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Small Credit Unions Surviving and Thriving Against the Odds

Small Credit Unions Surviving and Thriving Against the Odds By Cyndi Cohen
Published August 2, 2012
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Many leagues and organizations that work for and with smaller credit unions vary in terms of what defines these financial co-ops, ranging from asset size of under $100 million on the high end to threshold definitions of just $5 million or 7,500 members. Whatever their working definition, these groups can all agree that the advantages of being and belonging to a small credit union - intimate relationships with members and employer groups, loyal membership base, adaptable organizational structure, specialized services - are worth fighting to preserve.

According to a recent report by Credit Union Times, the existence of credit unions with under $50 million in assets began dwindling in 1997 and as of 2007 the number of credit unions was down to 6,374 from 10,212. This drop is due to a number of factors including the heavy compliance burdens they face, fewer marketing dollars than their larger counterparts, increased competition, and lack of quality talent.

While this sounds like a bleak outlook for today’s small credit unions, there is still hope, and more importantly, dedicated people and organizations that care about keeping small credit unions alive and well. However, if they want to remain competitive in today’s marketplace, it is up to the credit unions themselves to learn about, seek out and take advantage of such services, and in doing so, recognize and embrace what they do best.

“Instead of looking how to compete with larger financial institutions, small credit unions need to understand their niche in the marketplace and how they can better serve their members,” says Patrick LaPine, President/CEO, League of Southeastern Credit Unions, or LSCU, (Tallahassee, FL).

Overcoming Challenges to Better Serve Members

Despite the challenges they face, with the proper knowledge and resources, small credit unions have the ability to rise above and continue providing superior member service.

Anne Farrell, Senior Portfolio Consultant for CSCU, Card Services for Credit Unions (Tampa, FL), says that small credit unions may sometimes be limited by financial constraints especially when it comes to advertising or acquisition campaigns to stay competitive. “They need to partner with an organization like CSCU and FIS and take advantage of all of the membership benefits and learn how to benchmark their portfolio to compete in the card industry to keep their card top of wallet.

According to Mike Schenk, V.P. Economics and Statistics at the Credit Union National Association (Madison, WI), smaller institutions have substantially fewer resources which can make it harder to provide a wide menu of service offerings, especially higher-cost, technology-heavy services, and can make it more difficult to overcome the crushing weight of the increasing regulatory burden. “Due to resource constraints, an increasingly difficult regulatory and operating environment and large and growing time commitments they tell us that it often is more difficult to attract and retain qualified staff and volunteers, and succession planning can be especially challenging.”

Schenk feels the biggest strategic move that would potentially benefit credit unions (both small and large) would be to look for more and better ways to reduce redundancies and lower expenses through cooperative initiatives such as expanding collaboration efforts.

LSCU’s LaPine says it’s hard for a small credit union with a single field of membership (FOM) to offer the same level of convenience as larger financial institutions. “It is difficult to remain compliant with rules and regulations and to have dual controls in place -- bad loans have a disproportionate effect on the credit unions, so lending decisions are critically important.” LaPine suggests that rather than looking at an FOM expansion, they can often mine more business from their existing members. “Participating in a shared branching network or a surcharge-free ATM network can help small credit unions offer the same type of accessibility as larger credit unions.”

In addition to regulatory challenges, Martha Ninichuk, Deputy Director, Office of Small Credit Union Initiatives, NCUA (Alexandria, VA) sees a major disadvantage for small credit unions being competitive with other financial institutions that are able to offer traditional financial products through electronic delivery channels, which then impacts the age of membership. Most young people require e-services, making it a challenge to attract the younger demographic.

Getting By with a Little Help from their Friends

Small credit unions can succeed in fundamental areas including technology, marketing, credit cards, and more with the support of CUSOs, larger credit unions, leagues, and associations like those quoted above.

CSCU is a resource in and of itself with credit union savvy staff who share what they know with each other and their member credit unions. They also have a strong partnership with Visa and FIS and the knowledge and experience that those two organizations bring when coupled with their expertise to provide a powerful resource. “As a Sr. Portfolio consultant at CSCU I support the smaller credit unions through portfolio consultations, marketing resources, education and leveraging the economies of scale so that they can compete with larger CUs in their space,” explains Farrell.

Within CUNA’s system there are a wide variety of organizations and resources available to assist small credit unions. “CUNA, state credit union leagues, many credit union service organizations (CUSOs), the NCUA’s Office of Small Credit Union Initiatives each provide products, services and expertise that can help smaller institutions thrive,” contends Schenk.

CUNA and most leagues have established small credit union committees, have created listservs, and have implemented a wide variety of other initiatives.

In addition, CUNA’s Small Credit Union Committee recently created and unveiled a collaboration web site to serve as a repository for stories of successful collaboration efforts and to encourage conversation and idea/resource sharing.

The LSCU has a robust small asset size (SAS) credit union program. Its Cooperative Initiatives team is in the field daily working with SAS credit unions, consulting with them on operational issues and strategies to grow and thrive. The League offers all SAS credit unions a $500 voucher to use toward an LSCU or CUNA product, service or educational event. “Our resources include an SAS toolkit on our website, roundtable discussions at our conferences, workshops, and forums focusing on best practices,” explains LaPine.

The LSCU board has four seats for small credit unions. “It’s important that our board reflects our membership -- small credit unions bring a different perspective and often need help in different areas than larger credit unions,” says LaPine.

According to Ninichuk, the NCUA’s Office of Small Credit Union Initiatives (OSCUI) provides support in order for small credit unions to survive and thrive, in the following areas:

  • Training and Education: They offer over 30 workshops to over 2,000 credit union staff and volunteers, webinars and training videos.
  • Grants and Loans: This year was their largest year ever receiving 332 applications for the grant cycle. “We’ll be announcing recipients of the 1.2 Million available on August 15th,” says Ninichuk.
  • Consulting: They have a team of 15 Economic Development Specialists (EDS) who provide consulting services for small asset size credit unions
  • Partnerships and Resources: They work to provide relationships with other government agencies, non-profits and for-profit entities willing to partner with credit unions on specific initiatives.

Small Credit Unions: An Important Piece to the Overall Credit Union Puzzle

Defined by their ability to provide personal service to members and their communities, small credit unions are really the epitome of the overall credit union movement and thus, deserve the time and attention it takes to maintain them.

“Small credit unions make up 70% of the total number of CUs in the U.S., so they are critically important to our movement – they are successfully meeting the financial needs of many consumers with targeted lending programs and personalized service,” says LaPine. He adds that many still serve specific employee groups and are often housed on-site at plants and other businesses, providing great convenience to the members.

“Small credit unions are just awesome!” contends Ninichuk. “They really know the individual member and their background, so when a member experiences financial hardship the smaller credit union is more apt to find a workable solution to overcome that hardship.”

Likewise, Schenk notes that closer relationships often translate to more operational flexibility including a greater likelihood that each member’s unique circumstances are considered in the loan underwriting process, in the collections process, etc. “Members of small CUs also have greater opportunities to participate directly in the governance of their credit union through both board and committee appointments -- each member’s ‘voice’ is more significant.”

Farrell feels that since smaller credit unions are very community focused, they understand the challenges their members may be facing in a particular region.

“It’s always rewarding working with the smaller credit unions as they tend to know their limitations and are looking for assistance from us to work within them,” says Farrell. “Often times we are forced to look outside of the box for solutions that will help them succeed and it’s very gratifying when we come together as partners to do so.”

If you’d like to be part of a financial institution that cares about its members and is dedicated to meeting your financial needs, a credit union may be the answer. Large or small, all credit unions work hard to help their members achieve financial freedom and reach their goals. Not a member? Find a credit union and join today!

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