By Ray Birch
HOUSTON—Houston Police FCU averages a whopping 5.45 products per member and CEO Ayn Talley says that kind of member loyalty begins with a share account that pays 2%.
That’s right—2%.
Houston Police FCU has been paying 2% on its regular share account for years, even through the Great Recession. Talley said the decision to pay that rate on the first $100,000 and then 1% afterward sends a strong message to members that the credit union is in business to give back to the members, not line its pockets like a bank.
“Our members clearly understand we are paying them back with our earnings,” Talley said. “We have a very loyal membership, because we are very loyal to them.”
More than 65% of members, too, have one of the credit union’s checking accounts.
Talley said that Houston Police FCU, with its closed field of membership, understands it must gain a great deal of business from each member to be successful, and again emphasized that a high-paying share account gets all that started.
“We have $720 million in assets and only 27,000 members, so we have to do a lot of business with each member,” she said. “Our service, too, that’s tailored to each member, drives that loyalty, as well.”
Houston Police FCU serves the Houston Police Department employees and their families.
The CU was recognized by CUNA with a Benefits of Membership honor for 2017. The award recognizes CUs that return great value to their account holders. This past year, according to CUNA, Houston Police gave back an average of $970 per household. The CU won the honor four years in a row.
Efficient Operating Structure
Talley said the credit union is able to give back that much—one of the higher totals among CUs receiving the award in 2017—because having members take many of the credit union’s services is cheaper than marketing for new accounts.
“We have an efficient operating structure,” said Talley. “We have only three branches, we rely a lot on digital delivery, and we pay 81 cents to make a dollar.”
Houston Police FCU’s ROA is 1%, capital is 13.49%, and the credit union’s net income was $7 million, $8.7 million, $6.8 million, respectively, over the last three years.
Despite the strong financial performance, can the credit union continue to afford to pay the high share account dividend as rates rise?
“We will be able to raise the rate,” Talley told CUToday.info. “The credit union focuses on returning earnings to our members. As earnings rise as the result of higher loan and investment rates, we plan to increase the share rates accordingly. With our liquidity position and our market position, we will have ample opportunity to adjust rates prior to withdrawals having a negative impact on our balance sheet, even with 90% of our deposits in regular share accounts.”
Years ago the credit union paid 2% on any share account deposit amount, but Talley said the CU had to limit the great rate to the first $100,000 because Houston Police FCU was attracting too many deposits.
“We were bringing in so many deposits it was affecting our ability to invest effectively for the membership,” she said.
A Certificate Cannibal
Talley acknowledged that the share account—with $615 million in total deposits—has cannibalized the CU’s CD business. Houston Police pays .50% APY for six months, .75% for one year, and 1% for 18 months.
“If our CD rates were higher, we would not be able to manage our deposit growth,” Talley noted.
Members, too, receive top-of-market loan rates. Houston Police will go as low as 1.99% APR for a new car loan, 7.99% on a credit card and 9% on a personal loan. The total loan portfolio tops out at $411 million.
“Our members tell us all the time they feel very fortunate to have the credit union,” Talley said, adding that the CU does not worry about a large amount of the share deposits leaving at once. “Our rate is very competitive with most offerings on the market and it’s liquid funds for the member. Why would they move it? And, too, we are very liquid at the credit union. So if money began to run off we would not be greatly affected before we could make an adjustment.”