LIBBY, Mont.-The far northwest corner of Montana felt the sting of the economic downturn before most areas of the U.S., thanks to falloffs in both mining and logging.
Yet despite the area's troubles, Lincoln County Credit Union has been rated by Raddon Financial Group as one of the best-performing and most efficient CUs in the nation. RFG gave the $81-million, 7,000-member credit union a Crystal Performance Award for CUs with below $500-million in assets.
Bill Handel, VP of research and development for Lombard, Ill.-based Raddon, said the numbers Lincoln County CU posts are all the more impressive given not only the financial struggles of the region it serves, but its limited assets.
"It is very unusual for an institution that size to get to this level of performance," Handel told Credit Union Journal. "What this credit union fights from the beginning is a demographic disadvantage. The credit union has a higher percentage of low-income members, and it has an older membership. Its operational efficiency ratio is 52%, or in the 99th percentile. This is just extraordinary performance, and the CU is up there consistently."
LCCU President Chari Lucas noted the CU benefits from a membership of 7,000 that has "a lot more loyalty and higher penetration, and that alone reduces our expenses."
Lucas credited much of LCCU's success to a long-serving leadership team. Lucas has been with the credit union since 1989, and its president since 1995. Two VPs also have served since 1989, and a third since 1999.
"When you have that depth of experience amongst your staff it allows you to be very aware of efficiency and be able to incorporate new things to be relevant in the marketplace," she said. "If you are already operating very efficiently, it is easier to incorporate new things. We are very innovative and not afraid to try new products that will add value."
As examples, Lucas said in the last two years her CU has introduced a savings builder program and an emergency fund account. In implementing the latter, Lincoln County encouraged its members to systematically build savings by setting aside funds on a regular basis.
"These were two components that came out of our financial education sessions," Lucas continued. "Members discovered they had spent too much for a number of years and had not established good savings habits."
LCCU recently offered financial fitness check-ups in which members sat down with an MSR and reviewed their credit reports. "We let them know if the credit union had a product to help them with their budgets. That went over very well."
Raddon's Handel also praised the lending side of Lincoln County's ledger, noting it's "very effective" in pricing its loans (95th percentile for loan margins). The result is while it is at the national average in household penetration, it generates greater margins.
The reason, he noted, is the CU is "effective" with the members it cross-sells (Cross-Sold Household Index, 91st percentile). Handel said it reaches 17% of its membership (the average is 13%), and the average loan balance in cross-over accounts is $14,400. Average household profitability is $800, which is "very high."
"The credit union sells loans very effectively with good margins to generate a good level of profitability," he said. "All of the household relationships numbers are good, including 70th percentile on deposit balances and 74th percentile on loan balances per loan household. Those numbers are extraordinarily strong given the demographic challenges the credit union faces. The end-result is Lincoln County has Return on Assets in the 99th percentile, and Household Profitability is 100th percentile."
High Member Retention
Another success driver is high member retention at 97.6% (75th percentile), which shows the credit union has created value "beyond simply rate," Handel concluded. "At many credit unions, the benefit to the membership is strictly rate-based. This credit union achieves great levels of efficiency despite its small size, which shows efficiency in its business model."
Lucas said management's primary focus is developing products needed in a "low-income, struggling economy. Every staff member is trained to communicate what we have to benefit the members. Also, we are very involved in the community and have earned a high degree of trust among our members-they know we have their best interests at heart."
As for its highly praised loan pricing, Lucas said an effort is made to manage all aspects, from efficiency in processing to developing an appropriate rate structure.
"Sometimes (members) come in and ask for a specific product, but our staff is trained to ask to discover a hidden need so we can find other products that will help them. That builds loyalty. We put on a number of financial education classes in the community. That component is highly valued. We have one course that is offered in 13 sessions."
