Teachers Prepares as Recession Approaches

Teachers Federal Credit Union’s slow march toward becoming a national credit union hit a speed bump with the COVID-19 pandemic, and now it approaches the likelihood of a recession next year.

But Teachers ($9.2 billion in assets, 444,027 members as of Sept. 30) would enter a recession healthy. The credit union generated $58.7 million in net income in the nine months ending Sept. 30 for an annualized return of 0.87% of its average assets, down from ROA of 1.03% a year earlier. Those results were in line with the ROA for all credit unions.

Operating income, which replaces loan loss provisions with net charge-offs, was $68 million for the nine months, or an operating return of 1.01%, down from 1.03% a year earlier.

Its net revenues were up 8.4%, while loan production rose 38%. Mortgages and other residential originations rose 9.9% to $875.5 million, while non-residential production rose 65% to $1.4 billion.

In the last three years, Teachers has added 105,544 net new members, many of them in states outside New York, including Florida, where it is opening its first out-of-state branch in Tampa this fall.

President/CEO Brad Calhoun said the credit union’s geographic spread into areas with stronger-than-average housing markets has helped the credit union buffer a shrinking market.

“We’re seeing a big uptick with our loan officers in other parts like Florida, Texas and so forth that are helping us diversify,” Calhoun said.

“We’ve seen a dramatic shift as refis just fell off of a cliff,” he said. And although home buyers are finding purchases less affordable, “we still see purchase activity,” Calhoun said. “There’s still a need for people getting into homes.”

Teachers and retired teachers make up about a third of the credit union’s membership. When recessions come they still have income and pay their bills.

A largest chunk of the Florida members are teachers who retired and moved to Florida, or settled in other states to the south. But many are not retirees.

“We’ve noticed an uptick in just people moving out of the New York region, and looking for other places where their money can maybe go further,” he said.

In either case, when Teachers learns a member is moving, “we’re doing our job and educating them on all that we have to offer, and getting that next loan in Florida or wherever they’re migrating to,” he said.

Calhoun said loan growth remains strong, but the challenge has become keeping and expanding deposits.

“We’ve enhanced our deposit growth and gotten very aggressive with some promotion,” he said. That includes not only drawing attention to its rates, but also offering bonuses to members who bring in new-money deposits.

“We want to grow members,” Calhoun said. “We want to bring in deposit growth so that we can continue to be there for our members on the lending side.”

Calhoun said he expects to see Teachers’ spending on advertising grow over the coming years. “We want to get that word out, and make more of an investment there to drive membership growth.”