Reversing a Negative Growth Trend in 2008, Opportunity in 2009

With the book closed on 2008, this article sheds some light on a critical industry growth trend that reversed its slide during the second half of the year.

 
 

There were plenty of doom and gloom headlines in the industry trades in 2008, and certainly many credit unions are suffering, particularly in areas of the country, such as Florida, California, Michigan, Ohio, and Nevada, which have experienced the most severe fallout from the mortgage market crisis and the specter of rising unemployment. Total credit union industry delinquency and net charge-off rates steadily rose over the year, but still remain much lower than those at banks and thrifts.  

However, many credit unions out there are realizing a huge opportunity as beleaguered competitors retreat from the market- clearly indicated by positive 3Q industry performance figures

  • The industry is on pace for record loan volume in 2008
    • Credit Unions reached an all-time high in the national share of first mortgage volume, auto loans, and credit card balances during the first three quarters of 2008.
  • Stock market collapse, bank failures, negative headlines, and temporary higher deposit insurance limits have spurred an increase in credit union deposits.
    • Money market balances increased nearly 17% since September 2007
  • Total industry income is up 3.6% in the past 12 months
  • Credit unions hold $94 billion in capital, up $4 billion in the past four quarters

Success Eluded a Critical Area at Mid-Year

Many of these positive trends were evident several months ago as our analysis team examined 2008 2nd quarter data, but at that time, the industry continued to underperform in one crucial metric- member growth.   

The annual member growth rate fell below 2% after 2003, and dropped to an anemic 1% in 2006 before rising in 2007. Credit union membership slumped again between June 2007 and June 2008, only growing at an annual rate of 1.25% despite the addition of over 1 million net new members during this period. Considering credit unions were seeing growth nearly across the board in 2008, and the number of potential members has been rapidly increasing over the last decade, this trend was particularly worrisome.



Needless to say, I was very pleased when I saw the third quarter member growth figures.  After adding over 1.3 million net new members between September 2007 and September 2008, the annual member growth rate grew 1.5%, as the trend started to increase after several years of decline. The loan and deposit growth that the industry has experienced over the last year has finally spread to the critical foundation of the credit union movement and the core source of future vitality: membership. 

So, What are Credit Unions Doing to Grow Members?

  • Offering attractive rates on deposit products and tailoring the message to those seeking stability in the midst of widespread economic turmoil,
  • Targeting specific demographic segments such as the Underbanked  and Gen Y, thus positioning the credit union for future growth,
  • Developing stronger SEG relationships,
    • Typically these types of promotions are much more cost-effective than a general media campaign
  • Continuing to invest in the communities they serve,
    • The industry added over 400 new branches, and over 4,000 new employees in the first 3 quarters of 2008
  • Differentiating themselves from banks and thrifts by publicizing stability, ample liquidity, and willingness to lend,
  • Basically, credit unions are taking advantage of varied opportunities emerging  in the current economic environment

Keep Positive Performance Going in 2009

Banks and thrifts are hurting right now, but they won’t be forever. Many of these institutions have tightened lending standards, lowered credit limits, and continue to absorb the brunt of negative publicity. As other types of financial institutions have taken a public relations beating, there has been an increase in positive credit union media attention over the last few months. On both the national and local level, people are hearing more about the credit union difference.

Get your positive message out to members and potential members now, while many competitors are reeling. Times might be tough, but credit unions are naturally designed to function better than other financial institutions in times of economic turmoil. There are huge opportunities out there in 2009, find a way to take advantage of them!

 

 

 

Jan. 5, 2009


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