All CUs are critical, both large and small. Source: Adobe Stock
As the credit union movement barrels into the future to meet the challenges of what Jim Nussle calls the "next normal" – the post-pandemic, increasingly online operating environment – it's important that we don't overlook the critical work being done by smaller credit unions.
These small institutions – with less than $100 million in assets – continue to deliver for their members while finding ways to adapt in our ever-changing environment.
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The cost of doing business as a smaller shop rises every year and faster than for other financial institutions. But the dedicated individuals who run these credit unions are still getting it done; innovating, collaborating and making it work with the slimmest of budgets imaginable.
A new report out this week from the CUNA Small Credit Union Committee reminds us why it's important to continue supporting these institutions. They provide strength in numbers from an advocacy standpoint, and ensure the movement has a broader and deeper understanding of the varied and complex financial challenges facing our communities.
A hyperlocal focus can ensure a credit union's products and services are truly right for the people and communities for which they were designed.
The report also demonstrates that most small credit unions are efficiently run and commonly outperforming some of their larger peers. In 2019, the operating expense ratio for the typical credit union under $100 million in assets was slightly lower than larger institutions (3.58% vs. 3.63%, respectively). From a growth standpoint, a full quarter of small credit unions reported loan growth 50% higher than the average large credit union.
The picture, however, isn't all sunshine and roses for these stalwarts. Between 2016 and 2018, the cost of small credit unions' regulatory burden grew at more than twice the rate of larger institutions, with regulatory costs now 30% higher than their return on assets.
These costs, coupled with limited asset size, makes it difficult to scale and afford the tools needed to accomplish a primary goal of every credit union: Growing their membership base. Marketing costs, a full complement of product offerings and cutting-edge technology can often remain out of reach for institutions whose budgets cannot be deployed at scale in these categories. It also means that they may struggle to attract and retain talent in the front of house and in the C-suite.
Across America, small credit unions are the lifeblood of our movement. They meet the needs of employee and religious Select Employer Groups, find ways to spin up unique recovery and financial-planning solutions in niche communities, and continue to drive our movement in service of our mission.
As we focus on the growth of our movement, it's critical that we bolster these tenacious institutions to secure a sound future for all of us.
And don't forget, we as an industry may call these credit unions small. But these "small" institutions mean a great deal to their members and communities. Small credit unions mean a great deal to the future success of the movement as well.
Tom Sakash Tom Sakash is the Manager of Small Credit Union Initiatives for CUNA in Washington, D.C.
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