Helping Small Credit Unions Survive

One laptop. One full-time employee and maybe two or three part-time employees. That one laptop might be five years old and passed around among the small staff in order for everyone to do their jobs. Oh, and it could be the only piece of equipment that manages everything and keeps track of all the things required to run a credit union.

That is the day-to-day reality for hundreds and hundreds of small credit unions around the country – those credit unions with less than $100 million in assets.

In all, there are roughly 3,500 credit unions that fit into that asset category. To put that number into perspective, there are approximately 1,700 credit unions with an asset size of more than $100 million.

In a simple and profound plea from Dan Schline, president/CEO of the Carolinas Credit Union League, he said, “We need to help smaller credit unions.”

While small credit unions have the same regulatory and compliance requirements as larger credit unions, many of these smaller institutions run on such tight margins that there might not be enough room in their budget to afford a new surge protector and power strip for their computer. They might not have enough money to purchase a webcam for Zoom calls or update programs on the one laptop they share. These kinds of realities have inspired some credit union leagues over the years to launch grant programs that could and have resulted in small but significant help for many small credit unions.

In June, for the first time ever, the Carolinas Credit Union Foundation announced a new Technology and Capital Improvement Grant Program aimed at supporting small credit unions with strategic upgrades such as IT enhancements, facility renovations, CDFI certification costs, website creation and even new computers.

Carolinas Credit Union Foundation President Lauren Whaley said the Foundation has provided professional development grants to small credit unions in previous years, but the pandemic-related shift to online and mobile banking revealed a true ­technological gap and need for those smaller credit unions to keep up with their members’ digital demands.

“In order for small credit unions to remain relevant in the marketplace that we’re in, they need to implement some of these technology improvements that may be outside of their budget,” Whaley said. “So if we can step in to offer that level of financial support to these small credit unions, to ensure that they can thrive and survive, then it’s a win-win for us.”

Of the 110 credit unions headquartered in North and South Carolina, 67 are small credit unions. The need for these grants for technology and capital improvements is widespread.

The Foundation’s new grant program was aided by a joint contribution of $50,000 from the Carolinas Credit Union League and Madison, Wis.-based CUNA Mutual Group. According to Whaley, grant applications have come in swiftly since the announcement, with the application deadline of Aug. 1 now quickly approaching.

Schline, who sits on the Foundation’s board, said it was time for the League and Foundation to do more for small credit unions. “We sort of looked at what we were doing; we thought about, how could we do more in the Foundation? And the board has really stepped forward and said, we need to help smaller credit unions with larger chunks of dollars on these technology and capital improvement opportunities that will really help them take a bigger step forward.”

Whaley said her inspiration for this grant program came from several Zoom calls during the pandemic with a colleague located 900 miles away in Madison, Wis.

Vice president of system collaboration and development for the Wisconsin Credit Union League, Josh Roberts, said his League and Foundation have been offering technology and capital improvement grants for small credit unions in the Badger State since 2012.

“Over the years, small credit unions have been applying for things that I think big credit unions take for granted. You know, updating computers, updating core processing systems and creating websites, believe it or not.” He continued, “There are a lot of small credit unions out there, even in the $20 and $30 million range that don’t have websites or very robust websites.”

Roberts said that at the beginning of the grant program they only had $4,000 to offer applicants. As of this year, that amount has grown to $43,300. By far, technology needs are the most-requested grant items in the applications.

“I think one of the things in particular that we hear from credit unions, especially with the tech requests that they have is, ‘If we couldn’t do this all at once, it’s kind of this perpetual game of we’ll replace this computer this year and that computer next year.’ And they’re never caught up and there’s always something that’s breaking or some legacy thing,” Roberts said.

According to a new report released by CUNA’s Small Credit Union Committee, smaller credit unions’ struggles have become even more dire.

“The State of Small Credit Unions Today” report, released in July, found that even though small credit unions serve more than 10 million members and carry $50 billion in loans, compliance costs rose 5% between 2016 and 2018, while the larger credit unions saw only a 2% jump.

CUNA’s manager of small credit union initiatives, Tom Sakash, said when the first report of this kind came out 20 years ago, the biggest challenge cited by small credit unions was regulatory and compliance burdens. This report found that challenge remained a top concern, while adding technology, talent development/retention and health care costs to the mix.

“Certainly small credit unions with smaller staffs have a harder time having the scale to drive down the cost of health care,” Sakash said. “But that issue also bled into talent, which is one of the biggest existential threats for small credit unions.”

According to the report, rising health care costs have kept small credit unions from hiring more employees and/or investing in technology and other services that would help the credit union grow and thrive. Nearly everything it takes to run a credit union has become almost cost-prohibitive. The report emphatically recommended a robust technology grant program be created by credit union leagues and foundations nationwide, as the Wisconsin and the Carolinas Leagues have done. Sakash, Roberts, Whaley and Schline all agreed that these grant programs are vital to the industry as a whole.

In order to keep those programs in place, they also agreed that receiving donations from large credit unions to fund the grants is critical.

“My vision in providing this type of grant program to our small credit unions is that the larger credit unions may want to provide financial support for this initiative and be able to donate directly to this fund that will allow us to be able to offer more grants,” Whaley said.

Fortunately, the Carolinas League and others have seen important support from large credit unions. “It’s nice to know that there are credit union friends out there that are willing to support our Foundation so that we can help these little shops,” Roberts said.

Schline said he believes he will see strong support from large credit unions for this new program in the Carolinas. “And I think we’re going to have some early success stories and continue to find dollars to support it and grow it, and create some wins for these small credit unions.”

Sakash said the California and Nevada Credit Union Leagues have similar grants that are mostly funded by large credit unions. He attributes his hopefulness for the future to the collaborative nature of credit unions. “You know, I think the more we see that [collaboration], the more support in general we’ll have for smaller credit unions,” he said.

By sustaining these small credit union grant programs, the goal for Whaley and others is simple. “We want to be that source for them when they do not have the financial capability to be able to implement some of these upgrades that are needed desperately for them to survive,” she said.