The past few years have brought with them an interesting change to the American consumer landscape. The Great Recession renewed a nationwide effort to support local businesses and interests. The Occupy movement and Bank Transfer Day are both examples of ways individuals found personal empowerment through financial services decisions — after all, choosing a credit union or community bank as a primary depository is one way to ensure local money stays at work in the local community.
On the flipside, large, publicly traded corporations, especially banks, have had to contend with image concerns as well as navigate shareholder reactions to quarterly earnings report. The pressure to constantly and consistently provide a greater return can lead leaders at the top to make decisions that ultimately harm those at the ground level — its customers, employees, and communities. Such is the case in large-scale closings or layoffs.
As not-for-profit cooperatives, credit unions have the ability to take the long view. They are not under shareholder pressure to return, return, return and live or die by the quarter. Instead, the scrutiny of the credit union “shareholder” — member/owners, employees, SEGs, communities, etc. — takes on a different form with different expectations. These shareholders expect a return that takes into consideration the long-term health of those whom the credit union serves. The consistent growth of the credit union industry over the past 20 years is a testament to the work individual institutions are doing to provide value and operate under cooperative principles. This ground-up approach gives credit union leaders the flexibility to build the institution slowly while serving members in the best way possible.
When looking at credit union asset growth, total assets of credit unions are nearly four times what they were in 1993. However, the industry has posted only four years of double-digit growth and its slowest annual asset growth rate was 3.2% in 1995. In the past 28 years, membership has increased 92% and loans have increased eight-fold. Capital is nearly 15 times higher than it was in 1985. So why is it rare to see large swings in asset levels?
Credit union growth largely reflects that of the employee and community groups they serve, for which it is unusual to see large swings in economic growth. Therefore, credit unions must be patient while their growth objectives, including individual member relationships, mature. The average member relationship, which is defined as the average amount of loans and deposits each member has with a credit union, has gradually grown to be nearly two-and-a-half times what it was two decades ago. The fastest growth of 7-8% was in the early 2000s. The compound annual growth rate over the past 20 years is closer to 5.0%.
AVERAGE MEMBER RELATIONSHIP
Data as of December 31 for all U.S. credit unions
© Callahan & Associates | www.creditunions.com
Source: Peer-to-Peer Analytics by Callahan & Associates
Credit unions share a responsibility to support their members and the communities they serve, regardless of whether they define “community” by geography or sponsor organization. Although it is not unprecedented for a credit union to close a branch, the considerations in doing so go beyond the bottom line. In many cases, the credit union tries to meet member needs through shared branching and mobile services or by turning over its member relationships to a credit union that is able to serve them. And there are still credit unions that are willing to serve a community after the sole financial institution departs, as Hope Credit Union ($186.7M, Jackson, MS) and NorthCountry Federal Credit Union ($435.3M, Burlington, VT) have done in recent years.
Services With Sustenance In A Financial Desert
Financial Hope In Desperate Times
Stepping Up When Banks Step Out
Banking On The Underbanked
More than 97 million Americans now belong to a credit union nationwide; that’s up from 64.2 million in 1993. These are the beneficiaries of the credit union long-term approach. As credit unions steadily grow in the future and more consumers choose to bank with a credit union, these individuals as well as the overall economy will reap the rewards of smart members that are able to save money through lower loan rates and higher deposit returns.