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Many CUs call bonus dividends the right thing to do Maybe just as importantly, members love it.
In a strategic planning session a few years ago, management was considering how Statewide Federal Credit Union could grow its net worth. The discussion soon moved to the question of how much net worth is enough and how much is too much, recalls President Paul Armstrong, a CUES member.
At the time, the Flowood, Miss.based credit union's net worth was around 8 percent. The executives set a goal of 9 percent. Anything earned beyond that figure would be given back to the members of the $56 million credit union (www.statewidefcu.org).
At the end of 2005, members received a bonus dividend of 1 percent. At the end of 2006, the bonus was a whopping 2.5 percent.
"It's the members' credit union; it's their money - how much do we need to squirrel away for a rainy day?" Armstrong explains.
"I see credit unions that have 20, 25 percent net worth, and I think, 'What are you doing with it? Why not treat your members right?'"
That attitude is shared by many CEOs whose credit unions give bonus dividends to members.
"It makes sense to reward the people who helped make the credit union a success," says CUES member Dennis Pierce, CEO of $1.5 billion CommunityAmerica Credit Union (www.cacu.com) with 132,000 members, based in Lenexa, Kan.
"We did it for our members and for the community," says CUES member Ron Vogel, president/CEO of Fort Community Credit Union (www. fort community.com) , Fort Atkinson, Wis.
"It's the right thing to do," notes CUES member Richard T. Webb, president/CEO of Atlantic Financial Federal Credit Union (www.affcu.org). Hunt Valley, Md.
As at Statewide FCU, Atlantic Financial FCU management believes 9 percent net capital is sufficient; 7 percent meets the National Credit Union Administration's definition of well-capitalized.
Capital beyond 9 percent is distributed at the end of the year in bonuses, based on both dividends paid and interest collected. "The credit union is made financially successful by both borrowers and savers," Webb says. "We give back at the end of the year. We pay a bonus on the entire amount the member saved that year. On the lending side, it's the same."
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