By Ray Birch
DENTON, Texas—One small credit union believes too many within the movement are “running away” from one of its biggest problems—the plight of small CUs—and instead it is running “towards” it.
Small credit unions need support. As CUToday.info has reported, the trend line has been consistent and long running, with the latest NCUA data again showing credit unions with assets of at least $1 billion claim the strongest growth in loans, membership and net worth, while CUs with less than $50 million in assets continue to show declines in loans, membership and net worth.
“We see almost a fire burning and a lot of people are running from the fire. We are running towards it,” said Deke Alexander.
The $24-million Living in Fulfillment Everyday Federal Credit Union (LiFE FCU) has formed a CUSO called CU Evolution headed by Alexander. The CUSO’s focus is to give credit unions under $100 million in assets the strategies and tools to provide “exceptional member and employee experiences.”
‘A Kind of Fear’
“Small credit unions, in number, represent at least 50% of credit unions,” said Alexander. “I think that within the industry we have created a kid of fear of small credit unions—that they can’t survive and thrive independently and the best thing to do is to merge them out and move on.”
But Alexander insists the “reality” of the situation is that many small credit unions can improve their positions one step at a time.
“They have potential. Whether they have $5 million or $100 million in assets, there is a foundation and value within these credit unions to grow upon,” he said. “They just need some help, some tools and resources to begin moving forward.”
Alexander contends that many within the credit union community, particularly vendors, are emphasizing that technology solutions are what’s needed most to assist small CUs. But he insists the real need is one-to-one education on some key skills.
“They need more hands on teaching to help them improve their leadership and management skills, help them with underwriting, balance sheet management and the income statement. That will help them grow,” he said.
A Big Problem
One of the big problems holding back small CU growth, insisted Alexander, is that not much change in leadership style has occurred at small shops in many years.
“I think if you met with a lot of small credit union CEOs, and even their boards, you would find out that the same leadership style has been in place for the last 20 to even 50 years,” contended Alexander. “And credit unions have changed a lot in the last 50 years. So the industry has evolved, but the leadership style and the ability to manage small credit unions often has not.”
Alexander emphasized the goal of the CUSO is to help small credit unions grow to the size they feel is appropriate for them.
“Choosing to stay a small or medium-sized credit union is fine. All small credit unions do not have to have big growth goals to thrive,” he said. “But what they need to do is determine their path toward the future and begin building a foundation for long-term success.”
The Services Offered
CU Evolution is focused on improving a credit union’s strategic planning, lending, leadership and marketing capabilities.
“Programs we offer are fully customizable, allowing credit unions to choose the areas they want to focus on,” said Alexander. “Those areas can be anything from board leadership, succession planning and culture development to logo design, branding guides and custom marketing campaigns.”
Alexander explained that the CUs that partner with CU Evolution will be taken through a three-step process he described as “engage, equip and evolve.”
“The engage phase signifies an assessment period, which is followed by training and consultation to equip credit union staff with the right tools to meet its strategic objectives,” he said. “The evolve phase provides ongoing consultation and support in the form of lending program consultation, training, leadership development and marketing analytics.”
Not ‘Walking Away’
Alexander noted that CU Evolution will provide strategy execution, as well.
“We’re not writing up a plan and walking away,” he said. “We see CU Evolution as an extension of a credit union’s own staff, as much a part of the implementation as the planning.”
He also believes the CUSO being staffed by executives from a small credit union is an advantage.
“We have found where small credit unions struggle—we know from experience,” said Alexander.
LiFE FCU has increased its assets by more than $10 million over the last five years. However, the CU posted a $222,838 loss last year, according to call report data. The CU said the 2017 loss was due to expensing the entire cost of a new branch in one year so the credit union could drive profitability in 2018 and beyond. Through June of 2018, LIFE FCU shows $14,926 in net income.
It took a little time for LiFE FCU to find additional talent to backfill the executives who have now left to run CU Evolution.
“As soon as we had the new people in place, my CEO (Dustin Fuller) released me and my branding and marketing director to run the CUSO,” said Alexander, who explained that CU Evolution has four total employees.
How It Works
CU Evolution has worked with nine small credit unions so far this year and hopes to bring that total to 12-14 by year’s end.
LiFE FCU launched CU Evolution in January of 2018, and in May of this year the $14-million Family 1st of Texas FCU in Fort Worth, Texas, also signed on as an owner.
Costs for the various programs are variable, according to Alexander.
“If you are an owner of the CUSO or provide capital funding, the charge is 2% of your quarterly gross revenue,” explained Alexander. “The charge for non-owners is 4% of your gross revenue quarterly. Everything ties back to the call report. So as a small credit union’s gross revenue increases with our help, we are compensated accordingly. The price is built around the success the small credit union has—their success is our success.”