Community Charters Growing Just Slightly Faster Than Credit Unions As A Whole

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Community credit unions are experiencing only slightly faster growth than the CU movement as a whole, despite a large increase in potential membership, an industry analyst said.

Jay Johnson, executive vice president at Callahan & Associates, said membership at the 9,406 credit unions operating as of June 30 was up only 1.7% from the previous year.

"Community credit unions are not seeing breakthrough growth in membership. They are up only 2.8%, even though potential membership is way up," Johnson told the group that was formed to serve the growing number of community charters, National Association of Community Credit Unions annual conference here.

"Are we a growth business, or a mature industry? I think there are opportunities to grow," he declared.

According to Johnson, the issue for community CUs is making the credit union value proposition clear in the marketplace. The traditional definition of member value has been better earnings on shares and better rates on loans. But add in a community charter, and credit unions take on the challenge of a new identity.

"They no longer have a natural affiliation. They no longer are, for example, IBM Credit Union. They no longer have the natural advantage credit unions have had all these years," he said. "It makes it imperative to get their message across. Credit unions decide how to differentiate themselves, and their connection to their historical roots."

CUs that convert to a community charter have many decision to make, he continued. The most important: which message to market to the public. Do they emphasize better prices? Convenience? Local presence? Trust?

"Share draft penetration in community credit unions is declining, which is a problem because there is a strong correlation between share draft penetration and member product usage," he said.

Reaching Members

Contrary to popular belief in the late 1990s, the Internet did not eliminate the need for branches. Johnson noted the "branch channel is back, though it never went away."

Since June 2003, 787 net new credit union branches have opened. CUs are weighing which type of branch best expresses their message: traditional, high tech, or an "unbranch" that feels like a coffee house.

"That's what we're trying to do, get out more," he said.

In Austin, Texas, credit unions formed an ATM network to compete effectively with banks. All CU-branded ATMs are included in the network, which allows members to use any credit union's teller machines for free.

"Doing something different like this changes the way people reach a credit union," he said. "If we are going to succeed, we must learn to work together."

Upcoming challenges for community CUs include marketing, mortgage lending, serving the underserved, offering payday lending alternatives and risk-based lending.

"We are changing the credit union business model. The new business model is more dependent on service. Credit unions must make sure to promote their message."

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