Seeking Out the Stories That Lurk Behind the Numbers
Credit unions deal in a world of numbers every day; not so much for the writer. However, I was struck by the vast quantities of figures coming at me in recent weeks, so I've decided to take a look at statistics for this week's column (No. 120).
Half. That's the fraction of bank customers who told ath Power Consulting that they were highly satisfied or likely to recommend their bank. That figure's atrocious and something credit unions can really capitalize on. Nearly half, 45%, of those surveyed by ath said personal relationships and service are the most important factor. If that's true then why do credit unions-which claim to have the best customer service-only control about 6% of the financial services marketplace? First, banks can also give good customer service; credit unions don't have a lock on it. Second, the banks' figure was dragged down by the largest banks, which came to less than a third of that total. And, finally, what people say is often very different from what they do, whether out of laziness, cost-consciousness or lack of education. Credit unions can only control one of these factors and that's education. The general public is still not aware of the services credit unions provide. A solid national awareness campaign is necessary.
One-quarter. In the same study, 24% cited convenience as the most important factor in their financial institution selection. Many credit unions participate in shared branching and ATM networks, but they do not do a very good job of letting their members know about them. Regular and consistent communication that includes visuals like maps about these offerings is a must.
Regarding communication, Callahan & Associates recently wrote up a piece on social media and marketing versus public relations. So many credit unions miss the boat on this one, making PR an insignificant subset of marketing, when in reality it's an entirely different mindset. In marketing, the one paying for the advertisement or tweeting the news controls the message; in journalism, an independent third party owns the ink. Consequently, John Boit, chief executive officer of communications firm Melwood Global (an interested party, I realize) stated that credibility in earned media exposure is 2.5 times more valuable to an organization than advertising. Solid ROI. Credit unions should focus more on their public relations strategy as a tool to supplement brand awareness. It's also very important that whoever the PR representative is possesses a basic understanding of the substance of the story they're pitching.
Case in point, in a separate Callahan article I used in researching this column, the author accurately stated the difference in the loan-to-share ratio of credit unions dropping from 83.1% to 76.0% as a seven percentage point difference. Nearly every press release I see from credit unions and vendors would say that's a 7% change, which is a huge difference that clearly demonstrates a lack of understanding. With a return of 2.5 times marketing, it pays to do it right.
But, getting back to that loan-to-share decrease due to a lack of demand, tightened lending standards and burgeoning savings, credit union borrowings have dropped despite the zero rate environment. Credit union borrowings increased 9.4% over 2008 and into the first quarter of 2009 but fell as savings grew over 2009 to just $37.7 billion, ending the year with just 0.6% over the previous year, according to Callahan. However, the loan-to-share ratio for credit unions that used borrowings towered significantly above average at 84.4% versus the industry average of 76.0%.
However, as in crises before, credit union member savings will flood out as the economy recovers helping to bring the loan-to-share ratio back up as well as helping capital ratios. Consumers are prepared for this too. According to the NCUA, share drafts grew 15.56% between year-end 2008 and year-end 2009. Regular shares grew 11.79% and money market shares were up 23.47%, year-over year. Nearly 90% of deposits at credit unions have less than one year to maturity. At the same time, share certificates were down slightly. However, IRA/KEOGH accounts were up 13.46%, so it's not all running out when the economy begins its upward trajectory.
During the recession in the early part of this millennium, credit union assets grew 11.08% and membership growth topped 2.0%, the NCUA reported. As the economy recovered and soared and consumers were prosperous, members looked elsewhere for their financial services providers. Membership grew just 1.13% in 2005 and assets were up 4.95%. However, as the financial services market tanked most recently, members-and their assets-came crawling back. The NCUA said membership growth reached above 2% again in 2008 while assets climbed 7.43%. In 2009, the figures were 1.52% and 9.08%, respectively. If credit unions don't actively demonstrate the benefits of belonging to that particular credit union and successfully cross sell additional products (particularly the sticky ones, like checking with direct deposit and online bill pay), they're going to lose them again.
Other than corporates' balance sheets and NCUA assessments, I'm not sure many figures jar credit unions as much as the delinquency and charge-off ratios that appear to be attempting to summit some great mountain. As of year-end 2009, the NCUA reported that delinquencies among federally insured credit unions reached 1.82%, steadily rising from 0.68% since 2006. Charge-offs mirrored that growth, up from 0.45% in 2005 to 1.21% in 2009. Credit unions historically have not had to deal with this magnitude of bad accounts, and collections departments need to be staffed and trained to salvage what they can from these loans. Unfortunately, with unemployment at its current levels, in many cases nothing can be done about loans that were made to a gainfully employed persons with 700 credit scores but now finds themselves unemployed for more than six months.
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