By Ray Birch
SAN BERNARDINO, Calif.—One small credit union decided that if it was going to survive it needed to play bigger and give more back to its members, and to do that it moved to use more of its capital and markedly decrease ROA.
Now, thanks to the decision, the $80-million CU is on pace to grow assets by $16 million this year, and says that if other small credit unions want to grow, they are going to need to tap their capital, as well.
Thinkwise FCU improved its loan and deposit rates, adjusted its fee structure, and is returning an average of $374 per household, according to CUNA’s analysis. That giveback landed the credit union a Benefits of Membership award last year, an honor handed out annually by CUNA to CUs across the country that are returning the most to members.
CEO Heri Garcia said that those who say small credit unions can’t compete are wrong.
“Our numbers prove otherwise,” Garcia said. “We not only compete with the big banks—and we have Wells Fargo, Chase and BofA here—we are better. Not only do we have a full line of products that are more affordable, when you walk in we know you. We know your likes and dislikes, your family, and we treat you with respect.”
Name Change
All of this is coming several years after the credit union began making some strategic decisions, beginning with a name change and an expanded field of membership.
“We were formerly known as San Bernardino Schools Employees Credit Union,” said Garcia. “With Thinkwise, we tried to keep the educational feeling in our name—pay tribute to our roots—but not lead people to think they had to be part of the local school system to join. And now, we have a broad field of membership.”
The changes have paid off, moving the small credit union away from a situation that plagues many tiny CUs—low account penetration. In the last 15 months Thinkwise members went from averaging fewer that one account per member—not counting the standard share account—to almost two. What may be more impressive, said Garcia, is recent asset growth.
“I think our new approach is really beginning to take hold in the community,” said Garcia. “We have seen quite a bit of asset growth recently—$4 million in the last three months. That is a lot of growth for a CU that was $80 million in assets at the start of this year. That shows the community and members are starting to really react to what we are doing.”
Thinkwise regularly rate shops its markets and then seeks to set both loan and deposit rates at the top of the market. Auto loan rates for the best paper have been as low as at 1.99% until the Fed’s latest rate hike pushed the number above 2%. A 30-year fixed mortgage goes for 4.75% APR and 15-year fixed is 4.375%. A 12-month CD paid 1.15% APY and 1.40% for two years.
“We don’t want to just be competitive with our rates, we want to be among the leaders if not the leader,” said Garcia. “We don’t beat the best rates by much, just enough to show that we have very attractive rates. I always want to make sure we beat the heck out of the bank rates. It’s harder to do that with the local credit unions.”
Too Much Net Worth
Several years ago Thinkwise also recognized that it was holding on to too much capital, and that by using more of it it could compete more effectively and give more back to members. Garcia explained that it wasn’t that long ago that some of its board members were proud of the credit union’s high net worth, which was at 14% and a great rainy day buffer. But Garcia said it was explained to them that holding onto that much capital shows the credit union was not giving enough back to members.
“We don’t have any set policy now on where our capital needs to be,” said Garcia, noting that Thinkwise’s net worth is now 12.96%. “We have been using that capital to add a lot more products and services, not just offer better rates. Our mobile and online banking have biometric authentication now. I recently told our staff that when members ask, ‘What do you offer?,’ I want to say everything. We offer everything the big boys do.”
The credit union is also heavily involved in the community, supporting local events and providing financial education programs.
“We’re helping the community be San Bernardino strong, a saying that arose after the attacks here,” said Garcia. “We are recognized for all that we do.”
On December 2, 2015, 14 people were killed and 22 others were seriously injured in a terrorist attack consisting of a mass shooting and an attempted bombing at the Inland Regional Center. On April 10, 2017, a shooting occurred inside a special education classroom at North Park Elementary School here.
New Biz Approach
What is also getting recognized, is the credit union’s change in business approach, noted Garcia. It has gone from making more than $665,000 annually in 2013 and 2014, to around $100,000 each of the following years. ROA has dropped from 1% to 15 BPs in that same period.
“My board chairman said he would call it an incredible year if we broke even. That would mean we gave as much as we could back to our members and paid all of our bills,” said Garcia.
That’s what it takes for a small shop to compete, Garcia emphasized.
“We’re growing and I love to see us grow,” he said.