Credit union membership grows, but for whom?

The cost of technology and the pace of digital innovation are proving to be among the major hurdles for smaller credit unions as they fight to stay relevant and find new members.

Those factors are evident in the latest industry-wide membership data recently released by the National Credit Union Administration.

While total U.S. credit union membership increased by 2.4%, to 141 million in the second quarter, much of that growth came at the top end of the asset spectrum.

Membership rose 4.5% for credit unions with at least $10 billion of assets, but institutions between $500 million and $1 billion of assets saw membership decline by 7.5%.

For example, Navy Federal Credit Union, the nation’s largest credit union, saw its membership climb by nearly 6.5% year over year to 13.8 million.

On the flip side, credit unions with at least $50 million but less than $100 million in assets saw membership fall 6.1% during the year.

Geoff Bacino, a consultant and former NCUA board member, told Tyfone the lack of growth for small credit unions is due to the fact that those institutions often have smaller member footprints.

“Smaller credit unions have to work harder to gain market share, and to overcome this they have to be more nimble but they also need more freedom from the NCUA,” Bacino said. “While smaller credit unions might need more oversight, they also need more care from their examiner, and NCUA always needs to recognize this.”

Credit unions between $1 billion and $10 billion of assets saw 5.6% year-over-year membership growth at the end of the second quarter.

One of those institutions, the $2.5 billion-asset Arkansas Federal Credit Union in Little Rock, had nearly 158,000 members at June 30, a 7% increase from a year earlier.

CEO Rodney Showmar told Tyfone the credit union has “top-of-market” certificate and checking account rates and has maintained adequate liquidity, allowing it to continue lending when others in the market have contracted.

“We opened an additional branch in the highly competitive northwest Arkansas market, and since 2019 we have added or relocated eight branches,” Showmar said. “We have an excellent marketing operation that expanded our reach throughout the state through multi-channel marketing outreach.”

In addition, Arkansas FCU expanded its commercial treasury management focus to attract new small business and commercial members. The credit union also expanded its outbound sales program to offer products and services that would make a difference for its members.

“We consistently receive world-class member service scores that enhance our word of mouth outreach from members to non-members,” he said.

Arkansas FCU also has strong indirect auto loan operation and remains the largest auto loan originator in Arkansas. Its indirect used auto portfolio has an annualized increase of 20% year to date, Showmar said.

A veteran credit union M&A advisor told Tyfone an “inordinate amount” of the industry’s membership growth is coming through indirect lending rather than by new members walking through the credit unions’ doors.

Those relationships can sometimes be trickier to navigate, he said.

The $1.1 billion-asset Deseret First Credit Union in West Valley City, Utah, had total membership of more than 79,000 at the end of the second quarter, nearly a 5% increase compared to a year earlier.

President and CEO Shane London said he could not share how much of that growth came from indirect lending  because “we’re operating in an intense CU market,” he said.

But London told Tyfone the credit union has seen membership growth of late above what the industry forecasters had projected.

“Our marketing efforts have been productive and we have a large number of members who refer us to others,” he said.

Credit unions between $100 million and $500 million in assets experienced a 2.1% decline in membership over the past year.

But one of the outliers was the $111 million-asset Citymark Federal Credit Union in Plains, Pennsylvania.

The organization saw better than 3% year-over-year growth to more than 6,000 members at the end of the second quarter.

Citymark membership is open to anyone who lives, works, worships, volunteers, is a member of an organization, goes to school, or regularly conducts business in Luzerne, Lackawanna and Wyoming counties in Pennsylvania.

To sweeten the deal, the credit union is currently offering $250 for anyone who opens a new checking account and keeps it active for six months.

But the convenience of using online banks and the ongoing struggle to educate the public on how credit unions operate continue to put a damper on growth.

“It’s not easy,” Citymark CEO Joseph Gimble told Tyfone.

Portland, Oregon-based Tyfone is a leading provider of consumer and commercial digital banking services for community financial institutions. At Tyfone, we believe that as credit unions face the challenge of finding new members, adopting the latest digital banking technologies becomes crucial. And we’re committed to providing those account holders with a modern, configurable and user-friendly digital banking experience that will set your institution apart.