As CUNA unveils a new credit union awareness campaign this week at the America’s Credit Union Conference in Seattle, perhaps a good place for the industry to start is among its own numbers.
A lively discussion Sunday at a roundtable discussion for small credit unions focused on the need for credit unions to work together, and especially for larger institutions to help their smaller brethren.
The movement’s smallest credit unions are disappearing at the rate of about one per business day but there are still a lot of them. Mike Schenk, CUNA’s chief economist and moderator of Sunday’s session at the Washington State Convention Center, said the median size of American credit unions is $27 million, and three quarters of the remaining 6,000 or so institutions are at or below the $100 million mark defined as a small credit union by the NCUA.
And while the industry continues to set new marks in asset, loan and member growth, small credit unions, especially the very smallest, are in fact losing members, and in many cases their struggle or even will to survive.
There are multiple reasons for credit unions vanishing at such a rate: SEG sponsors going out of business, lack of services that today’s consumer demands, leadership succession proving impossible, and simply merging to provide members what the credit union itself can no longer provide.
And there’s simple economics. Schenk said while the range of “small credit union” may be broad — from the very smallest up to $100 million — the challenges they face are not all that different.
For instance, their operating expenses are very similar. Schenk said a typical $1 billion-plus credit union has a 75 to 100 basis point operating expense ratio advantage over their smaller peers. “That’s a 1 percentage point pricing advantage,” Schenk said. “That’s a really big deal.”
That’s also where credit unions can help each other, through CUSOs, loan participations, and just talking amongst themselves.
Schenck said research shows collaboration “can be a real game-changer” and pointed to his own organization’s website about working together, and to work done by the Filene Research Institute.
“There’s no real silver bullet,” said Schenk, who has been staff liaison to the trade group’s small credit union committee for the past 15 years. “But we do find in the marketplace is that a lot of small credit unions are not connected. They’re not joining the groups available to them, they’re not out there sharing ideas on ways to do things. We’re doing a lousy job of collaboration.”
The Power Of Awareness
Raising awareness is a major first step and lack of time is a major hurdle. Kathy Deloney, CEO of Red River Mill Federal Credit Union ($8.0M, Campti, LA), said she like the others in the room wear many hats and finds it hard to make the time to reach out, but that when she has, it’s worked. Among the avenues she’s pursued was a CDFI grant that gave her money to lend. Her credit union has posted 12-month loan growth of 20.52% in the first quarter and an ROA of 2.43%, according to Peer-to-Peer data from the Callahan & Associates.
Another example was from Ynette Gibbs, CEO of Newrizons Federal Credit Union ($12.4M, Hoquiam, WA). She said her credit union also has funded loan growth without outside help, including secondary capital that has helped fuel fast-growing member business lending. She said her credit union also has had several collaborations with larger credit unions, including one that gave them matching funds for a grant.
An executive from one of the very largest of the large said they’re happy to help. Mike Banks, senior vice president at State Employees’ Credit Union ($33.3B, Raleigh, NC), said his credit union provides complete infrastructure to two credit unions and training, policy help, mentoring, and other resources to a few others.
They charge for the service but it’s not just about bottom line. Banks said SECU takes the view that the whole movement’s survival begins with the survival of small credit unions. “We believe credit unions survive on grassroots,” he said. “Our members are often not sure what a credit union is, but members of smaller credit unions are. Helping them is the right thing to do, and helps us in the long run, helping to raise awareness of credit unions, including among a lot of voters.”
A Matter Of Trust
Trust is a huge issue when it comes to collaboration. “Clear intentions on both sides is huge,” Banks said. “We’re not out there merge to take over anybody, but we’re very willing to provide our resources to help anyone when we can.”
Reaching out can be tough. “I just picked up the phone and called some of the larger credit unions around us. It was scary as heck,” acknowledged Joann Bisson, president/CEO of Trademark Federal Credit Union ($83.5M, Augusta, ME). She said she just wanted to find out how those credit unions got where they are. “We share similar goals and values even if we’re not equals in size,” she said. “There’s nothing specific going on right now, just an exchange of ideas.”
Something specific that is going on is loan participations, a particularly ripe area for collaboration. Schenk pointed to the low loan-to-share ratios of most small credit unions and how difficult it is to survive on that kind of portfolio.
“Real estate is a great are right now for participations, because a lot of small credit unions haven’t been doing real estate loans anyway and now the CFPB has forced a lot that had been out of the business,” he said.
Stephanie Sievers, CEO at ANECA Federal Credit Union ($95.3M, Shreveport, LA), takes collaboration seriously, including on loan participations, the power of CUSOs to provide scale for core processing contract negotiations and more, and into her broader community. Her credit union, in fact, recently invested $500,000 in a startup competition for entrepreneurs in her community.
She’s even created her own website — www.cuinformed.org — that aggregates free training, resources, grant information, and awards opportunities available to all credit unions. “As the CEO of a ‘small’ credit union, I know the challenges we all face. But with the right resources and sound information, suddenly we don’t feel so small,” she writes on her home page.
She adds, “In addition to the fabulous links, I’ll be sharing my own thoughts on running a small to mid-sized CU. Some ideas will be outside the box; others will blow the whole darn box up.”
Perhaps that’s just the kind of innovative, creative thinking that Schenk meant when he told the group about one of the consequences of so many credit unions vanishing, even while the industry’s numbers are up: the loss of intellectual capital invested in the movement.
As these credit unions close, he said, “We’re losing thousands of enthusiastic, dedicated people steeped in credit union philosophy.”
Callahan’s Chris Howard holds forth on the power of disruptive collaboration.