Membership Numbers Came to a Crawl as Industry Leaders Encourage Credit Unions to Get Creative to Boost Slowed Growth

MADISON, Wis. – As 2004 comes to an end, there is still concern from NCUA and others on why membership growth has considerably slowed over the past few years. The latest numbers from CUNA Mutual Group’s Credit Union Trends Report show total membership stalled at 86 million. The year-to-date gain through the first 10 months of 2004 was just 1.1 million, which is “off significantly” from the 1.8 million average YTD gain over the previous three years, noted CUNA Mutual Chief Economist Dave Colby in the report. The report’s data is based on data from CUNA E&S’s Monthly Credit Union Estimates, the Federal Reserve & CUNA Mutual-Business Insight Group – Economics Spring 2004 Forecast. Generally, the final quarter of the year shows the smallest membership gains (two of the past three years actually had declines) for two primary reasons, Colby said. “First, membership development budgets are usually depleted by this time, thus we see very limited SEG or community marketing,” Colby explained. “The second reason is that many credit unions use this slow period to clean and update membership roles (purge of long-term inactive members accounts) so they can enter the new year with more accurate membership assessments and reduced expense burdens.” Throughout the year, many in the industry were hard-pressed to come up with reasons why member numbers have slowed. Some had an easier time coming up with solutions to fuel growth. NCUA Board Member Debbie Matz continued her campaign of encouraging credit unions to reach out to Hispanics and other minority groups through affordable mortgages and member business loans. The underserved – those who rely on pawn shops, “predatory” lenders and check-cashing stores – are also a group ripe for inclusion, she said. The sluggish membership numbers may not be as bad as they seem, according to Mike Schenk, CUNA vice president of statistics and economics. The numbers are actually outpacing population growth in cities with more than 100,000 residents, he noted, citing data from the U.S. Census Bureau. Even though CUNA Mutual’s forecast of 86.7 million members for 2004 “appears optimistic,” the plethora of community charters granted this year “have not generated the expected lift.” NAFCU Senior Economist Jeff Taylor offered that membership will go up when credit unions with newly-granted community charters start to come into their own over the next few years. Indeed, the number of community charters granted has doubled to well over 900, according to a NCUA Office of Examination & Insurance study. While converted credit unions can expect to see slightly lower earnings in the short term due to share growth being high that first year, loan growth tends to exceed their peers in each of the first five years after converting. The latest Trends Report shows the credit union count is down by 272 through October with the decline of 31 leaving 9,437 credit unions remaining. “The pure macro-view credit union count trends mask the increasing market presence of large credit union,” Colby said. “We estimate that through the first three-quarters of 2004, the 83 credit unions that began the year with assets in excess of $1 billion accounted for 47% of all asset growth and a remarkable 61% of all membership gains.” May 2004 will probably go down in history as the most active month for credit union consolidation. That month saw the decline of 135 credit unions due in large part to “extremely rapid consolidation.” Colby said after a slow 2004, expect membership gains of less than 1.5% in 2005, and a net decline of 321 credit unions with a forecast of just over 9,060 credit unions at the end of December. -