Strengthening The Ties That Bind

As the economy recovers, any extra effort credit unions make to reward their members will help those relationships better stand the test of time.

 
Yun Ma

By Yun Ma

 

Credit unions are finding plenty of reasons to feel confident these days. According to the Callahan & Associates’ Beige Book survey, credit union managers are cautiously optimistic now that the economy is bouncing back, the housing market has bottomed out, and the unemployment rate is diminishing. Add to that a residual public distrust of banks, and credit unions stand to benefit in the coming years. Even if the economy improves only gradually, a turnaround seems inevitable.

“We feel optimistic about local economic conditions here in Virginia,” says Paul Muse, CEO of 1st Advantage Federal Credit Union ($562M, Newport News, VA). “We experienced strong loan growth in 2012 and think 2013 will build on that success.”

In 2012, more than two million people joined credit unions, setting a new industry record. 

On the other side of the country, Elizabeth Lipke, CEO of Bourns Employees Federal Credit Union ($35M, Riverside, CA), echoes Muse’s positive outlook. “We have seen an improvement over the worst period,” she says. “Financial institutions have worked through most of the inventory of foreclosure and REO property, and most have returned to profitability. Loan demand is starting to pick up.”

In an economy on the upswing, credit unions are also enjoying an increase in new members. In 2012, more than two million people joined credit unions, setting a new industry record. Credit union membership grew 3.1% in the fourth quarter of 2012, compared with 1.4% during the same period the previous year.

Of course, getting members to use the full range of a credit union’s products and services is equally as important as attracting new members. The fourth quarter of 2012 also saw the number of share draft accounts (also known as checking accounts) increase 6.7%. Because a share draft account is considered an indication that the cooperative serves as the member’s primary financial institution, the increase is encouraging news. As of December 31, the share draft penetration rate was 51.3%, up 1.7 percentage points from 49.6% in December 2011.

member-relationship-metrics

The value of the average member relationship — the total dollar amount for deposits and loan balances except for business loans — also increased. Since the end of 2011, that number grew 2.7% from $14,981 to $15,392 – another record for the industry.

Although all signs show that credit unions are enjoying strong relationships with their members, the American Customer Satisfaction Index indicates that there is still room for improvement. According to the firm’s 2012 report, customer satisfaction with credit unions fell 5.7% to an ACSI score of 82. That’s still a better score than the 77 that banks received, but it’s a reminder that serving members is a never-ending effort.

growth-in-avg-mem-relationship

Despite the bright outlook, many members still are worried.

“Members are uncertain about the long-term stability of the economy and about rising taxes and medical care,” says Gary Tuma, CEO of Smart Financial Credit Union ($527M, Houston, TX). “Hopefully, confidence will continue to build, and stronger loan growth will follow.”

net-new-members

Until then, credit unions should continue strengthening their ties with members. In today’s challenging economy, any extra effort that financial institutions make, such as reaching out to a member with a phone call, distributing a dividend bonus, or creating a rewards program, takes on added significance. Credit unions have come to a crucial juncture. They have an opportunity to build on existing relationships cultivated with members at the height of the economic crisis and establish an even stronger rapport with those individuals in the years ahead.

 

 

 

April 15, 2013


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