Small Credit Unions an Endangered Species?
A hot topic for 2018 has been the struggles of small credit unions compared to their larger peers. 2018 economic developments are broadly supportive of favorable credit union operating results and the first quarter was not disappointing. According to CUNA's Credit Union Profile Report for 2018, continued strong membership growth, solid loan growth, and healthy earnings results were hallmarks of the credit union industry as we kicked off the year. Overall, credit unions reported a 4.3% increase in memberships with a total of 112.7 million memberships nationwide, an increase of 3.9% in savings balances, and a 1.6% growth in loan portfolio for Q1 2018. When broken down by asset size, however, the numbers prove the old saying "the rich are getting richer," and the smaller CU's need to look at leveraging technology efficiencies to survive.
Growth rates of membership are a good measure of the health of credit unions.
Credit unions with less than $50M in asset size witnessed a negative growth rate in membership totals ( -.9% for CU's less than $20M in asset size, and -.4% for those between $20M-$50M). Credit unions slightly larger than these, with assets between $50M - $250M saw moderate growth rates in members of .4% - 1.3%, but small potatoes when compared to the impressive growth rates of large and extra-large credit unions nationwide, who boasted 4.3% - 6.9% increases in total memberships.
With more members comes a greater opportunity to position products and services. So it was no surprise to see the percentage of loans, savings and resulting asset sizes increase at a greater rate in the larger credit unions over the smaller:
Loans: The credit union industry in the United States witnessed a 9.6% year-over-year increase in total loans. The smallest peer group of credit unions by asset size (under $20M) witnessed a decent 3.7% jump, whereas the giants of the industry really took advantage of the consumer confidence the economy is riding, with an 11% catapult in total loans.
Savings: The industry averaged a 5.6% increase in total savings. Not a number to write home about - with consumer confidence and retail sales high, household savings tend to trend low. However, the big guys aren't complaining, boasting 7.3% growth in total savings, whereas the smaller CU's have reason for concern with just .7% growth.
Operational efficiency is becoming more crucial to the survivability of smaller credit unions.
Handling and sustaining growth without increasing employee count and costs will continue to be a focus of credit union executives. According to the CUNA report, credit unions with less than $20M in assets have .37 employees per million in assets. That number hovers around .28 employees per million in assets for mid-size credit unions, but then plummets to .17 for the Billion+ demographic.
It's becoming increasingly obvious that despite the lower employee count, member service is not suffering as membership rates in these large credit unions, as demonstrated above, are doing significantly well. Taking advantage of technologies that aim to streamline operations and increase operational efficiencies is no longer an advantage just available to credit unions with deep pockets. While we hold on to the people-centric nature of The Credit Union Difference, smaller credit unions must find ways to value employees while automating aspects of the role. The goal is not to let go of employees and replace them with technology but to increase membership and asset growth with the support and staff you have in place today.
Learn how one Utah credit union grew 33% in eight months, after converting their core processing system.
Small credit unions have limited resources and personnel which is why it is vital they leverage technology that helps them automate, scale and multiply their efforts. Consider your efficiency ratio, which is the cost to generate one dollar of revenue, a great gauge of operational success. The credit union national average efficiency ratio is 71.6%, meaning it takes 71 cents to generate one dollar of revenue. The right technology should help your credit union achieve an efficiency ratio at or below 70%. Learn more about other efficiency ratios that can help your credit union ride this economic wave to its greatest potential.