The Numbers Show More Members Doing More

The credit union industry continues to add members at a record pace, an upward trajectory that is characterized by strong indicators of deepening engagement as well.

Membership nationwide grew 4.1% in the fourth quarter of 2017. That’s the same percentage growth at the end of 2016, but growing on a larger base meant that another new record was set. The 796,213 net new members in Q4 2017 was the highest yet recorded for the final three months of a year.

That’s still a good bit less than the highest net new member surge in one quarter in recent years – 1.4 million in the third quarter of 2016 – but the fourth quarter is typically the slowest for member growth. The holidays are not the biggest quarter of the year for taking out loans, and auto lending – a major driver of member growth all on its own – tends to be higher in the second and third quarters.

In fact, the fourth quarter is often when credit unions shed dormant members, including people who have paid off a loan and have done nothing since.

Half Up, Half Down

There were 5,689 credit unions in business nationwide at the end of the year, and member growth, or any other metric for that matter, was not evenly spread among them, either individually, by asset band or geographically.

That said, this fact stood out: 49.3% of U.S. credit unions grew membership in 2017, 49.7% saw membership drop, and only 1% stayed the same. But let’s look a little deeper.

Credit union geography in the U.S. is typically defined by NCUA regions, and three of the five regions had higher member growth rates than the industry average of 4.1% in the final quarter of 2017: The Western, Mid-Atlantic and New England regions. Lagging were the Central and Southeast regions. But the Central Region joined the Western Region as the only two that actually grew members faster than they did in 2016.

The bottom line here: All five regions have shown positive growth every year for at least the past five years. Further, the growth is not just at the largest credit unions. While credit unions with less than $100 million in assets continue to struggle as a group, positive member growth occurred in each of the four asset bands and in all five regions, as shown in the accompanying graph titled “Regional Member Growth by Asset Class.”

How Engaging

Average member relationship (AMR) is a key measure of engagement, since it’s basically loans and shares added together and divided by the number of members. All in all, it’s a pretty simple but powerful way of looking at how much business credit unions are doing with the member-owners they serve.

The national AMR at year-end 2017 was $18,312, up $589 or 3.2% from the $17,723 recorded in the fourth quarter of 2016.

By region, the highest was recorded out West, where the 692 credit unions of the Western Region posted an AMR of $20,817. A growing market share for mortgages and sky-high real estate prices may be a major contributor there. By contrast, the lowest AMR was in the Southeast Region, where the 1,186 credit unions there recorded an AMR at year-end of $16,301, nearly 25% less than the regional leader.

Now, here’s an observation about penetration rates among products themselves. Share draft penetration – checking accounts – are considered the gold standard there, the best indicator of a primary financial relationship with a member.

The industry penetration rate for share drafts has risen steadily, jumping 5.72 percentage points – or 11.11% – in the past five years. That includes a jump of 1.03 percentage points in 2017. Second was auto loan penetration, to 20.5% at year’s end, up 0.96 percentage points over the year.

Credit card penetration also rose during the year, and mortgage penetration, perhaps the toughest nut to crack with all the competition from banks and non-banks alike, has remained steady for the past five years.

Overall, positive growth among so many metrics and across so many regions is an indication that American consumers are increasingly seeing the value in member-owned financial cooperatives.

Samantha Cristobal is an Industry Analyst for Callahan & Associates. She can be reached at 202-223-3920 or scristobal@callahan.com.