A Winning Strategy for Small Credit Unions: The Right Strategic Focus

On a cloudy day in early September, in a blue-collar town in the Pacific Northwest, Ynette Gibbs, president/CEO of Newrizons Federal Credit Union, can hear bulldozers leveling the manufacturing buildings that have long surrounded her $15 million credit union.

The facilities, of course, housed the original sponsor of the credit union. But most of the employees are now gone, the parent company slashing the labor force back in the early 2000s, undercutting the original lifeblood and purpose of the credit union.

Yet, Newrizons has seen membership grow in recent years, significantly in fact. And its loan portfolio is growing. And it has positive ROA.

In fact, in the face of a community marked by economic turmoil, this small credit union is unquestionably thriving.

How?

The answer to that question is the same answer that any successful small credit union in today’s marketplace will give you, and that’s that Newrizons has found its differentiation point – its niche.

From our perspective on the CUNA Small Credit Union Committee – of which Gibbs is a part – having a strategic focus is the secret sauce to success as a small credit union in 2018. It can be the difference between life and death for a small credit union.

More importantly, it can be just about whatever you identify as that “thing” that can give your credit union an edge over the competition.

It’s not the upper hand in all facets of financial services, of course – even billion-dollar credit unions struggle with scale and focus, which should give you an idea of how important this is for smaller credit unions – but rather an advantage in one narrow area that gives you the ability to stand out.

For Newrizons, once it learned it was losing its SEG, the credit union immediately shifted gears to a community charter and decided to become an anchor in Hoquiam, Wash., for anyone facing difficult financial situations.

Every move the credit union has made since that decision, Gibbs says, has been shaped by that clear focus.

With community members losing their jobs, the credit union knew it should offer financial counseling. So credit-building classes and education have become standard practice. Every member (and non-member) who comes in for a loan receives one-on-one credit counseling, with two certified financial counselors on staff to help with serious cases.

“Lean times are a fact of life here,” Gibbs said.

From there, Newrizons has only continued to hone its services to reflect its strategic focus. It has partnered with community organizations to offer financial education, including a mentor program for small and start-up businesses. It has rolled out free tax-preparation services through the VITA program. It has hired young Hispanic staff members to serve the growing Hispanic population. The list goes on. But the point is the same.

What Newrizons has done is demonstrate to the community that if you need financial help, you work with the credit union.

And while the credit union might be “small,” Newrizons is the biggest player in town when it comes to its community’s financial health.

Now, financial education has worked for Newrizons because it was “right” for the makeup of its community. But small credit unions shouldn’t necessarily copy Newrizons’ strategic focus. What they should copy is the credit union’s efforts to identify what the “right” focus is.

HALLCO Community Credit Union of Gainesville, Ga., and its President/CEO Joe Foster, also a Committee member, gets that. And they have ridden their own strategic focus to 300% asset growth in only a dozen years.

“I thought we were a mile wide and an inch deep, and the board did as well,” Foster said of the credit union’s situation in 2006, an inflection point for HALLCO. “We were kind of meandering around and did not have a value proposition. So we had a strategic planning session.” He added they wrote down that they wanted to be “the number-one, direct used-auto lender in the areas we served.”

Just as Newrizons did, the credit union went about re-tooling its entire organization around that focus and strength. It changed policies in order to offer auto loans that reflected changing consumer preferences, streamlining the loan process with e-sign technology and even promoting nothing but used auto loans in its marketing efforts.

“We had to execute our strategy,” Foster said.

And execute they have. Since 2006, HALLCO increased the auto loan share of its loan portfolio from 59% to 78%, and subsequently has watched its loan portfolio climb from $18 million to $54 million. Its assets, meanwhile, soared from $28 million to $87 million.

In fact, the credit union has had such success that it’s now looking at a secondary strategic focus: Member access. But the credit union also knows that its growth and the resulting benefits would never have occurred had it not been for the original strategy.

That’s a message that Foster, Gibbs and the rest of us on the Committee would like as many small credit unions to hear as possible.

“It’s not about selling our strategic plan,” Foster said. “It’s about the plan you need for your credit union.”

Learn how to start having discussions about your strategic focus at the CUNA Governmental Affairs Conference next year March 10 to 14, at which CUNA will host the first-ever Small Credit Union Strategic Planning Workshop.

Note: This is the second of a three-part series by the CUNA Small Credit Union Committee on the challenges facing small credit unions, and ideas on how to address them. Read part one here.

Gary Parker is Chair of the CUNA Small Credit Union Committee and President/CEO of 1st University CU. He can be reached at 254-752-2797 Ext. 313.