The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

This Not-For-Profit Must Still Make A Profit

On September 24th, 2012, posted in: Uncategorized by

Yes, we are not-for-profit.  And yes, we have to make profit.  Yes, we give back our profits to our members in the form of products, services, facilities, pricing and great people.  And yes, we also must put some money away for a rainy day.  If all of this “not-for-profit needs to make a profit” language is confusing, then you may be taking the phrase “not-for-profit” just a wee bit too literal.

My hope is that there is at least one person out there that this blog will help to clarify and assist in understanding why St. Louis Community Credit Union must make a profit.  On occasion, I get a “doubter” because the Credit Union has to make a buck.  I apologize and set out to explain the need for income to pay the utilities, the staff, the building costs, etc., etc.  They are curious in a sort of “gotcha” way, when I explain that the money left over, after we pay all the bills, goes into a cookie jar that belongs to the members and is required by the government.

That cookie jar is “capital,” i.e. the Credit Union’s savings account on behalf of the members.  The federal government requires that we put a minimum of 7% of our total assets in the cookie jar in case of a rainy day.  Anything short of 7% puts you on their “double secret probation” list, and the further south of 7% you are the more likely that there are letters written and report cards issued and trips to the principal’s office made.

So, as you can see, after we’re done with all of the ins and outs of the income and expense statement, we better have (at the very least) $70,000 per $1 million in assets put away for the prospects of a rainy day or the Feds get fussy.  SLCCU is $230 million in assets, so our cookie jar had better have at least $16.1 million of profit tucked inside.  We do – and then some!

And that “lots” can’t be given back even though it is by the truest definition profit.  And, true up, it belongs to the members.  But, we can’t give it directly to you.  Indirectly, you gain the benefit of us investing or loaning the money and giving you the earnings it generates in the form of products, services, convenience, low fees, higher-than-market deposit rates and lower-than-market loan rates.  But, to reach in the cookie jar and give each of you your share directly is strictly prohibited.

Most credit unions have substantially more in the cookie jar than the minimum 7% required, and SLCCU is no exception.  We tend to be overly cautious just in case we encounter something like the past five years of the “great recession” and the subsequent anemic recovery.

Yes, it is true.  We are not-for-profit with a twist of our arm by the Federal government.  Please don’t be confused or think badly of the Credit Union when we talk about making profit.  As you can see, we have to make some money.  It’s required.

From time to time, a not-for-profit has to make tough decision about not losing money.  That’s because of our need to make a profit is real.  Clearly, literal thinkers will struggle with this idea.  Just know that the cookie jar is full and that’s a good idea for everyone.

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