BIRMINGHAM, Ala. — The economy, uncertainty about the future and conservative leadership have some credit unions protecting their capital instead of carefully planning for growth — a decision Dennis Dollar says CUs can't afford.
The former NCUA chairman and Dollar Associates principal told Credit Union Journal that for CUs to compete they have to grow, and outlined a three-step process.
"Growth remains essential for credit unions of all asset sizes, simply because we don't get an exemption clause from the basic business rule of economy of scale due to our structure as not-for-profit cooperatives," asserted Dollar. "Credit unions must grow to remain competitive."
Dollar insisted that a growth initiative is imperative for all credit unions, big and small. "Every credit union, regardless of asset size, needs a strategic plan for growth," said Dollar. "A $5 million credit union needs a plan to become a $6 million credit union. A $100 million credit union needs a plan to become a $200 million credit union. A $1 billion credit union needs a plan to become a $2 billion credit union."
But Dollar emphasized that growth can't happen overnight, nor should it.
"Growth requires strategic planning, but it is still absolutely essential and cannot be ignored," he said. "The numbers speak for themselves. The credit unions that are growing with strategic managed growth are performing better than those that are sitting on their capital, fearful that any growth will mess up their ratios."
The Three 'Ps' Of Growth
The three major growth focuses for 2014, said Dollar, all "start with the letter 'P':
- "Planning for growth makes it a part of the credit union mindset and builds managed growth into the credit union's DNA," said Dollar.
- "Promoting more membership will be essential in 2014 with the challenges to earnings per member," noted Dollar. "Credit unions will need to look at field of membership growth potential, as well as recapturing the business of existing members through some of the new innovative recovery programs specific for credit unions that have large numbers of members who have fallen from favor because of past losses.
- "Penetrating existing membership with more products and services, including checking accounts, credit cards and auto refinances" must be a priority, insisted Dollar. "Most credit unions, even many large ones, do not have the majority of their own members' checking accounts, credit cards or auto loans. A major emphasis on greater member penetration will be and should be a high strategic priority at growing, progressive credit unions in 2014."
Dollar, an ardent proponent of CUs stepping up their checking account penetration, emphasized in a previous CU Journal report that CUs grabbing more of their members' checking activity can offset threats to revenue sources such as overdraft and interchange.
"The checking account is a transaction account, it is the one that is most often used, and prompts the most interaction with a credit union," Dollar stated. "A two-year CD might not cause any interaction for two years, a mortgage might not cause any interaction unless a payment is late, but with checking there are interactions every week."
