Learn Marketing & Strategy Insights, You Will.

Tag: credit unions (Page 1 of 5)

Are 80% of Credit Unions in Trouble?

Originally published in CUInsight.com

This was going to be an article about holiday cheer and Christmas music. The first paragraph would be asking you when you first heard that holiday song this year. And then there would be a section on how holidays seem to be starting up earlier in 2020.

Which is totally fine, because if there was ever a year we needed some extra cheer…well, yeah.

Instead, a coworker (ok, my dad) shared a recent Credit Union Times article about the performance of the industry, separated by segments. He noticed they are now calling all institutions smaller than $1B in asset size “small”.

$1B Is Small?

Kids Shoe
Small for an adult shoe or huge for a kid’s shoe?

Are you from a $750M asset size credit union? Do you feel small? Because now you are. Join 4,875 others that fall under that classification. Not to mention you make up 92.3% of all credit unions.

Doesn’t that seem, odd, to you? It did to us as well. So I started digging into the numbers. Spreadsheets, here we come! Don’t worry, you’ll only get the highlights. I’m not subjecting you to more columns and rows than you already have at work!

Feel free to check my data using the publicly-available 5300 call reports. I’d love to be wrong in this. You’ll see why soon.

It’s Good to Be King

Lion
It was either Mufasa or Mel Brooks.

First, let’s take a look at the top of the top…our $4B+ credit unions. There are 70 of them as of December 2020. Here’s their big stats:

  • $705B in total assets (industry as a whole has $1.81T, or $1810B for consistent decimal points)
  • 42.7 million members out of a total 125.1 million (34% in 1% of CUs)
  • 18.2% average asset growth (17.6% median growth)
  • 5.7% average member growth (5% median growth)

In addition to those positive numbers, none posted any losses. Overall, big credit unions are doing great! It is a testament to the hard work of thousands of credit union employees. Congratulations on helping serve millions of Americans through a not-for-profit financial cooperative.

So I’d assume if the top is doing so well, everyone else must be, too! “A rising tide raises all ships” is a phrase heard often in our industry. And I love seeing the cooperation between institutions.

I mean, there are hard-working and dedicated people at credit unions of every size, whether “small” or actually just a few thousand members strong! Good things for all, right?

“Small” Credit Unions Doing Well

Sapling Growing Out of Dirt
Growth is great!

You can check out some of their data in the aforementioned article. In general, the numbers look positive. But remember, that’s counting all credit unions under $1T asset size in one pot. A bit crowded, don’t you think?

Plus, it’s important to have some social distancing.

I wanted to dig deeper, and not into that group, but one which you’re more familiar.

And, it was time to put that one statistics class I took to good use. Besides, it wouldn’t be the first time I highlighted how you can make stats say almost anything.

A Different Picture <$250M

Fingers Holding Tiny Dollar Bill
Are you getting the full dollar, ahem, story?

I remember not long ago when “small” credit unions were considered those with an asset size below $250M. Even today, you make up 4230 of 5,244 institutions. That’s 86.8% of the total!

In speaking with some of you, I’ve learned that you serve members whom the larger ones cannot. You fulfill a need for financial services in our country that no one else does. Thus, you’re important!

Here are some of your numbers:

  • $210.6B assets (11.6% of total CUs)
  • 19.6 million members total (15.7% of total)
  • 11.2% average asset growth (10.9% median)
  • 8.75% average member growth

Despite making up a small portion financially, and even numerically, you’re doing well. Asset growth is strong, whether we use average or median. In case you’re wondering, I used median to eliminate the effects of “extreme outliers”.

Essentially, using both gives us confidence that the numbers we see are representative of the group.

“But, Joe, you forgot to include the median for average member growth!”

Great catch. I was saving it for right now! Because something really interesting happened when I ran this value. In fact, I even did it a few times to make sure I hadn’t messed up.

For credit unions with a $250M or less asset size, median member growth is currently -0.92%. Yes, negative! Small credit unions are, in general, losing members.

“But the average was up so much!”

True. I looked at the data and some credit unions post 40% or higher member growth (and some with similar swings downward). Since they only have a few thousand members, it takes less to create large swings. Hence why I checked the median as well.

Deeper Still and More Concerns

Scuba Diver and Rocks
Let’s bring some light to that darker dive.

That made me want to see if the member loss was more prominent on one side of the group or another. Sadly, it was. I looked at the 2811 credit unions with <$50M asset size, composing 53.6% of the total. Their average member growth is 13%. Hooray! But…

Their median member growth is -1.3%. Nearly .4% lower than the larger segment. 

So why are the numbers so divergent?  PPP loans could have had something to do with the success of large credit unions, but not likely the member growth numbers.

Sure, they proportionally did more PPP lending, providing part of that boost. Truly smaller credit unions didn’t have an opportunity to provide as much of this assistance.

I recall hearing about how difficult the processes were. If you were filing them manually, you were getting fewer done, and that’s even with the enormous amount of time and energy you put into it!

At the end of the day, large credit unions benefited and smaller ones, as a whole, did not.

Though that alone shouldn’t explain the disparity.

With Your Data, You Can Act

Group of People at Table with Notes and Laptop
Make your plans with the best information.

I’m not here to ponder the reasons. You have a whole bunch of really smart people ready to dive into analysis. Sometimes I’m one of them, but not today. As I said above, this was just to share the data.

I believe it’s essential to have good information before you make any plan or take action. It’s why our company runs an unbiased and honest Learning Library, filled with insights and guidance for a range of products and services.

So seeing an article that puts a $900M credit union in the same group as one which has 4,000 members forced me to take action. You know you have different challenges and strategies for growth (or survival). Addressing you together isn’t helpful.

So, are 80% of Credit Unions in Trouble?

Caution Cone on Keyboard

That’s not a question I can answer. And yes, I may have triggered Betteridge’s law of headlines, though I really don’t know if it’s definitely a “no”.

There are definitely concerns which you may not always get to see. If viewed widely, this article likely won’t make me many friends in high credit union industry positions. It points out some concerns about a large portion of credit unions that many would not like promoted.

But data doesn’t exist to make you happy, sad, satisfied, or frustrated. It exists to be processed, so you can act on it. And you know what? I hope I’m wrong in my analysis. That I made some silly mistake.

Take a look at your own data. Does it line up with what I shared? Regardless, learn from it and take appropriate actions.

Because everyone deserves the best information so they can make decisions which benefit their credit unions, communities, and the members they serve. Isn’t that what the credit union movement is all about?

And in case you haven’t heard it a thousand times already…”I don’t want a lot for Christmas…”

Holiday Candle and Pinecones

Happy holidays to all!

If Not Here, Then Where?

Every week, a new post appears like magic (I might have a fundamental misunderstanding of how this site works). It probably won’t surprise you to hear that each article is written to meet a specific length criteria. How do I come to this magic number?

Average reading speed for comprehension is between 200-400 words per minute. Posts are typically between 400-600 words in length. It is scientifically fair to say I ask for no more than 3 minutes a week of your attention. You’re busy, and a long essay is not on your radar. My goal is for the average post to be “just right” for your reading enjoyment. If not, please let me know!

What about in-between posts? Am I just holed up in some basement, tooling around on the latest technology? No, that’s ridiculous. I live in Florida and we don’t have basements. So are you saying there is something even shorter than posts? There’s actually two things! One is my newest category, CUbit, where I present topics that just must be discussed in the moment.  But the other? If it’s not on the site, then where? Never fear, Twitter is here! (Lost In Space reference, anyone?)

Twitter is where I reside. Which is great for your length challenges. Nothing written will be more than 140 characters, and if that’s too long, then here’s a clip you may enjoy.

An article is one-way; I say something, you read it, and maybe someone makes a comment. However, on Twitter, a post can directly mention a credit union or other user, or be a part of a larger saved search with various hashtags. It’s a participatory experience by nature. And the topics vary widely, from IT to space to credit union stories. The best way to understand is to join. By following @JoeCUGeek, you see my own tweets, as well as those I retweet from others. Some of my best work comes in 140 characters or less, if I do say so myself. Then be sure to follow other influencers within the industry and even branch out to your own interests. Keep in mind, the more you follow, the less you’ll see from each (it’s a single timeline, so the more users, the more posts).

While I share content on this site about once a week, my Twitter account remains active each day. So, if the biggest problem in your life was too little CU Geek, here’s your solution!

Image credit: http://www.politicspa.com/wp-content/uploads/2011/08/STREET_SIGNS.jpg

A Tale of Caution and Frustration

Are you successful? How do you define it? From your member’s perspective, it could be in the amount of money you help them save. For your team, they may consider community engagement an important qualifier. Either way, success does not come by accident. It’s a deliberate result of focused acts.

Given that understanding, here’s a question: Is your credit union successful because of or in spite of your efforts?

I’ve run into a few companies which fall under the latter classification. By way of monopoly, past performance, or other factor, they ring in improving results each quarter no matter how they operate. “I bet he’s talking about the cable company,” you think, and you would be right. Each of these mega-corporations have set up a situation where they cannot fail. Want to see TV? Buy from them. Want to skip TV and just get online? Buy from them. How about a phone line? Yep, buy from them. And when your customers don’t have a choice, service can suffer with negligible financial impacts.

But credit union members have a choice. Some would say it’s A Smarter Choice. So obviously these risks don’t apply.

Only they can. Consider this: A member will tolerate inconveniences up to (but not exceeding) the level of perceived inconvenience it would take to move their finances out of your institution. In other words, the more services a member has, the more troubles it will take for them to leave.

Read that again. A member using you as their PFI may tolerate more issues than one with a single service. The solution? Empower your staff to relate, understand, and solve the problem as if it were their own.

That’s where the greatest challenges lie. In the aforementioned large company, each person I speak with tries to help, but none are empowered to see it from my position. I’ve been told the rate I have is impossible, though it can be seen on previous bills. Same with service combinations: “I’ve been here 7 years and never seen those put together.” Without saying so outright, I have been called a liar numerous times, despite the evidence being in their own system. For a company specializing in information technology, their own information is pretty spotty.

How do you handle member issues? Can every person on staff make substantive change, resolving problems in a single session, or, if not, able to call back to update the member?

Your members chose a credit union for a reason. Most of the time, everything is fine, and your member is satisfied. Sometimes, though, an issue will arise. How you handle it defines your member’s opinion towards the credit union. Five years of perfect service can be negated with one poorly handled problem.

It’s when things go wrong that it is most important for you to show how different you are. Be successful because of your efforts!

Or, consider becoming an effective monopoly. I hear the cable industry is a good choice.

Image credit: http://freestock.ca/grunge_warning_sign__do_not_read_this_sign_sjpg1725.jpg

« Older posts

© 2021 Credit Union Geek

Theme by Anders NorenUp ↑