Large Credit Unions' Offers of Help May Scare Off Smaller Credit Unions
At least, that's what Shirley Jenkins, a director at $1 billion Municipal CU for 25 years, has witnessed. She expressed her frustration with the many attempts she and others have made to help smaller credit unions in a number of areas. Prior to her board service, Jenkins once served as Municipal's president.
"I've had so much resistance from smaller credit unions. When we come bearing gifts, I think there's this concern that they're going to be absorbed," Jenkins said during a session by Tawana James, director of NCUA's Office of Small Credit Union Initiatives, at the African American CU Coalition's conference.
James, who has long championed getting the word out to credit unions with $10 million in assets or smaller that resources are available to them, said she can relate.
"I see a lot of small credit unions many times and that's a good thing," James said. "But the ones who might really need help, we just don't hear from them."
James said her office might consider adding the names of larger credit unions that have offered to help to a list that economic development specialists could distribute to smaller credit unions.
Collaborating with other smaller credit unions may also be an alternative to linking up with their bigger brethren. James said seven Pennsylvania credit unions with a total of $19 million in assets partnered to secure $30,000 in grants and other resources to set up a multi-branded Web site and individual marketing plans. A college intern built the site and together, the group of seven was even able to hire someone to do their Bank Secrecy Act audits.
James also recalled a $750,000 credit union that wanted to offer its members checking accounts. Unfortunately, the small financial institution could not afford it. Instead, it chose to partner with a corporate credit union for bill payment services. James also told attendees of a $10 million credit union that "made itself look bigger than it really was" because of its 25 partnerships.
"No credit union will survive as a solo act," James said. "A lot of times, especially with the smaller credit unions, you just can't do it alone. You have to involve others in helping to grow your credit union."
In 2007, 62% of mergers occurred because credit unions wanted expanded products and services, James said. The next most common reasons were poor financial conduct and the inability to obtain officials to run the credit union. James said the retirement wave is a looming concern for smaller credit unions.
"A lot of our credit union managers and volunteers are getting more seasoned. What are you going to do when they leave? You need to cross train, you need a marketing plan." Successful credit unions plan for the future."
James said Hurricane Katrina's aftermath led to many credit unions joining shared branch networks. She said loan participations, with the proper, prior due diligence, may also be a consideration for those thinking about member business lending.
While it's generally understood in the industry, James emphasized the point of a credit union finding and focusing on its niche. Even it means eliminating some inactive select employee groups, she added.
"Know your demographics and decide how you want to serve them," she suggested.
James shared a personal story of just how quickly a credit union can start to build loyalty. Her daughter, a college sophomore, worked this summer but was also looking for a three-month certificate of deposit to house $1,000 in savings. After an exhaustive search, most of the financial institutions she looked at required a minimum of $5,000 for the three-month time period. James' daughter was eventually able to find what she needed at a credit union.
"She is in love with her credit union," James said.