or saving a little more money. John D Wakefield President/CEO Power FCU Syracuse, N.Y.