DOTHAN, Ala.-It can be easy to show good numbers following a merger, especially if absorbing a small credit union. What takes more work is creating a culture to hit those numbers organically.
That's the word from Bob Steensma, CEO at Five Star CU, whose credit union capped off 2012 with 12.75% membership growth, 13.5% asset growth and 16.7% loan growth.
Five Star merged with $42-million Frederica CU in February 2012-the credit union's first merger in the last seven years-and Steensma noted that mergers are not a major part of Five Star's growth strategy. Rather, he said, "it was a failing institution that would've gone out of business and cost the share insurance fund money. We had the ability to swallow them due to the capital and whatnot that we had set aside, so we were invited to bid."
Five Star was included in the most recent round of Crystal Performance Award winners from Raddon Financial Group for credit unions with assets of $500 million or less. Crystal Awards are based on a scorecard of various factors such as growth, income, efficiency and margin management.
Branch expansion has been part of Five Star's growth strategy, and the 21,000-member, $251-million CU pushes goals for new memberships, checking accounts, loans and deposits down to the branch level. "It's a very singular or granular focus," said Steensma. "If you set a number out there and drive it all the way down to their annual review, we see that number on their annual review and whether they achieved it or not, that's a strong motivation."
Shift in Culture
A shift to a sales culture has also been behind some of the CU's growth, and Steensma noted that when that shift began three years ago, Five Star was seeing a net loss of accounts year after year.
"If you went in as a member to any of our branches, there wasn't anything that differentiated us from the bank down the street," he said.
Product offerings were subpar, the fee structure was unfriendly and above market, and it had no checking account offering. So Five Star began working toward a more attractive product and service menu, including an interest-bearing checking account and a relationship pricing model that pays higher dividends as members increase their business at the credit union.
Members can also get up to 50 basis points off of the CU's stated loan rates and a 50-basis-point increase on deposits if they have qualified products with the CU. Five Star currently pays 1.51% on a savings account for those qualified members.
Five Star also increased product knowledge and sales skill training for employees using the methods from Schneider Sales Management. Prior to that, said Steensma, "we were probably the place that the bank down the street sent their people who didn't want to do sales. We were the repository for those types of employees, because you could tell it was just a transaction house."
Change In Hiring Practices
In addition to investing the time and money in sales training, Five Star has also changed its hiring.
"We're looking for people that want to get out there and scrap it up a little bit," he said. "You've got to get out there and earn the business, and be willing to steal it from someone else."
Around the same time as the shift toward sales, Steensma-whose background is in lending and collections-hired VPs for both consumer and commercial lending, "because that's our main income producer for our organization. If you're going to put your talent and your dollars anywhere, you want to put them where you'll drive revenue."
Commercial Lending A Driver
Every loan category was up in 2012, he said, but commercial lending was the biggest driver of growth, with about a 50% increase, he said. Steensma added that commercial loans are a small portion of the overall portfolio, currently at only about $33 million.
Five Star serves several small communities, and Steensma said word-of-mouth referrals are common. But the CU also participates in chamber of commerce functions and a variety of other community events. Steensma said he expects Five Star to see double-digit growth in both shares and membership for 2013, with a similar year for loan growth, if not quite as strong as 2012.
Expenses at FSCU can run higher than other credit unions in its peer group, said Steensma, due to its size in comparison to its branch network. But the CU runs lean, with only four employees per branch, including the manager.
"We'll always be a bit higher in our cost structure because we're going to have to build brick and mortar, because in this neck of the woods people want to see you," he said, noting that many people in the region don't travel much beyond where they live.
Account openings continue to largely take place in-branch, though Steensma said he has toyed with the idea of a drive-thru only branch with no lobby, including lanes for members to join and apply for loans from their car.
Five Years To Implement
Steensma stressed that a transition to a sales culture takes at least five years and must come from the top down.
"I think everybody needs a sales culture," he said. "We talk about service a lot, but nobody wants to mention the sales word. But that's what service is: it's sales of our products and services that benefit them as opposed to them going down the street to a higher, more-costly-to-them institution."
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See also: "To Grow Your Credit Union, Create A Sales Culture," Jan 21.
"Incentives Reward For Quality Over Quantity," Oct. 22, 2012.
"Think You've Got Service? Prove (& Improve) It," July 9, 2012.
Or search "sales culture" in CUJ archives
