Credit unions are hopeful that an improving economy and healthier job market will bring more new members walking through their doors. But things aren't as simple as that.
While the industry saw
The National Credit Union Administration reported that total membership at federally insured credit unions rose by more than 5 million members, to 129.6 million, in the fourth quarter of 2021 from the same period a year earlier. But membership growth declined significantly during the first two months of 2022, with 290,000 new memberships added compared with the 847,000 reported in the first two months of 2021, according to a new report from CUNA Mutual Group.
And the largest credit unions — with bigger advertising budgets — have been responsible for a large chunk of the recent gains.
Credit unions above $1 billion of assets added new members at a rate of 9.2% in 2021, while those below $100 million saw a 6.9% decline, according to Dennis Dollar, a consultant and former NCUA chairman.
“Growth and scale build growth and scale, regardless of the economic times,” Dollar said.
For instance, the largest credit union in the country by far — the $160.4 billion-asset Navy Federal Credit Union — saw its membership grow by 11% in the first quarter, to 11.4 million, from the same period a year earlier.
Smaller credit unions have not been so fortunate. Membership at Pinnacle Credit Union in Atlanta fell about 5% year over year in the first quarter to 6,927, according to call report data.
Matt Selke, CEO of the $88 million-asset Pinnacle, said the trend of declining membership has been going on for a while now across the industry, despite growing assets.
“The entire credit union industry has been working on that problem for about seven years now,” he said. “Our assets keep growing, but our loan penetration and new member percentages are stagnant compared to banks.”
But there may be hope.
Millions of Americans are expected to gain jobs this year, and many people join credit unions because they are affiliated with their employers, according to Steve Rick, chief economist for CUNA Mutual Group, an insurance and financial services company that monitors the credit union industry.
“That avenue of membership growth will be strong,” Rick said in a report. Auto lending has declined in recent years due to the pandemic and chip shortages, but "new indirect auto lending is expected to rise again in 2022 and 2023, which will bring in new members," he said.
The $961 million-asset Deseret First Credit Union in West Valley City, Utah, saw membership rise about 2% in the first quarter, to 72,933 members, from a year earlier, according to call report data.
While the credit union did see some slowdown, those trends have reversed in the past couple of months, according to Shane London, Deseret First's president and CEO.
Deseret First’s growth target is a minimum of 3%, and the credit union is on pace to come in higher than that for 2022, London said.
The rise in interest rates may bring out the “rate shoppers” as deposits begin to chase the highest possible yields, he said.
Additionally, “car inventory improvements could also lead to increased loan opportunities in that sector,” he said. “But we are concerned about membership growth as we’re not currently seeing results we are comfortable with.”
Our assets keep growing but our loan penetration and new member percentages are stagnant compared to banks.
Geoff Bacino, a credit union consultant and a former NCUA board member, said COVID-19 forced everyone to "disconnect" from the outside world, as consumers chose to stay the course and remain where they were. Marketing also slowed as there were fewer outside events.
But moving forward, an improving economy and a better understanding of the coronavirus will help break this gridlock, Bacino said, and he envisions an increase in member growth in the fourth quarter and into 2023.
“For those credit unions seeing a falling membership number, the best advice is to concentrate on the basics in regards to member satisfaction and service,” he said. “Another option is to concentrate on organic growth in membership as [select employee group and field of membership] expansions have slowed as well.”
Pinnacle CEO Selke said the credit union benefits from great word of mouth and is the only 4.9+ Google-rated financial institution in Atlanta.
“We just needed to finally get our net worth high enough to grow," Selke said. "And we get to open two new branches in the underserved areas of Atlanta that have been asking for a credit union to move to their areas for years.”
Pinnacle is also adding core deposits, which helps avoid the worry of more expensive time deposits or CDs but still maintain profitable margins and better focus on its members, Selke said.
“I know it's cliche, but Pinnacle’s focus on 'people helping people' does work in the right setting,” he said.
