What do credit unions do with their profits?
Prepared for the Fort Wayne Journal Gazette
April 14, 2004

Because of their structure, credit unions are less likely to charge service fees than are for-profit banks and savings institutions. When they do charge, the fees tend to be lower than they are at banks. Credit unions also pay, on average, higher dividend and interest rates on savings and charge lower interest rates on loans.

The combined effect of these savings to credit union members, nationally, is estimated to have been $6.3 billion in 2002. This works out to be $76 per year per member. In Indiana, the benefit to credit union members was estimated at $141 million in 2002. Divided by Indiana’s two million credit union members, (about a third of the state’s population) this means a benefit of about $70 annually for those who choose a credit union over a bank.

Credit union "profits" are also referred to as "net income." These are the funds that businesses—including credit unions—use to build capital. When a credit union builds capital it is used as reserves and contributes to the safety and soundness of the credit union.

The only way a credit union can build capital is through generating net income. Because of their cooperative, not-for profit structure, credit unions cannot sell stock like other financial institutions that are public companies. Credit unions use their capital to serve members effectively and more efficiently and to meet the varied needs of their memberships.

DeKalb Financial Credit Union: For the ninth consecutive year, the DeKalb Financial Credit Union’s board of directors issued an interest refund to its borrowing members. For 2003, the refund of interest totaled $28,874.27. Refunds were deposited into the qualified members’ savings accounts on December 31, 2003.

All types of loans are covered by the interest refund including car, truck, personal, mortgage, home equity, business and farm loans. Over the past nine years, DeKalb Financial Credit Union has returned approximately $220,000 to its borrowing members with this program. DeKalb Financial has offices in Auburn, Garrett and New Haven.

"It is simply one way to express our appreciation to our borrowing membership for doing business with the credit union," explains Denny Post, Senior Vice President at DeKalb Financial Credit Union.

Pinnacle Credit Union: This credit union has issued dividend bonuses of 1% in many of the past years.

According to Pinnacle Credit Union President/CEO Don Simpson, "A bank does not have a mechanism to redistribute surpluses to its customers the way that a credit union does. Consumers are enjoying benefits of membership in a financial cooperative by sharing in the successes of the organization. Our member-owned structure allows us to be able to share our successes with our members."

Rather than pay the dividend bonus in 2003, this credit union kept its savings rate above market rates while banks and other financial institutions in the area dropped theirs below the 1% level. Currently Pinnacle Credit Union pays .75% on savings, compared to .25%; .15% and .10% at three Fort Wayne-area banking competitors.

Professional Federal Credit Union: Nina Baker, Professional Federal's Executive Vice President of Finance/Technology, states, "Member service is our number one priority. We invest our profits in offering the best products and services to our members. We offer our members competitive loan and deposit rates, and we serve them through 11 convenient locations. Any remaining net income is used to build capital for the safety and soundness of our financial structure."

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