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PALM SPRINGS, Calif. – Credit unions that convert to a community charter in the hopes of reaping a sudden windfall of new members and increased deposits and loan demand had better think again. Unlike the Field of Dreams idea of “build it and they will come,” the credit union concept of “convert it and they will come” just doesn’t hold up, at least not without a lot of hard work, effort and planning. That was the message offered by a marketing company guru who advises credit unions and a credit union executive whose financial institution went through the conversion process in 2000. In a three-plus hour workshop, Mark Weber, president and chief executive officer of Weber Marketing Group in Seattle, and Geri Dillingham, executive vice president and chief operating officer at North Island Credit Union in San Diego, spelled out some of the misconceptions, problems and issues that credit unions face when dealing with a conversion to a community charter. “Saying you’re a community chartered credit union does very little to help you,” Weber said. “You have to do a lot more.” One reason, he stressed, was because community members who don’t know that they can join a credit union today will also be in the dark about whether they can join a community credit union, or even what it means to be a community chartered credit union. Weber and Dillingham spoke March 16 at a pre-conference workshop at the 12th annual CUNA Marketing and Business Development Council Conference held here. A wide range of topics were covered, from attracting new members to deciding on whether to change the name of the credit union when undergoing a conversion (Weber presented an educational session later in the conference dealing with the name change issue). Weber also outlined what he said were the seven biggest mistakes and misconceptions that credit unions make in the conversion process (SEE SIDEBAR). “One of the things you learn about a community charter is you can have all the strategy in the world but tactics become crucial,” he said. “The other thing is if you don’t have a strategy, the tactics can be worthless.” Weber’s involvement with community charters goes back to when he was director of marketing for Washington Credit Union. In 1981, the credit union became one of only a handful of credit unions nationwide to convert to a community charter. He warned that simply switching to a community charter was not going to result in a stampede of new members, despite that expectation by many credit unions chief executive officers and board members. “It doesn’t happen,” he insisted. That push for new members “may be one of the biggest mistakes you ever make if you do it at the cost of relationships with existing members,” he warned. “If you forget to focus on relationship development and profitability, you’re going to have a huge loss. We’ve seen credit unions bring in 3,000, 4,000 or 5,000 new members in a year at an average balance of about $86. That does not help grow the credit union in a solid way.” Getting the word out to the community not only will require a boost in the marketing budget, but also needs to include a change in marketing strategy, he said. “You will need to rethink the way you approach markets, the way you approach members and the way you allocate your time resources of dollars,” Weber said. Dillingham agreed that it was important to increase the marketing budget. “I don’t think we really estimated the necessity for that,” she said of North Island. “We knew we would incrementally have to put it up. We have doubled our marketing budget in five years. It probably should be higher than that now. It probably should have doubled the day we changed charters. I think we would have had a lot better results if we had really sat down and had a serious talk about how much money we needed. “So regardless of your size, whatever you’re spending today, plan on spending times two that,” she said. North Island, with 12 branches and 360 employees, has assets of $1.5 billion. Dillingham noted that San Diego is one of the most competitive credit union markets in the nation. “Getting clarity in San Diego is hard,” she said. “There are just so many financial institutions . . . that always is a challenge, getting a distinctive message. And it is more costly to attract new accounts. It is very hard. “It is a tough tough road to go out and get the non-members who don’t know you and don’t even understand you,” Dillingham said. She said North Island was refocusing its efforts this year on its select employee groups. “Banks would love to have them and I don’t think we have a good enough appreciation of what the gold was in there when we changed the charter,” she said. Dillingham reported that membership growth since the conversion was “not significant,” increasing only 6,000 members, from 120,000 in 1999 to 126,000 in 2004. “We have lost a lot of unproductive accounts,” she said, noting that she expected membership to go up exponentially over the next few years now that those accounts had been weeded out. “It took us a couple of years to get to that point but the quality of those is definitely getting better,” she said. “It isn’t just about the numbers,” she added. “It’s the kind [of accounts] you’re bringing in.” Core deposits from 1999 to 2004 grew from 28% of portfolio to 38%, she reported. Business deposits jumped from $8.7 million to $63.7 million from 2001 and 2004, she said. Consumer loans, which totaled $750 million in 1999, were up to $1.2 billion in 2004; business loans in that same period went from $46 million to $108 million, she reported. That represented a shift of a 76% loan-to-savings ratio to a 108% loan-to savings ratio. “The demand for loans is intense out there,” she said. [email protected]

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