WASHINGTON — While credit unions have been in the midst of a "growth stall" for some time, it hasn't stopped many of them from implementing innovative expansion strategies.
That was one of the sentiments shared at an Aug. 29 Webinar from Callahan & Associates and Open Solutions, Inc. on notable trends within the credit union industry. Some credit unions are sticking with traditional organic growth while others are going after niche markets such as younger members and the underserved. Then there are those credit unions that have left or are attempting to leave the system through bank conversions.
"The real problem credit unions are facing is an effectiveness challenge," said Chip Filson, president of Callahan. "The cost per member to run a credit union with $10 to $50 million in assets is not that much different for credit unions over $1 billion. The real difference comes with the amount of member participation."
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The $6.6 billion BECU is hoping to turn "the normal thought process [of saving] upside down" through programs that reward small savers with higher than usual rates to encourage them to become habitual savers. Its "Member Advantage" program is a bundled product that includes a savings and checking account, eStatements, and bill payment or direct deposit. Members, regardless if they have zero dollars in either their savings or checking account, will receive a 7.50% annual percentage rate and 7.25% dividend rate. The "Early Saver" program targets younger members and works the same way as Members Advantage.
"We're trying to work on something that expands our core relationship with members and brings in the unserved and the underserved," said Ken Myhra, BECU product and delivery channel manager.
With the offerings, BECU said it is hoping to replenish the share savings bucket organically while encouraging thrift with those who have the hardest time saving. Myhra said the credit union came up with the 7.5% rate through its own internal pricing guide and emphasized that the rate is not a "teaser rate." So far, 10% of its more than 450,000 member base already qualify for Early Saver and Member Advantage.
"We found that pieces of the account left out the youth segment," Myhra said. "We have a fairly strong contingency of younger members so we said there's no reason we shouldn't be helping these minors save and encourage saving early on."
Myhra said it would be hard-pressed to find banks that are offering similar deals with such APYs and dividends.
"We're competing with ourselves more than anyone else," Myhra said. "We haven't seen an outflow of dollars to other institutions but we have certainly seen a migration of dollars from savings to CDs and [MMAs]."
Wright-Patt Credit Union's subsidiary, Wright-Patt Financial Group, has a division called myCUmortgage. It collaborates with 42 credit unions primarily in Ohio to help members with home ownership and financing through partnerships with Prime Alliance, Fannie Mae, Midwest Loan Services and CU Realty Services. The division's success hinges on one important factor, said Tim Mislansky, president, myCUmortgage.
"We let credit union partners focus on what they do best–talk to members," Mislansky said. "We do what we do best–back office mortgage processing. [The] preference is that the credit union member doesn't know we exist."
Mislansky said the collaboration allows for the creation of a larger pool of loans to reduce focus on a credit union's one geographic area and drives down variable loan costs through increased volume. Meanwhile, myCUmortgage can help credit unions create a recurring stream in mortgage servicing rights and generate fee income.
Some of myCUmortgage's success stories include $5 million Middletown Hospital Credit Union, which has averaged $1 million in funding per year while $10 million Dynamic Federal Credit Union has funded nearly $2 million or 20% of assets in the last 12 months. The $76 million Canton School Employees Credit Union has seen a 101% month growth in mortgages outstanding in the last 12 months and $102 million Vacationland Federal Credit Union has a 125% year over year growth in mortgages originated.
Mislansky said small to mid-size credit unions, like many of those serviced by myCUmortgage, "[are] crucial for the future of the movement." –[email protected]
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