Credit unions and like-minded small businesses across the country are the heart and soul of the US economy. While big business focuses on shipping jobs to far-off lands where labor is cheap and taxes are low, small business remain centered on winning and serving customers the old-fashioned way—that is, by delivering what they promise, and even more importantly, by responding to customers’ needs in a prompt and personal way. Many economists credit the small-business sector with providing a majority of the success of the modest business recovery which we have witnessed in recent years.
While some are larger than others, by any definition, credit unions are small businesses. Few have more than 100 employees or revenue in excess of $10 million. Many have fewer than 20 employees and total revenues of less than $2 million.
Credit unions have performed well in recent years, but unfortunately that success has not been evenly distributed. The largest third of US credit unions have scored the majority of the success. Meanwhile, many in the lower two-thirds have struggled to remain viable and profitable. Many credit unions, especially the very small ones, struggle and are being merged into larger institutions at an alarming rate. That’s not necessarily a bad thing; but in speaking with many of the merged credit unions, we have noted that a merger was not their first choice.
In this article, we will explore the basic nature of small businesses, and credit unions in particular. In future issues of CU-ALM Report, we will provide an in-depth look at several credit unions. These credit unions have out-performed their peers in key metrics. Let’s start by reviewing what credit unions have working for them, especially the smaller ones:
The above points are proven, but without doubt some of you are mumbling, “How easily said, but not so easily accomplished.” We agree. In fact, on a personal basis in the 35+ years that I have worked with credit unions I would classify the current economic landscape as the most difficult and challenging that I have ever seen. Nevertheless, here at MHSI, we interact with clients every day who are having great success in spite of the challenges they face. We have spoken with several of these successful CEOs and encouraged them to share the keys to their success with you. The response has been very positive.
In each of the remaining 2016 issues of CU-ALM Report, we will feature a credit union that has been swimming against the tide in recent years.
First, in our July/August issue, we will highlight the success of Family Focus Federal Credit Union in Omaha, Nebraska. It’s small – $30 million in assets, with limited resources. It is supported by a closed and mature field of membership that is not growing. It competes with 20 other credit unions in the Omaha metro area as well as banks and other lenders. It is typical of so many small credit unions that have seen their membership mature, loan volumes plummet, and net income evaporate.
“But wait” like the guy on the television commercial teases. In 2015 Family Focus earned a ROA of 1.13% from ongoing operations. No, that’s not a misprint. That’s an ROA of 1.13% for the year 2015 compared to a peer group at .27%. Loans-to-shares at year-end was 93% compared to the peer average of 57%. How many of our readers would sacrifice a body part for numbers like that?
Amy Broderson is the CEO at Family Focus. She credits a strong board of directors and highly motivated and well-trained employees as the core of the credit union’s success. But there has to be more to it than that and I intend to find out what it is and report to you in our next issue. I will be traveling to Omaha in late May to visit extensively with Amy and her team. She has promised to share all with respect to the success the credit union has achieved.
In the fall issues of CU-ALM Report, we will interview and report on success stories, one at about $75 to $100 million and the second at around over $100 million. Stay tuned.