By Ray Birch
HARRISBURG, Penn.—Credit union membership has been robust, with the most recent data showing more than 108 million Americans belonging to a CU. Yet recent NCUA data shows median membership growth is flat or negative in numerous states.
What’s going on?
Representatives of leagues in two states that have seen CU membership decline in the NCUA data told CUToday.info say the reasons for the issue are not state specific, but instead are a direct result of the growing problem of the “have and have-nots.”
Typical small credit union problems are simply not allowing them to add members like their larger counterparts. Mounting compliance demands are exhausting resources, keeping smaller CUs from focusing much on growth of any kind, according to representatives from the Louisiana CU League and the Pennsylvania CU Association—two states where median growth is negative. CU membership in Pennsylvania declined the most of any state (-1.6%) during the year ending in the second quarter of 2016. Median membership growth was negative in 18 states, despite the upward growth in the national numbers.
Michael Wishnow, SVP of marketing and communications with the PCUA, said that with NCUA breaking down state membership growth by median average can mask the fact that membership growth, overall in a state, is actually increasing.
Median Growth
Michael Wishnow
“So instead of listing growth year over year, NCUA lists median growth. And in states like Pennsylvania that have several-hundred small CUs it makes us look like we don’t have any growth at all,” said Wishnow, noting that the mean asset size of credit unions in Pennsylvania is $15.6 million—with 240 CUs below $20 million. “Now, in the small credit unions, it is true that many are not growing membership. But among our larger institutions, many are growing members at a record pace.”
Growth among large CUs has lifted the state’s overall membership growth rate to 1.3% to 1.6% over the last three years, Wishnow said.
“Credit unions in Pennsylvania above $1 billion in assets are seeing 3.7% membership growth,” said Wishnow.
In Louisiana, where NCUA data shows media growth was -1%-0.5%, Lacey Hyer, VP of communications and PR at the league, said the same scenario is playing out in her state.
“For the majority of our credit unions, which are small, membership growth is stagnant or falling,” said Hyer. “We don’t have a lot of larger credit unions, but in those shops they are adding members. We have 195 credit unions in Louisiana, and more than two-thirds fall below $100 million in assets.”
Growing Above $100 Million
In Pennsylvania, which has more CUs (427) than any other state, the issue of the have and have-nots is clear in the data.
Wishnow explained that for CUs with less than $20 million in assets membership growth from Q1 2015 to Q1 2016 was -2.5%. CUs from $20 million-$50 million saw membership decline by 3.2% in that same period. From $50 million-$100 million in assets, membership growth was -.6.
“But above $100 million things turn around,” said Wishnow. “From $100 million to $250 million in size, Pennsylvania CUs are increasing membership by .3%. From $500 million to $1 billion it’s 2.9% growth. At $1 billion-plus its 3.7% growth.”
Wishnow shared what many within the industry have long noted—that smaller credit unions have a difficult time focusing on growth due to the financial and time demands of compliance, in addition to other challenges.
“And if the credit union is not growing in assets and membership, the next thing to look at is ROA,” said Wishnow. “Those less than $20 million in assets are barely breaking even or are losing money. No matter how much capital you have you can only do that for so long.”
Tech Demands
Growing consumer demand for new technology, too, is becoming a larger problem for small credit unions every day, said Wishnow.
“It’s getting harder and harder for small credit unions to keep up with technology,” he said. “And if you can’t keep up can’t offer all the new electronic services, how are you going to attract younger members?”
Hyer said small credit unions in Louisiana are struggling with those same issues.
Lacey Hyer, LCUL
“They spend so much time and money on compliance,” said Hyer, pointing to a recent study the league commissioned that shows that Louisiana credit unions in the past year felt a $77.1 million financial burden due to excessive regulations. “This financial impact redirected time, resources, and capital away from credit union members in Louisiana. Most of the impact was felt in staff time and having to increase staff to comply with regulations.”
Almost half of Louisiana’s credit unions are below $10 million in assets, and all but 26 are under $100 million.
“The larger credit unions are doing a great job of selling themselves to the communities they serve and the smaller ones simply don’t have the resources and time to do this,” concluded Hyer.
Wishnow said what is happening in Pennsylvania is a “snapshot” of what is occurring nationally among small credit unions, and among the have and have-nots.
“Take any state and I think you will see this same trend,” said Wishnow. “And if you looked inside the banking industry, I think you’d see the same thing.”