Medford, Ore.-based Rogue Credit Union finished 2016 with the highest membership growth and asset growth it has experienced in 30 years.
The $1.2 billion CU said it saw “solid” loan demand throughout its service area. Rogue reported its loan portfolio increased $125.5 million, or 14.8%, in 2016, to end the year at more than $974 million. This loan growth compares to an increase of $80.4 million, or 10.5%, in 2015.
Rogue Credit Union’s net income in 2016 was $19 million, compared to $15.7 million in 2015, an increase of 21%. Overall, deposits increased $190 million, or 20.1%, during 2016, far outpacing the $114.4 million (13.8%) deposit growth it saw in 2015. Rogue’s membership grew from 96,933 to 110,092 in 2016, an increase of 13.6%, or more than twice the national average for credit union membership growth.
Rogue ended 2016 with a 9.58% net worth ratio, above the “well capitalized” regulatory requirement of 7%.
But according to Gene Pelham, president and CEO, “Growth is not, and has never been, our strategy at Rogue Credit Union.”
“Our strategy goes back to April 2008,” Pelham told Credit Union Journal. “We decided to pursue loyalty as our long-term strategy. We look to create loyalty, as measured by NPS, or Net Promoter Score. Our part of Oregon is out of sight from the rest of the state – it sometimes feels as if we are part of California – so we decided to act local.”
In everything Rogue CU does, the focus is on “loyalty and local,” Pelham continued. And when the financial services world was in chaos late last decade, “We continued to focus.”
“There are three financial institutions in our market that have changed their name multiple times in recent years. Bank of America sold 14 branches to another bank. With these changes, we have been consistent, and members in the community have embraced us,” he declared. “Our annualized membership growth number has not been below 10% since May 2014. It is pretty good compared to the national average, but we believe it is related to our strategy of doing the right thing for the member, even if short-term it is not the profitable thing to do. We have one of the strongest ROAs out there.”
Trust is the currency of success
Rogue CU’s focus is on building trust with its members, Pelham said. Sometimes, that means walking away from something that might be profitable. For example, the credit union used to have a member rewards program that Pelham described as “anything but rewarding.” In a nutshell, if members did not follow certain guidelines, they had to pay a fee.
“In August 2008 we walked away from $144,000 in annual fee income – at a time when it was harder than ever to walk away from income,” he recalled.
The result of discontinuing the punitive “rewards” program? Rogue’s member loyalty scores “jumped” within months, Pelham said.
“One of my favorite phrases is, ‘Trust is the currency of our success.’ There are a lot of products that we have chosen to walk away from unless they are a win-win-win, a win for the credit union, the members and the community.”
Rogue also is not afraid to go against conventional wisdom in its branching strategy. Pelham noted there is “a lot of noise about consumers wanting to go all-digital.” He pointed to one bank in its market that closed a number of branches. “When that happened, our membership spiked,” he said.
“Our branch transactions are growing, along with our digital transactions, he said, adding of Rogue’s total membership, 82% have visited one of its branches for a transaction in the last year. “We deliver service digitally in a ‘competitive’ way – not the best, but better than most. As long as we provide a competitive digital experience along with our branch experience, we are successful. We have gone from No. 8 in total deposits in our service area to No. 1.”
According to Pelham, many people are “miscalculating” what the 21-to-30-year-old age group wants. “They like using digital, but they also want a connection. And you get a connection in person at a branch.”
Using a ‘loyalty filter’
A service strategy will not work if an organization confuses it with a pricing strategy, Pelham asserted. He said Rogue CU’s pricing is “better than most, not the best,” as measured by tracking against 10 local competitors.
Any policy or program contemplated by Rogue is run through a “loyalty filter,” which Pelham said consists of a simple question: Does the action create a promoter?
“Will it get someone to tell a friend or family member about us? Of our new members right now, we are consistently 90% from referrals. We can’t remember the last time we had a new member campaign.”
When the credit union is doing well, that is a “great benefit” for the local community, Pelham said, which ties in with its “living local” strategy.
“We reward participation in the credit union. We recognize those members who participate with dividends.”
Starting in February 2016, Rogue created an “Ownership Account.” The CU deposits year-end dividends into the Ownership Account, which Pelham said pays a “high yield.” Members cannot deposit money in the Ownership Account, it has to be earned. The CU is creating multiple ways for people to earn money for their Ownership Account, including cash incentives for switching to e-statements and using its Visa credit card.
After six months, 80% of the money was still in the Ownership Accounts, which Pelham said was a “much larger percentage than we imagined.”
Rogue has an in-house marketing team, which produces all of the elements it uses, including video and radio.
“We have a ‘presence’ marketing campaign – we are present everywhere,” Pelham said. “We contribute to local high school athletics and do many other forms of community outreach. This has led to market share. We have the No. 1 deposit market share in two of the six counties we serve, and the No. 1 consumer lending market share in four of the six counties we serve.”
There are “a lot of good strategies for credit union growth,” Pelham said. “Our team has done a great job of executing our strategy. The mantra for me is: If we take care of the member, everything else takes care of itself. It sounds simplistic, but it works.”
Membership in Rogue is open to anyone who lives, works, worships, or attends school in select Oregon counties. Rogue is No. 118 on the Potential Members list, as calculated by NCUA.
