By Ray Birch
Bob Steensma, Five Star
DOTHAN, Ala.—Five Star CU has instituted a relationship pricing program it is crediting with helping it to average almost three products per member.
More so than many credit unions, Five Star understands the need to convert the wave of bank customers heading to CUs into bottom-line contributors, as it is the first credit union to buy two banks. Five Star has purchased Farmers State Bank in Lumpkin, Ga., and Flint River National Bank in Camilla, Ga.
Membership in the last four years has grown 10% at the $350-million Five Star, which boasts an impressive 69% membership checking penetration.
“We are at about the highest percentile for checking penetration in the Raddon rankings,” said CEO Bob Steensma. “For non-interest income divided by household, we are in the 99th percentile.”
RFG Rankings
Steensma was referring to the Raddon Financial Group Rankings—which led to the credit union winning a Crystal Performance Award from the company this year. The CU has won the award three of the last four years. Raddon recognizes credit unions for achieving a Top 10 ranking within the company’s Performance Index, a balanced scorecard measurement of growth, income, efficiency and margin management. Five Star received an award for CUs under $500 million in assets.
“For household profitability we are in the 86th percentile,” said Steensma, noting ROA last year was 1.37%.
Steensma said the credit union’s success pivots off its checking product, which staff lead with when potential new members walk into one of Five Star’s 16 branches.
About the time the recession started, Five Star streamlined its checking account to not only institute relationship pricing but to improve operational efficiency and give members a more clear checking choice. In recent years experts have emphasized the importance of credit unions reducing the number of their checking products.
“We think if you have too many checking offerings members look at you, ask which one is bad, and have a more difficult time finding which one fits their needs,” said Steensma. “We tell them we have one account, and that it is free.”
Tiered Savings
Free checking pays .25% interest. But the CU pays a tiered savings rate based on the checking relationship and other services members use. If members just have a savings account and no checking, they receive .10% on their savings balance. If they take checking, they get .25% more on their savings. If they take checking and three other services—choices include a debit card, credit card, CD of $500 or more, a money market balance of $2,000 or higher—the savings rate moves to .50%.
At this level members can earn as much as 1.35% on their savings account. To get the higher interest, as well as a 25-basis-point reduction on auto loans, members must swipe their debit card at least 12 times a month (+.25%), take an e-statement (+.25%) and have an active loan (+.25%).
The CU’s cross selling lands it in Raddon’s 80th percentile.
“We focus on our branches and measure what the branches are doing with cross sales,” noted Steensma. “We have specific goals for each office, and we follow up and measure.”
The credit union also posts branch progress against their goals and updates them each month.
Healthy Competition
“We want everyone to see what everyone is doing,” said Steensma. “It promotes healthy competition.”
Steensma added that the credit union’s fixed rate Visa (7.95% check for the best credit) cross sells well.
“We began a concerted effort last year to grow our credit card portfolio,” said Steensma, noting that around 2000 Five Star sold its card portfolio, and started in-house again a few years ago. “We ended 2013 with just under $5 million in balances. Our goal was to double our balances in 2014, and we reached $12.5 million.”