How MECECU Used CU Difference To Make A Difference On Its Bottom Line

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JEFFERSON CITY, Mo. - Missouri Electric Co-op Employees CU has taken the old saw of "the credit union difference" and turned it into a viable, profitable value proposition.

The proof: MECE CU took the top spot in the $50 to $100-million asset category in Callahan & Associates' Return of the Member (ROM) rankings.

When asked how the credit union stormed to the top of the ROM charts, CEO Randy Marks said there's no secret formula-just the nearly century-old CU ideals of serving members.

"We really just put that back to adhering to credit union principles. What more people are starting to differentiate about credit unions is: ownership," he said. "Our members understand the value of ownership."

The credit union takes great pains to instill pride of ownership among its members, and Marks attributes MECE CU's low delinquency rate of .07% (which equates to $32,000 in delinquent loans) to that pride.

"The average credit union has $400,000," Marks said. "Thirty-two thousand dollars for a $61-million (credit union) is pretty unbelievable."

Emphasis On 'Ownership'

In a time when most Americans-indeed, even a good number of credit union members-don't know what the differences between banks and credit unions are, how does MECE CU make sure its members know and appreciate the value of CU membership?

Marks said building member relationships at MECE CU involves reminding the member all the time that they own the credit union, even going to the extent of referring to members as "owners" in daily operations. Marks said the constant "ownership" emphasis reinforces MECE CU's commitment to the membership but also makes the point that few Americans can help determine how a bank is run.

"The average person can't be the owner of a financial institution. We almost use the word owner instead of member. If you owned a restaurant, you'd be amazed how the waiters treat you," he said.

Just as important as telling members about the difference is demonstrating it. Marks cited simple actions such as offering checking accounts with 1.5% interest rates and no minimum balance or a large array of fees to use their own money or CU financial services. Marks said MECE CU does have an NSF fee, but few of the fees routinely charged by banks, such as a charge to close an account. Marks said more and more credit unions are becoming like banks, by charging fees for a wider array of services or actions. Marks said one Missouri credit union had even begun to charge for cash back when a member makes a deposit into their own account.

"We're seeing more credit unions with fee schedules like other financial institutions," Marks said. "We have no smoke and mirrors."

Marks said MECE CU is frequently mailed vendor pitches citing the credit union's low fee amount charged to members. Vendors tell Marks that a CU the size of MECE CU should be bringing in quite a bit more revenue from fees, which Marks takes as a compliment.

"We look at that as being a good thing," he said. Marks also said MECE CU can afford higher returns to members and lower interest rates as its operating expense ratio of fully "half of other credit unions."

One way the CU keeps its expenses down: it found a way to be "everywhere its members are" without having to build an extensive branch network. MECE CU has recruited "field representatives" from among the personnel at each of the 51 electrical co-op locations.

The Jefferson City main office has little foot traffic and no drive-through access. Further reducing costs is the fact that MECE CU doesn't have high marketing costs as it can contact members through their payroll checks using a database maintained by the field representatives.

"It lets us know where we need to work. We can specifically target because we know what we're looking at," he said.

Mailers and newsletters are then sent to family members to increase member usage in online banking and e-statements. Marks said MECE CU examines up to 15 lenders within Missouri before the board of directors sets an established rate that loan officers can't deviate from. Marks said he has a $47-million loan portfolio that includes $12 million in home equity loans and $19 million in new and used auto loans. Marks said MECE CU is planning to offer student loans to help its members through their various life stages with appropriate financial services.

While offering the usual array of credit and debit cards, plus online banking and e-statements, Marks said his "MVP" for loans is a MECE CU Platinum Personal Loan, an unsecure personal loan with a 7.75% rate.

"Our members like to use that for a variety of things," he said.

Growth In IRA Portfolio

For example, Marks said many of the electrical coop's linesmen are hobby farmers with several acres of land and livestock such as cattle. Marks said the popular loan is a good example of MECE CU cooperation with its members by providing financial products and services that matches needs, not what the credit union wants to sell. "The services we provide, we offer the members what they actually want," he said.

Marks said he expects to increase the size of the $15-million MECE CU IRA portfolio soon as new retirees seek out financial products for their golden years. Again, Marks said MECE CU uses its member databases to determine who is retiring. The founding principles of member service, cooperation and virtually preaching about ownership has set MECE CU apart, he said.

"We've never had to convince anyone that we're different. I'm big on momentum; either you have it or you don't." (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.

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