Grossmont made more than $617,000 last year, according to NCUA records, and finished 2010 with a capital ratio of 8.72% and a return on investment of 0.56%.

Grossmont paid out the rewards based on whether the member had a checking account with direct deposit as well as whether the member had any consumer loan, Devan explained, adding the CU had paid out $55,000 in special dividends, with the largest checks totally $169 and the smallest $5.

"We tried to include everyone who had a checking account or consumer loan with us," Devan said, adding that there may have  been some members who had taken out loans late in the year who had not had enough time to pay the $5.00 in interest that the CU required to participate in the program. 

All in all, Devan said 1,871 of the CU's 4,800 members had qualified for the dividend, and while the CU was still measuring member reaction, the anecdotal evidence suggested strong support.

"You don't get an $81 check from your credit union without expecting one and not say anything about it," Devan observed. "We have been hearing from a lot of the members."

Devan explained the CU put a big premium on becoming members' primary financial institution  because it provides so much of a gateway to the other parts of the household financial service business and that the dividend program had come on top of other programs the CU had designed to build more consumer value into its products.

For example, the CU's e-checking accounts pay as high as 4% interest for most of the members, but not all, Devan explained.

"We use a tier system on our checking accounts in order to reward our average members who are looking for a high rate on a relatively small balance without attracting those looking for a money market account," he said.

Under the tier system, deposits of between $0 and $2,499 earn 4.00% interest; between $2,500 and $4,999 earn 2.50%; between $5,000 and $9,999 earn 1.00%; and over $10,000 earns just 0.50%.  "The overall effect is to lessen our appeal to people who might be just looking to park their money someplace while still helping out our average members," Devan said.

In addition, Devan said Grossmont considers itself a fee-averse credit union, does not charge any fees for the accounts, funding their operation through debit card usage, delivering statements electronically, savings from direct deposits and limiting the number of paper checks written each month while increasing the numbers of electronic payments made each month.

Grossmont also uses a similar structure with something it calls the "Step Up Auto Loan."  Those loans start at 1.99% when the loan is disbursed but increase at the rate of 100 basis points every 12 months.  This means the member pays the lowest interest when the auto loan is at its highest and then higher interest when the loan balance is falling and, often, Devan said, the member will trade in the car for a new one at the time when the loan rates are hitting their highest.

"The overall impact is to let our members experience an even car payment over the life of the loan," Devan explained.