Credit Unions Grow Bigger but Keep It Personal
YOUNGSTOWN, Ohio -- The credit union that clings to the past by staying small, offering its members little beyond savings and checking accounts and small loans is disappearing.
Such financial institutions find themselves not far from dissolution or looking to join with a larger credit union to provide their members what they cannot. Increased regulation of the financial services industry is just one reason why.
“We have to meet the needs of our members,” says Mike Kurish, president and CEO of the Associated School Employees Credit Union, Austintown. “Time has marched forward and members are more demanding than they were 40 years ago. … Today there’s a greater expectation of what constitutes basic service.”
Those greater expectations require the growth that allows a much wider array of products and services.
At $146 million in assets and with 17,200 members and seven offices, ASECU is the result of the consolidation of several smaller credit unions, which combined, offer its members most of the products a community bank offers its customers. While it does not engage in commercial lending, Kurish suspects more than one loan ASECU has extended has been used to support small-business ventures. He cites a woman who borrowed to buy “a large embroidery machine that had a commercial purpose.”
(Credit union officers are quick to point out that the institutions they work for have members for whom they work where shareholders own banks and that banks have customers.)
The First Choice Community Credit Union, Niles, had completed the integration of the former Sherwil Credit Union the previous month when manager Marc Mucroski spoke about its hopes for additional growth. The 300 members and $800,000 in assets of Sherwil, he said, increased the membership of First Choice to 4,400 and assets to $25 million.
With PNC Bank closing its office in Niles, First Choice has picked up members, Mucroski relates. The credit union serves members in Niles, Girard and Lordstown, and Weathersfield and Howland townships.
Credit unions tend to have closer relationships with their members than banks have with their customers, credit union officers posit. That closeness is dissipating, they say, with the demand for and acceptance of online banking. Members make fewer visits to their offices.
“We pride ourselves on getting to know our members,” Kurish says. “But members are not coming into our offices in the same numbers as they used to.” He attributes that to direct deposit of paychecks and online banking.
In addition, the adoption of debit cards has reduced the need for, and use of, cash. So even visiting an office to use a through-the-wall ATM occurs far less often.
The weekend before Mucroski was interviewed, he reported, First Choice members used their debit cards to purchase $20,000 in goods and services for everything from “gas stations to Panera Bread. Nobody carries cash anymore,” he observes.
Regardless, he and his staff of seven strive to make “individualized service” the characteristic that distinguishes First Choice and reinforces member loyalty. “We have a lot of blue-collar members,” the manager says, “and this is their financial institution.”
Tradition plays a role in reinforcing loyalty. First Choice still offers Christmas Clubs and they continue to attract new accounts each year, Mucroski says.
The credit union pays members who open a Christmas account “a slightly higher rate of interest” on the minimum of $20 that must be deposited each week.
Also reinforcing loyalty is members’ knowledge that during the Great Recession or when members are on prolonged strikes, “We didn’t foreclose on a house or repossess a car,” Mucroski states. Many members work at the Niles plant of RTI International Metals Inc.
No credit union manager or president can say for sure whether members feel more of an obligation to repay their loans than a bank customer. Mucroski notes, however, “Our delinquency rate is 1% or less and we haven’t had to charge much off.”
Direct deposit has “increased dramatically over the last two years,” Mucroksi relates.
First Choice offers first and second mortgages but the maximum term is 15 years and demand for second mortgages (or home equity loans) has fallen off.
Besides checking and savings accounts, First Choice members can take advantage of auto financing as low as 2% and have their paychecks directly deposited in their checking accounts.
The members who serve on credit union boards do so voluntarily and all interviewed for the reportage on this section note there is little turnover and that board members have a deep sense of responsibility.
Credit unions hold annual meetings. When they were smaller, they usually were dinner meetings. As they’ve grown, through, they’ve become just business meeting attended by fewer and fewer members.
First Choice continues to hold its annual meeting in March, a dinner meting at Ciminero’s Banquet Centre, with anywhere from 160 to 200 attending, Mucroski says. Besides dinner, there is a disc jockey to play dance music and prizes are given away.
ASECU holds its annual meeting at Austintown Fitch High School. With its membership of 17,200, attendance is but 300 or 400 and so members can elect officers by proxy.
At ASECU, Kurish says he welcomes large banks’ recent announcements that they are abandoning free checking.
“That’s an opportunity for us,” he says, to reach out and show what his credit union offers.
“People evaluate their options when new fee schedules and charges are set,” he says. “The challenge for us is to constantly evaluate what we offer.”
ASECU offers the same products and services most community banks offer, Kurish says, and often for less. His credit union does not strive to be first in introducing new products.
“A lot of new services are introduced to the market. We’ve got to see whether it’s a fad or likely to be permanent,” he says.
Use of email to communicate with members seems likely to remain a fixture and ASECU issues fraud alerts both to warn its members of scams and keep the lines of communication open.
EDITOR'S NOTE: First published in the print edition of The Business Journal.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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