Teresa Halleck is CEO and president of San Diego County Credit Union, the largest financial institution based in San Diego County. Halleck was president and CEO of Golden 1 Credit Union in Sacramento – the largest credit union in California – and has more than 20 years of financial institutions industry experience. She currently serves as a board and executive committee member of the California Credit Union League.
How will regulations from the Dodd-Frank Act affect community and regional banks?
The Dodd-Frank impact is significant upon financial institutions and the full ramifications remain to be seen. It apparently was intended to be consumer friendly, but will no doubt instead have notable negative impact on consumers who will end up paying more for services in the broader market. An example of this is the move by some large banks to already begin charging high monthly fees for checking accounts. This results largely from the Durbin amendment to Dodd-Frank, which aims to regulate costs currently paid by merchants related to the convenience of accepting electronic payments in lieu of cash or checks. History has shown the lowering of merchant costs in this manner does not get passed along to consumers. Instead, large retailers simply make larger profits. Meanwhile, financial institutions must seek to recoup the costs related to electronic payments and card issuance elsewhere, including those related to fraud.
Fortunately, San Diego County Credit Union has been able to continue its free checking with e-statements offering in the market. Nonetheless, it is disappointing that Dodd-Frank is resulting in unanticipated negative consequences to consumers.
What is the current state of demand for loans from small businesses, and how much ability do community and regional banks have to meet that demand?
[This] would vary from credit union to credit union, and from community bank to community bank. Depending upon the institution’s loan pricing and terms, loan demand volumes will vary based on several factors, such as whether the institution is currently advertising its products so consumers are aware of them, as well as how competitive the product or service is viewed relative to other competitor offerings the consumer may have considered. Since this situation is individual to each financial institution, I can only respond on behalf of San Diego County Credit Union and what our experience is in the current market. I would have no way of knowing how much loan demand competitors are seeing, since that is highly-guarded competitive data.
In general, I am comfortable stating that credit unions continue to have a strong ability to meet current loan demand, given industry financial data showing strong investment portfolios that credit unions would be happy to instead use to fund loans to provided additional credit and support for our local communities.
As cooperative financial institutions, credit unions seek to provide highly competitive financial products and services to the communities we serve and to do so in a very responsible manner. In other words, we offer products that are consumer friendly and do not seek to push inappropriate products upon consumers, as some other lenders have done in the past, for profit-related motives. When our customers succeed, the credit union succeeds as well since we are a financial cooperative. This is an important contrast when comparing our business model to the mega banks, which are shareholder driven, to enrich their stockholders who seek returns on their investment versus personal use of consumer-friendly products and services. In other words, stock-based financial institutions are primarily driven to benefit their shareholders first and foremost, while credit unions are driven to benefit their consumer base since we have no unrelated or outside stockholder interest to primarily serve.
It is for this reason that credit unions in general, such as San Diego County Credit Union, continue to have money to lend to consumers inasmuch as the credit union industry in general did not engage in the risky lending products - such as pick-a-payment mortgages or negative amortization mortgages - that caused the downfall of some of the largest lenders and contributed to the real estate crash. I would assume some community banks may have had similar experiences as that of the credit union industry since they too would be locally based, but I am not comfortable speaking about their capabilities or past practices.
How does continued consolidation of the biggest banks affect community banks?
As the mega banks continue to consolidate in our local markets, consumers continue to seek local providers that better understand their needs, make decisions locally and support our local communities. Credit unions are great at providing local support to the communities we serve and we believe consumers recognize and value that difference.
-Compiled by Andrew Keatts