1 / 38

Growth Strategies for Credit Unions

CUNA Marketing & Business Development Council Conference Nashville, Tennessee--March 17, 2008. Growth Strategies for Credit Unions. Bob Hoel Filene Fellow. www.filene.org. Good News!. Strong capital—11+% High member satisfaction CU political strengths impress experts

lok
Télécharger la présentation

Growth Strategies for Credit Unions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CUNA Marketing & Business Development Council Conference Nashville, Tennessee--March 17, 2008 Growth Strategies for Credit Unions Bob Hoel Filene Fellow www.filene.org

  2. Good News! • Strong capital—11+% • High member satisfaction • CU political strengths impress experts • CU financial services needed and wanted • Economy in flux—special growth opportunities

  3. “My financial provider does what’s best for me, not just its bottom line.” • A credit union 66% • Regional or local bank 48% • Wachovia Bank 40% • National City 40% • U.S. Bank 36% • Wells Fargo (credit cards) 35% • Washington Mutual (banking & cc’s) 34% • Bank of America (banking) 32% • Chase (banking) 27% • Citibank (banking) 24% • HSBC (credit cards) 24% Source: Forrester Research, 2007, 5005 U.S. Households

  4. “My financial provider does what’s best for me, not just its bottom line.” • USAA 88% • Independent financial advisor 76% • A credit union 66% • A.G. Edwards 66% • Independent insurance agent 64% • GEICO 60% • Edward Jones 59% • AAA Insurance 59% • State Farm 57%

  5. Challenges

  6. CU Membership GrowthSix Decades U.S. Population

  7. 2006 Membership Growth • 55% of CUs under $50 million shrank • 32% of $100+ million CUs shrank • 20% of $500+ million CUs shrank • 30% of $500+ million CUs grew by <1% Source: NCUA & CUNA.

  8. Asset Growth

  9. 2006 Asset Growth • 63% of CUs under $50 million shrank • 22% of $100 million+ CUs shrank • 14% of $500 million+ CUs shrank • 27% of $500 million+ CUs grew by <2.35% Source: NCUA & CUNA.

  10. Two Ways to Grow • More Members • More Business per Member

  11. Switch Financial Institutions? • Won’t switch for any amount 41% • For a gift valued at $250+ 33% • For one point higher deposit rate 20% • Ipod 5% • Toaster 1% Source: 2006 IBT/MCA Market Pulse.

  12. Eligible Non-members’ Reasons for Not Joining CU Source: CUNA Survey

  13. Where Americans “Bank” % of U.S. Households Total CU % = 34% Source: J. Lee, Filene Research Institute, 2007

  14. New Filene Studies:High-Growth vs. Low-Growth CUs • Stars vs. Laggards • 3390 mid-size and small credit unions • 5-year period • R. Hoel, “Thriving Mid-size and Small Credit Unions,” Filene Research Institute, 2007 • Big Stars and Laggards • Large credit unions • 5-year period • R. Hoel, Filene Research Institute, study underway 2008

  15. Stars vs. Laggards: 5-Year Asset Growth Group Group

  16. Stars vs. Laggards: 5-Year Asset Growth

  17. Assets Per CU—Group 50-100(Stars +147%; Laggards +5%; All CUs 56%)

  18. Performance Measures: Group 50-100(Avg. Annual Data: 2001-2005)

  19. Assets per member Loans per member Loans/savings ratio Operating expenses/ average assets Employees per $million in assets Delinquent loans/ average loans Net chargeoffs/ average loans Bankruptcies per 1000 members Other Performance Measures Stars better in all!

  20. Why Are Stars Successful?

  21. 1. Stars are highly effective lenders • Loans are the “Golden Goose” • High loan/share ratios • More loans in almost all loan categories • Manageable chargeoffs (not same thing as delinquencies) • Have the “Lending Attitude”

  22. 2. Members use CU extensively Per thousand members… • More transaction accounts • More savings accounts • More loans Higher average… • Savings balances • Loan balances

  23. 3. Pay higher savings rates • Emphasize CDs and money market funds • Laggards depend more on traditional share accounts • Savings rates higher across almost all savings product categories • Higher rates fuel asset growth

  24. 4. Emphasize high-payoffproducts • Used auto loans • Mortgages • 1sts • 2nds • Checking accounts • Savings products

  25. 5. Manage expenses aggressively • Low operating expense ratios • Fewer employees... • Per million in assets • Per thousand loans generated • Per thousand members • Lower… • Compensation and fringe costs • Office-operations expenses • Occupancy costs

  26. High average balances = low expense ratio Expense ratio= Operating expense $ Total average assets Best predictor of operating expense ratio: Deposits per member Best predictive model also includes loan/assets ratio, average loan size, real estate loans and CU size.Source: Doyle and Kelly, Predicting and Managing a CU’s Expense Ratio, Filene Research Institute, 2005.

  27. 7. Don’t rely only on low loan rates • Convenience • Speed • Good service • Aggressive marketing • Cross selling

  28. 8. Usually generate more fee income • High checking account penetration • Other fee-generating products

  29. 9. Invest their capital in growth • Instead of building excessive capital, stars invest in… • Membership • Product and service offerings • Growing their asset and loan portfolios “In short, they deliver member value while maintaining adequate net worth levels.”

  30. MH Federal Credit Union • Asset growth rate 20+% • Membership growth rate 20+% • Loan growth rate 25+% • Borrowers/members 92.5% • Return on assets 2.0+% • Net charge-offs/loans <0.25% • Net worth/total assets 6.5%-7.5%

  31. “Premier Account” Package for Every New Member • Standard share account (1%) • “Better than Free” checking account and debit card • 1% interest, free first box of checks, no minimum balance • $100 line of credit tied to the free checking account (covers overdrafts) • Credit card—even low credit scorers get a $100 Visa Classic card • Ala carte relationship with MH CU is not allowed

  32. 10% CD for Members 8-18 • Initial deposit is $100 • Maximum balance is $1000 • CD matures on 18th birthday • No interest if withdrawn early • Catches… • In name of the youth—prevents parents from gaming the product • Must attend one 2-hour financial education seminar • Can roll it into an auto purchase or use it for other worthwhile purpose

  33. Loan Deferral Program “Skip a Loan Payment” • Put your loan on “vacation” • $25 charge • Easy form • Not on… • Loans < 6 months old • RE secured loans

  34. Selected CD Rates—1/18/08

  35. Selected Loan Rates—1/18/08

  36. Offers Simple Legal Services • Wills • Attorney letters • Referrals

  37. Every Employee Is A Salesperson • External • 1 hour/week minimum • Internal

  38. Keep in Touch & Free Reports… Bob Hoel Filene Research Institute • bobhoel@filene.org • www.filene.org • 608-279-5553 www.filene.org/free/guestpass

More Related