Membership Growth Crept Along Mirroring Ten-Year Trend, 2007 Could be Repeat that Causes CUs to Tighten their Belts
WASHINGTON -- This year continued a 10-year downturn trend in membership growth but the latter half of 2006 has shown some momentum that could carry over into 2007. It looked promising in January when 158,000 members joined credit unions, according to CUNA Mutual Group's Credit Union Trends Report for that month. January also experienced its first dip below the 10,000 mark for credit unions with the loss of 36 during that month. Industry experts remained firm to their forecasts of conservative growth for 2006 and their predictions were pretty much dead on. Membership growth has hovered between 1% and 2.5% over the past few years, according to CUNA. The latest data through October shows movement has been 2%. Recent numbers show 88.7 million members and 8,737 credit unions. "Membership has been on a long, sliding path for the past decade," said Bill Hampel, CUNA senior vice president, research and policy analysis department, and chief economist. "We've seen a little bit of a pickup in 2006. Even if we don't have membership growth for the rest of the year, we have 2%."
In 2005, credit unions added 1.5 million members to their rosters while 2006 could see an additional 1.4 million. At the end of March, membership climbed to 87.9 million and through the first quarter of 2006, an estimated 900,000 members joined credit unions, according to CUNA Mutual.
The industry was still feeling the effects of 2005's conversions of OmniAmerican Credit Union and Community Credit Union, which took 500,000 members off the radar. Any further conversions, especially among larger credit unions, could certainly trickle down toward overall membership growth, said Tun Wai, NAFCU director of research and analysis and chief economist. Barring any of those occurring, he expects 2007's growth will again be about 2%, which is in line with the 10-year average.
"If you look at membership, it hasn't expanded beyond the 10-year average because we're seeing a shift in the way members view their financial institutions," Wai said. "Younger people seem to not mind having a lot of debt. They look at the borrowing component. Older people are looking towards retirement (and are likely) to move their accounts elsewhere as opposed to going to the credit union."
The balancing act to push growth forward will be courting young people and finding ways to keep older members from leaving--a move credit unions are extremely capable of doing, Wai said. Another factor impacting member growth this year had to do with job loss, Wai offered. Members will tend to stay with a credit union if they have a job and they're financially stable. When a member loses his or her job, others issues come into play that could help a credit union build long-term loyalty. "People will look to them for loans to tide them over if they lose their job," Wai said. "Credit unions do this all the time. They're known for these touchy-feeling kinds of things."
Hampel said much of this year's membership strength has come in the second half of the year and if that's any indication, "it looks like we might be on an upturn." He cautioned that membership is the second least reliable number on the call report, preceded by potential membership growth.
"So many things go into it. The process of new members being added and dormant [accounts] being closed," Hampel said. "Because of all of this, I would not look at [membership numbers] as saying we're out of the woods yet. We still need to be concerned."
Hampel said a slowdown in consumer loan demand, the bread and butter of many credit unions, may slow membership growth in 2007. One way to counter this might be to more aggressively court the children of Baby Boomers, many who are entering college for the first time. With members aging faster than the general population, it is something to consider, he added.
As spreads tighten, credit unions could look to cut more expenses next year, said Dave Colby, CUNA Mutual chief economist. "Some will purge inactive accounts," Colby said. "The most critical thing is credit unions stepping back as part of the planning process and understanding who their members are by age and ethnicity. More importantly, who is the best member to go after to establish beneficial relationships." Another factor that has possibly slowed membership is the shift in the credit union model. "With occupational fields of membership, it was fairly routine that when someone started working at a business or government agency, during orientation, it was 'here's your parking space, this is where employees eat lunch and here's your credit union,'" Hampel said. "With more community charters and multiple group credit unions, that's been less the case."
Wai believes credit unions will continue with strong consumer lending into 2007 especially with "character loans," which are often approved for members who do not have enough collateral. --firstname.lastname@example.org