By Ray Birch
SUNNYVALE, Calif.–A credit union that has now won an award for nearly a decade for the value it returns says the secret to big annual returns can be simple—if the credit union does one thing.
“Just make sure that you are always focused on asking this question when you make important decisions: Is what I am doing benefitting the member? And if not, just don’t do it,” advised CEO Gary Rodrigues. “Make that your guiding principle.”
The $10.2-billion Star One Credit Union has won CUNA’s (now America's Credit Unions) Benefits of Membership honor nine years in a row.
The Benefits of Membership Award is a third-party calculation that CUNA had performed based on reported data related to a credit union’s net income and rates and which determines how much in savings a credit union returns a household each year versus getting those services from another provider.
A Quarter-Billion-Dollar Return
CUNA estimated that Star One, during the 12 month period ending in March of 2023, provided $250,114,521 in direct financial benefits to its members. These benefits are equivalent to $4,362 per member household, or $2,114 per member.
The credit union has more than 125,000 members.
Rodrigues, who has been CEO of Star One for the last seven years, emphasized the credit union believes the award is a good measure for how a credit union delivers value.
“We're really proud of it. It's a big focus of our overall strategy, and trying to deliver good service and good value to our members,” he told CUToday.info. “Those are really the two planks of our strategic objectives. There's different ways to calculate membership value, but we think this is probably the best that's out there.”
Additional Savings
The CUNA data states, as an example, that if a Star One member were financing a $30,000 new automobile for 60 months, they would save an average of $231 per year in interest compared to what they would pay at a banking institution in the state.
“That's approximately $1,155 in savings over five years,” Rodrigues said.
The data also show that “loyal” members save even more—those who use the credit union extensively often receive total financial benefits that are much greater than average, approximately $3,205 in direct financial benefits during the 12-month period.
“Star One excels and providing member benefits and many loan and savings products,” CUNA stated in presenting the award to Star One. “In particular, Star One offers lower loan rates on the following accounts: new car loans, used car loans, first mortgage, adjustable-rate home equity loans and credit card loans. Star One also pays its members higher dividends on the following accounts regular savings: share draft checking, certificate accounts and IRA’s.”
A Motivator
Rodrigues said the credit union holds out the award as motivation for employees and promotes the return it delivers to members via its advertising.
“It helps when you are trying to explain to people why they should do business with you,” he said.
Efficient Operations
Not surprisingly, Star One is a lean operation.
“We're definitely efficient,” Rodrigues said. “Our operating-expenses-to-assets ratio is .45%. We only have six branches and we really rely on the digital channel. We do a lot of our business online or over mobile devices.”
Gary Rodrigues
Rodrigues emphasized he does not think one particular aspect of driving value back to members, such as lower loan rates, stands above any other.
“Again, it's really everything that we offer,” he said. “We make sure that everything is a good deal. Maybe it’s not always the best deal in the market, but it’s close. So, whatever product or service you get from Star One, it is very well priced. Frankly, if it's not something that we think we can offer and be competitive, then we typically don't offer it.”
Few Fees Charged
Star One also does not charge a lot of fees, the CEO explained.
“In fact, when we do charge fees, they are some of the lowest in our market,” he said. “It's just a philosophy. We really focus on helping members improve their lives.”
The ability of Star One to give back has been affected by interest rates, noted Rodrigues.
“A lot of what we do depends on rates,” Rodrigues acknowledged. “When interest rates were lower, near zero, it was harder to give back as much, due to margins being smaller. But we now have a pretty good margin. With rates getting higher, there's more room to play with.”
Competing on Rates
During 2023, in a landscape that has seen aggressive rate offers, Star One has also upped its deposit pricing.
“It's an asset/liability management issue for us. We're struggling to retain deposits like a lot of credit unions are, so as a result our net worth is building higher than we'd like,” he said. “So, again, we're trying to be a little bit more aggressive with our savings rates to pay some of that out to our members. I think the yield curve is helping us too.”