Nestled in The Shoals of Alabama — a region encapsulating the cities of Florence, Muscle Shoals, Sheffield, and Tuscumbia — is the Wilson Dam. The dam, which was authorized by President Woodrow Wilson in 1918, was the first constructed on the Tennessee River and helped fuel the needs of a new generation of manufacturing.
By 1952, the region was in the midst of a population boom that offered employees of Reynolds Metals plenty of new economic options yet few banking ones.
Payday lenders lined the main roads of Muscle Shoals, so to avoid becoming victims of these predatory lenders, seven employees from the plant each contributed $5 to build a credit union, which would be housed on-site and funded by garnishing employee paychecks.
Today that institution, Listerhill Credit Union ($674.5M, Sheffield, AL), is a state-chartered cooperative that has 18 branches in 13 counties, stretching from northwest Alabama to south central Tennessee. But its connection to the industry from which it was born remains. In fact, one of the original seven who signed the charter in 1952 remained Listerhill’s board chairman until four years ago.
The New Sound Of The Shoals
CU QUICK FACTS
Listerhill Credit Union
Data as of 09.30.15
HQ: SHEFFIELD, AL
12-MO SHARE GROWTH: 4.56%
12-MO LOAN GROWTH: 7.85%
To many, The Shoals represents a birthplace of rock ’n’ roll and the blues. W.C. Handy, an influential blues composer and musician, was born in Florence, Alabama. FAME Studios and Muscle Shoals Sound Studio — where artists such as Aretha Franklin, Wilson Pickett, the Rolling Stones, and Bob Dylan have recorded — are also located there.
But today, the rhythms and melodies coming from The Shoals are mixed with the sounds of growing industry, namely education, health care, government, and high-tech manufacturing.
Listerhill’s membership is still largely working class and blue collar. But its members also include young adults from Florence-based University of North Alabama.
Were it not for Listerhill, both groups would pay more for their financial services and likely get less in return.
But serving these members can be more expensive for the institution. Listerhill’s expenses eat up 71.41% of its total income compared to an average of 68.59% at Alabama credit unions. And third quarter operating expenses at the credit union increased nearly 9% year-over-year compared to 7.43% and 7.45% at asset- and state-based peer institutions, respectively.
“We spend money to make money,” says chief financial officer Clay Morgan. “And we help the member on both sides of the loan and deposit equation.”
Listerhill's cost of funds is currently 0.69%. The same metric at asset- and state-based peer institutions is 0.48% and 0.57%, respectively. However, the credit union typically absorbs these costs rather than pass them on. For example, Listerhill is paying 45 basis points on its base checking account while the going rate in its market is 10 basis points, Morgan says.
Thanks to the current interest rate environment, Listerhill is lending more than ever but income is stagnant. And because it refuses to lower its year-end member dividend, both its return on assets — 0.47% — and bottom line will remain compressed until rates move.
The biggest threat we face is people forgetting the value of the financial cooperative and how it is supposed to work for the greater good.
A Search For Relevance
This past Columbus Day, the credit union gathered employees for an event in its on-site auditorium, which was built as a joint venture between the credit union and Reynolds in the early 1970s.
This year, Listerhill brought in Ken Schmidt, the former communications director of Harley-Davidson, to speak to employees about competition.
“How many of you play golf?” Schmidt asked the crowd. A number of people raised their hand.
“You’re the problem,” he said in response. “I’m not competing with another motorcycle manufacturer. I’m competing for the leisure dollar, and you’re spending money somewhere other than on a Harley.”
This meant the motorcycle company was looking at what was distracting potential customers from the product it offered. Brad Green, Listerhill’s CEO, recognized the implication for the credit union.
“Everyone has loans, everyone has checking accounts,” he says. “It boils down to the experience we create and how we make people feel during every transaction.”
In this respect, Green doesn’t believe other financial institutions or even disintermediators are the largest challenge Listerhill faces. The largest challenge is relevance.
But what is relevance to a credit union?
“The biggest threat we face is people forgetting the value of the financial cooperative and how it is supposed to work for the greater good,” he says.
According to Green, the true litmus test for relevance is whether a potential member will start a financial relationship with the credit union.
“When my teenage son has a financial decision to make, will Listerhill Credit Union be the first place he’ll look for solutions?” Green asks.
The Sincerest Form Of Flattery
To ensure relevancy, Listerhill is turning its focus inward, on its own products, services, processes, and mission.
“As long as we’re coming up with ways to help our members make or save money, I don’t care what the competition is doing,” Green says.
For example, Listerhill is now putting a greater emphasis on member segmentation to provide more relevant information and services. It’s also using focus groups to judge how well it has spread awareness.
Three years ago, Listerhill spoke with 100 University of North Alabama students, 50 who were banked and 50 who were unbanked, to see how familiar they were with credit unions.
Of the banked students, 70% had no idea what a credit union was. Of the unbanked students, 80% had no idea. Those who did know about credit unions were asked to give their impressions of the industry.
“That was even more disturbing,” Green says.
According to Green, comments included: “Credit unions are lame.” “That’s an old person’s bank.” “Not to be trusted.” “They’ll get you in debt.”
Since then, Listerhill has increased its presence in the Shoals community. It holds $84 million in member business loans, a signal of its investment in the local market. It has also started a magazine for and by young adults, planned a music festival, and doubled down on its millennial outreach.
Although it’s not an exclusive partner of the University of North Alabama, Listerhill has become involved on campus. It runs an internship program, gives money to fraternity- and sorority-sponsored charitable organizations, organizes the occasional flash mob, and operates a branch on campus with charging stations, video monitors, and a service desk. In fact, the branch is located on a valuable piece of campus real estate.
“We’re right in the middle of Starbucks and Chick-fil-A,” Green says.
Two years ago, the credit union held another focus group on campus, and the reactions of students were quite different when compared against the survey it ran previously, says Kristen Mashburn, Listerhill’s vice president of marketing.
“They legitimately know what we do,” she says.
Comments included: “It’s a fun place where you do business.” “They're the people who are always giving stuff out.” “It’s the place where you get a loan.”
Now, Listerhill’s efforts to be more relevant are being imitated by area competitors.
One of its checking accounts offers overdraft forgiveness on up to five transactions per year. In late November, Green and his team noticed a new overdraft forgiveness offering from a local community bank. Still, Green isn’t fazed.
“You have to pay $36 to get three,” Green says. “That's why I say I'm not worried about competition.”
Who? What? Where? When? Why?
“Now Muscle Shoals has got the Swampers,” Lynryd Skynyrd sang in 1974’s “Sweet Home Alabama.” The Swampers, four session musicians, were also known as The Muscle Shoals Sound Rhythm Section and played at the historic FAME Studios until 1969 when they founded the Muscle Shoals Sound Studio, which is today on the U.S. National Register of Historic Places.
Some say the Muscle Shoals gets its name from a former natural feature of the Tennessee River, a shallow zone where mussels were gathered. Others say the name derives from the bend of the river around the area, the shape of which looks like a flexed arm muscle.
During World War I, President Wilson commissioned a dam downstream of Muscle Shoals to help power nitrate plants for munitions. The dam was not completed until 1924, well after the armistice and remained underutilized until the Roosevelt administration created the Tennessee Valley Authority in 1933.
Helen Keller was born in 1880 in Tuscumbia, Alabama. Despite losing her sight and hearing in early childhood, Keller experienced a breakthrough with her childhood teacher that allowed her to effectively communicate and go on to graduate from numerous universities, hold public lectures, and become a counselor for the American Foundation for the Blind. Every summer, the play “The Miracle Worker” is produced for public viewing at her original home.
Comedy Central’s The Colbert Report aired a three-part comedy feature in 2006 on Colbert County, home of Muscle Shoals. Antics included residents temporarily changing the pronunciation of the region to match that of the TV host and Colbert’s assistant setting up a short-lived Steven Colbert Museum and Gift Shop.