No. 1: Think Creatively About Goals
At 79.6%, Partner Colorado’s loan-to-share ratio is lower than the average for the industry (84.8%), credit unions in Colorado (89.3%), and credit unions with $250 million to $500 million in assets (80.9%).
CU QUICK FACTS
Partner Colorado Credit Union
HQ: Arvada, CO
Data as of 09.30.18
12-MO SHARE GROWTH: 13.6%
12-MO LOAN GROWTH: 14.1%
The Centennial State cooperative considers deposits a balance sheet management tool to understand member relationships. Rather than setting goals based on what percentage of its portfolio should come from new money accounts — like CDs and money markets — or retained accounts — like checking and savings — Partner Colorado considers how deposits affect net member retention and net member growth.
“If we hit our member growth goal, core deposits will follow,” Fagan says. “And if our retention efforts work well, we’ll keep that existing money and it will grow over time.”
The credit union hasn’t yet set retention and growth goals for 2019, but it met last year’s member growth goal and core deposits grew by double-digits each quarter of the year.
No. 2: Find New Money
CU QUICK FACTS
HQ: Vernon Hills, IL
Data as of 09.30.18
12-MO SHARE GROWTH: 13.5%
12-MO LOAN GROWTH: 15.7%
BCU ($3.3B, Vernon Hills, IL) has always been a lending machine, says Brett Engel, the credit union’s director of finance and credit risk management. Its loan-to-share ratio at third quarter, 110%, is just six percentage points higher than its figure from a decade ago. Even so, growing its share portfolio had never been a problem — until 2017.
Deposit growth at mid-year 2017 declined to 7% — a sharp downturn from the 15% BCU reported at mid-year 2015. What happened?
“As interest rates started to increase, members moved money that had been sitting in lower-yielding products,” Engel say.
The change in member behavior most affected BCU’s core deposit products, so to supplement that loss, BCU turned to new-money-only CD and money market account specials. It introduced two short-term, high-yield products (read more below) that helped share growth rebound in the ensuing quarters. Prior to mid-year 2017, Engel estimates 80%-90% of deposit growth came from checking and savings accounts; now, those accounts contribute approximately 30%-50%.
No. 3: Offer Products That Resonate
As it developed new money specials, BCU paid particular attention to liquidity and yield.
It launched a high-yield money market account in late 2017 that offered a 1.75% APY and required $15,000 in new money. Next, BCU looked to its CD offerings — a product not traditionally known for its liquidity. The suburban Chicago credit union knew it had to keep the term short. Enter an 11-month certificate at 2.60% APY.
“Especially in a rising rate environment, members were saying they worried about rates going up and didn’t want to lock in for a long time,” Engel says. “This was their preference.”
Engel also says the two products combined have brought in nearly $100 million of new money.
A few states west, Partner Colorado also found success tapping into member demand, albeit with a drastically different product. The Colorado cooperative is one of a select number of credit unions that offer services to cannabis businesses, an operational focus the credit union identified four years ago.
“There are businesses with 300-500 employees and every other Friday they lined up for payroll and would walk out holding envelopes full of cash,” Fagan says. “Everyone in the city knew this. It was a huge safety issue for the community.”
For regulatory reasons this is a complex population to serve, but Fagan believes his credit union does it safely — by limiting relationships to business checking accounts, no loans — and does it well.
If we hit our member growth goal, core deposits will follow,” Fagan says. “And if our retention efforts work well, we’ll keep that existing money and it will grow over time.
No. 4: Be Flexible
As time has passed, BCU has become more flexible with the requirements to its CD and money market accounts — but not to attract more new money.
“We’ve made exceptions as a way to retain deposits,” says Maggie Garcia, the credit union’s senior director of deposit products.
During new money promotions, the credit union is often approached by current members looking to take advantage of the attractive rate. And inevitably BCU bends its own rules, knowing that accommodating members is a better business practice than turning them away.
“Our growth has been built on the loyalty of our current members" Engel says. "Honoring the rates is rewarding that loyalty and putting the member first."
No. 5: Give Front-Line Staff The Tools They Need
Fagan at Partner Colorado says the cooperative has no secret sauce for attaining or retaining deposits. Rather, front-line staff focuses on individual member relationships, looking for ways in which the credit union can further benefit their financial life.
That means building trust and cross-selling only when appropriate. Those are learned skills. That’s why every member-facing employee must complete a consultative selling training program where they learn about conversational and relationship-building skills.
“Sometimes we can give our members a better deal and sometimes we can’t,” Fagan says. “We need our front-line staff to convey to members that we really are looking out for their best interest.”
No 6: Find A Better Way To Market
With greater need for deposits comes greater competition for deposits, something Engel calls an “arms race.” To stand out from the pack, BCU carefully considers all parts of its marketing messages — from propensity models to emojis.
In the case of its CD and money market account specials, BCU built propensity models based on previous deposit activity, among other pieces of data, to determine which members were likely to apply for either product. BCU’s marketing does not take a “spray and pray” approach; rather, it aims to find the members who will find value in each product.
For these two products, the best marketing results came from an email that promoted both products at once, says Kim McAuliffe, a senior campaign manager at the credit union.
“We’ve also done a lot of subject line testing which, believe it or not, really does help our members get the message,” McAuliffe says. “It’s interesting to see what works and what doesn’t. Even the ones you’d think would be winners can be busts. We carefully track what works and what doesn’t.”
So, what works for deposit product communications?
“With certificates and money markets, we’ve found that messages with the rates in the subject line get more engagement,” she says. “With checking, ‘free’ or ‘fee-free’ works well.”
Additionally, BCU tries to personalize its messages by using “you” in the message, as if the credit union is talking directly to the member, and has found success writing subject lines in the form of a question.
Finally, BCU isn’t afraid to try new things. If something doesn’t work, it tries something else.
And what is an example of something that hasn’t worked for BCU?
“We tried to make emojis work, but they haven’t had success,” McAuliffe says. “You just never know.”
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