Spokane Teachers Credit Union's field of membership extends well beyond its occupational roots of local educators and their families. Founded in 1934, the credit union operated for 30 years out of a shoebox in high school teacher Ernie McElvain’s classroom closet. The nearly $2 billion credit union has come a long way since then. The state-charted credit union has expanded from being a teacher-based organization to one that can serve anyone living, working, or worshiping in the state of Washington or Northern Idaho. Although the credit union has a large geographical field of membership, it chooses to concentrate on members in and around the Spokane area.
“We have chosen to say focused on the metropolitan area of Spokane,” says CEO Tom Johnson. “It’s been a successful strategy for us. We’ve been able to grow membership and grow assets over a long period of time.”
Over the past 10 years, the credit union has posted continual growth in market share, according to CFO Bill Before. The credit union’s reach now includes slightly more than 10% of the local market, and some of its larger branches have more than 30% market penetration in a seven-mile radius.
The Heart of the Member
The credit union’s choice to retain a sharp member focus allows it to invest in its members in myriad ways. Over the years, STCU has developed a framework of sorts to evaluate its decisions. That framework is materialized in “the heart of the member,” a red alabaster heart that sits on the desk of every leader at STCU. The heart is a constant reminder the credit union is there to serve its members.
“Our leadership tries to model the servant-leadership philosophy,” says Brad Hunter, vice president of marketing at STCU. “It’s not just a buzz phrase here. It’s at the core of who we are.”
For example, the credit union’s First Five savings account is designed to encourage new members to build savings, no matter what their age, by offering a premium rate — 5% — on the first $500. It’s a great account that demonstrates the impact of compounding interest.
“I think we’re one of the few institutions in Spokane that still offers 25 basis points on a savings account,” says Tammy Fleiger, vice president of operations, when talking about STCU’s deposit products.
In 2007, the credit union offered a $250.00 coupon to members who had a combined loan and savings balance in excess of $100,000. Members could put that coupon toward a new CD or loan of $5,000, or they could give the coupon to a friend or family member.
“The coupon was a way of saying ‘Thanks for using the credit union,’” Before says. “We were trying to teach them the more they used us, the more profitable we will be, and the more we’ll be able to return to the member.”
The credit union raised more than $16 million — 32% of which was new money — in deposits and $3.7 million in loans from the 23% of the members that cashed in the coupon. Ten percent of the recipients passed the coupon along. In all, the average balance generated by each $250 coupon exceeded $25,000.
But STCU takes care of its borrowers as well as its depositors, and the credit union remains 100% loaned out even during a time when loan demand is soft.
“We like mortgages,” says Scott Adkins, vice president of lending at STCU. “When you have the mortgage relationship with your member, it opens the door to the entire relationship.”
STCU carries 35% of its assets in mortgages. To maintain that ratio, STCU sells a lot of its mortgage production, keeping its year-over-year loan growth hovering around 3%; however, the credit union retains servicing.
The credit union offers traditional 15-, 20-, and 30- year mortgages as well as 10-year balloon with a 20-year amortization. The balloon has no origination fee, pays off sooner than a traditional 30-year, and re-prices only after 10 years. The product is popular for members trying to get out of debt and pay off their mortgages.
“It is beneficial for us to add to the mix on our balance sheet,” Before says. “It’s popular for the member because it gets them out of a house payment much earlier in their lifecycle. Members struggle having a variable rate product, which would be great for us because all of our assets would move up when rates moved up. But the fixed-rate product is beneficial to members and the credit union is better suited to handle the interest rate risk than the member.”
Despite its rates and products, occasionally borrowers fall into trouble. “Many of our members who had mortgages were not able to make their payments because their hours had been cut or they lost their job,” Adkins says. “Our typical collection staff was not prepared to deal with those challenges, so we created a centralized group of people who are out-of-the-box thinkers with good quantitative and people skills.”
In 2008 the credit union deployed its Financial Relief Solutions team. To date, it has fielded more than 2,200 requests from members and has offered some sort of accommodation to more than half of them. The team offers payment deferral or debt restructuring to help members pay off debt and decrease their total monthly outgo. The credit union even helps members who don’t hold loans at STCU by directing them to external resources or consolidating debt into an STCU loan.
STCU spends extra time nurturing new hires, provides ample educational opportunities for staff, and tries to promote from within. Its average employee tenure is seven years, and for first quarter 2012 its turnover rate was approximately 8.5% year-to-date. The extra time with and focus on employees has likely contributed to its strong financial performance in recent quarters as motivated staff connects with members.
The credit union recently reorganized after two long-term senior officers retired. It replaced, combined, and expanded jobs and responsibilities, creating more than 40 positions in the process. In all, the credit union filled 85% of the new positions with current STCU employees.
“It’s important to hire from the outside,” says Tammy Fleiger, vice president of operations. “But when we’re able to promote from within, that shows our dedication and support for building leaders and growing individuals here in the organization. It’s an advantage when someone moves into a new role and they already understand the credit union’s culture.”
The credit union’s focus on members through employee development appears to be having a positive impact on its financial performance. The credit union’s members held an average 0.62 loan accounts as of first quarter 2012, according to Callahan & Associates’ Peer-to-Peer data. That’s eight basis points higher than its asset-sized peer group ($1+ billion) and 13 basis points higher than all credit unions.
STCU’s average loan balance was nearly $20,000, exceeding its peer group’s average by $5,000 and the average of all credit unions by $7,000. It earned $222 in revenue per member, which was $60 more than its asset-based peer group. Finally, STCU was more efficient than its peers as of the first quarter. With a 63.25% efficiency ratio, the credit union trumped its peer group’s 72.23%.
STCU invests in its employees with the belief that, if it treats its employees well, they will treat its members well. The credit union has a robust training department that reaches all areas and tenures of the credit union. A Welcome Party for new hires provides a general overview of the credit union’s culture and pairs longer serving employees with newer ones. From there, training varies depending on the position. For example, tellers go through a week of concentrated teller training at the credit union’s headquarters to learn the functions of their jobs. Member service representatives can spend up to two weeks learning the ropes of their positions.
Additionally, every employee throughout the organization has access to dozens of classroom trainings and hundreds of online modules. The credit union even offers developmental assignments, where employees can take a position on a temporary basis with another department to learn about its functions and operations. Outside the credit union, STCU offers tuition reimbursement to assist employees working toward associate, bachelor, or master degrees.
“It took me 14 years while at the credit union to earn my undergrad,” Fleiger says. “Between working and raising a family, I took a class at a time.”
STCU offers assistance based on tenure, and employees can receive 50%, 75%, or even 100% reimbursement depending on how long they have been with the credit union.
“We invest in training in significant ways for our employees,” Johnson says. “We try to help employees develop a plan and map out with their supervisor where they might want to go in their own career, how they will get there, and what tools they will need. We promote from within, so we are constantly looking for talent and for people who can rise to the next level.”