The title character in the Pogo comic strip once uttered the now famous line, "We have met the enemy and it is us." He could have been talking about credit unions. There are many external threats to the industry (e.g., threat of taxation, diminishing margin spreads, excessive regulation) but the real threat is our inability to respond to the external threats. The credit union model is in deep trouble but the response of most of the industry is to ignore the warning signs and continue to drift toward becoming a marginal industry.

Alarmist you say? How do you ignore the fact that we are losing a credit union a day or that membership growth is flat? Yes there are strategic mergers but most mergers are due to credit unions that are in dire financial straights or have lost the energy to fight the good fight. With net interest margins that are now less than 1% and some credit union operating expenses exceeding their income, we must conclude that the traditional credit union mode is in serious trouble.

What is the answer? The simple answer is to make the margin larger. If interest income is not enough, generate non-interest income. Work with other credit unions and third party service providers to generate income from additional and valuable services to members. If operational expenses are too high, create scale and efficiencies by collaborating with other credit unions in CUSOs. Credit unions have proven that these strategies work but most credit unions will never give them a chance to work or give them a half-hearted effort that is destined to fail. Why?