By Ray Birch
JACKSON, Mich.–One credit union posted 2.19% ROA last year after giving back members 50% of their loan interest paid in 2017—plus a special bonus dividend.
American 1 Credit Union’s Give Back totaled $1.58 million. Nearly $900,000 in loan interest rebates were returned to members, with the average individual member Give Back exceeding $150. In addition to the loan interest Give Back, a bonus dividend of more than $690,000 was deposited into members’ savings accounts.
This most recent Give Back exceeded the previous Give Back by 52%, when the credit union returned $1.038 million back to members in the form of loan interest rebates and bonus dividends.
“This is the second year in a row we have delivered our Give Back this way,” said Laura Pryor, VP of marketing and communications. “It was so successful in 2016, from member reaction, that the board decided to increase the Give Back in 2017.”
The $323-million credit union is well positioned to return money to the membership. Capital has been steadily growing in recent years, increasing from 14.96% in 2013 to 18.77% at the end of last year.
Different Approach
But how the credit union achieves its strong financial performance runs somewhat counter to the approach many credit unions are taking today, which is to streamline offices and focus more on electronic delivery and fewer—costly—branch transactions.
Pryor acknowledged American 1’s business model differs from those opting out of bricks in mortar. Indeed, she said the credit union is looking at adding to the 13 offices it already has.
“We are considering investing in some additional branches in some communities that are underserved,” said Pryor.
Pryor explained that the credit union’s membership, largely blue-collar workers, enjoy visiting the credit union. While American 1 has good penetration with its home banking and m
Laura Pryor
obile solutions, members often prefer to stop in.
“We are very transactional. We welcome the face-to-face interactions, which we think a lot of financial institutions are getting away from,” said Pryor. “We like to talk with our members, find out what they are doing, what their needs are, where they have products elsewhere and look for ways to help them. We do have a lot of traffic in our branches, and to take advantage of that we have a strong sales culture with staff very well trained on our products.”
The approach contributes to the CU’s operating expense to average assets standing at 5.13%. But American 1 also averages close to three accounts per member.
Pryor said a big driver of growth at American 1—including $6.8 million in net income last year—is focus. She said the credit union has been careful not to go too wide with its product offerings. The CU does not do first mortgages or business lending, focusing instead on consumer lending. Credit cards and auto loans are strengths, she said.
“We like to think we specialize in serving the everyday banking needs of the average person,” Pryor said, noting American 1 also does no indirect lending. “That has contributed to our growth. Our credit card portfolio had fantastic growth in 2017.”
Keeping It Simple
For its Visa rewards card, American 1 charges from 9.49%-18% APR for its variable rate product, and 10%-18% for the fixed card. In 2017, the CU’s net interest margin was 4.54%.
“We keep things simple and don’t go off and do a lot of other things,” Pryor said.
Pryor said American 1 is adjusting the Give Back in 2018 to return more to members during the year, also basing the Give Back more on member participation in the cooperative.
“We are changing things up a bit in 2018, and will give back in different and creative ways and during the year,” Pryor said. “This year, the more members use the credit union the more we will give back. And at the end of the year, if we feel we have not given enough back, we will go to the board to authorize that we give back even more.”